The heresy of the Greeks offers hope

Greece junk? At 11 per cent, Greece’s deficit is no higher than America’s

In his latest column for the New Statesman, John Pilger inverts the perception of Greece as a "junk country" and sees hope in the uprising of ordinary Greeks protesting against the "bailout" of an economy plunged into debt by the tax-evading rich. Greece, he writes, is a microcosm for the developed world, where class war are the words seldom used because they are the truth.

As Britain’s political class pretends that its arranged marriage of Tweedledee to Tweedledum is democracy, the inspiration for the rest of us is Greece. It is hardly surprising that Greece is presented not as a beacon but as a “junk country” getting its comeuppance for its “bloated public sector” and “culture of cutting corners” (the Observer). The heresy of Greece is that the uprising of its ordinary people provides an authentic hope unlike that lavished upon the warlord in the White House.

The crisis that has led to the “rescue” of Greece by the European banks and the International Monetary Fund is the product of a grotesque financial system which itself is in crisis. Greece is a microcosm of a modern class war that is rarely reported as such and is waged with all the urgency of panic among the imperial rich.

the uprising of ordinary Greeks protesting against the "bailout"

What makes Greece different is that within its living memory is invasion, foreign occupation, betrayal by the West, military dictatorship and popular resistance. Ordinary people are not cowed by the corrupt corporatism that dominates the European Union. The right-wing government of Kostas Karamanlis, which preceded the present Pasok (Labour) government of George Papandreou, was described by the French sociologist Jean Ziegler as “a machine for systematic pillaging the country’s resources”.

The machine had infamous friends. The US Federal reserve Board is investigating the role of Goldman Sachs and other American hedge fund operators which gambled on the bankruptcy of Greece as public assets were sold off and its tax-evading rich deposited 360 billion euros in Swiss banks. The largest Greek ship-owners transferred their companies abroad. This haemorrhage of capital continues with the approval of the European central banks and governments.

At 11 per cent, Greece’s deficit is no higher than America’s. However, when the Papandreou government tried to borrow on the international capital market, it was effectively blocked by the American corporate ratings agencies, which “downgraded” Greece to “junk”. These same agencies gave triple-A ratings to billions of dollars in so-called sub-prime mortgage securities and so precipitated the economic collapse in 2008.

What has happened in Greece is theft on an epic, though not unfamiliar scale. In Britain, the “rescue” of banks like Northern Rock and the Royal Bank of Scotland has cost billions of pounds. Thanks to the former prime minister, Gordon Brown, and his passion for the avaricious instincts of the City of London, these gifts of public money were unconditional, and the bankers have continued to pay each other the booty they call bonuses. Under Britain’s political monoculture, they can do as they wish. In the United States, the situation is even more remarkable, reports investigative journalist David DeGraw, “[as the principal Wall Street banks] that destroyed the economy pay zero in taxes and get $33 billion in refunds”.

In Greece, as in America and Britain, the ordinary people have been told they must repay the debts of the rich and powerful who incurred the debts. Jobs, pensions and public services are to be slashed and burned, with privateers in charge. For the European Union and the IMF, the opportunity presents to “change the culture” and dismantle the social welfare of Greece, just as the IMF and the World Bank have “structurally adjusted” (impoverished and controlled) countries across the developing world.

Greece is hated for the same reason Yugoslavia had to be physically destroyed behind a pretence of protecting the people of Kosovo. Most Greeks are employed by the state, and the young and the unions comprise a popular alliance that has not been pacified; the colonels’ tanks on the campus of Athens University remain a political spectre. Such resistance is anathema to Europe’s central bankers and regarded as an obstruction to German capital’s need to capture markets in the aftermath of Germany’s troubled reunification.

In Britain, such has been the 30-year propaganda of an extreme economic theory known first as monetarism then as neo-liberalism, that the new prime minister can, like his predecessor, describe his demands that ordinary people pay the debts of crooks as “fiscally responsible”. The unmentionables are poverty and class. Almost a third of British children remain below the breadline. In working class Kentish Town in London, male life expectancy is 70. Two miles away, in Hampstead, it is 80. When Russia was subjected to similar “shock therapy” in the 1990s, life expectancy nosedived. A record 40 million impoverished Americans are currently receiving food stamps: that is, they cannot afford to feed themselves.

In the developing world, a system of triage imposed by the World Bank and the IMF has long determined whether people live or die. Whenever tariffs and food and fuel subsidies are eliminated by IMF diktat, small farmers know they have been declared expendable. The World Resources Institute estimates that the toll reaches 13-18 million child deaths every year. “This,” wrote the economist Lester C. Thurow, “is neither metaphor nor simile of war, but war itself.”

The same imperial forces have used horrific military weapons against stricken countries whose majorities are children, and approved torture as an instrument of foreign policy. It is a phenomenon of denial that none of these assaults on humanity, in which Britain is actively engaged, was allowed to intrude on the British election.

The people on the streets of Athens do not suffer this malaise. They are clear who the enemy is and they regard themselves as once again under foreign occupation. And once again, they are rising up, with courage. When David Cameron begins to cleave £6 billion from public services in Britain, he will be bargaining that Greece will not happen in Britain. We should prove him wrong

Greece's national debt will be 120pc of GDP in 2010

Fears of a euro break-up have reached the point where the European Central Bank feels compelled to issue a legal analysis of what would happen if a country tried to leave monetary union.

"Recent developments have, perhaps, increased the risk of secession (however modestly), as well as the urgency of addressing it as a possible scenario," said the document, entitled Withdrawal and expulsion from the EU and EMU: some reflections.

The author makes a string of vaulting, Jesuitical, and mischievous claims, as EU lawyers often do. Half a century of ever-closer union has created a "new legal order" that transcends a "largely obsolete concept of sovereignty" and imposes a "permanent limitation" on the states' rights.

Those who suspect that European Court has the power pretensions of the Medieval Papacy will find plenty to validate their fears in this astonishing text.

Crucially, he argues that eurozone exit entails expulsion from the European Union as well. All EU members must take part in EMU (except Britain and Denmark, with opt-outs).

This is a warning shot for Greece, Portugal, Ireland and Spain. If they fail to marshal public support for draconian austerity, they risk being cast into Icelandic oblivion. Or for Greece, back into the clammy embrace of Asia Minor.

ECB chief Jean-Claude Trichet upped the ante, warning that the bank would not bend its collateral rules to support Greek debt. "No state can expect any special treatment," he said. He might as well daub a death's cross on the door of Greece's debt management office.

This euro-brinkmanship must be unnerving for the Hellenic Socialists (PASOK). Last week's €1.6bn (£1.4bn) auction of Greek debt did not go well. The interest rate on six-month notes rose to 1.38pc, compared to 0.59pc a month ago. The yield on 10-year bonds has touched 6pc, the spreads ballooning to 270 basis points above German Bunds.

Greece cannot afford such a premium for long. The country must raise €54bn this year - front-loaded in the first half. Unless the spreads fall sharply, the deficit cannot be cut from 12.7pc of GDP to 3pc of GDP within three years. As Moody's put it, Greece (and Portugal) faces the risk of "slow death" from rising interest costs.

Stephen Jen from BlueGold Capital said the design flaws of monetary union are becoming clearer. "I don't believe Euroland will break up: too much political capital has been spent in the past half century for Euroland to allow an outright breakage. However, severe 'stress-fractures' are quite likely in the years ahead."

As Portugal, Italy, Ireland, Greece, and Spain (PIIGS) slide into deflation, their "real" interest rates will rise even higher. "It is tantamount to hiking rates in the already weak PIIGS," he said. This is the crux. ECB policy will become "pro-cyclical", too tight for the South, too loose for the North.

The City view is that the North-South split may cause trouble, but that there will always be a bail-out to prevent a domino effect. "If a rescue turns out to be necessary, a rescue will be mounted," said Marco Annunziata from Unicredit.

It comes down to a bet that Berlin will do for Club Med what it did for East Germany: subsidise forever. It is a judgement on whether EMU is the binding coin of sacred solidarity, or just a fixed exchange rate system like others before it.

Politics will decide, and in Greece it is already proving messy as teams of "inspectors" ruffle feathers. The Orthodox LAOS party is not happy that an EU crew dared to demand an accounting from the colonels. "The Ministry of Defence is sacrosanct," it said.

Greece alone in Western Europe treats the military budget as a state secret. Rating agencies guess it is a ruinous 5pc of GDP. Does the country really need 1,700 battle tanks, 420 combat jets, and eight submarines? To fight NATO ally Turkey? Merely to pose the question is to enter dangerous waters.

Who knows what the IMF surveillance team made of their mission in Athens. The Fund's formula for boom-bust countries that squander their competitiveness is to retrench AND devalue. But devaluation is ruled out. Greece must take the pain, without the cure.

The policy is conceptually foolish and arguably cynical. It is to bleed a society in order to uphold the ideology of the European Project. Greece's national debt will be 120pc of GDP this year. S&P says it will reach 138pc by 2012. A fiscal squeeze - without any offsetting monetary or exchange stimulus - will cause tax revenues to collapse. Debt will rise higher on a shrinking economic base.

Even if Greece can cut wages without setting off mass protest, it lacks the open economy and export sector that may yet save Ireland in similar circumstances. Greece is caught in a textbook deflation trap.

Labour minister Andreas Loverdos says unemployment would reach a million this year - or 22pc, equal to 30m in the US. He broadcast the fact with a hint of menace, as if he wanted Europe to squirm. Two can play brinkmanship.

Thanks to SOTT for the post

Related articles by Zemanta

• ECB prepares legal ground for euro rupture as Greek crisis escalates (telegraph.co.uk)
• ECB President: Greece Must Put Finances in Order (abcnews.go.com)
• ECB president: Greece must put finances in order (sfgate.com)
• Euro brinkmanship escalates as ECB shuts door on Greek bail-out (telegraph.co.uk)