“It's no exaggeration to say that today is a historic day for the Greek economy,” said Lucas Papademos, banker and unelected prime minister of Greece. Yes indeed. February 21 was the day he signed his country’s people into debt slavery for the foreseeable future.
He also abandoned his country’s right to self-determination, turning Greece into a department of the Brussels bureaucracy, which will now have a permanent team of officials in Athens to enforce cuts and make pay-outs.
The terms of the second bail-out of Greece’s sovereign debt are so harsh that even officials inside the European Union secretly acknowledge they can’t be met. Even if every Greek worked round the clock for nothing, the country’s debt mountain cannot be made manageable.
A confidential 10-page “debt sustainability analysis” by EU officials says the spending cuts demanded will deepen a five-year old recession, making it extremely difficult – in actual fact, impossible – for Greece to gain from the €170bn bail-out.
“The Greek authorities may not be able to deliver structural reforms and policy adjustments at the pace envisioned in the baseline,” the report cautioned. Here the resistance by Greek workers, which has already produced several general strikes and violent confrontations with the state, is a key factor. The report’s key passage (with translation) says:
“Greater wage flexibility [eurospeak for wage cuts] may in practice be resisted by economic agents [trade unions]; product and service market liberalisation may continue to be plagued by strong opposition from vested interests [workers] ; and business environment reforms [free market competition] may also remain bogged down in bureaucratic delays.”
So the bail-out might have to rise to €245 billion, the report admits, because one thing is certain – Greece won’t be able to borrow on the financial markets this side of the Messiah making an unexpected return. Under the bail-out terms, banks and private investors are being asked to accept a write-down of 53% in what they loaned to Greece (while the European Central Bank keeps 100%). Bankers may yet revolt against these terms and derail the bail-out agreed after 14 hours of negotiations.
There is absolutely nothing in the bail-out but new loans to service existing and upcoming debt. This is a desperate deal to keep the ailing euro afloat at the expense of the entire population of a member state. Already unemployment for the under-25s in Greece is nearly 50%, having risen by more than a third since November 2010. The national suicide rate has doubled from 2.8 per 100,000 people in 2008, to about 6 last year. Hundreds of people are sleeping rough on the streets. Half of the country’s small businesses cannot pay wages and Greeks have withdrawn about a third of the money on deposit at the banks, fearing financial meltdown.
The Greek state is now in turmoil, not trusted by large sections of the population. "The political system is incapable of handling the situation. The people who created the problem are now going to solve the problem: that's the paradox," said broadcaster Stelios Kouloglou.
Between them the two ruling parties, Pasok and New Democracy, now only command a third of the votes in the latest opinion polls. No one knows what the general election scheduled for April will produce. That could derail the bail-out because smaller parties have not signed up to the deal unlike Pasok and New Democracy were made to. A military junta ruled Greece from 1967 until 1974 and with the country beginning to resemble a failed state, a new intervention by the colonels is not to be dismissed.
What the bail-out shows yet again is that the global debt crisis is insoluble within the present profit-driven economic framework. Reduced living standards produce lower tax revenue, more unemployment, higher welfare benefits and more bad loans for banks to deal with. This is not a Greek but a global problem, with countries like the US and Britain amongst the most indebted. The prospect for “economic justice” under these conditions is less than zero. For that to happen we will have to make capitalism history.