Banks in 'collateral crunch' as debts mount

Thousands of high school students took to the streets outside parliament in Nicosia yesterday. They were protesting against the harsh consequences the people of Cyprus can expect from the deal imposed by the European Union, International Monetary Fund and European Central Bank.

This conspiracy of non-elected bodies is the technical arm of a near-dictatorship ruling throughout Europe. It is fighting belligerently to save a social, economic and political system that is wrecking the fabric of societies. The resources that are being consumed, let alone the lives ruined, surely don’t justify the results. As for the people of Cyprus, they simply get no say as the deal is not going to parliament, just in case it’s rejected.

The banking crisis in Cyprus is just one of the storms in the vast clouds of credit and debt invented to finance the global growth of production and consumption from the 1980s onwards. This one was triggered months ago when Greece was forced to write down the value of its government bonds as part of the bail-out punishment for its people. At the end of 2011, the Bank of Cyprus had $14 billion tied up in Greek debt, while Laiki Bank had more than $24 billion.

The botched and brutal temporary patch designed to prevent a formal default by the smallest member of the eurozone will reverberate throughout Europe and the rest of the world. The imposition of capital controls to stop instant transfer of funds out of the country undermines the fragile state of both the eurozone and the wider European Union.

UK  civil servants won’t have been the only ones working through the night to minimise the impact on ex-pat Cypriot bank branches, like those in Mayfair and Birmingham. President Putin’s people will have been hard at it too, searching for ways to extricate the remains of the vast amounts of Russian wealth that found its way into Europe via Cyprus in recent years.

Cyprus, already in a deep recession, now facing an estimated further 20-30% cut in its GDP as a result of the deal, will be devastated. Thousands of businesses and tens of thousands of jobs will disappear overnight. The story is being replicated throughout Europe.

Portugal, where unemployment is heading towards 20%, is entering a third year of contraction amplified by austerity; and Spain’s jobless rate will pass 27% according to its central bank as the Europe-wide contraction drives the country into a deeper slump. France, the second biggest eurozone economy, has seen 22 months of rising unemployment, now exceeding 10% and certain to rise further as car factories are shut down due to overcapacity.

The global recession is spreading like a virus across the United States too. Cities wrecked by the crisis, including Detroit in Michigan, San Bernardino and Stockton in California are seeking bankruptcy protection to exempt their pension funds from being raided to pay debts.

In the UK, observers are warning that the decision by the Bank of England today to require banks to raise another £25 billion of capital, will could lead to a “collateral crunch” that could shut down the market for credit. So don’t fall into the trap of thinking it’s just Cypriot banks that are over-stretched. UK banks have piles of debt that no one is paying interest on, which is why the Bank of England has stepped in.

Wherever you look, which ever way you turn, the conclusion must be the same. Capitalism as an economic and political system is in extermination mode. In this situation,  private and public sector employees and pensioners need to unite with finance sector workers throughout the world with one goal in mind. All the resources needed for production, distribution and exchange must come under social ownership and control. So long as they remain out of reach, the worse our prospects become.

Gerry Gold

Economics editor

Historic strike against austerity must become turning point

The historic, co-ordinated pan-Europe strikes and marches taking place today are the clearest indication yet that the struggles against the governments that have imposed austerity policies are coming to a head.

With more than 25 million out of work, all major unions will be marching to oppose further devastating cuts in salaries, pensions, benefits and social services, tax increases and new limits on trade union organisation.

The strike is expected to cause near or total shutdowns of the four most debt-battered countries — Portugal, Spain, Italy and Greece.

There will be solidarity marches elsewhere organised by new movements like Spain’s M15 as well as trades unions. Demonstrations are planned throughout France. Rail workers in Belgium are striking, as are unions in Malta and Cyprus.    

And from Germany and Switzerland to Turkey, eastern Europe and Scandinavia, workers and many organisations have promised to rally around the single message: No to austerity.

In Britain, the Trades Union Congress has organised precisely nothing, however. A statement declared that its main action had taken place on October 20, when an estimated 150,000 people marched through London on a Saturday afternoon. New general secretary-designate Frances O’Grady will, however, address an evening rally outside the European Commission’s offices in London. That’ll frighten them!

Mounting anger forced the European Trades Union Confederation, representing 85 trades union organisations from 36 countries, with 60 million members to support the action. But the ETUC’s hope that the protest will encourage the European Commission, the European Central bank and the International Monetary Fund to get the economy “growing” instead of cutting deficits, were dashed even before the sun began to rise.

Yesterday, the Bank of Portugal slashed its growth forecast for 2013 from minus 1% to minus 1.6%, following an expected 3% contraction this year; and a new report from respected US forecaster the Conference Board foreshadowed a continued slowing of the world economy through to 2025.

Many eyes are watching events unfold in Europe and elsewhere with more than a little trepidation. Reuters news agency tried its hardest to play down the threat contained in the mounting anger, fulfilling its role in attempting to calm the volatility on the financial markets and encourage the global corporations.

In a piece hopefully headlined “European austerity protests far from revolution”, it claimed that things are looking good for investors: “While US carmaker Ford has announced plans to scrap 6,200 jobs in Europe to reflect tough auto sector and wider economic conditions, its decision to shift some output to low-cost Spain underlined that social tensions there were not a concern.”

This is a report from cloud-cuckoo land. In Spain, people are laying siege to banks that have repossessed over 300,000 homes in the last couple of years. The police union says it will back any members who refuse to help with evictions. Seizing the banks has become a practical notion in the eyes of many Spanish households.

Reuters noted that though “the sense of alarm has reached better-off youths in northern Europe, it is often tempered by a mood of resignation and inability to define a political alternative”. There is some truth in this observation.

Across the world, strikes, demonstrations and protests of all kinds – a massive action is planned in the United States next week against the anti-union corporation Walmart - are powerless to stop the accelerating contraction of the global capitalist economy. This – and not some misguided policies - is what is driving governments to cut spending and drive down conditions.

The struggles against austerity must not be allowed to founder in a futile effort to get governments to "change course". It is high time to begin the construction of a not-for-profit replacement, and we’ll be working with others on the blueprint – a new Agreement of the People - this Saturday.

Gerry Gold

Economics editor

Unrest grows as crisis spins out of control in France

Angry confrontations between police and young people on housing estates near Amiens are a sign of growing social unrest in France as the recession, highlighted by the threatened Peugeot plant closure, deepens.

Amiens has often experienced unrest, but the prefect's office said there had never been violence "as serious as this". After just 100 days as president, François Hollande made his position clear, with a statement that could have come from his right-wing predecessor, Sarkozy: “The state will mobilise all its means to combat these violent acts. Security is not only a priority for us, it is an obligation."

There were riots here during the nationwide disturbances in 2005 across France, but economic and social conditions have greatly intensified in the wake of the global financial meltdown of 2007-8. Massive upheavals in the Middle East, North Africa, Greece and Spain and riots in cities in the UK are indicators of social turbulence on a transcontinental scale.

Unemployment is already as high as 40% amongst the mostly immigrant youth on the estates surrounding French cities, and now the deepening slump is driving corporations onto the offensive throughout Europe. Growth in the eurozone has turned to contraction, so workers and unemployed people throughout the whole continent are being driven into action against employers and the state.

With no possibility of any recovery in demand for mass market cars, car maker PSA Peugeot Citroen has announced plans to close its Aulnay-sous-Bois factory in the suburbs of Paris. Other cut-backs are certain to follow.

Sergio Marchionne, the chief executive of Chrysler and Fiat, two of the world’s biggest car companies, and president of the European Automobile Manufacturers’ Association, warned in April that the industry needed to cut capacity in Europe by 20%.

Translated into jobs that would hit close to half a million workers in an industry directly employing 2.3 million people in Europe, including sub-contractors. Economic conditions have worsened since Marchionne’s forecast, so the assault on jobs is likely to be much worse than his prediction.

The crisis is echoed in steel production – one of the car industry’s main inputs.  World crude steel capacity utilisation was running at 80.4% in May, down 2.5% on last year.

No part of the world is exempt from the global contraction. Its impact is reflected in a crisis in shipping where disappearing credit and overcapacity interacts with falling demand. The second-hand ship market has collapsed. Both bulk ships and tankers are trading at lower levels today than during the worst moments of the 2008-09 crisis.

Clarkson’s ClarkSea Index for maritime freight rates has halved since mid-2010, and fallen by 80% since 2008. This includes the wildly volatile Baltic Dry Index for bulk freight, which has crashed by 90% to post-Lehman depths.

Responses to the Aulnay-sous-Bois planned closure have been mixed, to say the least. Jean-Pierre Mercier, head of the CGT union at the factory targeted for closure said: "We have the power to make Peugeot back down, to preserve our jobs." He told a crowd gathered by its gates. "We are a political bomb, a social bomb, and we intend to detonate."

The union is planning a long-term campaign of protest, including marches on the company headquarters, to keep the plant open. Other unions are more intent on extracting improved redundancy terms for workers. Gerard Segura, Aulnay’s Socialist Party mayor, has ordered Peugeot to find a new industrial employer for the site, threatening to expropriate the factory grounds if it fails.

Closure would wreck the town's finances. It would lose taxes from the company and from hundreds of families that would have to rely on social services. Already deep in the red, its debt payments have doubled in the past four years to €90.4 million euros in a budget of €226 million.

These attempts to preserve jobs, attract a new employer or even win improved redundancy conditions only serve to hide the impact of the unfolding economic holocaust. Conflict is certain to sharpen when French car workers return from their August holidays.  

Gerry Gold

Economics editor

“Double meltdown” warning for Europe

Today the leaders of the 27 countries that make up the European Union meet in Brussels. Their desperate aim is to keep the debt crisis in Europe from spiralling out of control and ‘promote jobs and growth’.

On Tuesday, the Organization for Economic Cooperation and Development warned that the 17 countries that use the euro risk falling into a "severe recession." It called on governments and Europe's central bank to act quickly to keep the slowdown from dragging down the global economy.

After three years of pushing for ‘austerity’ to reduce debts accumulated by governments as they shored up the bankrupt banks, cuts in public expenditure have wrecked services, driven unemployment levels beyond anything seen in the 1930s, and triggered a political revolt – certainly in Greece. In a sharply polarised Greece polls indicate that the left-wing coalition Syriza is likely to win the election being held on June 17.

The French elections brought a new government committed to abandoning austerity in favour of growth, which is also the International Monetary Fund’s perspective. So the long-term pact between Sarkozy and Germany’s Chancellor Merkel is broken. 

The financial columns are full of doomsday scenarios assessing the consequences if an anti-austerity government results from a second election in Greece on June 17th and defaults on its debts.

But the impact would be small compared to the spectre of a ‘double meltdown’ which could see the simultaneous departure of Greece from the eurozone and a Spanish banking implosion, warned former IMF economist, now hedge fund manager, Stephen Jen, after credit rating agency Moody’s downgraded the entire Spanish banking sector.

Stephane Deo, an economist at UBS, says the slow-motion collapse of Spanish banks from toxic real estate loans could suddenly turn into a fast-moving bank run, as depositors accelerate the withdrawal of their deposits.

In the UK, the insults in the Coalition’s camp are flying back and forth between a previously unknown advisor - venture capitalist, Adrian Beecroft, and Business Secretary Vince Cable. Beecroft’s proposals to enable growth would remove protections for workers - allowing employers to sack them virtually at will. Cable says the idea is ‘bonkers’ because Britain’s workers are already amongst the least protected. Beecroft says Cable is a socialist.

But this renewed assault on workers’ rights and living standards throughout the world is the real meaning of all the talk of ‘restructuring’ and ‘rebalancing’.   

Today, as the discussion in Brussels reaches fever pitch the main idea is for Europe to move to a stronger, more mutual common defence by issuing ‘eurobonds’, in which the European Central Bank would raise loans from investors to be used wherever they might be needed. Eurobonds would protect weaker countries, like Spain and Italy, for example by insulating them from the impossibly high interest rates they now face when they raise money on bond markets.

But, also today, in a direct challenge to a more united Europe, Germany’s federal government is strengthening its national interest, holding an auction for some new bonds, borrowing money from investors in the way that governments do.  Only there’s something new about this auction. The relative strength of the German economy is so attractive to investors desperate for a safe haven, that the Germans have set the interest rate they’ll be paying at zero – 0%.

The IMF is also pushing the Bank of England to reduce its base rate below the half per cent it has been at for more than three years.

So, at its moment of sharpening crisis, the capitalist system has arrived at a new contradiction: competing to save the for-profit system means issuing credit at a not-for-profit 0%.  And with inflation above zero, investors will be inverting the essence of finance - paying to lend money.

The declining value of money reflects and can only accelerate the contraction in the real economy, bringing a global slump into view. The system is definitely broken. How to bring into being a needs-based, co-operatively run economy based on people’s assemblies is the issue of the day.

Gerry Gold

Economics Editor

Global economy heading from contraction to destruction

It’s no wonder that prime minister Cameron now sees no prospect of a “recovery” in the foreseeable future. He’s just stating the obvious.

Twelve European countries are in recession – meaning they have suffered at least two consecutive quarters of contraction: Belgium, Cyprus, the Czech Republic, Denmark, Greece, Ireland, Italy, the Netherlands, Portugal, Slovenia, Spain and the UK.

Germany, the so-called European economic powerhouse, contracted by 0.2% in the first quarter of 2012, after two quarters of less than 1% growth. In France, the growth rate has been less than 1% for four years. In the last three quarters it was 0.0%, 0.3% and 0.2%.

Recession is declining production. It finds its expression in rising unemployment.

The global employment situation is already alarming and shows no sign of recovery in the near future, according to the International Labour Organisation in its World of Work report 2012, optimistically sub-titled “Better jobs for a better economy”.

How do you even begin to comprehend the meaning of 25% unemployment in Spain, rising to 50% amongst its young people? 

These rates are already comparable with those the 1930s Great Depression when while unemployment in the US never rose above 25% in some countries of Europe it soared as high as 33%. In Germany the unemployment rate reached nearly 25% in 1932. In the UK in the same year it peaked at just over 22%.

And what of the future? The evidence shows that the contraction has hardly begun.

A survey out today shows that the eurozone's manufacturing sector slipped further into decline last month. Firms cut workers at the fastest pace in more than two years in April after new orders fell for the 11th straight month.

The ILO report shows that soaring unemployment is going hand-in-hand with a prolonged investment deficit – another sign that the crisis has entered a new phase.

With no hope of increasing consumption, large firms, seeing no possibility of profits from investment, are holding on to unprecedented levels of cash. In some economies, more optimistic small firms have difficulty accessing credit that would allow them to invest and create jobs, because banks, seeing no hope of a profitable return, aren’t lending 

As the effects of only recently adopted austerity programmes begin to bite, even taken together with monstrous injections of further credit from the European Central Bank, and their cumulative effects are seen, voices of alarm are beginning to predominate in the pro-growth camp.

Lawrence H. Summers, former US treasury secretary, knows a thing or two. This week he warned:

Once again European efforts to contain crisis have fallen short. It was perhaps reasonable to hope that the European Central Bank’s commitment to provide nearly a trillion dollars in cheap three-year funding to banks would, if not resolve the crisis, contain it for a significant interval. Unfortunately, this has proved little more than a palliative. Weak banks, especially in Spain, have bought more of the debt of their weak sovereigns, while foreigners have sold down their holdings. Markets, seeing banks holding the dubious debt of the sovereigns that stand behind them, grow ever nervous. Again, Europe and the global economy approach the brink.

The brink of what he doesn’t say.

This inevitable self-feeding spiral of contraction was triggered in 2007 when the capitalist economy reached the limits of five decades of growth funded by clouds of fantasy finance. But these five decades started from a low level. The tidal retreat of the 1930s left a mountain of surplus capacity exposed.

The BBC’s Stephanie Flanders economics editor quotes economists at Citi who say “it's been the worst four years for the UK economy in at least 100 years: worse than what happened in the 1920s and 1930s, and worse than anything in the 1970s and 1980s”. “Leaving aside the war”, she told viewers recently.

Since there’s no prospect of a recovery, and austerity is making a bad situation worse, the turn from contraction to destruction is next on the agenda for global capitalism. We need to learn the lessons from history about the political consequences of slump and depression – and quickly – to block the process through mass action aimed at a transfer of power to the 99% asap.

Gerry Gold

Economics 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 'national interest' con trick

If there’s one phrase that’s dominated parliament, the airwaves and the media over the veto used by David Cameron to block a new European Union, it is the “national interest”. It’s an Orwellian phrase, designed to obscure rather than reveal the truth.

In the House of Commons yesterday, the debate on the prime minister’s Brussels veto was whether it was in the “national interest” or not.

Cameron claimed: "I went to Brussels with one objective – to protect Britain's national interest. And that is what I did."

Ed Miliband, leader of the Labour Party, responded: “Faced with a choice between the national interest and his party interest, he has chosen the party interest.”

Using a phrase often enough does not necessarily mean that it accurately describes what’s going on. Especially when it’s deployed by a political class not exactly known for telling the truth.

Some self-evident, basic facts first. Presently, we live within a capitalist economic and political system. In our society, there those who own and control production and finance (aka capitalists) and those who are employed by them (aka the working class). This relationship extends to the public sector where the employer is the state.

The “interests” may appear identical in the sense, for example, that an employer needs workers and a worker needs resources and a place to labour. But it is an identity of opposites because ultimately the interests at stake are essentially different. Employers need to generate profits and will drive down costs, including wages when they can. Workers have an interest in maximising their income and defending what they have, which is why trade unions have had to strike to defend their pension rights.

None of this is exactly new. Nor is the use of the term “national interest” to disguise the very real social, class-based divisions in society. Yet people are not fooled into thinking that the interests of the banks, for example, are the same as theirs. Or that politicians represent ordinary people rather than powerful corporate interests.

In a the state of the nation survey 2006, only 17% questioned thought they had a great deal or a fair amount of power over government policies. compared with 67% that large corporations exercised. No doubt that figure would be higher today in the wake of the meltdown and bank bail-outs.

So a “national interest” actually doesn’t exist in practice. But it is a convenient smokescreen that can be rolled out to justify the odd invasion (Iraq for example), or to justify a veto exercised to protect the narrow interests of (global) bankers, or simply as a way to whip up patriotism and hatred of foreigners in general and France/Germany in particular.

Some like Guardian columnist Aditya Chakrabortty accuse Cameron of being too narrow in his definition of “national interest” by overly focusing on the importance of the City of London and financial services in Brussels.

But Chakrabortty lends the term credibility it does not merit by suggesting that a real “national interest” would be better served if it included a whole range of other economic activities. His sociological, non-class viewpoint is simply a liberal acceptance of the status quo of capitalist social relations.

The interests of ordinary people cannot be served, defended or advanced by submerging them into those of the ruling economic and political elites – in any country. The political crisis within the European Union is driven by the global failure of a debt-driven capitalist economy and its impact on the euro. A new democratic, internationalist framework that unites ordinary people against corporate and financial power wherever it is located has to be our answer to nationalist rhetoric and downright lies.

Paul Feldman

Communications editor

The great 'deception' that killed millions

Perhaps it is fitting on the day that the slaughter of World War One finally ended, the Treasury is said to be preparing for “economic Armageddon”.

Vince Cable’s admission refers to the consequences for Britain of a disorderly (it can’t be orderly) break-up of the euro as a currency and the resultant depression that will sweep not just Europe but the global economy.

But there’s no hiding the connection with the world wars of the 20^th century that cost tens of millions their lives. They were essentially the product of inter-imperialist conflict over trade, empire and markets.

Let no-one claim otherwise, although the political establishment tries might and main to do so every November when the official line is that millions went off to fight “for their country” in 1914.

Wearing a poppy becomes almost compulsory in official circles. Everyone on TV wears one. Those called in for an interview are asked to wear one, whether they want to or not. Of course, it is not wrong to honour the dead but we have to cut through the hypocrisy.

What is never up for discussion is that within months, soldiers on both sides realised that they had been trapped, even duped into a conflict from which they could not escape. A war which was not of their making exacted an intolerable price.

With the first global conflict unresolved, another one arose out of the break-down of the capitalist economy in Europe and the United States. And less than 70 years after its conclusion, with the mass murder of Japanese civilians, the storm clouds are gathering again.

The European Union, which was designed in part to prevent a repeat of 20^th century wars by bringing nations together, is in disarray. Governments in two member states were brought down this week by the economic crisis.

In Greece, the unelected former vice-president of the European Central Bank is to become prime minister of a national government. In Italy, the financial markets are demanding a government of technocrats. In both countries, early general elections were ruled out by the financial markets because they would take too long! Democratic procedures are now considered dispensable.

Now the talk is of a core of richer countries like Germany and France ganging up to exclude the poorer economies within the EU as well as Britain. So the seeds for conflict of all kinds are being sown. A system driven by the need to access and grow markets has no other direction to travel.

So perhaps the best way to mark armistice day is with the letter that the great war poet Siegfried Sassoon wrote to his commanding officer in July 1917, declining to return to duty after recovering from his wounds:

I am making this statement as an act of wilful defiance of military authority because I believe that the war is being deliberately prolonged by those who have the power to end it. I am a soldier, convinced that I am acting on behalf of soldiers. I believe that the war upon which I entered as a war of defence and liberation has now become a war of aggression and conquest. I believe that the purposes for which I and my fellow soldiers entered upon this war should have been so clearly stated as to have made it impossible to change them and that had this been done the objects which actuated us would now be attainable by negotiation.

I have seen and endured the sufferings of the troops and I can no longer be a party to prolonging these sufferings for ends which I believe to be evil and unjust. I am not protesting against the conduct of the war, but against the political errors and insincerities for which the fighting men are being sacrificed.

On behalf of those who are suffering now, I make this protest against the deception which is being practised upon them; also I believe it may help to destroy the callous complacency with which the majority of those at home regard the continuance of agonies which they do not share and which they have not enough imagination to realise.

Paul Feldman

Communications editor

Panic as new meltdown looms

On the eve of the third anniversary of the collapse of Lehman Brothers – the investment bank which became the icon of the crash of 2007/8 – the world’s financial markets are once again in a febrile state little short of panic.

Exposure to Greek debt this morning led the ratings agency Moody’s to downgrade two French banks, indicating how close to another financial meltdown we are.

A Greek default, which will threaten the euro as a trading currency, seems impossible to avoid. Interest charges on lending to the Greek government have gone off the scale. One three-year bond, which was trading at 20% in June, now commands an astonishing 172%.

Jeremy Warner, the Telegraph’s senior business commentator, warns: “Greece is already effectively a cash only economy. Most forms of credit has effectively dried up, the Greek banking system is finished, and capital controls to prevent what little money that remains from leaving the country are surely only a matter of time. European banking must prepare for the worst as far as Greece is concerned.”

Charges on Italy’s €1,900bn debt mountain have also soared to record levels. The desperate Berlusconi government is offering state-owned properties and power companies for sale to the managers of China’s investment funds.

As the second phase of the global capitalist crisis breaks through, stark new figures tell the human story of millions of lives throughout the world, already wrecked by failed and now abandoned attempts to bring about a return to growth.

In 2010, 46.2m Americans fell below the poverty line, taking the rate to 15.1% of the population from 11% in 2000. More US citizens are living in poverty than at any time since records began more than 50 years ago according to the US Census Bureau.

With the more affluent having so far managed to stabilise their income, the 2.3% drop in median household income of all Americans in 2010 from the previous year masks a much greater decline for those below the line. Increasing long-term unemployment has depressed wages and left many without any income at all.

The number of Americans without health insurance rose by nearly 1m people to 49.9m. Nearly a quarter of American children are now living in poverty. Their number increased for the fourth year in a row to 22%, the highest since 1993.

Across the border, Mexico had 53 million people - half the country's population - living in poverty in 2010, according to the Monterrey Institute of Technology, with almost 20% in extreme poverty. Even for those working, according to the Bank of Mexico, 95% of the 800,000 jobs created in 2010 paid only $10 a day.

In Greece, poverty has visibly increased on the streets of the capital of four million, where people huddle in sleeping bags in empty alleys and can be seen rummaging through rubbish containers, looking for food or scraps of metal or glass to sell.

NGO Klimaka estimated the population living on the streets has increased by a quarter to 17,000-20,000 over the past two years. With Greek unemployment now over 16%, the new homeless come from all walks of life.

In the UK, the number of homeless families rose by 10% to 44,160 households in the past year, the first increase since 2004. Real incomes for UK families have dropped by 3.5% in the last year, according to the Institute for Fiscal Studies (IFS).

IFS researcher Robert Joyce, predicted the future in quietly measured tones: “The current economic downturn began more than three years ago, and may seem like old news. But, as in other developed countries, the most severe consequences of the recession on UK living standards have only just begun to be felt, and will continue to be felt for years to come.”

The global economic contraction the collapse of Lehman Brothers set in motion is driving debt-strangled Europe and everywhere else towards a second, far more devastating implosion. The Arab Spring could well be followed by the European Winter.

Gerry Gold

Economics editor

Greece is the first domino to fall

The global debt crisis has claimed its first sovereign state victim in the shape of Greece, which has effectively defaulted on its international loans. It won’t be the only country to suffer this fate or its population the last to feel its social impact.

The eurozone’s political heavyweights Germany and France sealed Greece’s fate last night when they agreed that private holders of Greek’s mammoth debt will take a hit of €50 billion over three years. Whether the banks and bond holders in the firing line will do so quietly is another question, however.

Not even achieving an agreement in Brussels can paper over the deep divisions between Bonn and Paris about how to prevent the collapse of the euro as a trading currency or prevent financial contagion moving on to other economies like Spain and Italy.

All the 17 eurozone governments could agree was that a "controlled" failure was the only way to prevent the collapse of the single currency and a global financial rout. In the end, the figures are meaningless and only add to the debt mountain facing Greece.

Athens will get another bailout package totalling €159bn. This is on top of the €110bn “rescue package” agreed less than two months ago. The country’s debt is by various manoeuvres, including subsidising interest rates, cut by a quarter.

So get this straight. You give someone more money to pay back existing debt, adding to the total outstanding, extend the repayment period by decades and ask some lenders, including the European Central Bank, to take less in return.

That’s the world of fantasy finance that was built by the banks and has now been adopted as the way to go by governments.

Refinancing is clearly a miracle cure of our age! Shame this arrangement is only available to states facing bankruptcy and not individual households running out of money for housing, food, transport and energy.

The deal means that banks could be forced overnight to write down as losses billions of euros in losses on Greek debts, leaving them short of capital. Financial experts say the

the debt restructuring could also trigger payouts on billions of dollars of credit derivative contracts, used to hedge against or speculate on a Greek default

The emergency summit was accompanied by a truckload of wishful thinking. Dutch Prime Minister Mark Rutte said: "We have thus sent a clear signal to the markets by showing our determination to stem the crisis and turn the tide in Greece, thereby securing the future of the savings, pensions and jobs of our citizens all over Europe."

What has actually happened is that the “peripheral” economies like Greece, Ireland and Portugal are being cut adrift or reduced to vassal states to buy up goods produced in northern Europe. The European Union is beginning to resemble a corporate empire with cheap labour subsidiaries disguised as countries.

France pushed through a plan to create the European eqivalent of the International Monetary Fund and there was agreement for most countries to rein in their spending to protect the euro. It won’t be enough to hold back a crisis generated by mountains of debt built up in every sector over decades.

As Reuters correspondent Felix Salmon noted: “Overall, this looks like a deal which can quite easily be scaled up and used as a framework for future default/restructurings … But there’s nothing here to reassure holders of Portuguese and Irish bonds — or even Spanish and Italian bonds, for that matter — that they’re home safe. Greece will be the first EU country to default on its debt. But I doubt it’ll be the last.”

The second wave of the global financial crisis that has shaken global capitalism is under way and is certain to be much more devastating than the first shock of 2008.

Paul Feldman

Communications editor

System overload brings meltdown closer

Screaming headlines and scary language convey the immediacy of a renewed economic collapse as financial markets demand political solutions to a runaway debt crisis on both sides of the Atlantic.

According to the International Monetary Fund there is now "serious risk" of eurozone contagion with "large" potential knock-on effects worldwide. "Market participants remain unconvinced that a sustainable solution is at hand."

An emergency meeting of European presidents and prime ministers has been called for tomorrow to try and head off the break-up of the eurozone single currency.

According to the Daily Telegraph’s Ambrose Evans-Pritchard: “Only Germany can save EMU as contagion turns systemic.” He says “Europe's leaders have finally run out of time…. they risk a full-fledged run on South Europe's bond markets and a disorderly collapse of monetary union.”

But Germany’s banks are already heavily exposed to Greek debt and helping Greece would only serve to accelerate the spread of the contagious crisis throughout Europe. Now Portugal’s new government has discovered a gaping hole in the country’s finances, just as Papandreou’s PASOK administration did when it came to power.

Leading business commentator Jeremy Warner does not mince his words: “Financial confidence is again fast evaporating, threatening to plunge the world back into deep recession and some of the hardest times since the 1930s. This might sound unduly apocalyptic, but not since the depths of the banking crisis have conditions looked as perilous as they are today.”

While the failure to resolve Greece’s debt crisis would detonate a global explosion, the much bigger Spanish and Italian economies are under attack by market speculators.

Spain’s cost of borrowing has followed Italy’s soaring rates to unsustainable levels as investors demand higher and higher rates to cover the mounting risk of default. But compare their single digit rates to the punishing greater than 20% now demanded from Portugal and Greece.

Using the terminology of war, global bond trader Pimco says a plan of "overwhelming force to let the markets know that once and for all you’re putting out the fire" in Europe, should start with letting Greece, Portugal and Ireland default.

Attempts to break the US impasse grow ever more desperate as the August 2 deadline for raising its self-imposed $14 trillion debt ceiling approaches. The Financial Times warns that the “US faces economic suicide if spending isn’t restrained”.

President Obama has embraced the latest plan from the bipartisan “Gang of Six” which would sacrifice health and welfare and lead to a dramatic increase in unemployment. Yet there is doubt whether the political will exists for the Republicans to sign up to the deal.

So what of the UK? With the worst ratio of combined public and private sector debt to national income of the world’s developed economies, it is the most vulnerable to a renewed global recession, which would turn to depression immediately.

Says Warner: “The deleveraging [debt write-off] pressures are at their most acute in the[UK] banking sector, where bad debts and higher capital requirements are driving a sustained contraction in available credit. To meet these higher capital requirements, banks must either increase the cost of credit, so as to attract the necessary equity, or significantly reduce the size of their balance sheet.”

As the panic begins, the solutions being promoted become more extreme every day. No manufacturer can avoid the inevitable consequences of a sharp reduction in production. Whilst previously confident global corporations proclaim their prospects for growth to retain shareholders’ loyalty, in the shadows they are taking every opportunity to “restructure”.

Millions of people across the globe are determined that they can’t and won’t bear the costs of the systemic implosion engulfing the capitalist system. The revolutionary wave that began in Tunisia and Egypt is gathering pace as people become ever more impatient with the pace of change.

In town and city squares new democratic forms are in formation that can replace the discredited political systems. The creative genius of the people must now turn to seizing the resources of the system of for-profit corporations that are the source of the crisis and replacing it with a global society producing for need.

Gerry Gold

Economics editor

Second wave of the crisis reaches land

In pursuing what the prevailing law defines as their perfectly legitimate individual interests, investors are collectively destroying the universe within which they – and we – all live. As agents of the capitalist way of doing things they have no alternative.

The latest assault on Italy, where investors are bailing out of banking and the market rate of borrowing has soared underlines, what is surely obvious to all – the second wave of the crisis which erupted in 2007-8 is now underway.

The punitive rates of interest charged for the loans needed by Greece, Portugal, Spain, Ireland, Italy and Iceland to avoid default only ensure that such defaults are inevitable.

Rating agencies have now declared Ireland’s debts to be worthless. Greece is virtually certain to default in the immediate future. The recession – decline in production – in each of these debt ridden countries is deepening. A collapse of the euro as a currency, leading to an immediate slump in trade, is a distinct possibility.

The formerly mighty US is locked into a political impasse over proposals to reduce its staggering $14 trillion debt mountain. If it is not sorted out soon, the US government will come to a default and the unthinkable – a dollar default – comes closer.

Occasionally, in struggling to find solutions to the impossible contradictions which dog their attempts to explain the deepening crisis and find solutions, a rare commentator will be found shedding light on the inevitable consequences of following the current path.

The Financial Times’ Martin Wolf is one member of this rare breed. In a recent column reviewing the crisis in the eurozone he revealed another two of the impossible contradictions that are skewering the global economy -

- the more successful a country is in reducing its debt burden in order to be able to return to growth, the deeper its recession gets. Latvia’s GDP, for example has dropped 23% since the crisis erupted.

- the more successful a country turns out to be in cutting its costs, the worse the debt burden becomes.

The solution? Wolf says “debt restructuring [a polite term for state bankruptcy, default, and debt cancellation] is merely a necessary condition for an exit. It is unlikely, in all cases, to be enough.”

His chilling prediction sets the scene for the coming months. “Some economies may just wither away.”

Putting it simply, mounting and ongoing resistance to the measures – “austerity” hardly begins to encompass it – being used to attempt to reduce unsustainable global levels of debt, means that debt must now be “restructured”, wiped out.

But the debt grew throughout the last 40 years to fund growth. So growth must now give way to contraction. Latest estimates suggest that the value of Greece’s debt must be reduced by 75%. And so must its production. And not just in Greece.

Grasping how markets, governments and corporations are driven by forces more powerful than the sums of their parts is vital. We have to get to grips with the contradictory forces at work in the capitalist economy and show that the system itself is broken and unsustainable.

Cuts in services, £9000 fees for university courses, soaring unemployment, inflation, mounting house repossessions, privatisation and attacks on pensions are the consequences of the crisis that broke in 2007-8.

What is coming up the line as the second wave of the global tsunami advances will shake society to its foundations. At the same time, it will create opportunities for transcending capitalism and creating a rational, sustainable economy. It’s a chance we can’t afford to squander.

Gerry Gold

Economics editor

The emperors have lost their clothes

Nick Clegg’s statement that "the pillars of the British establishment are tumbling one after the other," should be taken seriously. The question is why now? What is driving the break-up of the institutions that rule Britain? And what follows?

The deputy prime minister has no intention of seriously upsetting the apple cart of British politics, but he has put his finger on an important insight. But the News of the World scandal is part of a wider, systemic crisis.

For prime minister Cameron, his connections with disgraced former News of the World editor Andy Coulson and through him to Rupert Murdoch, have rocked his already unstable government. Peter Oborne’s account of Cameron was drawn into Murdoch’s embrace – after some initial reluctance – is worth reading because it shows how fragile the political establishment is.

Whilst there are separate and independent reasons for flashpoints in the “parts” – the media, financial system, the police and parliament – together they constitute a “whole” which is also known as the capitalist system in Britain (and its relationships globally).

The unravelling of the unsavoury networks which constitute the power structures sheds a powerful light on this interconnectedness. And, crucially, the ruling class’s ability to rule relies on these connections remaining as secret as possible.

Trust - not only in the news media but in politicians and the venal connivance of the police (who had their own fingers deep in Murdoch’s pie) - is sinking at an unprecedented rate.

Murdoch’s chief executive Rebeka Brooks, who now faces questioning by the police, was not only a neighbour and family friend of the Camerons, but she is a crucial link in the spider’s web that embraces the Royal Family, the Blairs, and major corporations like the De Beers diamond dynasty and, of course, the media empire that is News Corp.

In the first years of the last decade, while the credit boom was in full swing, the phone hacking was put on the back burner by the police and the New Labour government. It must have seemed secondary to the mountains of “wealth” generated by the financial sector.

The crash of 2008 not only devastated the economy but it also shattered ordinary people’s faith in the market economy. This in turn led to a loss of confidence in ruling circles. The system was shaken and the skeletons fell out of the cupboard at the News of the World in the wake of the MPs’ expenses scandal, bankers’ bail-outs and bonuses and the resulting stalemate election of 2010.

And while many in ruling political and media circles are working feverishly to restore a modicum of confidence in the British state, the global economy and its financial system is heading for another meltdown.

Still reeling from the near default of Greece, the Eurozone is now staring into a new abyss: the spreading of “fiscal contagion” to Italy, the world’s seventh biggest economy. As one economics writer says: “It’s just too big to bail out. While the Eurozone could perhaps survive a Greek default, an Italian debt failure would mean all bets are off”. In the United States, a $4 trillion cuts package is seen as the only way to avoid a dollar default.

Separating out the political crisis in Britain from the continuing and worsening global debt crisis would be to ignore the reinforcing interactions which characterise the deep crisis of an entire system. That’s why stuffing the ugly genie that the News of the World scandal has revealed back into the bottle could be impossible.

The least we can do is to understand how fragile – ideologically speaking – the arrogant façade that the ruling classes deploy to intimidate those below them actually is. Each side of the crisis – political, economic, ecological – are parts of a rapidly changing whole reacting upon each other to create something quite new.

The rapidly-developing political crisis at the top cannot be patched up, not least because the economy is staggering from bad to worse. Down in society itself, a massive social upheaval, driven by a lack of confidence in the ruling classes, is brewing for which there is no obvious outlet. A heady mix indeed.

Corinna Lotz

A World to Win secretary

Portugal: another triumph for the bond dealers

As Portugal declares state bankruptcy, after its Socialist Party government failed to get an austerity package through parliament, it’s another triumph for the dictatorship of the money markets and bond dealers.

Now, even though Portugal is without a government, the price demanded by Germany and the richer EU countries for an €80 billion bail-out is even deeper cuts in public spending than were first proposed. The upcoming general election is definitely one to lose.

Portugal’s finances collapsed because its budget deficit grew rapidly following the onset of the global recession. But the money markets drove up interest rates until Portugal was borrowing at over 8.5%, adding to the total deficit at a rate which made it impossible to repay.

In the last year, Greece – which still has a “socialist” government and Ireland, which saw the ruling party wiped out at the recent general election, have suffered the same fate. Does the “contagion” stop at Lisbon, or is Madrid next?

Spain’s government – yet another one that claims the rubric “socialist”– is confident it can avoid Portugal’s fate – because it says it’s already making deep cuts in public spending! Youth unemployment is running at over 40% as a consequence. Meanwhile, Spanish bank assets are worth far less than before because of the collapse in property values and refinancing is increasingly expensive and hard to come by.

As the United States today desperately tries to avoid a shut-down of government activities as deadlock looms on reining in a federal budget swelled by endless borrowing, it is clear that capitalism is in a global bind.

You can cut – as the Coalition is doing in Britain – to avoid higher borrowing rates but that only deepens the recession. Spending more would leader to higher borrowing raters, which the banks won’t like. Why? Because in the perverse world of capitalist finance, the value of the government bonds, which they hold as assets, depreciates as rates rise.

At the same time, British banks are steadfastly refusing to resume rates of lending last seen before the credit crunch of 2007. That’s because their balance sheets remain toxic and full of bad debt. Even the right-wing press is fed up with the banks.

On Monday, the Independent Commission on Banking set up by the government reports and no one expects it to suggest any fundamental changes. The Daily Telegraph’s Jeff Randall, who is deeply pessimistic about the report, remarks: “The banks have captured our money twice over: as cash in their vaults and investments in their shares. We own all of Northern Rock, most of Royal Bank of Scotland and nearly half of Lloyds Banking Group. We rescued them – and in so doing became their prisoners.”

But this is not a new problem. By the outbreak of World War One, the banks and the monopolies had formed an unholy alliance against ordinary working people and elected governments alike. After creating the Federal Reserve – America’s central bank – President Woodrow Wilson declared:

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilised world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.

In the recent period of corporate-driven globalisation, the tensions and contradictions between the capitalist state and capitalist finance have deepened to the point where governments tread warily. The only way to sort that out is to put an end to the power of the bond dealers, banks and money markets and create a new, socially-driven financial system. It doesn’t need me to tell you that bourgeois governments are not capable of such a revolutionary change.

Paul Feldman
Communications editor

Ireland and Britain in the same boat

You would be wrong if you thought that Ireland’s banking and budget crisis that has all but overwhelmed the country’s government, couldn’t repeat itself in Britain. In fact, the two countries’ fates are inextricably linked.

Ireland’s banks are essentially insolvent. They don’t have the money to cover the write-offs of loans to property developers that have gone sour. And the Irish government doesn’t have the money to bail them out. That’s why Dublin has had to bite the bullet and go cap in hand to the European Central Bank (ECB) and the International Monetary Fund (IMF).

The price to be exacted for a bail-out is destined to fall on the backs of Ireland’s workers. Public sector workers have already had their wages reduced by 15%. Further cuts are planned, along with tax rises and a reduction in the minimum wage, plunging the economy into even deeper crisis.

British banks have a massive exposure to debt-ridden Ireland. According to the latest figures, their total lending to Irish households and companies totals a mammoth £140 billion. The Royal Bank of Scotland, which is largely owned by the British taxpayer, is the most exposed at £54.4 billion, a third of which is residential mortgages.

Clearly, British banks are going to have go whistle for most of these loans, which explains why coalition chancellor George Osborne is so keen to lend Ireland billions (which would have to be borrowed as the British exchequer’s coffers are largely empty too).

It gets worse.

British banks, like their Irish counterparts, are also insolvent, despite commitments from the state amounting to £1.2 trillion following the global financial meltdown of 2008. A recent report by the New Economics Foundation, Where did our money go? warns:

“Based on Bank of England data, banks now appear to face a funding cliff. In order to maintain existing levels of activity they currently have to borrow £12 billion a month; the projections we reproduce in this report indicate that in 2011 they will have to borrow £25 billion a month. We believe the public sector is likely, once again, to be asked to bail out the banks for the emerging funding gap.”

Other analysts suggest that British banks will require another £1 trillion in 2011 as existing loans mature and need refinancing. There is no way that the Lib-Con coalition can stump up this kind of money, despite the savage cuts in public expenditure planned for the next four years. The banking system all but failed in 2008 – it may well do this time around.

Those who still insist that the crisis is largely “ideological” had better wise up. There is an objective, evolving global crisis of the capitalist economic and financial system. It is having a direct impact on governments, tearing them apart as in Ireland or rendering them helpless and ineffective as in Washington.

The bail-outs of 2008 only postponed matters. Mountainous debts and valueless securitised assets dominate the balance sheets of the banks. As the IMF-ECB team will insist in Ireland, those who work, add value and are the source of profits will be told they have to sacrifice their living standards and futures so the bankers can survive for another day.

Quite simply, it’s a price not worth paying. A revolutionary reorganisation of society on both sides of the Irish Sea, restarting the financial system on a new, co-operative basis, is rapidly becoming the only practical alternative


Paul Feldman
Communications editor

Greek crisis triggers debt tsunami

A debt tsunami is now sweeping across Europe to Portugal, Spain and Italy and onwards to the shores of the United Kingdom, before crossing the Atlantic to the United States of America, triggered by the financial earthquake that hit Greece yesterday.

Share markets plunged after credit rating agency Standard and Poor downgraded the long-term credit rating of Greece’s government and banks to junk status, the first eurozone member to have its bonds declared worthless. Markets fear that many banks are stuck with worthless Greek bonds and that the world is heading for renewed financial meltdown.

S&P’s action was its response to the decision by the two biggest trade unions in Greece to call a 24-hour strike against the government’s austerity measures for May 5. This will be the third joint strike of the Greek General Confederation of Labour (GSEE) and Federation of Civil Servants (ADEDY) against the government’s budgetary measures since the beginning of the year.

This further deepening of the crisis undermined the bail-out deal for Greece cooked up between the eurozone countries and the International Monetary Fund, prompting the IMF to toss a further $10 billion into the pot. But the additional strings attached can only provoke further anger from Greek workers.

Early warning of the arrival of the tsunami in Britain has now been delivered to the parties contending to be the next government following next week’s General Election. Whilst all of the parties are keeping quiet about the detail of their plans to reduce the government deficit, the Financial Times and the Institute of Fiscal Studies have been doing their sums.

Both the IFS and the FT have identified black holes amounting to more than £30 billion in each of the manifestos of the three main parties.

The FT says the “next government will have to cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the axe to programmes such as school building and road maintenance – or make a set of equally politically perilous choices”. It has built a computer game enabling its readers to play at being Chancellor, to get the measure of the job he or she will have to do to attract investors to finance its debt.

The IFS said no party had come "anywhere close" to making clear where the axe would fall after the general election. This, it said, was despite the parties' plans implying the deepest cuts in spending since the 1970s and - in the case of the Conservatives - the biggest one-year reduction in public spending since demobilisation at the end of World War II.

The parties are keeping quiet because they too fear sparking a Greek-style revolt (actions taken or planned by university, college and school teachers against cuts are a sign of what’s to come). Never mind New Labour’s “hard choices” to be made, there’s a conspiracy amongst them all.

The IFS, the FT and the rest of the media and the political parties offer no choice at all. Somehow or other the cost of the debt must be paid by the millions of people being persuaded to vote for bailing out the capitalist system with the destruction of their jobs, pensions, health, education and social services.

But there is another way. We can build a better kind of democracy around a different kind of economy. A network of People’s Assemblies can oppose the next government and refuse to accept the cost of bailing out the banks and of putting profits into shareholders’ pockets.

They could decide to cancel the debt, outlaw speculation, close the profit system, and turn the private financial sector into a public service like, but even better than, the NHS.

Vote with your feet – take the revolutionary road on May 22nd.

Gerry Gold

Economics editor