New strikes called as more social cuts are prepared in Greece

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New strikes called as more social cuts are prepared in Greece
By Alex Lantier
3 March 2010

The Greek trade unions announced new strikes yesterday against further
budget cuts demanded by banks and European institutions, amid the
ongoing Greek debt crisis. This comes less than one week after a
one-day national strike against budget cuts on February 24, in which
an estimated 2 million workers participated.

The Supreme Administration of Greek Civil Servants Trade Unions, ADEDY
(the public sector union), called a one-day national strike for March
16—the day after a scheduled meeting between Greek Prime Minister
George Papandreou and European finance ministers to discuss
Papandreou’s proposed cuts. ADEDY announced rallies for today, as well
as March 8 and March 12. The tax service union also announced a
two-day strike for March 8 and 9.

Roughly 30,000 taxi drivers were on strike throughout Greece yesterday
against a plan to force them to keep receipts and accounts so that the
central government receives more tax income.

The unions are calling these actions under mounting pressure from the
working class, which is deeply opposed to cuts in its living standards
carried out to pay for the financial crisis precipitated by
international bankers and their political facilitators in the Greek
government and the European Union. Union leaders are seeking to use
limited strikes and protests to contain working class resistance and
buy time to work out an austerity deal with the social democratic
PASOK government of Papandreou.

The unions have pledged support for Papandreou, portraying his
government as the victim of international finance and the European
Union bureaucracy, rather than the representative of Greek capital.
This is bound up with efforts to channel popular opposition in a
nationalist direction

The Greek government ran a budget deficit of over 12 percent of gross
domestic product (GDP) in 2009, and is preparing massive social cuts
under pressure from European officials and financial markets to reduce
spending. Athens will refinance €8.2 billion in debt on April 20,
€1.92 billion on April 23, and €8.5 billion on May 19. Whether
financial markets lend these funds at a sufficiently low interest rate
will be key in determining whether the Greek government stays solvent
or requires a bailout.

Greek Prime Minister George Papandreou will travel to Berlin to meet
with German Chancellor Angela Merkel on March 5. He will also visit US
President Barack Obama in the White House on March 9.

The Greek government has already frozen wages in the public sector and
announced plans to increase the retirement age by two years, to 62.
The government may also eliminate one of two additional monthly
salaries traditionally paid to public and some private sector workers
to supplement their 12 monthly salary payments.

On a visit to Athens on March 1, European Union economy commissioner
Olli Rehn urged “additional measures” to cut spending. “No member of
the eurozone can live permanently beyond its means,” he said. “Either
you keep your debt under control, or your debt starts controlling you.”

Two hundred demonstrators tried to storm the building where Rehn met
with Greek Labour Minister Andreas Loverdos, but were repulsed by riot
police. Rehn was forced to enter through a side door.

As the Greek economy shrinks, keeping the budget deficit below a fixed
percentage of economic output involves ever-larger cuts. An audit by
staff at the European Commission, the European Central Bank (ECB) and
the International Monetary Fund (IMF) completed February 25 included a
demand for further budget cuts of €3.6 billion to €4.8 billion. Greek
officials also gave assurances they would push through regressive
increases in value-added taxes and fuel taxes.

After a March 1 meeting with Prime Minister José Luis Rodriguez
Zapatero of Spain, which is also planning large spending cuts to
reduce its budget deficit from 11.4 percent to 3 percent of GDP,
Merkel said the common European currency faced “great challenges.”

She said that if European budget deficits were not quickly reduced to
below the 3 percent limit set by the European Stability and Growth
Pact, “the euro would be vulnerable to attack, which would harm us all.”

The Wall Street Journal reported February 26 that US hedge funds are
speculating on a collapse of the euro, which fell from $1.51 in
December to $1.35 last month, possibly down to the level of $1.00.
Such a fall would risk setting off large-scale price inflation.
Economist Jacques Attali told Le Monde that in such circumstances,
“the euro zone could explode.”

There are rising international tensions over financing a bailout of
Greece. Currently, no officials are proposing to let Greece default.
At over €300 billion, Greece’s public debt is so large that financiers
say a Greek default would pose a systemic risk on the scale of the
collapse of the US investment bank Lehman Brothers in September 2008.

On February 26, Bloomberg News wrote that the 16 eurozone countries
might put together a €25 billion bailout package for Greece, with
Germany contributing €4-€5 billion. However, Merkel denied such plans
in a February 28 interview, saying, “We have a treaty which rules out
the possibility of bailing out other nations.”

Le Monde commented: “Merkel is ready to open her wallet, but she must
deal with public opinion and a political community that is mostly very
hostile to such a measure. In Germany, where reforms and wage
moderation have demanded sacrifices from the population, it is
inconceivable” to help Greece.

There are some discussions of private involvement in a potential
bailout. On February 28, French Finance Minister Christine Lagarde
said she was confident Greece could refinance its debt “via the means
that we are now studying…involving private partners, public partners,
or both.” Two days before, Deutsche Bank CEO Josef Ackermann traveled
to Greece for meetings with Papandreou.

Increasingly, European politicians are considering letting the IMF set
up a Greek bailout and force through social austerity measures. Since
the outbreak of the world economic crisis, the IMF has organised
bailouts for Hungary, Latvia, Romania and Ukraine. More broadly, the
IMF has pushed through draconian austerity measures in large sections
of Africa, Asia and Latin America over the last three decades.

The Wall Street Journal wrote: “Merkel is more open to a deeper IMF
role, says a person familiar with her thinking…. Ms. Merkel believes
the IMF has more know-how and experience at setting up aid packages
than the European Commission, the executive arm of the EU.”

However, many European officials are concerned that a bailout of
Greece by the IMF, which is dominated by Washington, would give the US
decisive influence over the eurozone and the euro itself. China also
has IMF voting rights.

Last month, Le Monde cited anonymous high-ranking European officials
as saying, “If [the IMF] intervened alone, we would lose all control
of the conditions [of the bailout]. Efforts at budgetary and monetary
coordination inside the eurozone would no longer have any meaning.”

On Monday, Luxembourg Minister-President Jean-Claude Juncker told Der
Spiegel, “I consider that an engagement by the IMF going beyond
technical help would not be necessary.” German Finance Minister
Wolfgang Schäuble is also hostile to an IMF bailout of Greece, Der
Spiegel wrote, noting, “no one in Berlin wants the US to be involved
in the eurozone, even indirectly.”

French President Nicolas Sarkozy is said to be hostile to an IMF role
in a Greek bailout. IMF chief Dominique Strauss-Kahn of the opposition
French Socialist Party is a potential opponent for Sarkozy in France’s
2012 presidential election, and Strauss-Kahn currently leads Sarkozy
in opinion polls.

However, as a bailout will entail drastic and profoundly unpopular
austerity measures against the working class, there are fears the
European Union might be too weak to carry it out. One aim of having
unelected IMF authorities in Washington rather than European
governments organise a financial rescue would be to make the bailout
impervious to popular protest and defuse intra-European tensions.

In one sign of the explosiveness of the situation, Greek officials are
raising the issue of German reparations for the Nazi occupation of
Greece during World War II. After similar comments last week by Greek
Deputy Prime Minister Theodoros Pangalos, Greek Prime Minister George
Papandreou said, “The issue of German World War II reparations has not
been finally settled. We have never given up on our claims.”

Former European Central Bank chief economist Otmar Issing told ZDF
Television Monday, “The IMF would be suitable [for a Greek bailout]
because it is meant for this…. By turning to the IMF, you avoid
resentment building up between Greece and other individual countries,
such as Germany.”

The Wall Street Journal wrote, “Ted Truman, a former international
Treasury official in the Obama administration, says the EU should use
the IMF more fully—if only to give the electorate in Greece and
elsewhere a political target other than Brussels, Paris, and Berlin.”

http://wsws.org/articles/2010/mar2010/gree-m03.shtml

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