Greek parliament imposes debt diktat

As Greek finance minister Evangelos Venizelos knows only too well, the measures being imposed on all but the super rich in Greece are raising the spectre of massive social division.

Venizelos, popularly known as the “Bull of Athens,” due to his thickset features and heavy shoulders, perhaps ironically bears the name of noted revolutionary and Greek founding father Eleftherios Venizelos.

It was today's Venizelos, a former opponent of Papandreou, who did the dirty work for the former Prime Minister by persuading the left in Pasok to agree to accept the EU-IMF imposed austerity measures.

He has made repeated appeals for national unity, imploring members of parliament not to resist the massive cuts that will wreck Greek society. He warned: "We are running the risk of burning ourselves. We must steer the ship to the safe harbour of debt restructuring. It requires national unity and for us to send a message of credibility.”

In response, the Greek parliament agreed massive minimum wage and pensions cuts in a bid to secure the bail-out deal intended to stave off the first bankruptcy of a eurozone state.

They have imposed a 22-percent cut on the standard minimum monthly wage of €751. For those under the age of 25, the cut will be even more brutal, a 32-percent reduction.

In addition, in another form of collective punishment for workers still holding on to jobs, they imposed wage freezes on some staff groups until the unemployment rate, currently 21 percent, falls below 10 percent.

Monthly pension payments above €1,300 euros will be reduced by 12 percent. Supplementary’ pensions, which are paid for out of workers' own contributions, will be slashed by up to 30 percent.

The trigger for the default, as Moritz Kraemer, S&P’s Head of Sovereign Ratings for Europe, the Middle East and Asia, explained it, was the Greek government’s ‘retroactive insertion of collective action clauses’ against private holders of Greek debt.

The crux of the matter is this: the bail-out deal depends on a sufficient proportion of bondholders agreeing to accept losses of 53.5 per cent on the nominal value of their Greek holdings, with actual losses put at around 74 per cent, but, according to S&P’s classic capitalist ‘methodology’, the Greek decision to replace agreement to losses with enforcement against investors was enough to send its assessment off the credit rating scale and into default.

In times of crisis it requires the remnants of democratic forms of government to impose a brutal collective punishment on those who depend on wages and pensions for their livelihoods, shrinking the economy bloated with decades of credit and debt, whilst protecting the “rights” of investors to compete for the last remaining profits to be squeezed out of those still in work.

Central banks are pouring hundreds of billions more into the monetary clouds buying themselves time to ‘restructure’ economies in trouble. Portugal and Spain are next in the firing line.

No amount of austerity will solve the crisis in Greece. Placing the burden on the 99% in society, as the supine parliamentarians have done, only makes things worse. Even the one-day general strikes undertaken by the Greek trade unions, and fighting outside Parliament have not brought about a change of direction from the political parties. Support for Pasok, which is the governing party, has fallen to only about 20 percent according to current polls.

But Venizelos is right about his country’s “historical and existential crisis”. Greece has indeed lost its right to self-determination, which it fought for so hard centuries ago. But there is an alternative for all those who want to free themselves from diktats from Brussels, the IMF and the ratings agencies. That is to form networks of democratically controlled assemblies and to reshape its economy on a not-for-profit basis, alongside other countries inside and outside the European Union.

Gerry Gold
Economics editor