Greece’s heavy load

While the UK left is divided over how to respond to Brexit, the people of Greece continue to groan under the burden of EU-backed austerity. Jane Shallice reports

May 23, 2017 · 9 min read

October 2016. A taxi in Athens. The four people squashed in are discussing places they’ve visited. ‘When I was in Macedonia . . .’

The taxi driver interrupts. ‘My English is not good – but you cannot say Macedonia, you are talking about Skopje!’ He speaks of the need for Greeks to maintain pride in their country and, passing some imposing building, waves his hand, saying when Erdogan visited, a Turkish flag flew on it. But no Greek flag. Turning to the man seated next to him: ‘You understand the importance of your flag!’ Our comrade smiles, and gently says he felt nothing but anger about the union flag, as it represents for him the crimes of British imperialism.

There is a sudden silence. Realising his opinions are going nowhere, the driver just says that the previous day he worked for 21 hours. ‘My rent has been rising. Food prices are going up. Taxes are increasing. As is petrol. I have to work and work.’ There is again a silence. ‘I am a human being. This is not a life! I am a human being.’

Back in London, watching the ending of I, Daniel Blake, I hear the same sentiments, the same tones, and recognise the same forces that created that last desperate statement. In the Ken Loach film, it is almost unbearable watching those trying to battle a system designed to demean and to deny. A system imposed by politicians serving the interests of finance capital. While food banks are running in a UK battered by the Tory austerity programme, in Greece ‘solidarity’ clinics, pharmacies, schools, and markets have opened in response to the EU-imposed strangulation.

If conditions for so many are desperate, why should we be concerned particularly about Greece? Is it a salutary reminder to supporters of governments parading under a left social democratic banner that they have no power to take on the representatives of capital or the institutions of the EU and the IMF? Is it that we need to support those who are still there in the fight? Or is it that this is and will be the future of many states? Where Greece leads the rest may follow.

Eyes on Greece

If there were not Trump, in all his manifestations, and May, with her ‘handling’ of Brexit, eyes would be focused on Greece. Once again, the Greek state is teetering under the burden of historic debts and its inability to deal with them.

All sorts of figures are being bandied around about the size of the debt: currently its extended debt is 239% of GDP (in 2011 it was 188%), whereas the public debt in 2016 was 179% of GDP. The IMF is arguing, accurately, that the debts are unsustainable and there has to be some ‘forgiveness’. This could affect German and French banks, which is why the EU and the European Central Bank (ECB) is resistent. The IMF is now arguing for loan extensions with lower interest rates and delays on repayments. If this is not agreed it is threatening to walk away from its involvement in the Troika (the EU, ECB and IMF), creating another crisis of dramatic proportions.

Through the 1960s, and particularly under the colonels from 1967 to 1974, Greek growth per capita was among the highest in Europe. The Financial Times stated at the time that Greece was ‘a promising place to do business, with credible monetary policies, contained increases in labour costs, social peace, decreasing restrictions on trade and a favourable tax regime’. After the end of the dictatorship in 1974, Greece continued to be open ground for the oligarchs (the largest being the ship owners), the banks and interests connected with political parties, many of whom had been hand-in-glove with the colonels.

The following 20 years saw mounting problems, with high and rising inflation, falling productivity, a necessary devaluation of the drachma and increased public debt. The Pasok (socialist party) governments in the 1980s failed to develop an industrial strategy or take on the unproductive oligarchs, and tax evasion became rife, aided by a monstrously complex tax regime. With the monopolisation of much of the economy and relatively easy credit, personal debts increased.

Joining the eurozone in 1990 enabled Greece to borrow at low interest rates, and government expenditure rose by 4.7% (the eurozone average was 1.9%). There was huge additional expenditure on the Olympics in 2004 with its ballooning budget deficits and Greece continued to borrow. Loans for the state were offered by European banks, primarily German and French, while Greek banks provided personal loans, all seemingly increasing with no brake.

Making Greece pay

It was only in 2010 that the Pasok government, unable to pay the debt interest, revealed the extent of the crisis. The EU response was categorical: Greece had to pay. The ECB announced it should do so by cutting public expenditure and extending privatisation – the model extensively peddled by the IMF and other neoliberal institutions throughout the world

Key for the EU and IMF was that the banks were not left with the debts they had created. (It is now said that Greece joined the eurozone on falsified debt figures, but it is never pointed out that Greece at the time worked with Goldman Sachs to cover up its economic status through complex and willfully misleading economic instruments.) A ‘rescue’ organised by the IMF in 2010 saw the ECB and IMF paying off €100 billion to bondholders. A further €140 billion was loaned in 2012. It was then that IMF managing director Christine Lagarde released a list of the major Greek tax evaders, who had secreted €50 billion in Swiss bank accounts, but the governing New Democracy party refused to act against them.

Under pressure from the Troika, Greece was forced to consider privatisation on a massive scale: islands, coastlines and other land, ports, airports, raw materials. Unsurprisingly, Greek banks were revealed not as public institutions working for the public interest but as private institutions used by the oligarchs and capital interests for their own insider dealings and for engineering the flight of capital.

The newly-elected Syriza government in 2015 set up the Debt Truth commission. It reported that the Greek debts accumulated prior to 2012 were ‘odious debts’, there being no popular approval of the loans. In international law such debts need not be paid. This argument fell on deaf ears.

Debt peonage

Yet the clarity of the situation shines through. When state debts become so huge that there is no possibility of redeeming them, it should be named for what it is: debt peonage. Capitalism has developed over the past 30 years with a much greater reliance on the financialisation of the economy and the ballooning of credit and its concomitant – debt. For individuals, mortgages, student loans, car loans and credit cards are commonplace, with the mounting burden of debt ever present but somehow ignored. If wages are suppressed within a system that demands that people keep spending and offers easy access to credit, indebtedness and impoverishment will surely follow.

Similarly for states. When Greece applied to join the EU in 1975, it was given a 10-year pre-accession period. All sorts of political rationales were argued at the time, when, following the removal of the colonels, there had been a huge upsurge in left politics. Workers were organising in unions, and there was an explicit anti-US position expressed with demands for Greece’s withdrawal from NATO. It was felt that there was an air of pending political crisis in southern Europe, and the EU needed to admit Greece as a member. These political considerations were dominant factors in Greece’s entry.

Once inside, relatively easy access was ensured to banks in France and Germany, with their eyes on future returns. But it was after 2010 that Greece really got sucked into a vast Ponzi scheme, being lent money to pay back their creditors and then having to borrow even more. The familiar story is that vast bailouts from the Troika were used to pay back the European banks. And as the economy became increasingly vulnerable, Greece as a state became defenceless, with its land, resources, industries and infrastructure offering easy pickings for the rapacious companies and states ready to suck them in.

Each time the debt payments loom, optimistic forecasts come from the EU and the ECB of increased growth over the next period. Currently they say it will be 2.7% this year, whereas the IMF says 1%. In February, however, it was announced that the Greek economy suffered a ‘surprise’ contraction at the end of 2016. The creditors are said to have been ‘championing the return of economic growth’ – clearly a wish rather than reality. The latest demands have been for Athens to legislate for €3.6 billion in additional taxes and cuts in pensions, which the Syriza government is saying it will refuse to countenance.

The IMF, now with a smaller proportion of EU members and hence a harder edge to its analysis, wants Greece to sign an indemnity, which would introduce more swingeing cuts in the future if the repayments are not met on time. For the EU, worried about the impact of headlines about Greek debt on European national elections this year, it is vital to avoid further stand offs. But the EU needs IMF involvement to ensure the continued commitment of Germany, among others, to the bailouts.

A warning to others

Within the EU, Greece is a warning to other countries where the fragility of their economies is masked by eurozone membership. A swathe of states – Italy, Spain, Ireland and others – have ongoing concerns about their banking and other financial institutions. EU member states have experienced austerity in a myriad of forms. These include many countries that are rarely, if ever, mentioned.

States burdened by constant austerity programmes where state assets have been privatised or bled dry. Low-wage economies desperate to attract the relocation of large companies. Places with high unemployment rates, which export their skilled people on a large scale, like Poland or Hungary or Romania, or like Greece, Spain, Italy, Ireland. The impact of out-migration has been disastrous for social and family life in many countries. In Greece, the departure of more skilled people is having a dramatic impact, but the huge social costs of losing such skills and experiences is never calculated.

Greece accounts for a mere 2% of the EU population and 3% of its total area, underlining the fact that any fight with the IMF/EU to unburden it from historic debts is supremely political. Almost all countries are facing indebted futures, in the EU and out, and there has to be support given to those trying to fight back now.

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