|Recent protest in Athens, Greece, against cuts in wages, pensions of government workers.|
The plan, promoted above all by the rulers of Germany and France, technically avoids a default on interest and principal payments to banks and other holders of Greek debt throughout the continent. Bondholders, a category that roughly coincides with the biggest capitalist owners and ruling-class families, are asked to accept whats being called a 50 percent haircut on the Greek debt they hold. Those who choose not to accept the offer, betting they will eventually be paid in full, stand to lose much more. The European Central Bank and the International Monetary Fund, which lent $150 billion to Athens last year and in July offered a similar size bailout package in exchange for steep austerity measures, are not part of the write down.
The largest share of Greek debt is held by banks in Greece. Outside the country, banks in France and Germany, the two strongest powers among those who share the euro as a common currency, stand to lose the mostmore than $27 billion between the two of them, according to figures from the Bank of International Settlements.
Sharpening conflicts among capitalists powers of Europeparticularly those at different levels of industrial development and social conditionsis exploding the myth of a united Europe and viability of a common European currency.
Days after the latest bailout package was announced, Greek Prime Minister George Papandreou called for a referendum on it to take place early next year. A no vote would immediately pose whether Athens will leave the eurozone. Expressing shock at the call, German and French officials summoned Papandreou to crisis talks November 1, reported Reuters.
Whether Athens defaults in the nearer term or accepts further rescue loans from the more powerful ruling classes of Europe to ensure continued payment of its debton condition of enforcing further austerity measuresthe consequences for working people in Greece will be devastating. The same applies to the heavily indebted nations of Ireland, Portugal, Spain and Italy. Pumping in more euros in an attempt to stem the spiraling debt crisis in the eurozone will increase inflationary pressures, another way in which workers can expect to be hit throughout the continent.
Working people in Greece have already been clobbered with some of the stiffest austerity measures in Europe, including two previous ones, with more attacks to come. Unemployment is officially at 16.7 percent with many public sector jobs targeted for elimination. The government projects national income to decline by more than 5 percent this year and just raised the sales tax from 19 to 23 percent. All these measures, designed to foist as much of the burden as possible on the backs of working people, in turn accelerate the economic contraction and prepare the way for deeper economic and social crises.
According to the Wall Street Journal, if the haircut goes well, Greeces debt level will decline from 164 to 120 percent of its Gross Domestic Product by 2020.
This deal does nothing to address the deep, structural problems Europe faces, an October 28 Investors Business Daily editorial bluntly stated. In fact, theyve just kicked the can down the road.
The roots of the crisis are not financial. For decades the propertied rulers have faced sharpening competition for markets, low-cost labor and raw materialsas well as declining profitability of investment in industrial production. This had led them to seek other avenues of higher return. Instead of increasing employment in manufacture and other productive activity, they invest in ever-expanding and increasingly complicated forms of speculative debt. Among the massive credit extended by banks were loans to governments. With the expectation of unending interest payments, this increases the banks assets on paper, despite the fact that the loans cannot possibly be paid back.
As Karl Marx wrote in Capital, All nations characterized by the capitalist mode of production are periodically seized by fits of giddiness in which they try to accomplish the money-making without the mediation of the production process.
The U.S. banking system is also vulnerable, including through its holdings of credit default swaps, a financial derivative that Wall Street claims is a form of insurance against government defaults.
The so-called debt crisis in Greece is but the tip of the iceberg.
Spiraling debt in Italy
Italy, with the worlds eighth largest economy, is attracting increasing attention as the decisive country for how the eurozone debt crisis plays out, noted the Financial Times. Rome needs to refinance nearly $425 billion of its $2.6 trillion debt next year. French banks are particularly vulnerable with loans to Italy totaling more than $500 billion, dwarfing the Greek government debt held by French banks.
Italian Prime Minister Silvio Berlusconis austerity moves include raising the retirement age from 65 to 67 for men, selling off state assets, and making it easier to fire workers, according to Agence France-Presse.
In Portugal the government is seeking to implement a 30-minute-a-day increase in working hours without pay in private companies. Combined with eliminating bonuses equivalent to two months of wages, this could reduce some workers annual income by 24 percent, reported the Wall Street Journal.
Spain has the highest unemployment rates in Europeofficially 22.6 percent in September; among 16-24 year olds the rate is 45.8 percent.
In France, President Sarkozy is taking aim at the 35-hour workweek established in 2001. In an October 27 speech he asserted it has ruined the competitiveness of the country, reported the Financial Times.
UK unemployment rises, living standards fall
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