Image via WikipediaGreek Prime Minister George Papandreou will be judged in posterity by his actions rather than his words. He has two options. The first requires raising ever-greater revenues to meet growing government expenditure. However, how can he do so when his European benefactors are urging him to cut spending?
Papandreou's address to the Greek parliament this week was his last opportunity if he is to survive a vote of no confidence.The main task of Papandreou's speech was political. It backs up his contention that cuts would be "tough but necessary, and fair".
Some see this as politically suicidal. Most of Papandreou's compatriots are against the premier's logic.
Thousands of Greeks have taken to the streets and the scenes in Athens' squares are reminiscent of those of Cairo's Tahrir around the time of the January 25 Revolution.
Greece is facing power cuts as unions are concerned that the price of electricity will skyrocket and they are also concerned about job losses. In the past six months 70,000 Greek businesses were forced to close down. The country faces a liquidity crunch and austerity cuts are maddening the masses. Given the savagery of the cuts being demanded of the departmental budgets, the priority now must be to protect the poorest and most disadvantaged Greeks.
Papandreou is in a pickle and Greece is in Pandemonium. And the dreaded buzzword in the Mediterranean Basin is "contagion".
Countries on the European periphery are at risk of catching the Greek affliction. Spain, Portugal, Italy and even non-Mediterranean Ireland are jittery. It is against this grim backdrop that the 17 ministers of finance of the eurozone met in Luxembourg this week. A Greek default could trigger another financial crisis of Herculean proportions. There is talk of a brand new bailout, but European finance ministers are granting Greece some cash with fingers crossed. Greece is in danger of sucking good money after bad.
Amid Greece's tragedy of European financial intervention and political turmoil on the home front, Papandreou's desperate political tactics won't make very good odds if the Greek economy stagnates further.
A more strategic speech by Papandreou might have explained his plan B should things go awry. If erratic markets scare even the most intrepid investors away from equities, the Greek economy's loss will make the Asian financial crisis look like a trifle.
Greek politicians have failed abjectly to explain this puzzle. The European finance ministers, too, are in a jam. Trading platforms that compete to attract high-frequency traders should require them to provide liquidity more consistently. The predicament of Papandreou and his benefactors is that the European bailout is not having the required effect. The Europeans have therefore decided to put the cash on hold much to Papandreous's consternation. Eurozone ministers postponed the $12 billion five-year bailout package already pledged, much to Papandreou's chagrin. There was, after all, no indication that the eurozone bailout was anything other than a good-faith hedging attempt.
"The rescheduling or reporting of Greek debt is not an option," pontificated French Finance Minister Christine Lagarde this week. The frontrunner for the race to head the International Monetary Fund urged Greece to ensure the proper implementation of privatisation. Papandreou is under tremendous political pressure.
Flying in the face of IMF logic, some of the world's most successful risk takers and entrepreneurs advocate that governments should spend rather than cut. George Soros is one such capitalist. He said his benchmark for eurozone soundness and the overcoming of the debt crisis would be the return of tortured borrowers such as Greece to the international capital markets.
European Central Bank (ECB) chief Jean-Claude Trichet, however, thinks otherwise. As Al-Ahram Weekly went to press, the Greek parliament was debating a vote of no-confidence that will determine Papandreou's political future. The heavyweights within the EU are stepping up pressure on Greece to bite the bullet.
"It depends on Greece," the almighty German Finance Minister Wolfgang Schauble ominously glowered. "Europe is ready to do its share." To demoralise Greece, one might add, as the ancient Persians under Emperor Xerexes had attempted to do, Schauble has been adept at psychological warfare. The indomitable Greek spirit will survive the EU onslaught, just as it did the Battle of Thermopylae, when ancient Greeks were all but annihilated. Contemporary Greece must fight to win its financial Salamis.
Even so the global spillover of the Greek financial crisis has been alarming. This week the euro fell hard against the dollar and the Greek decade-old bond spiked to 17 per cent before mounting a modest comeback.
The current belt-tightening policy has failed miserably. "The burgeoning European movement in opposition to debt repayments and austerity is making concrete links with groups from the global South," noted pundit Nick Dearden recently.
The demonstrators denounce free market dogma. Greece is beginning to resemble a developing South American country, except that its economic prospects are not as bright as its South American counterparts. The current belt-tightening policy has failed in Greece and the other peripheral European Mediterranean countries. The ECB is to blame, that much cannot be disputed. The Greek crisis was greatly shaped by the nature of the country's integration into the European economy and especially the eurozone. In effect, Greece has become a vassal state of the ECB. "The bigwigs at the EU and ECB would rather see cities across the continent descend into a bloody free-for-all than lose one euro on their original investments," explained commentator Mike Whitney.
The Greek people had pinned high hopes on their joining the EU and the eurozone. They imagined that they were to miraculously metamorphose into an industrially advanced nation. Instead, the standards of living of ordinary Greek men and women plummeted. Portugal and Spain are in the same boat. The rich in these countries are becoming wealthier and the poor poorer. "And it expresses a confidence and rationalism a million miles away from the governments of Greece and Ireland, which have followed policies which are punishing ordinary people in order to repay reckless bankers."
The point is that bailout packages would not make the debts of Greece and Ireland sustainable. Stocks dropped this week as EuropeÒ's sovereign-debt crisis deepened and bond yields across the EU periphery headed sharply higher.
The IMF warned Greece that it would not provide its part of the next tranche under GreeceÒ's existing bail-out programme until eurozone governments had pinned down exactly how they would fill AthensÒ' funding gap for 2012. Scrutinising the dynamics of the neo-liberal age, poorer and relatively less developed European nations such as Greece are feeling the economic crunch.
The elite in the peripheral European nations, however, aspire to live entre soi. There was some meat in the address of Papandreou to the Greek parliament as far as the Greek elite was concerned. The problem was that for the poor it was all crumbs and bone.
The IMF concession has allowed EU officials to put off a debate on how to deal with private bondholders until 11 July, the next gathering of European finance ministers in Brussels. The ECB bigwigs believe that Papandreou deserves some credit for taking the axe to government spending. Yet, there are those who suspect that PapandreouÒ's tactics are not even big money-savers. Looking for a way out of his quagmire, Papandreou discussed forming a coalition between his PASOK parliamentary group and New Democracy, the main conservative opposition party.
For both Papandreou and his European backers, the results of his policies have been a huge disappointment. The Greek masses are up in arms. Athens has been rocked by violent clashes between protesters and police following demonstrations against deeper austerity measures.
Germany, the European powerhouse, remains determined to achieve a "substantial and quantifiable" contribution from private bondholders to any new financial rescue package. A German-inspired plan to reschedule Greek debt is now being seriously debated. Whether it will satisfy the Greek people is another matter entirely.
Provoking a risk of default, the plan might estrange the Greek masses further. Moreover, the tragic Greek experience will also be a tough lesson to rapacious shareholders of other banks and capitalists in other countries hit by the Greek crisis.
Read more
Posts
