Last year stiff austerity measures were imposed in Greece by that countrys capitalist class and its European counterparts in exchange for a $150 billion loan by the International Monetary Fund and European Central Bank. In July European capitalist figures floated a similar size bailout with even deeper cuts.
The Greek government now projects a 5.3 percent decline in national income this year. Unemploymentalready 16.3 percent even by official figures, with almost half without work for a year or moreis still on the rise. On September 7 Greek Finance Minister Evangelos Venizelos announced a further 20 percent cut in government workers.
On behalf of bondholders pressing to squeeze more wealth from working people in Greece, the IMF, ECB, and European Commissionthe so-called troikahave told Athens it must lay off 100,000 workers by 2015 and shift 50,000 into a special labor reserve to work at 60 percent of their wage. Among other measures demandedhere and noware rescinding all government hiring for the past 20 months, cuts in pensions to farmers and seamen, and major tax hikes.
Among banks hit hardest are those in France and Germany, Europes strongest capitalist powers. French bank loans to Greece total $89 billion, says the Bank for International Settlements. Germany is assuming a 50% loss for their banks and insurance companies if theres a default, says financial writer John Mauldin.
U.S. banks such as JPMorgan Chase, Citigroup, and Bank of America are vulnerable too. This is largely due to their trafficking with banks in Europe in what are called credit default swaps. Painted up by Wall Street as insurance against defaults, the swaps are really a form of massive speculative bets by competing capitalists since the mid-1990s, as prospects shrivel for profitable returns on investment in expanding industrial plants, equipment, and jobs.
Even if U.S. financial institutions have extended relatively little in loans to Greece or other weaker capitalist powers in Europe, it remains to be seen how much theyre on the hook for in the event of runs on major banks in Europe drowning in such debt.
At stake, among other things, is survival of the eurozone, that is, the 17 countries using the euro as their currency. These countries are ruled by competing capitalist classes and have sharply different levels of industrial development and social conditions.
The class arrogance and callousness of the capitalist rulers of the strongest EU countries toward workers and farmers in the weaker nationsPortugal, Ireland, Greece, and Spainis shown by an acronym for these countries thats become common in the capitalist media. Leave the Euro to the PIGS is how that imperial attitude was captured in the headline of a recent Wall Street Journal opinion piece.
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