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Greece: how to avoid a social default

Panagiotis Sotiris argues that stopping the debt repayments is the only way to avoid the devastation of Greece

February 16, 2012
11 min read

On Sunday 12 February, the people of Greece, in demonstrations and street fights all over the country, expressed in a massive, collective and heroic way their anger against the terms of the new loan agreement dictated by the ‘troika’ (the European Union, European Central Bank and International Monetary Fund).

Workers, youth, students filled the streets with rage, defying extreme aggression by the police, setting another example of struggle and solidarity.

Greece is becoming the test site for an extreme case of neoliberal social engineering. The terms of the new bailout package equal a carpet bombing of whatever is left of collective social rights, and represent an extreme attempt to push wage levels and the workplace situation back to the 1960s.

Terms of the bailout

Under the terms of the new agreement, there are going to be drastic changes. The minimum wage is going to be reduced by 22 per cent. For new workers under 25, the reduction will reach 32 per cent.

This reduction is also going to affect all other private sector employees covered by collective contracts and agreements. Most sectors will see wage reductions of up to 50 per cent – on top of drastic pay cuts already made.

All pensions are going to be reduced by more than 15 per cent – a reduction again coming on top of other reductions imposed earlier. Moreover, the terms of the agreement demand a new overhaul of the pension system, paving the way for more reductions and the raising of the pension age.

All forms of social spending are going to be drastically cut, including funds for hospitals and health coverage and social benefits. Hospitals are already in a critical condition thanks to earlier cuts, so this new wave of cuts is expected to lead to a dramatic deterioration.

A new wave of privatisations is demanded, including the sale of crucial infrastructure such as ports and airports, and full privatisation of public utilities. And a new wave of lay-offs of public sector employees is going to be implemented, helped by a wave of closures of schools and other public institutions.

Race to the bottom

The social cost of this transformation is going to be immense. For the first time since the second world war, large parts of Greek society are facing the danger of extreme pauperisation.

The first signs are already here: increased homelessness, soup kitchens, and a wave of people emigrating from Greece in search for employment. And things are only going to get worse as traditional forms of solidarity, mainly through family relations, can no longer cope with the situation.

It is obvious that most of these measures have little or nothing to do with dealing with Greece’s debt. Indeed, private sector wage reductions are reducing pension contributions, leading to more deficits. What is at stake is an attempt from the part of the EU-IMF-ECB troika and leading factions of the Greek bourgeoisie to violently impose social ‘regime change’ in Greece.

According to the dominant narrative, the problem with Greece is a chronic lack of export competitiveness, which demands a new approach based on cheap labour and doing away with any environmental restrictions, urban planning regulations and archeological protections that could discourage potential investors. The aim is to turn Greece into one big Special Economic Zone for investors.

What is not mentioned in this narrative, however, is not only that the social cost is going to be tremendous, but that it would lead to a hopeless ‘race to the bottom’, since there are always going to be countries, even in the close vicinity such as Bulgaria, with lower wages.

Competitiveness does not rely only on labour cost but also on productivity, and this has to do with infrastructure, knowledge, collective experience and ability – exactly what is being dramatically eroded by the current economic and social situation in Greece.

What is missing from this narrative is the crisis of the eurozone and of the whole European integration project. It is becoming obvious that the problem is the euro, a common currency in a region marked by great divergences.

The euro in a previous period functioned as a lever for capitalist restructuring through competitive pressure. At the same time it created increased imbalances, mainly to the benefit of European core countries such as Germany.

In a period of capitalist crisis, the euro only makes things worse, increasing imbalances and deteriorating the sovereign debt crisis. That is why the crisis of the eurozone is a crucial aspect of the current global capitalist crisis, and one of the main failures of neoliberalism.

Authoritarian mutation

At the same time, the European Union is going through a reactionary and authoritarian mutation. This is the new logic of European economic governance, as inscribed in the proposed new fiscal euro-treaty.

According to this, member states are going to include austerity measures such as balanced budgets in their national constitutions. European Union mechanisms will have the power to intervene and impose huge fines and funding cuts whenever they think that a member state is not prudent enough with its finances.

To this end the ‘expertise’ of the IMF in imposing austerity and privatisation is also used. The prevailing logic is one of limited sovereignty. Greece is a testing ground for this.

Under the terms of the troika bailout packages, there are already supervision mechanisms in place in all Greek government ministries, dictating policies in an almost neocolonial way. This is going to be the norm if the logic of this European economic governance is imposed.

Talking about a ‘democratic deficit’ is not enough. What we are dealing with is an aggressive attempt toward a post-democratic condition, with limited sovereignty and accountability and little or no room for political debate regarding economic policy, since these are to be dictated by markets through the mechanisms of EU supervision. Seeing ex-ECB central bankers such as Mario Monti and Lucas Papademos becoming prime ministers is more than symbolic.

But putting the blame only on the current configuration of the EU is also not enough. The most aggressive sectors of Greek capital (banks, construction, tourism, shipping industry, energy) are openly supporting its strategy.

Although sectors of capital have suffered from the prolonged recession, and despite the fact that the crisis has curtailed plans for a leading role in the Balkans, the dominant fractions are backing austerity and workplace despotism, doing away with all forms of workers’ rights as a means to regain profitability.

However, an increase in exports cannot possibly compensate for the shrinking of domestic demand, which can affect even dominant sectors of capital.

The Papademos government has been trying to pass the terms of this devastating austerity package by ideologically blackmailing Greek society through the threat of default and exit from the eurozone. But the question is not if Greece is going to default, but how.

The measures imposed are simply leading to some form of creditor-led default. They have already taken the steps of debt restructuring and a ‘haircut’ of the previous debt – with society taking the full cost.

Radical alternatives

That is why Greece defaulting on its own sovereign terms – that is, choosing the immediate stoppage of debt payments and of annulment of debt – is the only viable way to avoid social default. It is also necessary to immediately exit the eurozone.

Stopping debt payments and reclaiming monetary sovereignty will help public spending on immediate social needs and will help stop the erosion of the productive base by imports. This is not a nationalist choice, as some tendencies of the Greek and European left have argued, but the only way to fight the systemic violence of the current policies of the EU.

In fact it is truly internationalist, in the sense of being the first step toward dismantling the aggressive neoliberal monetary and political configuration of the EU – something which is obviously in the interest of the subaltern classes all over Europe.

Stopping debt payments and exiting the Euro are not simple technical solutions. They must be part of a broader set of necessary radical measures, which must include nationalisation of banks and critical infrastructure, capital controls and income redistribution.

But even these measures are not enough. What is needed is a radical alternative economic paradigm in a non-capitalist direction. It must be based on public ownership, new forms of democratic planning and workers’ control, alternative non-commercial distribution networks, and a collective effort toward regaining control of social productive capabilities.

Rethinking the possibility of such radical alternatives is not a simple intellectual exercise. It is also an urgent political need.

Against the current ideological blackmail and the attempt by the government, the ruling classes and the EU to present extreme austerity as the only solution, what is needed is not just to say no to austerity but to bring back confidence to the possibility of alternatives.

Urgent challenges

Hegemony, in the last instance, is about who has the ability to articulate a coherent discourse about how a country and a society is going to produce, cater for social needs, be organised and governed. The crisis of neoliberal hegemony is indeed opening up a political and ideological space for the emergence of such a counter-hegemonic alternative – but it is not going to last forever. In the absence of a positive vision the ruling classes are aiming at individualised desperation and sense of defeat as a means to maintain dominance.

Rebuilding people’s confidence in the possibility of alternatives requires the collective work for a radical programme based upon the experiences emerging on the terrain of struggle. This is one of the most urgent challenges the Greek left is facing.

Despite the fact that a coalition government of ‘national unity’ under Papademos was practically imposed in November, the political crisis is far from over. Pasok (the Socialist Party) is facing its biggest crisis ever, while the conservative New Democracy is facing increased pressure from its base not to accept the measures, and the far-right have exited the coalition government.

22 members of parliament from Pasok and 21 from New Democracy voted against the loan agreement. They were subsequently expelled from their respective parties, marking a new phase in an open political crisis.

The extreme pressures from the troika, with functionaries of the IMF such as Poul Thomsen acting as colonial governors, only makes things worse. Even though the agreement was passed through parliament, since Pasok and New Democracy had a combined majority that could compensate for dissenting parliamentarians, the political system is being stressed to its limits.

Attempts to create new political parties are under way, including an attempt toward a ‘Papademos’ party that could gather all those supporting ‘regime change,’ but they are far from gaining any momentum.

In such a conjuncture the left is getting increased support, but at the same time showing the limits of its strategy and programme.

Syriza (Coalition of the Radical Left) is still insisting on the fantasy of a democratic EU and refuses to bring forward demands such as the exit from the euro. The KKE (the Communist Party) despite its radical anti-capitalist and anti-EU positions, has sectarian tactics and underestimates the necessity of an immediate transitory program.

Antarsya, the anti-capitalist left formation, has played an important role in the struggles and in articulating political goals such as the annulment of debt and the exit from the euro – but it does not have the necessary access to large layers of the subaltern classes.

Radical recomposition

What is needed is a radical recomposition of the Greek left, both in the sense of the collective elaboration of a radical alternative that can create the possibility of counter-hegemony, and of a radical Left Front that could represent the emerging new subaltern unity evident in mass demonstrations and strikes, in forms of self-organisation, in networks of solidarity and in collective experiences of struggle.

Currently Greece is entering a new phase of a protracted ‘people’s war’ against the policies of the troika. The 48-hour general strike on 10 and 11 February and the mass demonstrations and street clashes on 12 February have become the new turning points in the struggle.

This people’s war is far from over. Facing the danger of an extreme historical reverse, we refuse to despair. We insist on the ‘windows of opportunity’ for social change the current situation opens. We shall fight to the end.

Panagiotis Sotiris lives on the island of Crete, Greece. This article first appeared in The Bullet, produced by Canada’s Socialist Project.

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