Goldman Sachs adds Italy and Greece to its portfolio

When trader Alessio Rastani told the BBC that "governments don't rule the world, Goldman Sachs rules the world", jaws dropped in the news room at his brazen candour. Seven weeks later, Rastani is looking more right than ever.

The global investment bank’s advisors have in the past week taken control of the Italian and Greek governments, replacing elected administrations with faceless economists, academics and bureaucrats.

These events are nothing less than corporate-driven coups in the heart of Europe, through which the financial markets have demanded and got the heads of government on a platter.

George Papandreou and Silvio Berlusconi were what they were, politically speaking. Their mistake was to try and ignore the European Central Bank (ECB), International Monetary Fund (IMF) and the leading lights in the European Union, Germany and France, in dealing with their respective debt crises.

So they had to go.

In Italy, Mario Monti, former EU competition commissioner and advisor to Goldman Sachs for the last six years, was appointed prime minister by the ageing president Giorgio Napolitano, who undoubtedly got his marching orders from somewhere in the Brussels region. Monti is planning a cabinet entirely made up of unelected appointees.

In Greece, prime minister Papandreou was ousted by Lucas Papademos, yet another advisor to Goldman Sachs and former vice-president of the ECB. Both men are going to try and impose savage cuts in living standards to keep the international loan sharks – aka the bond market – at bay, temporarily.

Normally, when governments collapse, a date is set for a general election. But this right is also being denied the Greeks and Italians. Chancellor Merkel and President Sarkozy, together with the markets, have declared that elections will take too long and may not even lead to a conclusive outcome. As for Papandreou’s plan for a referendum, don’t even go there.

Just in case you think this process doesn’t apply to Britain, let’s not forget that weekend in May 2010 after the general election here produced a stalemate. The Tories and Lib Dems were literally propelled into a shotgun marriage by the cabinet secretary, Gus O’Donnell.

He made it perfectly clear that the financial markets would not tolerate weeks of political instability in Britain. The ConDem coalition – a government without a mandate and for which no one voted - was the result.

The financial markets have effectively “bought” capitalist democracy, turned it into a commodity. They demanded and got deregulation from the politicians. And when they went bust, they demanded and got bail-outs. When governments have proved incapable of imposing the debt crisis on their people, an out-and-out takeover is the result in Athens and Rome.

So the democratic achievements of past generations in terms of the right to vote and influence course of events through parties committed to reform are negated. There is even less meaning to voting than ever before, as the people of Spain will discover next Sunday.

The corporate coups should drive us to renew the struggle for democracy. The global occupation movement, the revolutions in North Africa and the real democracy movement in Spain point the way forward.

As the present political system is ossified, alienated and generally in someone else’s pockets, then it follows that entirely new forms of democracy are needed. The assemblies that have been a feature of 2011’s uprisings are an experiment in democracy that actually works.

Democracy here is not an add-on, to obscure some other power relations but a conscious effort to do things better. The general assemblies have the potential to go further than the spaces they currently occupy. People’s Assemblies can become not just the voice but also the power of the silenced, disenfranchised 99%

They could reach out to neighbourhoods and communities and offer new forms of representation, participation and direct democracy. A network of assemblies could begin to draw up strategies and plans for a democratic alternative to the power and rule of the market capitalist economy.

Utopian? Yes. Possible? Undoubtedly. Necessary? Absolutely!

Paul Feldman
Communications editor

Greece is stuffed by the Merkozy

If the political meltdown in Greece tell us anything, it is that the eurozone crisis has gathered an unstoppable momentum and the ruling elites can’t do anything about it.

Whatever decisions are made by the major economic powers at the G20 summit in Cannes, the die, as Julius Caesar is reported to have said on crossing the Rubicon, is well and truly cast.

The unravelling of the second phase of the financial meltdown that got under way in 2008 is running ahead of and proving stronger than the half-baked decisions made by political leaders from the US to Europe.

It is not a matter of if but when the euro’s claim to be a stable currency that rivals the dollar and sterling falls apart. The debt contagion has already embraced Italy, the world’s eighth largest economy, with France and Spain considered next in line.

Italy has the second largest nominal government debt outstanding in the eurozone, at €9.3 trillion. “Italy is a banana republic that didn’t depend so much on foreign capital in the past, but now it does, and markets are less forgiving,” said Daniel Gros, the director of the Centre for European Policy Studies in Brussels. “Italy is in the danger zone; that is quite clear now.”

The political consequences are grave. Silvio Berlusconi’s government is close to collapse, while George Papandreou's government in Greece is now in a state of utter chaos. Whatever little political dignity Athens had as it carried out spending cuts ordered by the IMF and European Union, was lost this week.

After Papandreou called for a referendum on the latest austerity package he signed up for in Brussels last week, the storm clouds broke and the markets tumbled. He was immediately summonsed to meet the Merkozy – aka the chancellor of Germany and the president of France. Papandreou was given his marching orders – call off the referendum and impose the cuts.

While the referendum plan was undoubtedly a populist move to quell the strikes and mass demonstrations that have racked Greece, it at least offered the opportunity for a democratic debate. Opposition to it came from the opposition New Democracy (conservatives) as well as the Greek Communist Party (KKE).

The KKE, an ultra-Stalinist party, is the third biggest in the Greek parliament. It has spent the summer striving to keep the Pasok government in power while posturing against it.

On October 20, its members in the trade union front PAME formed a human shield at the entrance to parliament during a two-day general strike. Armed with clubs and dressed in a para-military fashion, their aim was to prevent workers and students from storming the parliament building. This led to ugly clashes with anarchists, who the Stalinists typically labelled as agents provocateurs.

Fresh election in Greece – or anywhere else for that matter – would solve nothing. The dilemma remains. How can the mountains of state, corporate and personal debt that have overwhelmed the capitalist system be reduced in a way that does not lead to mass unemployment, a collapse of living standards and a global depression?

The answer is that from a capitalist point of view, there is no alternative. This is the twilight for parliamentary democracy everywhere. Its fortunes are inextricably linked to the corporations and banks who dominate economic matters.

In defending the limited political freedoms we have against the Merkozy and others, it is clear that we need something better. A new political and sovereign power that puts into practice the very meaning of the term “democracy”, which ironically comes from the Greek words “demos” (people) and “kratos” (power), will be needed to overcome the imminent catastrophe.

Paul Feldman

Communications editor

Democracy bad news - for financial markets

There argument about whether democracy is good for capitalism was settled yesterday – by the financial markets. Any notion that people should have a choice about whether they should shoulder the burden of the global crisis was put to rest.

Markets recoiled in shock after Greek Prime Minister Papandreou’s unexpected announcement that he would call a referendum on the eurozone bail-out package which piles hardship upon hardship on the country’s people.

The suggestion of a democratic interference induced a cardiac arrest. Concern that Greece was now heading for default sent bank shares in particular plummeting. France’s Société Générale recorded its biggest one-day fall since it was privatised in 1987. The bank holds lost of pretty worthless Greek government debt.

Markets in government issue bonds – historically the safe-haven fall-back for investors – look as though they’ll also need resuscitation. The price Italy has to pay to borrow against its debt soared to over 4.5% above what Germany pays, despite heavy intervention by the European Central Bank.

This gap – or “spread” – is similar to one that that forced the Greek, Irish and Portuguese governments to seek mercy from the rest of the world, subordinating the fate of their people to the grim-faced come-what-may survival of the capitalist system.

Gary Jenkins, head of fixed income at Evolution Securities said “We may have reached the tipping point.” With a name like that, they should know, but what the outcome might be is beyond their, or anyone else’s ability to predict.

Last week, the 17 eurozone leaders thought they had a deal to avert a Greek default and

and prevent a European and global collapse into the unknown. The only certainty associated with the terms of the deal is that it must mean a further huge assault on the Greek people.

To receive new loans, the Greek government must impose still further cuts in public sector wages and scrap many bonuses, suspend 30,000 public sector workers for a year, cutting their wages cut to 60%, suspend wage bargaining, cut some pensions by 20%, increase taxes and implement a range of other measures.

So recourse to a popular referendum in the home of democracy is unlikely to meet with a majority in favour.

With his surprise move Papandreou, leader of the ‘Socialist’ PASOK, has thrown his party into turmoil. With only a tiny majority in Parliament, two members of his government have threatened to vote as independents, and a third is calling for a government of national unity. But he managed to win the support of his cabinet.

Then he was promptly summonsed to Nice to meet the leaders of Germany and France, who expressed total surprise at the referendum call.

It is more than 2,500 years since “the power of the people” was adopted as the basis for democracy in Athens. In the intervening period the forms of government in which, supposedly, all the people have an equal say in the decisions that affect their lives have changed many times over.

The advent and rapid development of capitalist society spread the parliamentary form as the means of resolving conflict in nation-states between the old feudal landowners, the new owners of accumulating capital, and latterly in Britain at least, keeping a lid on the aspiration of workers.

But, in the latter part of the 20th century, the credit-financed spread of global corporations overwhelmed and changed the role of parliamentary governments, who must now either submit to the rule of capital or leave the stage to someone who will.

In the occupation of towns and cities across the world, a new form of democracy is stretching its limbs, discovering its identity, assembling its forces in assemblies and occupations. They can easily establish relationships with employee-owned trusts like Publix in the US and John Lewis in the UK and co-operatives in manufacturing, distribution and finance, like Mondragon in Spain.

Then people’s assemblies could start to challenge the failed political system and open up a period of real democracy throughout the world. There’s no doubt it’s needed if we want to stop the rule of the financial markets.

Gerry Gold
Economics editor

In thrall to the markets

Governments across the world are engaged in a beauty contest judged by the ratings agencies which pronounce on their credit-worthiness, and the hedge funds which decide whether a country’s debt – its bond issues - are worth buying.

The closer a country like Greece, or Portugal, or Spain or the UK gets to defaulting on its debts, the more it applies the make-up to hide its decay. Greek prime minister George Papandreou is engaged in a two-pronged shadow play. It is designed to stop the bankrupt country’s ancient monuments – essential to the tourist industry from which the country derives much of it income – from falling into the hands of its creditors.

In act one of the country’s financial tragedy, Papandreou is implementing the first tranche of a broad austerity programme of savage cuts and tax increases. Act two is a world tour to gather support for a campaign to regulate the use of credit default swaps and other derivatives by speculators gambling on the likelihood of a default.

But Papandreou is himself gambling. His campaign is a populist move intended to deflect the anger of the still-powerful Greek trade unions that once supported his party PASOK. But the Greek workers are having none of it.

In protest against the planned austerity measures, Greek tax and rubbish collectors walked off their jobs for a second day on Monday. The country's two main unions have urged more than a million civil servants and private sector workers to strike today. This second general strike in as many weeks is set to paralyse much of the country.

Meanwhile, in Portugal, similar plans sparked a strike by civil servants which shut schools, courts and hospitals on March 4 in actions supported by 80% of the membership. In its historic referendum, the population of Iceland has resoundingly rejected the terms for repaying the debt guarantees for Icesave depositors held by the British and Dutch governments.

Public and private sector employers across the world are responding to the recession by driving up productivity and cutting labour costs. As a two-day strike by 270,000 UK public sector workers over cuts in redundancy pay came to an end on Tuesday, the threat was growing of action over the Easter holiday by British Airways cabin crews over pay cuts, and rail maintenance workers and signallers over job reductions and changes to working conditions.

In the United States, the economic shakeout is driving the rate of exploitation to record levels. Official figures show that in 2009, productivity rose 3.8% from 2008, while unit labour costs fell 1.7%, a record pace of contraction. There are surely limits to what American workers can stand. Trouble is brewing already at American Airlines.

Everyday brings new shocks that surprise and disappoint those who search for signs of recovery. The UK’s declining exports and widening trade deficit despite a 25% decline in the relative value of the pound, are just the latest in a long line of figures that lead it inexorably to join the sovereign debt crisis on the way to full-blown state bankruptcy. No wonder Gordon Brown today admitted that there were “substantial risks ahead” for the economy.

The financial markets are relying on New Labour and/or the Tories to deal with the public spending deficit at the expense of ordinary people. Brown’s denials on this subject should be taken with a pinch of salt. Capitalism is cornered in country after country and is fighting back the only way it knows how. The increasing resistance by workers around the world has to point towards the strengthening of international alliances on the road to putting capital out of business once and for all.

Gerry Gold
Economics editor