GREECE IS ONCE AGAIN ON THE EDGE of a precipice, and with it the fate of the euro. As we go to press, talks to seal a deal to roll over Greece’s massive debt have stalled. With no deal on the table, there is the prospect of a default on Greek debts for the third time since 2010.
Ministers of the Greek government have been seeking to renew the existing bailout on their country’s total debt of €330bn. Their creditors are the International Monetary Fund (IMF), the European Commission and the European Central Bank, known jointly as the Troika. The Troika has the right to review Greece’s progress and presumes to tell the Greek government what to do – otherwise no money will be forthcoming. The Greek people elected the Greek government. Who elected the Troika? In reality democracy has been abolished in Greece.
Greek debt has been described as “explosive” by the IMF. It predicts it may reach 275% of GDP by 2060 (from 179% now). The IMF is well aware that this level of debt is unsustainable – it cannot possibly be repaid. Its report states, “Greece cannot grow out of its debt problem... Greece requires substantial debt relief from its European partners to restore debt sustainability.”
The IMF is at odds with the EU authorities on this - they are demanding their pound of flesh. The German Finance Minister Wolfgang Schauble rules out debt reduction. “For that, Greece would have to leave the monetary union,” he says. As the crisis deepens, that could well happen.
Don’t think the IMF is the softy on this one. They are insisting on a ‘reform’ of Greek pensions. But Greek pensions have already been cut twelve times since 2010 at the insistence of its creditors. If the IMF walks away, that will leave the EU authorities as the chief bloodsuckers. And Greece has big repayments to make of €7.4bn on existing debts this coming June.
Is Greece trying to get itself out of this hole? Contrary to the frankly racist criticism of the ‘lazy’ Greeks, their government ran a primary budget surplus of 2.3% of GDP in 2016 and aim at running a primary surplus of 3.5% this year. By comparison the UK is currently running a £69bn deficit.
What does ‘primary budget surplus’ mean? It means that the Greek government is getting 2-3% of the country’s national income more in tax than it is spending. The trouble is the country gets no benefit from this budget surplus. It all flows straight out of the country to the creditors - the dreaded Troika.
Greece is being sucked dry. The country is in the position of a debt slave - however hard its people work, they just get deeper in debt. The country is starving itself to death to pay its creditors. The consequences – 23% unemployment and a social security safety net in shreds.
Who is actually bailing out whom? The banks triggered the biggest financial crash since the Second World War in 2007-8 through their reckless lending. The automatic reaction of capitalist governments across the globe was to bail out the guilty banks at the expense of the innocent working class people who lost their jobs and had their livelihoods destroyed as a result of the crash.
In the case of Greece, one of the weakest capitalist countries, the French and German authorities in particular were determined to rescue their banks which had imprudently lent money to the Greeks. The first bailout in 2010 transferred the debt owed to private banks in northern Europe to the Troika. So it was the banks that were bailed out - at the expense of Greece.
The Greek government is dominated by Syriza, elected on a firm anti-austerity programme. In July 2015 Syriza called a referendum on the Troika’s most recent demands for more austerity. A stunning 61% of the Greek people voted Oxi (No). Syriza, led by Alexis Tsipras, then capitulated tamely to the demands of the Troika, to the misery of the Greek people.
Naturally Syriza has been widely discredited and political demoralisation has spread. Whatever happens, the crisis won’t go away. Greece is just the weakest link. The country could be driven out of the eurozone.
Marine Le Pen, who could be the next President of France, is campaigning for a return to the Franc. The flawed design of the euro is hobbling growth and helping to impoverish a whole continent. National antagonisms could cause a rift in the eurozone and even a shipwreck of the whole single currency project.