Greece under European Union diktat

[Hannah Bell]

For the first time since the introduction of its common currency, the European Union has made a country subject to its diktat...The basis for the virtual dictatorship of the EU bureaucracy is a plan submitted in January by the Greek government to the European Commission. The plan envisages an overall reduction in public expenditure of 10 percent, public service wage cuts and job cuts, a two-year increase in the retirement age, cuts in the health service, and higher taxes, including a tax surcharge on fuel...

In practice, this means that the elected members of the Greek parliament and the Greek government can no longer freely decide on expenditures that affect the lives of millions of citizens...This development has a significance that extends far beyond Greece. The Mediterranean country is to serve as a test case for the entire European Union. It represents merely the tip of the iceberg.

Spain, Portugal, Italy, Ireland and Belgium all have similar high levels of debt, and Austria is in danger of being dragged into the abyss by its ongoing banking crisis. Even the allegedly “strong” eurozone countries such as Germany and France have piled up record deficits.

These debts have arisen from the hundreds of billions pumped into the banks by European governments in order to cover the banks’ speculative losses and enable them to make fresh profits. Now, these gaping budget holes are to be plugged at the expense of the working class, with the European Commission assuming the role of chief debt collector for the banks.

Greece provides an especially lucrative prospect for the financial predators. It must pay 3.5 percentage points more interest on its debt than Germany, although it shares the same currency. The banks, which can borrow money from the European Central Bank at near-zero interest rates, are able to make an enormous profit lending to Greece at extortionate rates, which they justify on the basis of the country’s risk of a state bankruptcy.

Meanwhile, the country is being propelled into the vortex of international speculation, which in turn intensifies its budget crisis. According to the Financial Times, hedge funds and speculators invested around $8 billion betting against the euro last Monday, the largest sum ever invested on the expectation of a currency’s decline. Many media outlets have drawn a parallel with the speculation against the British pound carried out by George Soros in 1992, which led the British Central Bank to devalue the pound, resulting in billions in profit for Soros.

The crisis in Greece is attracting the most parasitic representatives of finance capital, whose methods resemble those of the Mafia, with the European Commission serving as the consigliere to the godfathers of finance...

http://www.wsws.org/articles/2010/feb2010/pers-f11.shtml

[DeSwiss]

1. K&R

[Hannah Bell]

2. thanks, apparently it has multiple cowardly unreccers.

[jannyk]

3. K&R

[muriel_volestrangler]

4. WSWS is wrong; maybe that's why you're getting unrecs

"These debts have arisen from the hundreds of billions pumped into the banks by European governments".

No, Greece's debts have come because its government has consistently been spending more money than it has taken in, and was hiding the fact from the world with accounting tricks.

The Greeks have never managed to stick to the 60 percent debt limit, and they only adhered to the three percent deficit ceiling with the help of blatant balance sheet cosmetics. One time, gigantic military expenditures were left out, and another time billions in hospital debt. After recalculating the figures, the experts at Eurostat consistently came up with the same results: In truth, the deficit each year has been far greater than the three percent limit. In 2009, it exploded to over 12 percent.

Now, though, it looks like the Greek figure jugglers have been even more brazen than was previously thought. "Around 2002 in particular, various investment banks offered complex financial products with which governments could push part of their liabilities into the future," one insider recalled, adding that Mediterranean countries had snapped up such products.
...
But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.

This credit disguised as a swap didn't show up in the Greek debt statistics. Eurostat's reporting rules don't comprehensively record transactions involving financial derivatives. "The Maastricht rules can be circumvented quite legally through swaps," says a German derivatives dealer.

In previous years, Italy used a similar trick to mask its true debt with the help of a different US bank. In 2002 the Greek deficit amounted to 1.2 percent of GDP. After Eurostat reviewed the data in September 2004, the ratio had to be revised up to 3.7 percent. According to today's records, it stands at 5.2 percent.

http://www.spiegel.de/international/europe/0,1518,druck-676634,00.html

Greece hasn't been bailing out banks. This is just its own financial problems, which the worldwide recession have made worse. It's not helped by Greece spending a higher proportion of GDP on defence than the USA (see https://www.cia.gov/library/publications/the-world-factbook/rankorder/2034rank.html ), or large amounts of tax evasion.

The problem is that an independent currency could be devalued, making its exports more competitive and imports to Greece more expensive. While this would be a bit of 'austerity' for those buying foreign goods, it would mean more employment inside the country, and that would eventually fix the government's finanical problems too.

But Greece is in the Euro. This is what the danger of a shared currency is - one part is hit badly in a recession, and the old ways the internaional economies readjusted aren't available. Which is why it may well be necessary (both financially and morally) for the other Euro countries to support Greece with loan guarantees or similar.

Of course, maybe the unreccers have done so because WSWS attacks the left wing PASOK government, the trade unions, and other parties it calls 'pseudo-left', and seems to be saying the solution is a bloody uprising against PASOK, the way the generals were got rid of 36 years ago. That's if they've bothered reading the whole article, of course.

[Hannah Bell]

5. EU didn't bail out banks?

European Bank Bailout Total: $4 Trillion

EU countries may have moved more slowly to rescue banks, but their total commitments have now reached a staggering sum, Brussels reports

http://www.businessweek.com/globalbiz/content/apr2009/gb20090410_254738.htm?chan=globalbiz_europe+index+page_top+stories



Thursday, October 2, 2008

The Greek government has issued a blanket guarantee of all bank deposits after panic withdrawals by customers in Athens and Thessaloniki, creating an unstoppable stampede across Europe for an EU-wide bail of the financial system.

Greek officials said the state would cover "all bank deposits, whatever the amount." The move follows the dramatic decision by Ireland this week to guarantee the deposits and debts of its six biggest lenders in the most sweeping bank bail-out since the credit crisis began.

Greece has so far escaped attention as the financial storm breaks over Europe, but the economy is deeply unbalanced. A torrid credit boom has been allowed to run unchecked, leading to a current account deficit of 15pc of GDP -- the highest in the eurozone.

While property losses are modest so far, the Greek banks have run into trouble rolling over short-term debts after the near total closure of Europe's capital markets. The liabilities of the Greek banks are roughly €320bn euros.

http://www.gata.org/node/6710


UPDATE: Greece Plans EUR28 Billion Bank Bailout Package - Fin Min
Wed, Oct 15 2008, 10:37 GMT
http://www.djnewswires.com/eu


UPDATE: Greece Plans EUR28 Billion Bank Bailout Package - Fin Min

(Adds further details.)

ATHENS -(Dow Jones)- The Greek government Wednesday unveiled a EUR28 billion package to help support Greek banks as part of a pan-European effort to restore confidence in the financial system.

The package comprises three specific measures. These include a government commitment to guarantee up to EUR15 billion worth of new, medium-term bond issues by Greek banks.

In addition, the government will inject into the banks up to EUR8 billion worth of specially-issued Greek government bonds to help shore up their capital base. Further, the government will also purchase up to EUR5 billion in preferred shares in the banks.

"The Greek financial system does not have the problems that exist in the financial systems in other countries. But without question, it has been affected by the international crisis," Finance Minister George Alogoskoufis said in a news conference. "The reason we are proceeding with this overall plan...is to confront whatever impacts may emerge in the economy (from the crisis)."

Greek banks have been largely insulated from the recent crisis on international credit markets. Nonetheless, the Greek government was among the first of the euro zone economies to issue a blanket guarantee on all bank deposits.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=cac1ad4a-747d-4f7e-9483-1fdaa4f42428.



interesting reading comprehension you have, btw:

"It is only 36 years since the Greek military dictatorship was brought down following seven years of bloody rule. A return to a similar state of affairs is not excluded. The logic of the EU policy points in this direction."


your translation: "seems to be saying the solution is a bloody uprising against PASOK"

[muriel_volestrangler]

6. Though they said that 'bailout' didn't affect the deficit

From the end of your last link:

"Alogoskoufis also stressed that the new measures - that only will be in effect through 2009 - would have no impact on Greece's fiscal deficit, projected to be equal to 2.3% of gross domestic product this year."

My 'translation' come from the paragraphs following the one you quote:

At present, the EU and the financial interests behind it are relying on the social-democratic PASOK, which owes its election victory last October to mass opposition to the right-wing Karamanlis government. For its part, PASOK relies on the trade unions, which seek to keep growing popular opposition under control by organising disjointed, limited actions aimed merely at letting off steam.

The unions, in turn, rely on the opportunist, pseudo-left parties—the Stalinist Communist Party and the SYRIZA alliance—to provide them with political cover, bolster their efforts to channel popular anger along nationalist lines, and block the development of a socialist and internationalist perspective for the working class.

These organisations, however, are increasingly discredited and could well lose control over the working population. The likelihood of an open confrontation is growing. Workers must prepare for such an eventuality by drawing the necessary political conclusions.

This is WSWS, remember, a Trotskyite publication of a party that calls for worldwide revolution. They're staying true to their roots by calling for revolution in Greece.

[Hannah Bell]

7. I don't care what they said, the fact is, the government gave $28 billion (8% of GDP) to their banks

& their workers are going to eat it. Poverty rate in Greece = 20%.

"These organisations, however, are increasingly discredited and could well lose control over the working population. The likelihood of an open confrontation is growing. Workers must prepare for such an eventuality by drawing the necessary political conclusions."

I fail to see the call to "bloody" revolution you read there.

It's a *fact*, if you push people too hard they'll fight back.

If I recall correctly, you were on the side of the bankers over the workers in the Iceland case too.