Greek nightmare never ends

So the Greek parliament narrowly passed the latest round of fiscal austerity measures amid scenes of street protests and a general strike outside.  The coalition of three collaborationist parties buckled under the pressure and the small Democratic Left party abstained in the vote.  The ‘social democratic’ PASOK had to expel five MPs who voted against and the conservative New Democracy also exited one member.  That left the government with 153 votes against 128 against with the 16 DL members abstaining.   Financial markets breathed a small sigh of relief.

The Greeks will now get their bailout funds that have been withheld from the EU leaders some time next week.  Most of the tranche of €31bn will be used to bail out Greek banks that have taken a huge hit from losses on the Greek government bonds that they held in the previous ‘restructuring’ of Greek government debt. But the banks will not have to be nationalised and very little of EU funding will go towards helping the Greek economy or even government budget needs.

Instead, a new round of vicious reductions in government spending will be imposed.  The austerity measures include raising the retirement age from 65 to 67 years, with pensions being cut by 5-15% (on top of previous cuts).  Christmas, Easter and holiday payments will be scrapped. Lump sum payments for people who enter retirement will be cut by up to 83%, depending on the sector.  So-called “special salaries” in the civil service, which are paid to military personnel, security services, judges, doctors and judges will be cut by 30%. Employees at public enterprises face similar wage cuts as they will be inducted into the across-the-board pay structure for the civil service. This means that salaries will fall by 30-35% and a ceiling of 1,900 euros per month will be set. There will also be pay reductions for ministry staff, local authority workers, employees at the National Intelligence Service and the country’s president.

You might say that these better off civil servants should suffer like everybody else – and it’s true that the government has spared the military and the judges up to now.  But the real hit is to jobs across the board in the public sector with a programme of job losses for 2000 workers before Christmas and a further 6250 every three months next year with a limit of one new hiring per five redundancies until 2016.  The national minimum wage will be slashed and the redundancy notice period reduced.  The labour market is being ‘freed up ‘ with Sunday opening and the deregulation of professions.  These latter measures don’t look so bad, but remember it’s the job losses, the wage and pension cuts and the power to hire and fire that is the real aim to reduce wage costs.

The government’s draft budget shows that Greek GDP in 2013 will be 22% below its 2007 peak. Over 800,000 people have already lost their jobs and unemployment is at 25.1%.  And the new measures show that the worst is yet to come.  So far most of the austerity in the government sector has been achieved by slashing government investment (down 39%) and weapons purchases (down 84%), while just not paying bills for drugs, equipment and services in hospitals and schools (€11bn in unpaid bills to suppliers).  But because of the collapse in the capitalist sector of production, social benefits and welfare spending rose.

Now the Troika and the government intend to destroy what is left of the welfare state in Greece and any public services and really get costs down.  Of course, it has failed to catch any of the rich Greek tax evaders who have fled with their money to places like London to buy big properties.  The journalist who revealed that there was a list of Greeks with Swiss bank accounts (including prominent ex-ministers) was promptly arrested for his pains (he was eventually released, but no action has been taken on the list).  Instead massive hikes in personal and sales taxes on the average Greek have been imposed in order to drive tax revenues up.

By the way, it’s the same story in Cyprus, the little bit of Greece on an island.  Cyprus and its banks have been used as an offshore banking haven by Russian mafia and oligarchs to hide their money.  This “black money” amounted to €26bn—about 150% of the country’s GDP.  There were over 40,000 ‘mailbox’ companies in Cyprus.  Financial services and banks accounted for up to 70% of the country’s economy.  Cyprus became the largest foreign investor in Russia.  But the Cypriot banks also used these funds to invest in Greek government bonds and property!  With Greece prostrate and having ‘restructured’ its bonds, the Cypriot banks are now bust.  They must be bailed out at a cost to the EU of about €11bn.  This bailout is solely for the purpose of ensuring that the Russian mafia get their money back.

But there is no alternative.  At least so claims Jean Claude Junker, chairman of the Eurogroup of euro zone finance ministers.  He told some Asian journalists “Our Greek friends have no options or choice. They have to do it. And my impression is that the reforms which are (being) undertaken in Greece are increasingly better understood by the Greek citizens.”  Really, well they are certainly being felt.

Of course, there is an alternative as outlined in previous posts.  Instead of imposing more austerity on Greeks, the government could negotiate a complete ‘restructuring’ of its debt with the EU leaders.  It could nationalise the banks and turn them into vehicles for loans to small businesses and households and use the money that it no longer had to pay in interest on its debt to fund new investment projects; it can chase the tax evaders and bring them to account; and it should expect help from the EU to fund projects for economic recovery.

Instead, the EU Commission has announced in its latest economic survey that the policy of austerity is working and should be continued for the likes of Greece, Portugal, Ireland and Spain.  The EU Commission is now a huge bureaucracy of 41,000 bureaucrats. In 2011, they spent €129 bn, of which the European Court of Auditors found that they had ‘lost’ 5%, or €6bn a year.  Also, the Commission never bothered to collect 57% of the fees etc from businesses for their services.

The EU can afford to help Greece and the EU budget is being discussed on 22 November.  But the EU leaders won’t be discussing how to help Greece, however, but instead on how to reduce their budget.

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2 Responses to “Greek nightmare never ends”

  1. henry Says:

    Micheal,

    I think you did a great job! People should also read “Can austerity work?” http://thenextrecession.wordpress.com/2012/09/30/can-austerity-work/
    There you explain what the purposes of these austerity measures are, such as reducing the unit labour costs and increasing the rate of surplus value, unfortunately the occ rises and the rate of profit declines…Could there be a connection between a rising rate of surplus value and a rising OCC in the case of Greece? Greece is producing mainly consumer services and industrial products for the Greek market, which means that reducing the wage rate will immediately reduce the capacity utilisation ratios of national corporations and firms, creating a rising OCC and falling rates of profits, this is reflected in a collapsing Greek economy or their version of the Great Depression….

  2. henry Says:

    Micheal,

    I like to add that current account and trade deficits, rising long term interest rates and cutting the budget deficit as in the case of Greece, all accelerate the collapse of investment and the falling rate of profit and contribute to their version of the Great Depression..

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