Europe’s leaders spent June playing a giant game of poker, as they bluffed each other over who would contribute most towards bailing out Greece from bankruptcy. But all the players were agreed on one thing: the Greek working class should be the ones to pay for the chips on the table.
The deal the European Union (EU) agreed on June 24, which will make available up to 120 billion euros ($162 billion) so that Greece can pay its immediate debts to the banks, was linked to further massive attacks on Greek workers.
The suffering is already enormous. One million from a population of 11 million are unemployed. Consumption has dropped 40 per cent as a result of cuts to benefits and wages, and 700,000 businesses have closed.
Now the EU and its partner in the latest bailout, the International Monetary Fund, are demanding that the Greek government imposes further suffering as the price of the loan. Measures will include lowering the minimum threshold for income tax to 8000 euros a year ($10,800) from its current level of 12,000 ($16,200).
There will be a one-off tax ranging from 1-5 per cent depending on income, higher tax on heating fuel, and a minimum tax on the self-employed. The government will also be looking to privatise swathes of the public sector.
General strikes
There is no certainty the deal will stick. On the one hand, the Greek working class movement is continuing to conduct a militant mass campaign against the cutbacks.
There was a massive general strike on June 15 that was joined by almost all public sector workers and many in the private sector. Tens of thousands of protesters have been running a protest camp in Syntagma Square, in central Athens.
The first 48-hour general strike took place at the end of June as the government passed the new wave of cuts through parliament.
The PASOK (Labor) government narrowly survived a confidence vote in parliament but remains in danger of disintegration as its working class support base turns against it.
There is also dissent and rivalry among Europe’s capitalists over how to handle Greece’s 350 billion ($472 billion) debt—150 per cent of its annual output—that won’t disappear with the latest deal.
Germany is the largest economy in Europe and is committed to maintaining the euro currency, which helps cohere the EU and thus protects its main markets. But even it is struggling to pay to keep afloat the weaker economies—the so-called PIGS (Portugal, Italy, Greece, Spain).
Sections of the German media have been campaigning hard against German subsidies. In response, German chancellor Angela Merkel argued that banks which lent to Greece should take a “hair cut” by getting less than 100 per cent of their money back.
But she was forced to back off under pressure from the European Central Bank (ECB) and France, who feared smaller repayments would lead to the financial markets declaring Greece in default, an outcome that could shatter the already shaky European banking system.
Europe’s rulers are also worried that if Greece falters, the other PIGS countries could follow. If Greece, Portugal and Spain all defaulted this would wipe out half the capital of the ECB, which has been buying their bonds (government debt).
But it is not clear how the Greek economy can survive. The first round of austerity did not solve its problems and a second bout will simply drive the country deeper into depression.
Greece is already having to pay 28 per cent interest on its bonds to attract investment. Even some on the right are backing calls from the left for the country to default on its debts.
As Panos Garganas of Solidarity’s Greek sister group, the Socialist Workers Party, put it: “The cuts aren’t stopping the crisis and more cuts won’t either. Workers are suffering with no end in sight.
“It’s important to ask how a default would come about. If it happens on the terms of the creditors, people will suffer. But if the movement says we refuse to pay the debt, that’s very different.
“Last year the Greek government paid 51 billion euros servicing the debt—that’s one billion euros every week.
“If we stopped paying that billion a week, we wouldn’t need cuts in pensions, wages or services.
“The wages bill for public sector is 16 billion euros. A default organised by our side would lead to improvements for the working class in Greece.”
By David Glanz
