by V N Gelis
July-August 2010
The Latin-Americanization of Greece and the lessons for the European South*
TAKIS FOTOPOULOS At the beginning of February 2010, the European Commission (EC) announced plans for Greece which were characterised by The Guardian, with the usual British kind of understatement, as "the most intrusive scrutiny of an EU member state's fiscal and economic policies and bookkeeping ever attempted", while the Commissioner himself stated, "this is the first time we have established such an intense and quasipermanent system of monitoring" --a system that involved a stiff regime of quarterly reports from the Greek government on progress towards fiscal probity and the right of the EC to order extra action, if
needed. That was followed, a month later, by the announcement (made by the Papandreou government on behalf of the EC) of swingeing spending cuts and huge tax rises hitting the lower social groups. These measures involved, in a nutshell, shaving off a month's salary from the already low (by Eurozone standards) incomes of people employed in the public sector --who are estimated to be about one million, i.e. 20% of the total labour force-- squeezing of public spending, rises in indirect taxes including VAT, freezing of pensions and worsening of social security conditions with respect to pensionable age,
privatisations etc.
The severe cuts in civil servants' salaries and in public spending, which will be complemented by the indirect negative effects on incomes (through the multiplier effect), would bring about, according to DeutscheBank‘s predictions, a decline in the GDP by 4% this year alone, whereas the total decline of GDP during the implementation of the program in the next three years would be in the range of -12% up to -20%. The inevitable effect of these predatory measures will be an increase in poverty in a country --which (together with Spain) is the joint record holder of poverty in the Eurozone-- with almost 20% of the Greek population, being on the margin of poverty, struggling to survive. Furthermore, unemployment will become massive, as the dismantling of the productive structure, brought about by the opening of markets since the country' s joining the EU, will be complemented now by the effective dismantling of the public sector. However, as the public sector traditionally played a significant role in absorbing the excess labour within the country, the effects on unemployment would be drastic. The combination of poverty and unemployment, with the uneven effects of the increase in indirect taxes on low incomes, will further increase inequality, one of the highest in the EU. The inevitable result would be the creation of a number of wealthy oases for the rich (locals and foreigners), in the midst of huge deserts of poverty concentrated in monstrous urban conglomerations --exactly as it happens in similar cities all over Latin America at the moment.
No wonder that the announcement of the measures have created a huge "river of anger" that poured in the streets of Athens and other major cities in repeated general strikes and sometimes violent
demonstrations. Particularly so, as it is more than obvious that the measures announced will neither catch the enormous tax evasion, nor shall they force repatriation to the country of the 10 billion of Euros or so, already escaped abroad in the last couple of months since the crisis was announced, to be added to at least 60 billion Euros which had already fled the country! However, had these funds and the local wealth been subjected to a drastic proportionate extra property tax (something which is of course inconceivable for the elites), the famous debt problem could have been solved in a flash, without having to beg for new loans from the foreign elites, which (with profit in mind of course!) have been imposing onerous conditions that the future generations will have to pay for many years to come. This, despite the fact that it was the same elites and privileged social strata (local and foreign) who created and primarily benefited from the debt and the growth 'bubble' it led to.
The predatory measures imposed on Greece by the Directorate of the EU, expressing the Eurozone's political and economic elites, clearly give the impression of a complete colonisation of the country by the transnational elite. It is, obviously, one thing to implement similar measures by a formal consensus of the people (as in Britain, Holland, Sweden, etc.) and quite another to enforce compliance with such measures, as it happens now in Greece. Particularly so, when these measures do not have any popular legitimacy, given that the ruling "socialist" party was elected a few months ago on a program that provided for policies entirely different from those imposed now on the Greek people. This, despite the fact that the leadership of the ruling party was fully aware of the economic crisis --which is basically chronic-- and deliberately deceived the electorate, with the help of the political and economic elites controlling the mass media, which were keen to have a "socialist" party elected as the only one capable to implement such measures because of its comprehensive control of trade union bureaucrats.
The fact that the economic crisis is chronic is expressed by the postwar dismantling of the production structure, which was brought to completion with the opening of its markets to the world market --a process that was accelerated by Greece's integration into the EU at the beginning of the 1980s. The effective dismantling of the productive structure, in turn, inevitably led to the creation of "a consumer society without a production basis" and a continuous growth of the external debt, and consequently of the public debt that has presently exploded. Naturally, these developments did not --nor could they-- lead, anyway, to the formal bankruptcy of the Greek state, as this would have opened huge holes in the pockets of German and French holders of Greek state bonds and would put at risk the stability of Euro itself. Particularly so, when other countries in the European "South" face similar problems --i.e., what the capitalist markets call the "PIGS" (Portugal, Italy/Ireland, Greece, Spain). However, the price to be paid, particularly by the lower income strata (workers, employees, under-employed, unemployed and pensioners) in the coming years, will be very heavy indeed. No wonder the measures were presented by the media, in a massive brainwashing campaign, as unavoidable, something which is true only if we take for granted the present institutional framework of today's capitalist neoliberal globalisation, namely, the open and liberalised markets, which are the ultimate cause of the crisis along with the consequential treaties of Maastricht, Lisbon and the Stability Pact.
In this context, competitiveness, (which depends on low wages and employers' contributions/taxes, high productivity, price stability, etc.) plays indeed a crucial role with respect to an exporting economy that bases its development on the free movement of commodities and capital (like Germany or China!). The Euro, therefore, cannot be separated from the Stability Pact, as is hastily suggested by the reformist Left, because --in the given institutional framework-- it is only when the common currency is complemented by criteria like those prescribed by the Stability Pact that monetary stability and the competitiveness of the advanced capitalist countries in the Eurozone can be achieved. In other words, the policies of squeezing wages, prices and budget deficits, are necessary for the EU economic elites to be able of surviving in the competition with the corresponding elites in USA, China, etc.
But, if such policies are to the benefit of countries like Germany, which played a leading role in the design of the Euro, they are in no way beneficial to countries like Greece, Spain, or other countries in the European "South". Thus, it is true that the policy of "hard euro" and the consequent policies of squeezing wage costs had led to a significant improvement of German competitiveness and consequently of the German balance of payments which, starting with a deficit of 1% of GDP in the Balance of Payments on Current Account in 2000, achieved a huge surplus amounting to 5% of its GDP today. It is also true that, in the same period, the labour cost in the European South has risen faster than in the North and that in countries like Greece and Spain the increase in labour costs, faster than in Germany, has led to the decline of their competitiveness and has consequently worsened their balance of payments (Greece's deficit tripled in absolute numbers and Spain's increased by as much as six times, etc.). --which ultimately led to an increase in the pub
lic debt to finance the bubble of "growth" that Greece or Spain had enjoyed since their adoption of the Euro.
Yet, this does not mean that to avoid surpluses in the North and deficits in the South all countries in the Eurozone should follow the same policies of squeezing wages and salaries. One should not forget that, historically, wages in the South were (and still are) almost half of those in the North (e.g. the minimum monthly wage in Greece, Spain and Portugal in 2006 was less than half of that in the European North). Therefore, implementation of such policies throughout the Eurozone would simply lead to further divergence between the North and the South rather than to convergence, which is supposed to be a main aim of EU and the EMU! In other words, a real convergence in wages and salaries would have led to such huge differences in competitiveness between the European North and the South that no transfer of funds from a new institution (like the proposed by the reformist Left European Monetary Fund) would have been capable to eliminate. This is why a real convergence within a capitalist market economy has not been achieved even within single capitalist nation-states like Italy, Germany, UK, etc., let alone a monetary union like the EMU!
So, the problem with the EU and the EMU is neither their "lack of solidarity" towards a member state, nor the policies of "hard Euro" followed by the European Central Bank and the German and other elites, as the reformist European Left suggests. The real problem is the EU and the EMU themselves! As it could be shown by both theory and historical experience, in any economic union consisting of members characterised by a high degree of economic unevenness (as is the case with the EU), the establishment of open and liberalised markets for commodities and capital would inevitably lead to a situation where those that primarily benefit from the free movement of commodities and capital would be the more advanced regions/countries (which have already developed high productivity levels and advanced technologies) at the expense of the rest. It is not therefore surprising that, historically, none of the presently advanced capitalist countries
--which are now keen to promote the freedom of trade, etc. -- opened its own markets before it had already achieved a high level of
competitiveness for its own exports, under protected markets.
It is, therefore, imperative that the anti-systemic Left, in Greece and in Southern Europe in general, directly challenges the present European integration in terms of markets and capital, and fights instead for the establishment of a new confederation of European peoples, initially in the European South, where they share common economic, political and social problems. This is a first step towards the creation, in the future, of a new institutional framework which institutionalises the equal distribution of political and economic power among South European peoples, and among all citizens within each part of the confederation --a development that could serve as a model for the integration of European peoples as a whole, within a panEuropean confederation of Inclusive Democracies. This implies the elimination of power structures and relations, which characterise the present so-called "democracies" and capitalist market economies, and their replacement with new societies where the peoples directly, and not through "representatives," control the political process, as well as the economic process through the collective ownership and control of economic resources, within a framework of self-management by workers, peasants and students of factories and offices, farms and education places respectively, in a way that reintegrates society with Nature.
Pensioners have suffered the greatest so far in the first wave of IMF measures…. Economics of the EU and Greece
What has been sold by leftists and globalists who stand for the EU is that it is a form of charity which helps the small countries of the EU.
As the chart below shows Greece contributes the most as a percentage of its income to the EU.
http://news.bbc.co.uk/1/hi/world/europe/8036097.stm#start The entire 'surplus' it receives goes straight into agriculture which is then for export to the northern industrialised countries which can‘t grow enough food for their populations.
Hence the volumes of fridges produced by Germany have a higher net value than what is produced by agriculture in Greece.
Greece therefore received absolutely zero from the EU and props it up.
On paper Greece is a net receiver of EU funds to the tune of E8billion whilst contributing E4billion. Greece, the EU‘s highest military spender be tween 2000 and 2005, finally realized the cost of military purchases to its economy and decided to curb its military spending.
Greece bought 4% of all arms sold in the world in the past five years. Greece buys 31% of its arms from Germany, 24% from the US, 24% from France and 21% from other countries.
Turkey‘s military spending gradually declined and fell to $11.6 billion in 2008, while Greece‘s military spending consistently increased, reaching $9.7 billion in the same year.
http://www.todayszaman.com/tz-web/news-201848-arms-purchases-tocount... CAP was supposed to secure indigenous growth first i.e... Europe first but instead the Eurocrats have allowed imports to cripple European agriculture. The losses incurred in this run into billions for Greece.
Therefore 3 decades of membership of the EU have ensured Greece goes bankrupt and is looted dry, but a globalist with no maths or economics states the exact opposite.
Factor in the 3 million illegals that work just to send money home, implies the land of Greece is used to prop up the Germans and the French and their industries.
VN GELIS Debate with PR on the Nature of the Crisis…
The Eurozone after the Greek bailout
The Greek sovereign debt crisis briefly threatened the existence of the Euro itself. The response of the European financial authorities with the establishment of an overwhelming€750bn European Monetary Fund, based on the model of the IMF, has qualitatively accelerated Eurozone integration. Rather than the extensive development of the Eurozone, with the acceptance of ever wider and more marginal members into it, like Greece formerly and Turkey possibly, from here on in there will be and has been a qualitative advance of the pace of the European integration towards the formation of a European state. Capitalism advances by crises. And the threat of a Lehman style melt down advanced European integration further in a day than in the previous decade....writes Bill Jefferies
Karl said… How will a deepening of the EU be sold in Britain, which is not even part of the Euro? This crisis has brought all the contradictions of the EU to a head; I think the entire projects future is in question.
What about nations like Serbia, which are being asked to comply with some EU requirements in order to become part of the EU? Will these processes now be in question?
My crystal ball sees only problems ahead.
Tue 11, May 2010 @ 13:03
Bill jsaid… Certainly I think that new candidates are much less likely to be admitted now. The deal was sold as France - in favour of deepening - against Germany - in favour of expansion. Deepening won. From here on in, candidates will face much more stringent conditions. In fact it‘s likely they simply will not be accepted at all. Let's not forget Greece fiddled the books to guarantee their entry. They won't want that happening again. But national governments have surrendered their right to set their budgets to the new European fiscal authorities. That is a major step towards the establishment of a single European state.
From threatening the break of the EU the crisis has in fact strengthened its integration.
Tue 11, May 2010 @ 15:17
Greece’s Euro Entry
The mythology that Greece had something to gain from entry to the Euro is indeed a mythology perpetrated by the capitalist media. 11 years in the Euro and Greeks are now faced with pre-war conditions of labour rights and wages which will soon reach Egyptian levels if the cuts continue unabated seems to show what, that fiddling the books leads to bankruptcy? This reinforces the central myth of the EU that it isn't a vehicle for big business, but some form of benevolent charity, an OXFAM whose central role is to help the smaller nations, when in reality
the smaller nations are faced with national, economic and political annihilation. For EU integration cannot proceed apace without political integration. If one no longer has control over ones economy, politicians are defunct.
If one takes a long term view of history, not the narrow one presented in the article above, the $1trillion bailout with 25% of it being by the IMF implies strings will be attached. The Structural Adjustments programs which made the IMF synonymous with depression politics eventually leading to war and collapse has arrived in Europe for the first time, not via the back door, but in the front. For the IMF conditions in Greece are secret as they are for the whole of the EU.
Up until now we had bank bailouts now we are essentially having state bailouts. The issue now is who will bailout all these bailouts. The next phase of the crisis, will lead to dislocation, disruption and the unraveling of the EU. They bought some time for now...
Bill jsaid…
What are you on about? The article is all about the strings attached. OK I appreciate you've your own spin on things, but why not at least read the thing your slagging off?
Tue 11, May 2010 @ 20:25
Vngelis said…
The world‘s capitalists were never likely to repeat the mistake again.
Bill J I did read your piece. Wall Street 1929 occurred in the USA. The second leg of the crash hit European defaults. This recent $1trillion bailout is about what precisely?
A sign of the crash continuing or solidifying European integration? So whilst Vienna was the culprit way back in 1931 and Athens today, in what precise way will bond yields return to pre-bailout times? Default is postponed for now, but like the sword of Damocles it hangs above capitalism.
Tue 11, May 2010 @ 23:01