There were two pieces of good news for Europe’s rulers in recent weeks. First the left reformist party SYRIZA narrowly lost recall elections in Greece. Then financial markets temporarily rose in response to the newest bailout plan, announced after a summit of leaders in Brussels.
Europe’s rulers welcomed the plan as a step towards allowing the whole of the EU to assume responsibility for debts in countries like Spain and Italy, so that that the EU’s biggest economy, Germany, would shoulder more of the load. Germany had been refusing to do so, with Chancellor Angela Merkel saying this would “not happen in her lifetime”.
But a look at the details shows that not much has changed. The new plans will allow the EU to directly feed money into struggling Spanish banks and to buy up Italian government bonds. For Spain, this means that bailing out its banks will not add to government debt.
There was even the suggestion that countries like Spain and Ireland could transfer existing debts run up by bailing out their banks over to the new arrangements, and thereby reduce government debt levels. But the new measures could take two years to bring into force—and there are plenty of details, like which banks this can apply to, still up for negotiation.
Italy wanted a deal where the EU buying up government bonds, or covering its debts, would not require the strict austerity conditions imposed on countries like Greece. But although there was talk about allowing this, countries will still have to sign a Memorandum with the European Commission in exchange for funds. The claim of newly elected French Socialist President Francois Hollande that “austerity can no longer be inevitable” is looking hollow already.
The new plans may buy the EU more time. Their immediate effect was to bring down the costs for the Italian and Spanish governments of borrowing money to fund debts. These had threatened to spiral to unaffordable levels, which could have forced them to default on their debts and triggered banking collapses across Europe. But just a week after the plan’s announcement Spanish bond rates had soared back above 7 per cent—a level considered unsustainable.
But none of the underlying issues have been resolved. If the recession in Southern Europe continues debt levels will only grow further. In May unemployment across the EU hit a record 11.1 per cent. Italy’s economy is expected to shrink 2.3 per cent and Spain’s 1.5 per cent in 2012.
Greece after the elections
Nor have Greece’s elections done anything to solve the country’s problems. The conservative New Democracy party took first place with 29.7 per cent, beating SYRIZA on 26.9 per cent. While SYRIZA did not manage to win the election, its vote rose another 10 per cent on the election in May, and the overall far left vote increased to almost a third of the electorate.
New Democracy has promised to continue the vicious austerity program that has shattered public services and deepened the economic depression.
The result was partly the outcome of blackmail by the EU and the Greek ruling class, threatening that a vote for SYRIZA would take Greece out of the Euro and produce a catastrophic decline in living standards. SYRIZA’s response was to argue they were for staying in the Euro and renegotiating austerity, a position that weakened their response to the blackmail.
Now SYRIZA has turned their focus to organising, “to be able to claim government when the opportunity arises”, according to the party’s leader, Alexis Tspiras.
But waiting for another election will not stop New Democracy’s austerity agenda. The immense wave of class struggle that has rocked Greece over the last two years has shown the power to stop privatisation and cuts.
New Democracy leader Antonis Samaras has already backed down on his promise that “responsible” leadership could soften the EU’s austerity conditions on Greece’s bailout package, after this was rejected by the EU and IMF.
Greek socialist Panos Garganas wrote after the election: “Samaras’s real agenda is a new wave of privatisations coupled with a tougher stance against strikes and demonstrations. But his government will be weaker than its immediate predecessors—which found they could not pass austerity measures because of working class resistance.
“Sparks will fly in Greece in the coming months. Any attempt to privatise the electricity or water supply will involve confrontation with some of the best organised sections of the Greek working class.”
Mass resistance to austerity has also spread to Spain. Eight thousand mining workers have been on strike for weeks against plans to cut coal subsidies that will destroy jobs.
These struggles are the key to defeating the drive for austerity, cancelling the debt and forcing bankers and the rich to pay for the crisis.