The euro zone is heading into stormy
waters. The crisis that opened with the near collapse of the world
banking system in 2008 has now deepened into a crisis of insolvency of
entire nations. The bourgeois has no idea of how to get out of the
crisis, which is sweeping like an uncontrollable tsunami from one
country to another in Europe. In the words of Italy’s finance minister,
“There should be no illusions about who will be saved. Like on the
Titanic, the first class passengers won’t be able to save themselves.”
The euro zone is heading into stormy
waters. The crisis that opened with the near collapse of the world
banking system in 2008 has now deepened into a crisis of insolvency of
entire nations. The bourgeois has no idea of how to get out of the
crisis, which is sweeping like an uncontrollable tsunami from one
country to another in Europe. In the words of Italy’s finance minister,
“There should be no illusions about who will be saved. Like on the
Titanic, the first class passengers won’t be able to save themselves.”
First
Greece, then Ireland and Portugal, and now Spain and Italy, one economy
after another is being dragged into an abyss. The fate of the European
common currency itself is being openly called into question. The euro is
being dragged under by the weight of huge national debts and the
effects of the global capitalist crisis.
One year ago, when the
Greek crisis was in full swing, the bourgeois consoled themselves with
the idea that only the states on the edges of Europe were in trouble.
But over the past few days, the idea of what the markets regard as the
risky periphery has got bigger and keeps expanding from one day to the
next. On Tuesday 12 July the Guardian published an editorial with the
following title: Italy and the eurozone: Welcome to the inferno.
European
stock markets experienced new and ever steeper falls, as fears spread
that Italy would be the latest victim of the escalating European debt
crisis, while Greece moved ever closer to a default. Bank shares slumped
across Europe, as rumours spread that Italy would soon be unable to
borrow on the international money markets. The euro continued to fall
against other currencies, and is now worth only $1.388.
In the
bond markets, the yield (interest rate) on Italian 10-year bonds
approached 6%, the highest in at least a decade. Spanish yields rose
still further, to 6.2%. Economists have warned that these borrowing
costs are approaching unsustainable levels. None of these things were
supposed to happen. The terms of the Maastricht Treaty prohibits big
deficits and budget deficits. But Maastricht is now only a dim memory.
Theoretically,
since all are members of the same single currency, with the same
central bank setting a single benchmark interest rate, each country
should be able to borrow at near enough the same rates. But over the
past couple of years the markets have begun to distinguish between the
stronger euro zone economies – Germany and its satellites (Austria, the
Netherlands and a few others) and the weaker economies like Greece,
Ireland, Spain and Italy.
Increasingly, the latter are being
charged punitive rates for money borrowed from the money markets. The
increased charges make the burden of debt heavier and even harder to
repay. So when a credit agency like Moody’s lowers the credit status of a
country, this action becomes a self-fulfilling prophesy.
This
poses a threat to the very existence of the euro zone. The European
Central Bank might be able to keep Greece afloat (although experience
shows that this is not so easy). It managed to stage a bailout for
Ireland and Portugal, which has solved nothing. But there is simply not
enough money in the ECB to bail out countries the size of Spain or
Italy. Any attempt to do so would soon exhaust the bank’s funds.
Failure of bailout
The
rescue package of close to a trillion euros that was hastily cobbled
together by European finance ministers last year has solved nothing. A
Greek default has only been postponed but very soon it will become
inevitable. All the attempts to prevent it will fail. The same European
finance ministers struggled to get an agreement on a second aid package
for Greece. Although in the end the latest round of austerity measures
were pushed through the Greek parliament, the markets have become
increasingly nervous as they can see that even these measures cannot
stop the inevitable.
The reason for this nervousness is clear. The
first Greek bailout of €110bn, did not work, but very soon Greece was
seeking a further €100 billion and more just to remain solvent through
2014. But the question is: who is to pay for all this? The EU leaders
are split over the issue: should Greece be eventually allowed to do a
soft, controlled, partial default on its debts which would force banks
and pension funds to lose some of the money they lent to Greece?
The
reason for this conflict is not difficult to see. The EU and the IMF
have hundreds of billions of euros in play in Greece. Therefore, the
central bankers want to put the entire bailout burden on taxpayers’
shoulders and want the aid packages to be funded from the EU’s rescue
fund. The leaders of Europe cannot agree. Each national bourgeoisie
wants to defend its own national interests – that is, the interests of
its own bankers and capitalists.
The Germans insist that private
investors must be involved in future additional aid packages for Greece,
but the European Central Bank begs to differ. Why? The Economist explains:
“The ECB wants to prevent a Greek default at all costs, and is categorically opposed to involving private creditors. The
ECB itself is sitting on a mountain of Greek debt and fears a chain
reaction if the country is categorized as being in default.” (my emphasis, AW)
This is an insoluble problem. The Economist writes:
“The
finance ministers want to square the circle. They want the private
sector contribution to be ‘voluntary’ but ‘substantial’ at the same
time. In addition, this debt rescheduling must not lead to the rating
agencies declaring that Greece has defaulted.”
But Standard & Poor’s indicated it would view such a move as a partial Greek default any way.
Rebellion in Greece
However,
they are all agreed on one thing: Greece must be made to pay. That is
to say, the Greek working class and middle class must be made to pay. To
justify the new bailout, both under its own rules and because voters in
Finland, Netherlands and Germany resent the bailout, the EU has
insisted on a new range of austerity measures, amounting to a 10% cut in
public spending, a 1/3 cut in the public wage bill and 50bn euros worth
of privatizations.
But there is a small problem. The Greek
working people rose up in revolt against these impositions. The streets
of Athens and other Greek cities were filled for weeks with angry
demonstrations. Papandreou this time eventually managed to get his
austerity programme through parliament. His majority, however, was
reduced and his government is now hated by the masses.
In the
middle of the crisis he offered a national unity government to New
Democracy, the centre right, who refused; he offered to stand down on
condition a new government signed up to the austerity plan. But the New
Democracy preferred to leave the dirty work to the PASOK for now. It is
desperately trying to hold on to electoral support by demagogic
opposition to the austerity measures, when it is abundantly clear that
once they return to government they will proceed with the selfsame
policies.
The fact is that the markets have long ago discounted a
hard default in Greece: 50 to 70% of the money is, as far as they are
concerned, as good as gone. This time round Papandreou, by imposing iron
discipline on his MPs, managed to squeeze through austerity once again,
but as even the recent package is not enough, and he will have to keep
coming back with more. And there is a limit to how far he can go. The
masses have moved in a decisive manner, they have had a taste of their
own power and strength, and they will move again. At some stage the
PASOK government will be forced out.
The law of the jungle
The
politicians do not know who to blame. Some point an accusing finger at
the three big rating agencies (Moody’s, Fitch and Standard &
Poor’s), which have colossal power in evaluating sovereign debt. It is
the power of the market made manifest. German Finance Minister Wolfgang
Schäuble complained that “last week there was a notification from a
rating agency related to Portugal that was generally met with total
incomprehension.”
“Europe can’t allow three private US enterprises
to destroy the euro,” European Justice Commissioner Viviane Reding told
the German daily Die Welt, in a reference to the so-called Big
Three (though Fitch is majority owned by a French company and is based
in both New York and London).
This is like blaming a thermometer
for registering a fever. If you accept the market economy, you must
accept the laws of the market, which are very similar to the laws of the
jungle. To accept capitalism and then complain about its consequences
is a futile exercise. A vast amount of money is constantly moving around
the world, like a pack of hungry wolves following a pack of reindeer,
seeking out the weakest and sickest animals. And now there are plenty of
sick animals to choose from.
Moody’s decision to downgrade
Portugal’s debt to junk status threw petrol onto a smouldering fire.
This decision took European politicians by surprise. They were indignant
at this action, which depressed share prices of major European banks
and also drove down the value of the euro against the dollar. Shares in
Portuguese banks, in particular, took a hit, with stock prices at Banco
BPI, Millennium BCP and Banco Espirito Santo falling by as much as 5 to 7
percent.
“That is a harsh reminder that the problems are still
there,” one trader told a news agency. “Now Portugal threatens to be the
next stone to turn. The people are nervous.”
Prime Minister
Coelho has only just taken office, but has showed himself to be
slavishly willing to implement the austerity measures imposed on the
country as a condition for the €78 billion bailout. The Frankfurter Allgemeine Zeitung writes:
“No
one in Lisbon had anticipated this stab in the back. The announcement
that Coelho’s new conservative government was being sold down the river
politically by Moody’s only two weeks after taking office, was sinister
news. In their ambitions to distance themselves from Greece in a
positive way, had the Portuguese not done everything correctly? Their
savings and reform programs were custom tailored to the demands of the
troika (the European Union, International Monetary Fund and the European
Central Bank)… And to quiet both the EU and the IMF, Coelho sought out
Vitor Gaspar, a man with a reputation when it comes to stability-related
policies that is practically German.”
The downgrade
is again a self-fulfilling prophecy. Moody’s are saying in so many words
that Portugal will not be able to regain investors’ confidence within
two years. But this downgrade has made Portugal’s fight to regain
investor trust impossible. Stock prices fell and interest rates rose
immediately after the announcement. The shock and anger is considerable.
A former government minister even spoke of “terrorism.” The effects
were felt not only in Lisbon, but also in Madrid and Rome.
Just
one week after downgrading Portuguese debt to junk status, the rating
agency Moody’s slashed Ireland’s credit rating to junk status also.
Ireland, unlike Greece, has met the targets set for it when it received
its €85 billion ($119 billion) bailout from the European Union and the
International Monetary Fund (IMF) last November. But the money markets
are unimpressed. They are well aware that Ireland is still struggling
under an immense load of debt and they have concluded that a new bailout
package is unavoidable.
Moody’s outlook for Ireland remains
negative, meaning that further downgrades are likely. Finance Minister
Michael Noonan on Tuesday admitted on television that the country’s
situation remained tenuous. “Ireland,” he said on state television, “is a
cork bobbing on a very turbulent ocean at present.”
What does
this mean for the people of Ireland? It means that all the sacrifices
have been in vain. The workers and farmers of Ireland are being asked to
make ever bigger sacrifices to pay the moneylenders. But, as in Greece,
the continuing attacks on living standards only serve to undermine the
economy. The growth of the Irish economy has remained sluggish,
reflected in falling tax revenues. Ireland is even less able to pay its
debts than previously.
For every step back the people take, the
bankers and capitalists will demand ten more. Society is entering into a
never-ending downward spiral.
Germany and the euro
The
ambitions of the German ruling class to dominate Europe following
unification two decades ago have blown up in its face. The realization
is gradually dawning in Berlin that the rapid spread of the economic
crisis threatens to drag Germany down. They failed to solve the Greek
crisis by a huge injection of cash. And there is not enough money in the
Bundesbank to underwrite the debts of Spain and Italy.
Market
fears are reflected in a sharp fall in the euro’s value against the
dollar. The European common currency is now at its lowest level against
the dollar in four months. The euro fell below $1.39 on Tuesday, down
from €1.42 at the end of last week, and further falls are inevitable.
The yield on the Italian 10-year bond rose to 5.9 percent, while the
yield on 10-year bonds issued by Spain, the euro zone’s fourth-largest
economy, rose to 6.28 percent.
All this is causing growing alarm in Germany, the EU’s principal banker. Die Tageszeitung writes:
“The
next approaching crisis – in Italy this time – shows that the euro
states’ rescue strategy isn’t working. In fact, it shows that one can’t
even call it a strategy, strictly speaking. Buying time, whatever the
cost – not much more than that has happened in the one-and-a-half years
since the Greek crisis erupted.”“The problem is that buying time
makes no sense. It entails the constant cobbling together of new bailout
packages while the speculators and their henchmen, the rating agencies,
set their sights on the next crisis candidate.”“Even though the
Italian economy is fairly solid by comparison with the other crisis
countries, the nation is an easy target. All market players know that
the Italian debt mountain was the highest in Europe until the Greek
crisis and that the Berlusconi government was usually too busy with
other matters to worry about the dreary task of balancing the budget.”
This
is causing Angela Merkel a gigantic headache. Splits are opening in her
governing coalition. The anti-euro camp in the German parliament is
growing. The polls show that up to 60 percent of Germans reject plans
for a second bailout for Greece. If this trend continues, Merkel will
find herself lacking the majority she needs. Under pressure from
domestic opinion, suddenly Merkel and Finance Minister Wolfgang Schäuble
are expressing support for debt rescheduling.
Der Spiegel writes:
“Italy
has slid into the speculators’ crosshairs amid concerns that the
euro-zone crisis could hit the country next. In many respects, Italy is
much better off than its neighbors on the periphery. But unlike Greece,
it is definitely too big to fail.”
However, Der Spiegel forgot to add – and definitely too big to save. Over the weekend, the German newspaper Die Welt
quoted an unnamed European Central Bank source as saying the European
Financial Stability Facility, the euro zone’s sovereign bailout fund,
which has a nominal size of €440 billion ($616 billion) euros, was not
large enough to protect Italy.
After Italy comes Belgium. The
markets are particularly worried that Dexia, a Belgian bank, could be
hit hard, bringing Belgian sovereign debt into the picture next. Can
Germany be expected to pay for all this? The question answers itself.
The German mass circulation paper Bild writes:
“Italy’s
weaknesses have become a focus for all the doubts that in truth are
directed at the euro overall: Will the euro states get to grips with the
debt and currency crisis? Or won’t they?“The euro will only
truly be saved if a convincing solution is found for Greece. That is
lacking at present. Who still believes that constantly lending billions
upon billions can do any more than postpone Greece’s insolvency and debt
restructuring?“As long as the euro states just play for time and
keep on shouldering new aid packages, the mistrust of the markets will
remain – and will in the end possibly focus on Germany.”
The
German political elite have concluded that a Greek default –
chaotically or otherwise – is inevitable. They want to use taxpayers’
money to bail out the affected north-European banks. Let wages be
slashed, let hospitals be closed, let the sick die, but the banks must
be saved at all costs!
Italy and the euro
As we have seen,
after dragging down Greece, Ireland, Portugal and Spain, the wolves are
now turning their attention to Italy, which has an enormous mountain of
debt, amounting to around 120 percent of the country’s gross domestic
product. This is the second highest level in the EU after Greece.
Moreover, Italy has €335bn of loans maturing over the next year, much
more than Greece, Ireland and Portugal put together. It will need to
borrow hundreds of billions and each time it asks for a loan, investors
around the world are likely to worry whether it will be repaid, given
its huge public debt.
Since the global economic and financial
crisis, the country has only been able to manage growth of a single
percentage point annually. Economic growth in the first quarter of this
year was just 0.1 percent, well below the euro-zone average of 0.8
percent, and the prospects of a recovery are not promising. Just how it
plans to pay off its debts remains a mystery. Investors are suddenly
asking how the government in Rome plans to ever pay off this debt.
The
government’s borrowing costs increase day by day, threatening to
strangle the Italian economy in the long run. So far, Italy has not had
problems issuing new debt, but worries are growing about the rising cost
of financing existing debt. The interest rate on 10-year bonds rose to
5.5 percent on Monday. The experience of other euro-zone members shows
that the critical level is around 7 percent. If yields rise above that
level, then markets develop their own momentum which is hard to stop.
This
is no surprise to the Marxists. We predicted it even when the single
currency was introduced. We said then that Italy, with its huge mountain
of debt, would be one of the euro zone’s weak points. Now the warning
signs are flashing. In May, Standard & Poor’s changed the outlook
for Italy to negative, on the grounds that the government was not
sticking closely enough to its austerity goals. In June, Moody’s
followed, announcing it wanted to review Italy’s AA2 rating, on the
grounds of the country’s weak economic growth, low productivity and
“rigid labour market”.
The risk premium on Italian government
bonds reached a new high on Monday, stocks fell and the Milan stock
exchange restricted short-selling as a precaution. After having
sustained losses of 3.5 percent on Friday and 4 percent on Monday, the
market indices in Milan on Tuesday morning looked disastrous. Shares in
the country’s biggest bank, Unicredit, lost 5.5%. Intesa Sanpaolo,
Italy’s second-largest bank, and Monte Paschi also dropped. Trading was
suspended in some banks.
The stock market fell by up to 5 percent
in the first few hours of trading. The yield spread between Italian and
German debt kept widening as well. Just a few weeks ago, the rate on
Italian 10-year bonds was just two percentage points higher than
comparable German paper. On Monday, the difference grew to three percent
and on Tuesday it reached 3.5 percent.
Doubts about the stability
of the Rome government and a deep scepticism about the country’s
finances form a dangerous mixture. The national debt is at 120 percent
of gross domestic product (GDP), the second highest in the euro zone
after Greece.
Italy is one of the seven leading industrial nations
(G-7) and the euro zone’s third-largest economy. A crisis in Italy
would have devastating effects on the whole of Europe. The euro slid
Monday on concern about Italy, trading down 1.5 percent at $1.4050 at
the start of US trading. European stock markets have also been falling.
The trigger for the market uncertainty was precisely the instability of
the government in Rome.
Economists have repeatedly stressed that
“Italy isn’t Greece or Portugal,” and “Italy’s economic fundamentals
aren’t that bad.” That may be true, but it will not convince the markets
in their present state of nervousness. The Corriere della Sera
stands strong: “It doesn’t help to get excited about international
speculators. If we conduct ourselves seriously then we have nothing to
fear. Unfortunately we have not been serious up until now. For that, the
markets are paying.”
The question is: exactly how are Italians
supposed to demonstrate their “seriousness” to the markets? The answer
is provided by Greece: only through massive cuts in living standards.
Downward spiral
In
reality, Italy is teetering on the brink of a downward spiral of
downgrades and rising bond yields. The consequences would be disastrous,
not just for Italy but for the euro zone. A new banking crisis would
hit the EU. German banks hold €17 billion in Greek debt, but have €116
billion in exposure to Italian debt. The economic destiny of Germany is
now indissolubly linked to a Europe that resembles a hospital ward for
the terminally sick.
German Chancellor Angela Merkel on Monday
responded to mounting concerns over Italy by urging the country to pass
its planned budget cuts to help restore confidence. Merkel said “Germany
and all euro partners are steadfastly determined to defend the
stability of the euro.”
“I have full confidence that the Italian
government will pass exactly this kind of budget, I discussed this
yesterday with the Italian premier,” said Merkel.
In an attempt to
calm the bond and equity markets, Italy’s finance minister, Giulio
Tremonti, promised to “send the markets a strong signal”. This “signal”
consisted of an unprecedented package of austerity measures: a
four-year, €40bn programme of cuts. This is a desperate attempt to
balance the budget by 2014 and begin reducing the level of debt.
The
international bourgeoisie is increasingly alarmed at the Italian
situation. The International Monetary Fund (IMF) has asked Italy to
ensure “decisive implementation” of spending cuts to reduce the
country’s debt. Angela Merkel told a press conference in Berlin that
Italy had to agree “on a budget that meets the need for frugality and
consolidation”, adding, “I have full confidence the Italian government
will pass exactly this kind of budget.”
But Tremonti’s signal did
nothing to halt the panic. The yield on 10-year Italian government bonds
soared to 5.565% – the highest since May 2001. This signifies a sharp
increase in the state’s borrowing costs. The panic spread to the stock
market where Italian banks, leading holders of their country’s debt,
suffered sharp falls.
International finance capital remains
sceptical about the ability of the present government to carry out the
necessary cuts. Tremonti speaks for the Italian bourgeoisie. But Prime
Minister Silvio Berlusconi is more interested in saving his own skin
than saving Italian and European capitalism. Silvio is preoccupied with
his scandals and legal battles.
When it came to a massive, €47
billion austerity package, Berlusconi attacked his finance minister,
saying he was not a “team player.” He then referred to “Tremonti’s plan”
as though he had had nothing to do with it. He publicly announced
changes to the austerity package, and seemed to be planning to get rid
of the finance minister. This will be even easier now, because Tremonti
and one of his closest allies, Marco Milanese are under investigation
for corruption. Milanese allegedly provided Tremonti with an apartment
worth €8,000 per month for free.
In ancient Rome, a failed
politician was expected to fall on his sword. But this is not ancient
Rome. Berlusconi correctly assumes that further cuts would be unpopular.
In a newspaper interview, he said “politics was about votes”. Tremonti
was recently quoted as saying that if he should fall, Italy and the euro
will follow. Perhaps he is overestimating his own importance. But the
nervousness in the markets shows that the bourgeoisie share his opinion.
Bankruptcy of the “Left”
Ordinary
Italian families are cutting back their spending. Only one in five
Italian families is planning to take a vacation this year and most of
them are contemplating staying away from home for not more than a week.
Last year about half the population took a summer holiday.
People
phoning in to a radio talk show on the state broadcaster RAI on Tuesday
were alternately panicky and angry at the government for failing to come
to grips with the dire economic picture being painted every day in the
local media. “If we are the victims of speculators in both near and
distant countries, can this be called democracy?” one woman listener
asked.
The ruling class is well aware that it cannot depend on
Berlusconi to defend its interests. The Berlusconi government will be
the most hated government of any since 1945. The present mood of sullen
acquiescence will turn into fury. The scenes we have witnessed in Greece
will be replicated in Italy. The present right-wing coalition will fall
and new elections will be called. The bourgeoisie has no alternative
but to pass the poisoned chalice to the “Centre-Left”, whose
ex-Communist leaders are eager to drink it to the dregs.
On
Tuesday, Giorgio Napolitano, appealed to the opposition for “national
resolve.” And he quickly got what he wanted. All three opposition
parties in parliament pledged not to stand in the way of the passage of a
package of austerity measures. They said they would not vote in favour,
but they promised not to slow down the bill with a long list of
amendments.
The leaders of the “Left” in Italy behave as their
equivalents in every other country. No sooner does the ruling class lift
its little finger than they fall over themselves in their haste to
demonstrate to the capitalists that they are “responsible statesmen” who
can be relied upon to hold high office. This shameful conduct may
convince the ruling class that the “Left” can safely be entrusted with
the administration of capitalism, but the working class will pay a heavy
price for this “responsibility”.
It is partly for this reason
that the Milan stock exchange experienced a partial recovery on Tuesday.
The risk premium on Italian bonds dropped again and is now back to just
three percentage points higher than the German benchmark. But this is
only the calm before the storm.
Massimo D’Alema, head of the
Democratic Party, said that once the austerity package is passed,
Berlusconi should “go immediately” and make room for a new government
aimed at improving the country’s financial health. The “Left” leaders
are greedy for the fruits of office. They are in a hurry to enter the
government, where they will faithfully do the bidding of the
bourgeoisie.
The only slight problem is Berlusconi himself. He
continues to insist that his coalition is “unified and determined.” He
welcomed the conciliatory gestures from the opposition – and said
nothing at all about a possible resignation. In the end, his future,
like that of Italy, lies more in the hands of the financial markets than
it does with the Italian parliament or electorate. And the markets are
already signalling the end of the road for Berlusconi.
The budget
will hit the poor hardest: increased health charges and a freeze on
cost-of-living increases for higher-value state pensions. More cuts must
be made by local and regional authorities, which are set to lose €10
billion in central government transfers. The budget also includes a rise
in the stamp duty on government bonds that have for years formed the
core of every middle class Italian’s savings, which could sharply reduce
their income.
This will hurt many of Berlusconi’s voters and even
more of Bossi’s [leader of the Northern league in coalition with
Berlusconi], further undermining an already shaky coalition. The biggest
threat to Berlusconi is a civil action brought against Fininvest, the
firm at the heart of his business empire, by a company belonging to his
long-standing rival, Carlo De Benedetti. Alarmed by the bad result of
the ruling parties at local elections in May, the leader of the Northern
League , Umberto Bossi, is demanding a U-turn: tax cuts funded by
drastic cuts focused on defence spending.
The moment of truth approaches
The
moment of truth is rapidly approaching. A Greek default will cause
panic on a scale not seen for decades. The collapse of confidence will
reach the point where one bank refuses to lend to another. This is what
the Euro policy makers fear. If it is triggered, it will have a huge
impact the whole world economy.
European government bonds, which
were once regarded as the safest of safe havens, are now regarded with
universal suspicion. The worries that Greece will not be able to repay
its debts have spread rapidly to other countries showing symptoms of
economic and financial sickness. Contagion is quite a good word to
describe the present situation. The nervousness that grips the markets
is like a highly contagious disease. It is spread by the air and once it
enters the brain, it is fatal. There is no known antidote.
We
pointed out even before the euro was launched that it is impossible to
unify economies that are pulling in different directions. Now some
bourgeois economists are warning that the pressures and tensions
building up can lead to the collapse of the single currency. For the
first time, the question is openly being aired of the possibility of the
breakup, not just of the euro, but of the EU itself. The slump in the
euro is an expression of the insoluble contradictions of the European
Unity.
Jane Foley, senior currency strategist at Rabobank International, says:
“The
contagion that is eating its way through the Spanish and Italian and
other European bond markets has a self-prophesying element to it. The
greater its foothold the more difficult it will be for affected
countries to keep their debt maintenance costs and budgets in line […]
Too much more delay and EMU [Economic and Monetary Union] could
implode.”
If, as seems probable, Greece is forced out
of the Eurozone, nothing will be solved. It will still be forced to
implement a vicious austerity policy. The price of economic sovereignty
will be very high: a worthless currency, soaring inflation, a collapse
of investment and massive unemployment. Inside or outside the EU, there
is no solution for Greece on the basis of capitalism.
The Greek
working class has already shown that they totally reject any more
austerity. At some stage Greece will have to default and refuse to pay
its debts. This will give Ireland and Portugal ideas. Why should we
accept cuts if the Greeks have rejected them? The ground would be
prepared for a chain of defaults that would shake Europe to the
foundations.
“Contagion” is on the order of the day, not only on
the economic but also on the political plane. The working class in the
past 60 years conquered through struggle what we may call the conditions
for a semi-civilized existence. The existence of these social conquests
has now become intolerable to the capitalist class. That is the real
meaning of the attacks that have been launched everywhere. But the
workers of Europe will not sit with their arms folded while the ruling
class systematically destroys all the gains of the last half century.
The stage is set for an explosion of the class struggle everywhere.
