Severe austerity package provokes wrath of Greek working class

Greek capitalism is in a deep crisis. It is the weak link in the chain and it is beginning to break. The country risks defaulting on its debt repayments, posing a serious threat to the stability of the euro. Severe austerity measures are being imposed and these are provoking a working class backlash.

Greece is one of the weakest members of the euro-zone. It is heavily burdened with debt and it has now reached the point where it risks defaulting on its repayments. Things have dramatically changed in the past two years. After a period of 16 years of economic growth, in 2009 the economy went into recession with a fall of 1.6% of GDP, and while there are signs of recovery in other parts of Europe, Greece in 2010 will see more of the same with an expected contraction of the economy of 1.6%.

Greece, like all other European countries, also had its credit boom, followed by a banking crisis, with the government stepping in to save the banks. But the Greek bailout pushed the budget deficit up massively to 12.7% of GDP, more than four times what the eurozone rules allow for. Its total debt now stands at about 300bn euros.

This economic situation is what eventually led to the calling of early elections at the end of last year, which saw the New Democracy being kicked out of office and the PASOK (Socialist Party) being brought back in with a huge majority. By voting out the New Democracy party, the Greek workers were making a clear political statement: we have had enough of austerity measures!

However, very soon after being elected Papandreou, the PASOK prime minister, announced drastic economic measures in an attempt to reduce the deficit. He announced plans to cut 10% of the deficit, which would mean draconian measures affecting all aspects of the welfare state, from education, to healthcare, to pensions. But this was considered not enough by the Greek bourgeois. The capitalist media launched a huge campaign pressurising Papandreou to make even more severe cuts.

This posed the “socialist” prime minister with a big dilemma. What he had announced was too much for the Greek workers, but not enough for the Greek capitalists. He was attempting to walk a very thin line between the two major classes in society. Now the pressure is piling up even more, as the whole of the European Union looks on in trepidation as the Greek crisis unravels.

The problem facing the major European powers, such as Germany and France, is that Greece is not only part of the European Union, but also a part of the eurozone. If Greece goes it pulls down all its eurozone partners with it.

Unless Greece receives help from its EU partners it could default on its debt repayments and this poses a major threat to the single currency. Long gone are the days when the euro was presented as a victory for European capitalism. At that time we explained the contradictory pressures that existed within the EU, pressures that were putting at risk the euro. Back in 2005 we pointed out that “Hans Eichel, the German finance minister, and Axel Weber, the Bundesbank president, had discussed the break-up of monetary union”. Similar statements were being made by Italian ministers, who even suggested going back to the Lira. In January 2001, nearly ten years ago, and shortly before the setting up of the euro, Alan Woods and Ted Grant wrote that, “In the end, it is probable that the Euro experiment will break down amidst mutual recriminations. Already there are indications of conflict between the states in the Euro zone, as each government tries to protect its own capitalists against foreign competition.” (The Launch of the Euro - Towards European unity? 3 January 2001) When the Marxists explained this they were laughed at. How things have changed, and how quickly too!

In the period of the boom, all seemed rosy in the garden. The euro was going to usher in a period of economic growth and stability… at least that was if you believed the fairy tales of the EU gurus. What is happening in Greece confirms what the Marxists explained at the time. Of course, the euro is not going to collapse tomorrow morning. They will do everything to stop this from happening, because the alternative is even worse, but for how long can they hold out?

The media in the last few days has been full of rumours about Germany preparing to organise a possible bail-out, supported by France and other eurozone members… that can afford to do so. Countries like Britain, of course, will not be part of the “rescue team” as they have enough debts of their own to be taking on those of countries like Greece!

The fact is that powerful economies like Germany cannot allow Greece to sink, at least not so long as they have the resources to step in. But they are facing a real dilemma. If they don’t step in and allow Greece to sink, this will rip at the heart of the euro which will in turn affect the whole of the eurozone and the EU as a whole. If they do step in, as seems the most likely option from what is emerging from the talks they are holding, then Germany and France and other countries will become guarantors for Greece’s credit rating, i.e. they will take on the burden of the debt.

This means that the German economy will add to its already serious problems, and will have to tighten the screws at home, with more austerity measures. During this crisis we have seen the state intervening to save the banking system, for fear of an even worse collapse of the whole economy. Now we are seeing small and weak states like Greece (but also Spain and Italy – not so small – and Portugal) having to be saved by the more powerful economies at the heart of the EU. Who will save the big states when their time comes?

Here we see how everything can turn into opposite. The EU was a mechanism by which powerful Germany could achieve what it did not achieve in two world wars: the economic domination of Europe. Now it is turning into a mechanism whereby all the economic ills of Europe are being brought to bear on Germany.

For now Germany and France will be forced to step in and bailout Greece. But for how long can this continue? The point will be reached where this can no longer hold, and we will eventually see members of the eurozone defaulting, possibly starting with Greece.

One thing that is guaranteed is that the Greek government will now have to apply severe cuts in public spending. Papandreou, in Paris for talks with Sarkozy, promised he would "take any necessary measures" to reduce Greece's deficit, and added that, "The stability programme will be implemented in every measure."

All this has a logic from a purely capitalist economic point of view. It is what is required to achieve economic stability. The problem is that these same measures provoke political and social instability.

The trade unions are being forced to reflect the growing anger coming from below. The Greek working class see the austerity programme as a declaration of class war. And today we saw what the Greek workers are capable of. The confederation that organizes the public sector workers, ADEDY, together with PAME (the KKE faction in the GSEE, general confederation of Greek workers) called a general strike.

Airports have been paralysed, many schools were closed and hospitals have been operating only emergency services. There have been many rallies across the country as thousands of angry Greek workers took to the streets. In one incident police fired tear gas at refuse collectors who tried to get through police cordons.

The crisis of capitalism is beginning to break the weakest links in the system. Greece is one of these. This is bringing out clearly the class differences in society and showing the Greek workers the real nature of the system. It is having a radicalizing effect on the thinking of thousands of workers and youth across the country.

In removing the hated New Democarcy government a few months ago, the workers and youth of Greece voted massively for the left parties. If one adds up the votes of the PASOK, the KKE (Communist Party) and SYRIZA (the Synaspismos-led electoral front), the three mass workers’ parties of the Greek working class, we see that 56% voted to the left.

Now the PASOK leadership is going to be put to the test, and a very bitter test it will be. Millions of Greek workers and youth will see in practice that the party’s leaders do not have a programme to solve the crisis that has hit Greece. This will have a radicalizing effect on the workers who vote for the PASOK and will open contradictions within the party, especially affecting the rank and file. Already, even before all this happened, a significant layer (more than 12%) voted to the left of the PASOK for the KKE (7.54%) and SYRIZA (4.6%). Within these two parties there is already ferment as the impact of the crisis pushes the social base of these two parties even further to the left.

A strong anti-capitalist mood has emerged in Greece, as even the BBC and other mainstream news agencies could not avoid reporting on, which indicates that a period of sharp class conflict is opening up in Greek society. Greece, however, is not the exception; it is merely where the crisis is most acute. It also indicates what the future of the whole of Europe will be. What we are seeing in Greece today, we will see tomorrow in Italy, Spain, Portugal, Ireland and later in all of the EU including Germany and France.

The conditions are being prepared for intense class struggle across the whole of Europe in the coming period.

[NOTE: In the next few days we will provide a more in-depth analysis of the Greek situation, looking in more detail at the economic, political and social contradictions that are now exploding in the country.]