European capitalism's weak link?

THE GREEK economy is the "weak link" in the capitalist chain of the European Union (EU). The term--used by the revolutionary Lenin to describe Russia in 1917--was initially used in Greece by the radical left. But now, it's in broad use, even by Prime Minister Georgios Papandreou Jr., who, as head of the social democratic party PASOK, took office after the collapse of the right-wing New Democracy party in elections held in October 2009...

Politicians and the media blame the crisis on the supposedly generous Greek welfare state, which, they claim, must be slashed to bring the budget under control. In fact, the situation is the direct result of the neoliberal policies that were followed by the social democratic governments of the 1990s, and even more so by the right-wing government of Prime Minister Kostas Karamanlis, as the leader of the New Democracy (ND) party between 2004 and 2009.

For many years, Greek public finances were based exclusively on the taxation of the wage-earning population and the lower middle class. Greece has one of the lowest corporate taxes among EU countries, but even these low taxes aren't collected properly--corporate tax evasion is at record highs. Even the sales tax isn't fully collected by the government, but is left in business hands to further raise their profits.

At the same time, Greece has one of the highest taxes on wages among the EU countries. What's more, employers and even the state--the biggest employer--have stopped paying their contributions to pension funds, creating a shortfall of more than 10 billion euros annually...

The government budget problems were made even worse last year by the decision of the former Greek government to follow its European counterparts in carrying out a colossal bailout for corporations at the onset of the crisis. To understand why, consider the numbers. The Papandreou government today wants to extract 25 billion euros from the people over the next three years in order to reduce the budget deficit from 12.5 percent of GDP to 3 percent. Yet in one night only last year, former Prime Minister Karamanlis made available for the support of Greek banks a colossal total of 28 billion euros! Similar support programs were speedily put together for the tourist interests and other capitalist groups.

TO PAY for these bailouts, the Greek government has been forced to turn to massive borrowing. To meet its financing needs for 2010 alone, the government has to sell bonds--that is, borrow--some 55 billion euros.

Investors are skeptical that the government can repay those loans. Thus, at the beginning of January, a report by Germany's Deutsche Bank on the potential risks of government bonds sent interest rates on loans to the Greek government through the roof. On January 25, with the first issue of Greek bonds for a loan of 5 billion euros, there was surprising interest, with offers for almost five times the asking amount. However, the bonds carry a stiff interest rate of 6.2 percent, which, together with the bankers' commission, raised the cost of the loan to 8 percent.

The head of the bank consortium that organized this robbery was none other than Deutsche Bank, the same outfit that warned the world about the riskiness of the investment.

All this highlights the fact that "servicing the public debt" in Greece is nothing than a way to rob the people, depriving them of badly needed resources in order to serve the interests of the banks and all the other loan sharks of the " international market."

This giveaway to the banks is being organized by the PASOK government that came to power in October 2009. PASOK was elected as a result of a campaign that promised resistance to a wage freeze proposed by then-Prime Minister Karamanlis.

Yet in the few months that PASOK's Papandreou has been in office, he has made clear that he is committed to pushing through an austerity program even harsher than that of his right-wing predecessor--which means an all-out attack on labor rights and social gains. This government aims not only to freeze wages, but to actually cut pay in the public sector, thereby opening the way for bosses to do the same thing in the private sector...At the same time, the government wants to turn public pensions and the social security system into a private and semi-private system. It also plans a broad program of privatization of parts of the public sector, including ports, energy, water, etc.

That's not all. Papandreou aims to substantially raise taxes for working people and the lower middle classes, without touching the profits of the rich--especially big businesses and the banks...

http://socialistworker.org/2010/02/10/european-capitalisms-weak-link

Lee Sustar has an excellent article on the matter as well.

the average working Joe. Aided by the politicians they buy off. How long before the populace fights back? I guess that if the Gret Depression is any gauge, it will be long after they have been totally bankrupted by the banksters and the world economy is in shambles.

And look who was involved in the cover-up that cooked their books in order to get them in?

Our good friends at Goldman Sachs, that's who: http://www.nytimes.com/2010/02/14/business/global/14debt.html?hp=&pagewanted=all

pretty much the late capitalists program anywhere ya go, including here.

k&r

I always asserted that policy-wise the Euro had all the downside of a currency peg and none of the upside of a central bank. A bit like the worst of both worlds.

It does not surprise me in the least that this is now being exploited, the setup could be seen a long way off.

K&R

Interesting article