By Kevin Devine
Downloading PDF. Please wait... Issue 345

Greece, Ireland and the eurozone crisis

This article is over 13 years, 11 months old
Pigs. It's not an insult as such, but that depends on what it's referring to.
Issue 345

In this case it’s an acronym coined by “economic analysts” to describe the European countries that have been hardest hit by the recession: Portugal, Ireland, Greece and Spain.

Now, I happen to be Irish, but I’m not particularly nationally-minded, so on one level it doesn’t bother me all that much. However, when you consider who these “economic analysts” are, and what their role has been in the crisis affecting Greece, it’s a different story.

The current Greek crisis has seen the Pasok (or Labour) government of George Papandreou threatening public sector workers with hundreds of thousands of job losses and pay cuts of at least 10 percent. It amounts to an all-out war on the public sector from a government that was elected precisely because voters were fearful that the Greek Tories (“New Democracy”) were likely to do exactly the same thing. Unhappily for Pasok, their plans have been met with demonstrations and strikes, in a wonderful example of the potential for a real fight against the symptoms of the recession.

The crisis arose when, like other countries, Greece attempted to ameliorate the worst effects of the credit crunch and the accompanying downturn by expanding public spending. It borrowed to do so and as a result its debt, or “deficit”, grew.

This is where the “economic analysts” come in. A small group of exceedingly wealthy businesspeople make their money by buying up countries’ debts in the form of the “bonds” issued by those governments. If you’re rich enough to get in on this trade in the first place, it’s a quick route to easy profits because governments “guarantee” their bonds by offering to pay them back with interest.

All governments that run large deficits have to finance their debts in this way. But the problem for Greece is that the speculators have forced it to pay double the interest on its debt that richer countries like Germany pay.

This means that it costs Greece twice as much to service its debt. This is because in the opinion of the economic analysts who make their (extremely lucrative) living by selling advice to the bondsmen, Greece – along with the other “Pigs” – has an apparently unmanageable deficit and must submit to the financiers on terms favourable to the fat cats.

Crucially though, this is also a way of forcing the Greek government to reduce its deficit, which it is doing by attacking jobs, pay and pensions. This might not have needed to happen if the EU had agreed to bail Greece out.

But the right wing German premier, Angela Merkel, vetoed this. In part this was revenge for Pasok beating her fellow right wingers in the polls. However, it is also connected to the sort of tough medicine that Merkel and other neoliberals want Greece to swallow.

The model here is Ireland, where the ruling party, Fianna Fáil, has pushed through swingeing cuts in public sector pay. While the cuts were opposed by workers, the trade union leaders threw away the chance of a fightback in favour of a talks process that saw them grovelling to offer all manner of concessions, only to have these rejected by a government that was being egged on by the real culprits in all of this – the bankers – and, of course, the right wing press.

The other point here is that it is partly Ireland’s membership of the eurozone which dictated the response. In the past the Irish government could have devalued its currency to make its exports more competitive, thereby solving its balance of payments problem and reducing its overall deficit. Now, however, it’s a member of the eurozone and this route is barred to it.

On top of all this, the euro is itself in trouble. This is one reason why Merkel thinks the Irish model is so exemplary. It offers the chance to cut deficits and refloat the currency without increasing spending. But there’s no guarantee that these measures will solve the crisis, especially as they don’t tackle the problems that gave rise to it in the first place. Moreover, the cuts may even make it worse – by affecting the demand for goods and services that ultimately makes capitalism tick.

In the end, that’s what is so appalling about glibly naming a group of four European countries after a farmyard animal. The economic nightmare that has engulfed these countries’ populations, with widespread redundancies and wage cuts, is reduced to an almost Orwellian acronym, predicated on the notion that because their bonds aren’t worth buying, they must somehow be worthless.

The answer to this lies in the response of the Greek workers. On the demonstrations in February one of their banners read, “The workers’ answer is war on the capitalists.” That’s almost perfect. I’d only make one amendment: “War on the capitalist pigs.”

More on the strikes in Greece: ‘No self-restraint’

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

Latest News

Make a donation to Socialist Worker

Help fund the resistance