Downloading PDF. Please wait... Issue 2197

EU loan deal won’t solve Greek crisis

This article is over 14 years, 2 months old
Fears that Greece will default on its debts panicked European leaders into agreeing a multi-billion pound loan package this week, writes Panos Garganas
Issue 2197

Greece is back in the eye of the storm—if it ever went away. European leaders this week agreed to loan the government up to £26.4 billion, if it asks for it.

Europe’s leaders have vacillated and disagreed for months over how to respond to Greece’s crisis. The bailout agreement follows an intensification of that crisis.

The government is finding it harder and harder to meet its debt repayments. This has led to fears that Greece will default on its debts and that, if it does, other countries could do the same.

European bosses and governments don’t want countries defaulting because it would destabilise business, undermine the banking system and shake confidence in the Euro.

So they are demanding that the government imposes harsh cuts on workers. These cuts are a condition of the bailout. But George Papandreou, the prime minister, is already imposing cuts and it is not resolving the crisis.

The credit ratings agency Fitch downgraded Greece’s rating for the second time in five months last week. It slashed the rating to -BBB, the lowest investment rating except for junk.

Greece needs to raise £30 billion this year to refinance debts. The fear is that, if it has to rely on borrowing from other sources, the cost will be high. The European agreement would carry a 5 percent interest rate—lower than Greece has been able to access so far.

The Greek press dubbed Thursday of last week “Black Thursday” as the interest rate the government has to pay hit a record high. It came close to 7.5 percent—and bank shares fell sharply on the Athens Stock Exchange.


Europe’s leaders hope that the offer of a bailout will stabilise Greece. But some commentators think that an eventual default is inevitable. And the cuts are already sparking resistance from workers.

German capitalism has been the biggest opponent of a bailout. This is not because Germany is “anti-Greek”. In fact, Greece and Germany have worked very closely together over the last ten years.

When Athens built a new airport in the

run-up to the 2004 Olympics, Hochtief, a German construction company, got the contract and still runs the airport. When the Greek government privatised the Hellenic Shipyards, they went to German industrial giant ThyssenKrupp.

Greek Telecom (OTE) went to Deutsche Telekom. Olympic Airways ended up in the hands of Lufthansa.

Germany has a lot of vested interests to defend in Greece—and Greece is at the sharp end of a global crisis that is far from over.

Further evidence of the continuing crisis comes from the European Central Bank (ECB). Last summer the ECB was pressing for a quick “exit strategy” from the policy of state support for the ailing banking system.

Two weeks ago the ECB reversed this position. It even stated explicitly that it would accept Greek bonds as collateral for advancing loans to the country’s banks.

Papandreou is following the neoliberal mantra that “the tougher the cuts in public spending, the more the markets will regain confidence in Greece”.

Yet interest rates have gone up and up. Asking for a bailout will be the final admission that appeasing the markets has failed.

Workers in Greece have been fighting back and are preparing for a new strike on 21 and 22 April. A bailout will bring fresh attacks on the working class—but it will also weaken the government that has to implement them.

We can safely predict that the strike movement has not yet uttered its final word.

Vasilis Sylaidis, a worker who toured Britain at the invitation of the Right to Work campaign, returned with the belief that strikes in Greece act as “little Vietnams”—an inspiration to workers fighting back everywhere.

It’s an encouraging thought for those of us “in the eye of the storm”.

Panos is the editor of Workers’ Solidarity, Socialist Worker’s sister paper in Greece

Topics ,

Sign up for our daily email update ‘Breakfast in Red’

Latest News

Make a donation to Socialist Worker

Help fund the resistance