Wednesday, February 15, 2012

Greek update

 by Michael Roberts

Today, New Democracy leader Antonis Samaras finally buckled down to the demands of the Eurozone finance ministers and the Troika to pledge in writing that he would back the fiscal austerity measures and the other conditions of the EU-IMF bailout package.  Samaras said he was “committed” to the “objectives and key policies” of the country’s new loan deal with its foreign creditors, adding that “if New Democracy wins the next election in Greece, we will remain committed to the program’s objectives, targets and key policies”.

Samaras, when voting for the package in the Greek parliament on Sunday had hinted that he wanted to renegotiate the terms of the bailout if he formed a government after an election mooted for April.   That was too much for the Euro finance ministers and they called off the euro meeting planned for today to approve the deal.  The Euro ministers demanded that Samaras make a written pledge on the deal, that the current bankers government under Lucas Papademos identify exactly where some $320m in cuts would be made to meet the Troika’s fiscal target and to show that the proposed ‘voluntary’ public sector debt default was in place.  There was a shortfall because Samaras opposed cuts in supplementary (occupational) pensions demanded by the Troika.  Now it appears that the government cannot find enough cuts from defence, health and elsewhere and so it is reverting to the pension cuts after all!

Of course, Samaras was not holding out because he wanted to protect the interests and living standards of the Greek people.  Remember he had already expelled 20 of his MPs on Sunday for opposing the bailout agreement.  He wanted to appear to the electorate before the election as defending their interests.  But in reality, his plan to adjust the bailout package is designed to protect the interests of the Greek capitalist class.  His proposed changes to the fiscal austerity package are to be ‘fiscally neutral’ ie they still deliver the same amount of austerity that the Troika wants.  But Samaras wants to cut taxes for corporations and introduce a flat tax on personal incomes (again delivering lower taxation on the rich), while cutting public spending even more and introducing even greater measures of privatisation of state assets than the Troika proposes.

However, even the capitulation by Samaras is not enough for the Euro leaders.  They are worried that Samaras might backtrack on his pledge or that an April election will produce an unviable coalition at best, or, at worst, elect a leftist coalition government that opposes the bailout package and the Troika.  So the Germans, Finns and Dutch are proposing that the package be delayed in part or in full until the election is over.

By refusing to provide funds to pay off the bond holders, the Euro leaders hope to pressure the Greek people into voting for the parties that support the deal or face calamity in the form of expulsion from the Eurozone and the EU.  Remember that over two-thirds of Greeks asked want to stay in the euro and yet nearly 80% oppose the package.  The proposed delay by the Euro leaders is trying to break the will of the Greek people.

Now it may be that the French, Italians and Spanish, who also have debt problems, will not back this idea.  After all, on 20 March the Greek government is supposed to pay back around €16bn to bondholders.  It does not have the money, unless the EU leaders cough up the funds and/or the private sector haircut on the debt is implemented.  And that is before the election takes place.  Most likely, the EU leaders will find the funds for that payment, but then hold back on any more until the Greeks capitulate.

There is another problem with funds too.  If the voluntary ‘haircut’ deal to reduce Greek government debt goes ahead, then €35bn must be found to sweeten the deal for the bondholders and another €58bn must be found to recapitalise the Greek banks or they will go bust and have to be nationalised.
Is there any way out of this?  One of the leftist parties opposed to the Troika is the Coalition of the Radical Left (SYRIZA).  It has called for a renegotiation of the Greek government debt to exclude any losses for the state pension fund that the Troika plans to include in the deal; an end to interest payments on any outstanding debt (costing €17bn a year) and a switch of resources from bailing out the banks to investing in public sector projects for investment and employment.

Such an approach, moderate as it is (there is no call to leave the euro), is anathema to New Democracy, the Troika and the Euro leaders.  But SYRIZA leads the public opinion polls on such a programme.  The decisive test between the interests of Greek capitalism as represented by New Democracy and the interests of the capitalist European Union (as represented by the Troika) on the one hand, and the interests of the Greek and European people on the other, is coming to a head in just the next few weeks.

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