The word austere comes from the Greek austeros, meaning “bitter” or “harsh,” originally referring to wine that “makes the tongue dry.” The economic austerity that Greek workers, youth, and pensioners are now being forced to swallow will parch their entire bodies.
Under a scheme devised by the European Commission, European Central Bank, and International Monetary Fund (the troika), the debt-ridden Greek government has agreed to further suppress the living standards of Greece’s working class. The plan includes an additional cut of $4.2 billion in government spending on civil servants’ wages, public health service, and retirees’ pensions.
In exchange, the Greek government will be granted a temporary fix on its debts, $182 billion. Greek banks will initially receive $51 billion and other European banks – mainly German, French, and British – will receive $39 billion. All these banks hold nearly 100 billion euros in Greek national bonds, i.e. its “sovereign debt.” But the Greek government cannot pay on the bonds that have come due, because its economy has been in a steep recession for five years.
Huge international banks are bailing billions and billions of dollars to other banks, to cover the Greek government’s debts. It’s what capitalist governments do these days to keep their sinking economies afloat. None of this money is going to the Greek people.
Indeed, this bank bailout is not designed to jump-start the Greek economy. Old loans are simply being paid off with new ones. And the most vulnerable of society are to foot the bill. The troika is demanding that the Greek government pay its debts from revenues originally intended for education, healthcare, and unemployment insurance. It means job reductions of public and private-sector workers, rapid tax increases, and large cuts in monthly pensions, already very low.
Vicious austerity policies cannot stop the inevitable decline of Greece’s economy. They will depress it even more, because the government will have far less tax revenue, banks won’t lend money, and investors won’t risk their capital in a failing economy. National bankruptcy remains a real possibility, leading to massive joblessness and a fast disappearing social safety net.
The Greek economy is just a link in a chain of national recessions. Its deterioration and austerity decrees will reverberate everywhere else, including in the United States.
A divided EU. Greece is a member of the European Union (EU). Formed in 1993, the EU is currently a federation of 27 national capitalist economies. Its genesis was the result of a long series of treaties and agreements designed to make European capital more competitive, especially against the U.S.
EU’s chief institution is the European common market. Seventeen of the countries employ a common currency, the euro. The various Social Democrat parties of the member countries backed this federated capitalist coalition as a step towards social harmony. They have been among the main parties implementing the austerity.
Despite that supposed harmony, the European Union is, in fact, divided by a host of internal contradictions. As one expert put it, “The EU is more unequal than India!”
At one end is an export-driven country like Germany, whose economy continues to grow — by 3 percent in 2011, and whose unemployment levels are actually declining. At the other end are less developed, import-driven countries like Portugal and Greece. The Greek economy declined by nearly 6 percent in 2011. But even the relatively stronger economies of Spain and Italy have accumulated massive debts and are enforcing harsh austerity cuts.
The economies of the individual capitalist nations worldwide, of course, are deeply interconnected. The U.S. crisis of mortgage defaults and recession reduced our buying from the European market. This contributed to depressing the EU’s economy. No longer able to fully unload their products onto depressed economies, the much wealthier capitalist regimes of Britain, France, and Germany foresee downturns, and are already establishing belt-tightening policies.
Dictatorship tactics. One of the most dangerous aspects of this bank bailout is the imposition of austerity by frankly dictatorial methods.
For example, the agreement between the Greek government and the troika contains a stipulation that their constitution be amended to make repayment to the banks a higher priority than paying for social services. The banks will have a greater right to life and liberty than people!
Additionally, the capitalist architects of the agreement are putting together an unelected committee of economic technocrats who will sit in an office in Athens, and make sure that government revenues are indeed going to Europe’s banks, not Greece’s working people. And they want legal guarantees that future Greek parliaments cannot undo their plan.
Commitment to democracy and human rights is also supposedly a condition of membership in the European Union. The reality that has always existed under the surface is now showing itself with clarity — it is the harsh, bitter, and fundamentally undemocratic dictatorship of capital over labor.
EU’s much exalted opposition to the death penalty is another condition of membership. But with extensive cutbacks in social services, the number of deaths attributable to the combined effects of poor nutrition, unaffordable medicines, and inadequate health care will inevitably rise.
Capitalist federation? The global economic crisis sweeping the world has arrived in full force in Europe. The only solution the ruling class will tolerate is one that moves more and more wealth from the working class to the banks.
Workers need their own solution. In fact, the EU’s common capitalist market was never a solution for working people. If the EU is a union at all, it is one made up of the bosses and the banks against workers, students, youth, destitute immigrants and all the afflicted.
European workers need a socialist federation of their countries, to pool their resources in the service of those who labor. Working and living in such integrated economies is why Europe’s workforce knows that the current situation in Greece reflects their own plight as well.
Massive, militant Greek protests have ignited demonstrations of solidarity in France, Germany, Austria, Belgium, Spain, Finland, Ireland, and Italy. A common slogan: “We are all Greeks.”
Now that’s the kind of federation everybody needs.
Steven Strauss can be contacted at email@example.com.