‘Debt trap’: Greek workers reject austerity program

Published Jan 7, 2010 4:49 PM

Thousands of Greek workers took to the streets in 63 cities on Dec. 17, called out by unions protesting a government austerity program. The All-Workers Militant Front (PAME), which is close to the Greek Communist Party, and Syriza, the Coalition of the Radical Left, supported the action.

This strong workers’ action took place in Greece, but it was provoked by a worldwide attack on the working class. This affects workers especially in the countries hit hardest by the global capitalist economic crisis, including some countries that maintained a veneer of prosperity through borrowing but are now falling into what is called a “debt trap.”

This prosperity mainly benefited the wealthy, already prosperous elites that controlled countries like Dubai and Greece. But budget deficits in the world’s industrialized countries have more than tripled since the financial crisis shook the world in 2008.

Economists say that a country is in a “debt trap” when its public debt is greater than what it produces in a year — all the goods and services created in its internal economy, its GDP — and its economy is not growing fast enough to pay the interest on its debt.

Greece’s public debt was 113 percent of its GDP in 2009 and is forecast to be 125 percent of its GDP in 2010. Its economy shrank by 1.1 percent in 2009 and is forecast to decline a bit in 2010. It most definitely is in a debt trap. (Figures from Eurostat.)

The big imperialist banks are only lending to their most affluent and stable customers. Thus, companies and customers have turned to the bond market for the cash they need to operate. Moody’s and S&P, two bond ratings agencies, recently downgraded Greece’s bonds.

Greece’s new Socialist Party government won the Oct. 4 elections on a platform to tax the rich and help the poor. When it was faced with an edict from the European Central Bank after its credit rating was cut, Prime Minister George Papandreou didn’t hesitate to announce an austerity program. He planned to cut spending on health by 10 percent, freeze salaries over $3,000 a month and impose a freeze on hiring.

The government also called out 10,000 cops to repress the demonstration in Athens. PAME’s banner on the façade of the Finance Ministry read, “Arise! The government and the plutocracy are dismantling Social Security.” (L’Humanité, Dec. 17)

Greece is not the only country in Western Europe whose economy is weighed down by debt. Italy’s debt at the end of 2008, the last period for which Eurostat has data, was 105 percent of its GDP. Portugal, which has kept its debt within the Eurozone limits, has had no growth. Ireland has seen its economy shrink by 7 to 8 percent since the financial crisis started and the Irish government has committed to $4 billion worth of budget cuts, including slashing salaries for 400,000 public employees.

Spain’s overall unemployment rate is 19.3 percent, with a youth unemployment rate of 39.2 percent. The rates for youth, which include people from the age of 16 up to age 25, range from 18.5 percent in Portugal to 24 to 27 percent in Ireland, Greece and Italy.

None of these five countries has a central bank like the Federal Reserve in the U.S., so none could adopt a stimulus package like the one the U.S. put together to attempt to boost its economy. In order for the local capitalists to get the advantages of participating in the world’s largest market in the Eurozone, they had to give up a major part of their sovereign control of their economies and the ability to serve the needs of their citizens.

Germany and France, the dominant imperialist economic powers in the European Union, have effective control of the European Central Bank. German Finance Minister Wolfgang Schaeuble, representing German bankers, said the following about Greece’s problems: “It would be misplaced solidarity if we were to support Greece with financial help.” (Reuters, Dec. 30)

Of course, this “misplaced solidarity” might keep people from going homeless or hungry, but that is not really the concern of the German ruling class.