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Greece: Crunch Time

8th February 2017

Greece: Crunch Time

By Mick Brooks

Tennessee Ernie Ford: Sixteen Tons
“You load sixteen tons, and what do you get /
Another day older and deeper in debt /
Saint Peter don’t you call me ‘cause I can’t go /
I owe my soul to the company store.”

Greece is once again on the edge of a precipice. Talks to seal a deal to roll over their massive debt have stalled. If there is no settlement by the time the EU Finance Ministers meet on February 20th, then, with no deal on the table, there is the prospect of a default on their debts for the third time since 2010.

It is a measure of the coming crisis that Greek government two-year bond yields have spike from 6% to 10% over the past two weeks. Bond yields are based on two things – risk and return. The jump in yields shows that speculators think there’s a real risk they won’t get their money back. By contrast yields on German bonds are low because they are regarded as ‘safe’. Nobody thinks Germany will default on its debts any time soon.

Ministers of the Greek government have been seeking to renew the existing bailout of €86bn 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? 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. 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. Germany and its Finance Minister Wolfgang Schauble are to the fore in their insistence that Greece continues to be bled dry. In this they are not only hardhearted but also hypocritical. In 1953 Britain and the USA wrote off the vast majority of (West) Germany’s debts. So where’s the debt forgiveness from Germany now?

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. The IMF understands that Greece will be quite simply incapable of ever repaying the debt. They are constitutionally bound to walk away from an impossible debt burden. 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, they ran a primary budget surplus of 2.3% of GDP in 2016 and aim at running a primary surplus of 3.5% this year. 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 country is starving itself to death to pay its creditors. The consequences – 23% unemployment and a social security safety net in shreds.

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 same position of the debt slave in the song ‘Sixteen Tons’ – however hard its people work, they just get deeper in debt.

The EU authorities show no sign of making concessions before the deadline later this month. So as things stand there will be no further bailout for Greece.

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 incautiously 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.

Further background on the Greek crisis can be found here:

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.

But the demands of the Troika for pointless sacrifices are endless. It is not too late to turn the situation around. The Greeks should cancel the debt. Naturally that would provoke alarm among international capitalists and a flight of capital. To prevent that happening, the banks must be nationalised. That can only be successful with the enthusiastic support of the bank workers and the rest of the working class.

Capitalism has failed the Greek people completely. The fight against austerity is the fight for a better, socialist society.