The Eurozone’s political leaders are battling to prevent the collapse of their economies. This week Standard and Poor’s, the US credit rating agency, warned that all eurozone countries—including France and Germany—could lose their credit ratings.
German chancellor Angela Merkel and French president Nicolas Sarkozy are desperately patching up a deal to impose centralised budget control on the eurozone. Countries deemed to have overspent or broken spending rules will face sanctions or have bailouts withheld.
Sarkozy fears he will be accused of selling national sovereignty in the coming elections.
But his government is also terrified of losing its triple-A credit status. It has been imposing its own harsh austerity measures but the threat of meltdown remains.
All eurozone countries are entwined together in this crisis. Even if a smaller economy like Greece—3 percent of Europe’s GDP—dropped out, it would have a major impact on the EU’s biggest economies.
Bank of England governor Sir Mervyn King has warned that British banks have £14.8 billion exposure to the five most fragile European economies.
He advised banks to build a war chest against possible European defaults by cutting bankers’ bonuses and shareholders’ dividends.
Sarkozy and Merkel want a deal so they—and behind them the IMF and the banks—can dictate economic policy and impose austerity. Already, the governments of Italy, Greece and Ireland have announced new budgets which impose more brutal cuts.
Whatever the spin, all these talks have one common purpose—to make ordinary people pay for the crisis. Bailouts are to guarantee bank debts, not help people who have suffered job losses and pay cuts.
The politicians and bankers are fighting to save their skins—but the workers of Greece have shown how we should respond.