Posted by John, November 3rd, 2011 - under People's default.

Tags: Euro, European Union, Greece

The Greek government is trying to present the decisions of last week’s European Union (EU) summit as a “helping hand” that relieves the Greek people of half their debt burden.

Apparently the bankers had the kindness to write off 100 billion euros of debt. Yet the stock markets celebrated this so-called “haircut” for the banks by raising bank share prices by up to 15 percent the next day.

The explanation for this apparent contradiction is that the “haircut” deal is heavily biased. Pension funds in Greece that have invested heavily in government bonds will be penalised. But Greek debt to the International Monetary Fund (IMF) and European Central Bank (ECB) will not be touched.

On top of this, the IMF, EU and ECB (or the “troika” as they are collectively known) will gain powers to control how the Greek budget is run.

No wonder workers in Greece are furious.

Now George Papandreou, the Greek prime minister, has announced a referendum on the bailout package in January—if he survives until then. His decision underlines just how weak his government is and how uncertain the bailout is even for the ruling classes of Europe.

Traditionally, 28 October is a national holiday, a day of military parades to mark Greek opposition to Benito Mussolini’s 1940 invasion. This year people took to the streets and turned the parades into anti-government demonstrations.

In Salonica the Greek president was forced to leave the platform where he was meant to take a salute. Other lesser officials in many other cities have had to run away from angry crowds.

So the debate on the alternatives is now wide open. The prospect of a debt restructuring or a “default from above” means endless years of misery for workers. The official projection is that Greek debt will still be 120 percent of GDP in ten years time even if the current “haircut” is implemented. Is there a way to escape from this trap?

The anti-capitalist left in Greece argues for a “default from below” or a “people’s default”. The difference between these two prospects is like night and day. Cancelling the debt on the initiative of workers would mean pain for the banks and gains for working people. The cost of interest payments to banks has escalated from around 10 billion euros a year back in 2007, when the crisis started, to 18 billion euros now.

Interest

If we stopped paying these vast sums, there would be no need to close schools and hospitals or to cut wages and pensions. The entire wage bill for the civil service is 16 billion euros—smaller than the interest payments.

We pay more money to bankers sitting on the debt mountain than we pay for all teachers in our schools, nurses in our hospitals and cleaners in public buildings put together. Cancelling the debt and refusing to pay would cause a huge crisis in the banking system. That is why a people’s default goes hand in hand with workers’ control of the banks.

Bank workers collectively have the power to stop the rich hiding their capital in tax havens abroad—a move that would ruin the economy. They also have the power to stop banks from repossessing the homes of those unable to pay mortgage costs.

This is no daydream. We glimpsed this when workers decided to occupy the central computer room responsible for sending out electricity bills and declare that no poor or unemployed person would be cut off if unable to pay.

Civil service workers occupying the Greek equivalent of the Home Office told striking local government workers that they would block any government orders to sack strikers. The left has to fight to defend and generalise such initiatives. Then workers’ control can begin to take shape from below.

Of course the ECB will fight tooth and nail if workers in Greece continue down this road. Greece would be thrown out of the eurozone and speculators would attack whatever new currency was introduced.

This is why we would need all the solidarity we can get from workers across Europe.

But the fight will be worth it. Together we can open up the prospect of a world where human need takes priority over bankers’ greed.