Pesky voters ignore markets, vote against austerity

When an anti-austerity, anti-establishment internet-based political movement with few policies and led by a comedian, gets 25% of the vote in a general election, you know for sure that the political system is travelling on a one-way ticket to disintegration.

Beppe Grillo's Five Star Movement (M5S) won 54 seats and cashed in on Italians’ hatred for a corrupt, incompetent state that has cut their pensions, living standards and left record numbers of young people out of work.

Deadlock is what the markets didn’t want. That’s why Mario Monti was appointed by the European Central Bank to head a caretaker government 15 months ago as Italy’s debt mountain threatened to overwhelm the euro. But given half a chance, the electorate rejected his policies.

The ex-Goldman Sachs banker only got 10% of the vote when he put his austerity programme to the electorate. And with Silvio Berlusconi also raging against Brussels and promising everyone a tax cut, many voters backed a man who has somehow evaded prison.

As a result there is no immediate prospect of a stable government to manage Europe’s third largest economy. And the markets don’t like the stalemate at all. After initial polls showed the centre-left alliance winning, the markets rallied.

Then when the electoral deadlock was confirmed, black turned to red on trading screens around the world. Italian bonds were sold off, trading in the major banks was suspended, the stock markets plunged and the euro crisis returned with a vengeance.

“This looks like a recipe for total gridlock,” commented Nicholas Spiro, a sovereign debt analyst. “On current projections, financial markets are facing the worst of both worlds in Italy: a full-blown political crisis in the eurozone’s third largest economy and a severe setback for the liberal economic agenda championed by Mr Monti.”

Pesky voters!

Enrico Letta, deputy leader of the Democrat party, concluded that the “absolute majority of Italians have voted against austerity measures, the euro and Europe,”.  This, he claimed, sent a “a very clear signal to Brussels and Frankfurt”.

But is anyone listening at the headquarters respectively of the European Union and the European Central Bank? No they’re not. The EU and the ECB is desperately to prop up a weak currency and austerity, austerity and yet more austerity is the mantra. No matter that it doesn’t work. They have no alternative.

Spending your way out of the crisis is no good because it’s a global economic recession that is already dependent on large-scale printing of money to prevent a full-blown depression. It’s not just the political system that’s broken.

Grillo’s Five Star Movement is hostile to Brussels and the indecently corrupt Italian establishment. It wants to reform parliament by halving its size and a new electoral law based on proportional representation. Other than that, it has little to say.

Grillo – called everything from “sans-culotte satirist” to “populist, extremist and very dangerous” –  hands it back with interest. His nickname for Berlusconi is “the psycho-dwarf”, while he refers to the technocrat Monti as “rigor Montis”.

Grillo told the Financial Times last year: “We are occupying a void, which in other places like Greece has been filled by Nazis and extremists. We are a response to government ‘parasitism’, corruption, a system of political diarrhoea.” Recent scandals include arrests at the top of state-controlled Finmeccanica to corruption probes into the Eni and Italy’s third-largest bank.

Grillo does not appear on television or take part in debates. His movement – it’s definitely not a party – is driven by the use of social media. He runs Italy’s most-read blog and the M5S organises on two levels – internet and local grassroots.

He used the social network “meetup”, which was already active in Italy, to set up local support groups across the country. There are now more than 700 such meetup groups, with more than 100,000 members.

In Britain too, the establishment and the state is also mired in a variety of scandals. The old politics is dying right across Europe and further afield as the recession coincides with  a crisis at the top.

A new politics, a democratic transformation of political systems, is not only possible – it’s absolutely necessary.

Paul Feldman

Communications

Interest rates at minus as 'perfect storm' looms

When you borrow money you pay interest to the lender. The rate you pay is the cost of borrowing and lenders derive their profits from it. At least, that’s the way it is supposed to work.

Not any longer. On July 5, the European Central Bank cut its deposit rate to zero. That means it stopped paying interest on money deposited with it.

As a consequence, six countries with economies for the moment at the edge of the economic storm now offer negative returns for government bonds maturing in two years or less: Germany, Finland, Denmark, Switzerland, the Netherlands and Austria.

Investors in effect have to pay them to look after their money. It’s a kind of parking fee. Rather than receiving interest on the loan the investors are so desperate to find a home for their money as the crisis escalates, they are willing to pay for it to be stored. 

And as a further consequence, more than half of Europe’s money market funds investing in government bonds – so-called “securities” - have closed. Not only is there no money to be made, but, because the interest rates are negative, it means that the value of investments will fall.

Switzerland’s two-year bond yield is the lowest of the six, at minus 0.55%, while Austria’s comparable government bond yield edged down to a negative 0.01% on Tuesday.

This morning, Japan joined the stampede. The Bank of Japan scrapped the 0.1% lower limit on the rate it would pay for government bond purchases, opening its door to the possibility of buying debt with negative returns.

And in the US, policy makers “are looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labour market,” said chairman of the Federal Reserve Ben Bernanke yesterday, using typically guarded language to disguise the seriousness of the situation.

Over the past 60 years the world’s economy was transformed. Production expanded, the population ballooned, the flow of commodities pouring out of factories turned into a flood.

Big and small companies operating from within national boundaries and subject to the home countries regulations expanded beyond their borders, becoming the transnational and global corporations so powerful that their requirements – for more growth from which more profits could be siphoned - determined national policies.

Regulation on the movement of capital was removed to allow the expansion of credit needed to fund continuously expanding investment. The ballooning of the credit (and debt) industry spawned a generation of brilliant, creative, inventive young people discovering ever new ways to make money out of money.

The amount of interest-bearing credit extant in the world soared, to become ten then, 20, 60 times larger than the real, substantial things of value in the world, like food, clothing, cars, roads, factories, computers,

And the velocity of its movement around the world accelerated as the power of those computers and the carrying capacity of the networks that linked them spread worldwide.

All that came to an end when the ability of people to repay their debts reached its limit, triggering the 2007/8 financial meltdown.

With the bursting of the bubble, global expansion has turned into its opposite - global contraction. In reality, interest rates have been effectively negative for years since central banks reduced their policy rates to below inflation in the wake of the crash to try and encourage more borrowing.  

The technical term for this is “financial repression” and millions of people around the world have felt its effects in unemployment, lost home, pensions, soaring food prices, and increasingly brutal austerity programmes.

Negative interest rates are a sign of increasing desperation in global economic and financial circles. Leading economist Nouriel Roubine is convinced that 2013 will produce a “perfect storm” as a number of factors come together to derail the global economy. You can’t say we haven’t been warned. 

Gerry Gold

Economics editor

Global economy 'off the rails'

No one any longs thinks that piling on the pressure through austerity, grinding millions into the dust, can possibly make any difference to the debt crisis. But despite increasingly strident calls, “pushing for growth” is a non-starter.

The influential Brookings Institution has just updated its tracking “Indices for the Global Economic Recovery”. Professor Eswar Prasad, inventor of the index introduced the latest findings with a stark warning:

The engines of world growth are running out of steam while the trailing wagons are going off the rails. Emerging market economies are facing sharp slowdowns in growth while many advanced economies slip into recession. Political fragmentation and gridlock have hurt confidence and stunted the effectiveness of macroeconomic policies. Financial markets have shed their optimism and investors are clamouring to retreat to safe havens as confidence has tumbled.

Parallel meetings of the G20 richest countries in Mexico and of 300 hedge fund traders and investors in Monaco have been able to do little more than watch the train wreck from the platform’s edge. The G20 declaration warned of the impending addition to the global catastrophe arising from US attempts to follow the European example, reducing, or even slowing the growth of its towering wall of debt.

Whilst in the European bolthole for the extraordinarily rich, Jamil Baz, chief investment strategist at GLG Partners told the speculators taking a break from sunning themselves on the terraces: “The crisis has not even started. It will take 20 years for us to reach escape velocity,” he said, tossing back another glass of champagne. “It will be devastating.”

For the Greek people, however, turned into guinea pigs by the EU, IMF and European Central Bank, their plight can’t get much worse. Tens of thousands of Greeks made unemployed and homeless by attempts to solve the deepening crisis queue for food at soup kitchens. The Orthodox Church says it is currently feeding a quarter of a million people daily. 

The Athens Chamber of Commerce says that 68,000 Greek businesses closed over the last 17 months and it expects a further 36,000 to close in the next 12 months. The economy is at a standstill. Businesses have no credit so no-one is paying for anything. The government which controls much of the economy has stopped paying its bills. As of last month, it owed nearly €7bn to the private sector. 

In 30 days it will run out of money, unless a coalition government can show eurozone authorities that it has both the determination and the means to implement a further round of brutalising austerity and so earn the next tranche of bailout funds. They’ll be certain to be relying on the fascist gangs of Golden Dawn who enjoy strong support from the police.

The Greek people are in the front of the firing line but they are not alone. The Spanish and Italian governments are screaming for more help and the terms of any deals will be no less stringent. International lenders, unimpressed by last week’s €100bn loan to Spain, have driven the country’s borrowing costs to even higher, impossible rates.

The logic of all this crash is another Great Depression, much worse than that of the 1930s, and a breakdown of political co-operation. You saw as much this week when Manuel Barroso, president of the European Commission, lost his cool in a press conference and blamed investment banks in the US for causing the recession when asked about the eurozone crisis.

Another world is not only possible but absolutely necessary for there is no way out through the current political system which is in a mutual dance of death with economic and financial elites.

A global network of local People’s Assemblies can act as opposing poles of attraction for all those whose interests lie in replacing the failed, bankrupt capitalist system. Assemblies can build on the achievements and successes of worker’s co-operatives, credit unions, and a broad range of democratically-owned and operated enterprises as the foundations of a new start. Allowing things to carry on as they are is not an option.

Gerry Gold

Economics editor

'Going for growth' will bring new attacks

If Europe’s voters think “austerity” is bad for their health, it’s nothing compared to what some of the advocates of “growth” have in mind as the next stage of the crisis unfolds.

People like Mario Draghi, president of the European Central Bank, know all too well that providing trillions of euros in cheap loans to banks has not led to increased lending.

The eurozone is firmly in recession so plan B is on the agenda. As far as Draghi is concerned, the aim is “structural reforms” like “labour-market flexibility” and increased competitiveness through speed up and lower wages.

In other words, living standards have to be driven down faster and further for there to be any chance of the eurozone coming out of recession.

What Draghi’s plan confirms is that the crisis has entered a new, more dangerous phase - economically and politically. The deadlock is absolutely clear in Greece.

The rejection of the draconian EU-IMF bail-out terms in the Greek election cannot be satisfied by any political deals amongst the minority left parties. Demands by Alexis Tsipras, leader of the Syriza party to tear up the deal cannot be met because the global capitalist economy is imploding.

Some like to say that “austerity isn’t working” and should be abandoned in favour of growth. The Guardian’s Seamus Milne remarks: “Cutting jobs and pay while increasing taxes isn't reducing borrowing and debt, let alone leading to economic recovery. It's deepening recession, increasing debt and destroying jobs and squeezing living standards across the eurozone – in countries such as Spain and Greece, catastrophically – as well as in Britain.”

This is stating the blindingly obvious but ignores a salient fact. Forced to contract by its own logic, capitalism is beyond the control of any political initiative that leaves the system intact.

The reality is “going for growth” just means moving to the next stage of a brutal contraction that will see workers sacked, factories closed, shutting down unprofitable production, driving up rates of exploitation.

New measures by the Con Dem coalition in the Queen’s speech like reducing public sector pensions and making it easier to sack workers, are part of this process.

The scale of what has to come if the current system is to survive is too terrible to contemplate. Attention must now turn to the means by which a new system can be created.

The interdependence of politics and economics rules out talk of a new direction for the economic system without a new political arrangement that removes the power of global corporations to dictate to governments.

Seismic shifts in electoral results in Europe follow on from mass movements in North Africa and the Middle East which have toppled regimes that ruled throughout the latter part of the twentieth century.

With unemployment soaring, anger cannot be contained and will explode on the streets  throughout Europe in the coming months.     

Replacing a bankrupt for-profit system with new forms of common ownership can only be carried out by new political formations, not co-existing with the world of capitalist corporations and global financial institutions, but challenging and replacing them.  

People’s assemblies, where everyone participates in the decision-making, can take the place of a five-yearly cycle of voting for representatives who immediately become subjects of capital.

A global network of people’s assemblies can establish democratic control over the financial and productive resources of the world, protecting them against the threat of destruction, turning them to the satisfaction of need. 

We should not ignore the other message from Greece, where an openly fascist party won 20 seats in parliament. People’s assemblies have to become the future shape of democracy because the old political order is crumbling but does not intend to go quietly.

Gerry Gold

Economics editor 

A default by any other name

When is a default not a default? When the Greek government and the European Central Bank pretend otherwise. In the real world, the truth is quite different.

According to the Financial Times, the swap deal closed out between Athens and private investors overnight is, in fact, the “world’s largest ever sovereign default”.

Lenders that include banks, equity and pension funds have, in effect, had what’s owing to them reduced by 75%. They agreed on the basis that the alternative was a 100% loss.

The deal may have reduced Greece’s sovereign debt by over €100 billion but it still leaves twice that amount outstanding – and an economy that has collapsed under the weight of austerity measures.

Yesterday, unemployment figures showed that one in five Greeks is out of work, with more than 50% of young people without a job. Homelessness, suicides, emigration and absolute poverty have soared.

This is the price Greek people are paying for a bail-out deal imposed by the ECB, the European Union and the International Monetary Fund. They are being sacrificed on the altar of a monetarist gamble to save the euro as a single currency.

BBC Europe editor Gavin Hewitt rightly says Greece has become a “laboratory for austerity”, adding:

“Never, in recent times, has an economy of a Western country shrunk so fast - 16% in just four years. Its politicians are held in low regard. There is humiliation and shame that the running of the economy has largely been handed over to outsiders. Many see Greece as little more than a protectorate of the EU. It is widely believed that the purpose of the bailout was less about helping Greece and more about saving the euro and protecting international banks from a default.”

But the measures taken or proposed can’t and won’t work because the eurozone – as well as countries like Britain and the United State – is truly overwhelmed by mountains of government, corporate and private debt.

They are the result not of bankers behaving badly but more fundamental causes at the heart of the capitalist system of production itself. These revolve around the system’s inbuilt drive to expand, regardless. Unlimited credit financed this expansion – until saturation point was reached. Financial collapse and recession followed. The unravelling is far from complete. It may have only just begun.

Greece’s effective default intensified the financial crisis before it was a done deal. Banks had already written off most of what was due – and cut lending to compensate. The ECB has had to pump no less than €1 trillion into the banking system to keep it afloat in recent weeks.

Portugal is considered next in line for a default. The country’s combined public and private debt is 360% of annual output, well above Greece’s level. Portugal faces borrowing rates of 13.2% but no one is buying the country’s debt. Italy and Spain are not far behind in the bail-out queue.

In Greece, a general election is due probably next month and the outcome could yet scupper the best laid plans of EU and bankers alike. Support for the pro-bailout parties Pasok and New Democracy has collapsed and parties that reject the Brussels takeover could win a majority.

Ultimately, however, the crisis won’t be solved by rearranging the political deckchairs in Athens or any other capital. The European Union itself is a failed project, based as it is on a global capitalist economy that is without doubt unstable, unsustainable and undemocratic.

Paul Feldman
Communications editor

Down with the 21st century Troika!

Whoever coined the term ‘Troika’ for the combined staff of the International Monetary Fund, the European Central Bank and the European Commission has a grim sense of recent history.

During the 1930s, Troikas – commissions of three appointees - were instruments of Stalinist repression operating at every level of administration. They were introduced to circumvent the legal system with a means for quick execution or imprisonment following a conviction without trial.

Troikas were responsible for sentences of death or exile for more than 600,000 Soviet citizens. They had other punishments available too. They and other parts of the Stalinist machine were used to consign upwards of 20 million people to forced labour camps.

And forced labour camps using and consuming 15 million workers from close to 20 European countries were also the basis of the economy in Nazi Germany before and during World War Two.

What have all these terrible episodes of 20th century European history got to do with today, you may ask? Surely the EU-ECB-IMF version of the Troika has nothing like labour camps in mind?

Well, let’s give them the benefit of the doubt on that one. But the logic and the consequences of the actions they are pursuing in Greece (soon to be visited on other countries) – unless they are halted – are just as terrifying.

Greek workers are to be reduced to pauperism to deliver the terms of the €130 billion bail-out agreed in principle this week. For the Greek economy to approach anything like competitiveness, its workers would have to be driven to work for lower levels of pay than anywhere else. That is equally certain to stoke up the revolt.

Germany’s stronger economy, is already dependent on ultra-low rates of pay. Its low wage sector grew three times as fast as other employment in the five years to 2010. Pay in Germany, which has no nationwide minimum wage, can go well below one euro an hour, especially in the former East German region. Greek workers will have to labour for less.

Having done its work in Greece, the Troika must now turn its attention back to the rest of Europe where conditions are deteriorating fast. But their efforts won’t be enough to keep a lid on the volatility and growing social resistance around Europe.

Back in December, Pedro Nuno Santos, vice-president of the Socialist Party in Portugal’s parliament, transmitted something of the feeling of the protests in the streets against the new right-wing government’s plans to raise the working week to 42 hours. and cut wages by 16% for the higher paid, and 8% for lower paid public workers.

"We have an atomic bomb that we can use in the face of the Germans and the French: this atomic bomb is simply that we won't pay," he said. "Debt is our only weapon and we must use it to impose better conditions, because recession itself is what is stopping us complying with the (Troika) accord. We should make the legs of the German bankers tremble," he said.

Santos’ call for southern European states to join forces to resist the austerity dictates of the stronger northern economies was quickly replaced by the 17 eurozone countries agreement on a stricter fiscal discipline which will loom large in the Troika’s armoury over the coming period.

The scale of today’s global crisis, prepared by decades of ballooning fantasy finance, overshadows the 1930s. We cannot begin to imagine the consequences of allowing capital to continue to its reign. Strikes and street protests have to become part of a wider revolutionary struggle for power over capital and crony political state systems. We cannot defeat the modern Troika without that perspective. And to succeed, we need a global network of organisations that are committed to seeing this struggle through to the end.

Gerry Gold
Economics editor

Global meltdown closer as risks pile up

Action taken by governments of the rich capitalist countries to reduce their deficits has produced a dangerous accumulation of risks for the world economy, warns the United Nations Conference on Trade and Development.

A fully-fledged recession will hit key advanced economies in 2012, even dashing hopes for what is bizarrely termed “expansionary contraction”. UNCTAD warns: “In today’s highly integrated global economy, the contractionary contagion will affect all countries and … emerging and developing economies need to prepare contingency plans.”

Other end-of-year reports on the prospects for capitalism in 2012 do not make happy reading for the world of government and politics, let alone those operating the crisis-ridden financial system.

According to the European Central Bank’s latest financial stability review, the probability of two large eurozone banks defaulting simultaneously “has been sharper and larger than in the past, pushing this measure of systemic risk to heights not observed since its inception in 2007”.

Having warned on Monday that the eurozone debt crisis could spread to engulf further member states, “creating risks to financial stability that could reverberate around the world”, the ECB has announced emergency, unlimited three-year loans to the major commercial banks

The ECB hopes this will tide them over the holiday period and avert the catastrophic collapse they face in the New Year.

But where will the money come from? The UK government has failed to stump up its hoped-for contribution to the latest £200 billion eurozone. bail-out fund which is already £50 billion short.

This was despite it being brokered via the International Monetary Fund to make it appear that Britain wasn’t contributing directly to Europe. And this adds to the problems of the biggest US money market funds having cut their lending to European banks to a further record low.

Meanwhile, ratings agency Moody has warned that Cameron’s prized triple-A rating for Britain is under threat from slowing growth, a worsening crisis in Europe, or any hesitation in the Coalition’s assault on living standards
New York economics professor Nouriel Roubini has for years been a front-runner in facing-up to the reality of the crisis. His forecast is for “a perfect storm of a double-dip recession in the US, a disorderly scenario in the eurozone and a hard landing in China” should policymakers continue to avoid “the tough decisions that are required to address their fundamental economic, financial and fiscal problems.”

The trouble is, policymakers aren’t in control of the global meltdown. As a nameless European Commission official quoted in the Financial Times has it: “You kind of always hope that someone, somewhere has a solution. And then one day it sort of dawns on you that no one here does.”

Every action that the governments or central banks take falls short of what would be needed because the social and political consequences are so profound. On the one hand they’re trying to create conditions for a return to growth. On the other hand, they’re obliged to follow the logic of capitalist “creative destruction”. They have to eliminate surplus productive capacity left over from the decades of credit-financed boom – at whatever cost to the billions of ordinary people whose lives are being smashed.

If humanity is to have any kind of decent future, the worldwide protests against the financial system and the effects of austerity must merge with the Arab uprisings and form a global movement of revolutionary people’s assemblies. The aim for 2012 has to be the replacement of the destructive capitalist system of exploitation with a not-for-profit, democratically-controlled system of sustainable production for need.

Gerry Gold
Economics editor

The 99% lose out all over Europe

In the end, the “choice” was between a British government determined to protect the City of London at all costs and the rest of the European Union agreeing to allow bureaucrats to impose co-ordinated spending cuts on their increasingly angry populations.

Thus the “interests” at stake in the all-night crisis summit in Brussels were essentially the same – whatever side of the Channel the member states happened to be located. And they weren’t those of ordinary people, the 99%.

Prime minister Cameron used Britain’s veto to try and keep the City free from any new EU taxes and regulations, while chancellor Merkel and president Sarkozy were driven by the financial markets towards a so-called fiscal union to save the euro. The 1% are the only potential winners here.

Cameron’s talk of “national interests” is in any case somewhat hollow, considering that the City is dominated entirely by global investment banks and dealers. Individuals n the UK own just 10% of the shares traded on the London stock exchange compared with 54% in 1963. Foreign investors, of all types, are the biggest group and now own 42% of shares on the London stock market.

All Cameron is concerned about – just like his New Labour predecessors – is protecting the tax revenue from a financial sector that was itself bailed out in 2008 to the tune of billions (while cutting the budget deficit at our expense). All Merkel and Sarkozy are worried about is cutting sovereign debt deep enough to appease the financial markets. Same difference.

The political breakdown in Brussels cannot disguise the summit’s failure to agree on a rescue plan for the single currency, or at least one that might impress the financial markets. The European Stability Mechanism (ESM), the permanent rescue mechanism due to come into force in July 2012, will be capped at €500bn while the Germany opposed giving it the banking licence sought by Herman Van Rompuy, president of the European Council.

Running in parallel is a profound banking crisis. Yesterday, “stress tests” showed European banks had a shortfall of €115bn compared to €106bn in October. Germany's banks were found to need more than double the amount of capital anticipated. And French banks are also under pressure. The rating agency Moody’s has downgraded three French banks including Societe Generale, which it says may need government support.

The banking crisis is directly connected to the sovereign debts overwhelming countries like Greece, Italy, Spain, Ireland and Portugal. Many banks are exposed to loans to these countries and do not have sufficient capital to handle a default, let alone the collapse of the euro. In a desperate move, the European Central Bank has cut interest rates, given loans to cash-strapped banks and is accepting virtually any collateral for loans, including the notorious mortgage-backed securities that drove the 2008 meltdown. ECB chief Mario Draghi admitted that a new credit crunch was under way, with banks refusing to lend to each other.

The EU was until the 2008 crisis a cosy, corporate, bureaucratic, undemocratic club run increasingly on free-market lines. It was the European arm of capitalism’s globalisation project. Deregulation of the financial system applied throughout the continent, not just in Britain.

Because the global economy’s growth was fuelled by debt, the recession exposed its soft underbelly and wrecked the finances of national governments. It wasn’t deregulation that did it for the capitalist economy but the in-built drive to grow or die to sustain profits that ultimately broke the back of finance.

A democratic Europe run in the interests of ordinary people, the disenfranchised majority, is a goal worth struggling for. The chances of the EU as presently designed being the vehicle for such a project are precisely nil. Cameron, Sarkozy and Merkel have made that abundantly clear.

Paul Feldman
Communications editor

Greece edges closer to the brink

Greece is closer than ever before to social breakdown as the Pasok “socialist” government struggles to force through yet more austerity measures demanded by lenders, including the European Central Bank (ECB) and the International Monetary Fund.

The credit rating agencies which assess each country’s health have now driven their assessment of Greece to the lowest in the world, because its now crumbling government has, as yet, been unable to impose a sufficiently brutal assault on its people.

Some Pasok MPs are refusing to vote for a new round of cuts, while the right-wing parties are opposing them for their own reasons. Another 24-hour general strike today brought the country to a halt while thousands of activists and unionists converged on Athens' central Syntagma Square on the parliament's front steps to try to prevent deputies from debating the measures.

"Thieves, traitors!" many chanted. "Where did the money go?" "I feel rage and disgust," said 45-year old public sector worker Maria Georgila, a mother of two. "These are very tough measures and they won't get us out of the crisis. I can't believe they have no alternative."

Daily mass protests have drawn hundreds of thousands of people on to the streets in every town throughout the country. They have rejected pleas from prime minister George Papandreou that it is his patriotic duty to make the cuts. Demands raised include a call for Greece to default on its massive foreign loans, to leave the euro and return to the drachma and for the replacement of the current political system with direct democracy.

New cuts would increase the size of unemployment, which is already at a record 16% and deepen a recession now into its third year. The Greek economy shrank by a further 5.5% in the year to March 2011, household consumption contracted 7.8%, while investment was down 19%.

The Greek protests are directed at the government, but behind it stands something much more threatening. Yesterday the finance ministers of the eurozone under pressure from the ECB failed to agree on a proposal to force private investors to share the cost of a further bailout by extending the period of their loans to the bankrupt country.

The ECB fears the wrath of “the markets”, the private investors who lend on the expectation of a fat return for their money. Also concerned are major European banks who stand to suffer if Greece defaults on its loans. The banks have Greek debt on the asset side of their balance sheets and a write-off would be catastrophic.

Across the Middle East, North Africa and Europe, the rapidly developing global capitalist crisis has driven millions of people, young and old into action against a system of governments – both autocratic and parliamentary – which became established during the post-1945 rebuilding of capitalist production.

In Britain, public sector unions, including teachers and civil servants, are set for the largest day of strike action for a generation at the end of the month over pensions and job losses. It’s a welcome start, but as the experiene of Greece shows, strikes by themselves cannot push back the waves of the deepening crisis.

During half a century, the inexorable logic of capitalist growth demanded international agreements which enabled the emergence of increasingly powerful global manufacturing, trading, property-owning and financial corporations. Their “rights” are established in contracts backed by international treaties more powerful than the laws of any country.

Ending their power over people’s lives is the key to finding a solution. To respond to Maria Georgila, “they” actually do not have an alternative. “We”, however, can proceed to build people’s assemblies and establish a new global economy and politics based on social ownership, democratic control and not-for profit sustainable production for need.

Gerry Gold

Economics editor