Democrat March-April 2010 (Number 117)
Britain is not far behind Greece
With exports falling plus other indicators it is clear that Britain retains major fiscal and economic problems which are not much different from those of Greece. There are serious lessons to be understood by the labour and trade union movement here in Britain.
The EU is now a political union and a super-state but with only 16 Member States in a monetary union - the eurozone - and 11 who have to date kept their national currencies. The EU is neither a fiscal nor a tax union although these remain Euro-federalist objectives. All 27 Member States are subject to the Growth and Stability Pact criteria including Britain which is in the penultimate stage of joining the euro.
Greece has no control over interest and exchange rates which are fixed by the EU’s Central Bank. Like all 27 Member States Greece is obliged to follow the stringent rules of the EU Growth and Stability Pact. These criteria limit the budget deficit to 3% of GDP and the public sector debt to 60% of GDP. In 2009 Greece had respectively 12.7% and 108%. Out of 27 Member States twenty two exceeded 3% Budget Deficits and 12 exceed 60% public sector debt which included Britain at 68%.
Reason behind crisis
There are several reasons why Greece has overspent. The Public Sector expenditure includes a free health service, free education from primary pensions at around 90% of wages. Compared to other EU countries Greece schools to higher education and has low wages and her industries have low profits which limits the ability to use taxes to resolve matters.
EU political elites, especially those from the leading eurozone states have discussed and tabled several options for solving the fiscal crisis of Greece and other Member States verging on a similar situation. Arguments continue behind the scenes over solutions to what has been dubbed a “Greek Tragedy”.
There are four main options. First is to let Greece default on paying back debts. Second it has been proposed that a bail out of Greece take place using loans from other member States. Another option is for Greece to reduce significantly the debt and fall back behind the Growth and Stability Pact criteria. Lastly it is for Greece to leave the eurozone.
Each choice has serious problems for the very future of the EU which would impinge heavily on Britain.
On the face of things, to allow Greece to default on the debt and not honour government bonds would only hurt bond holders. However, this course would be politically unacceptable and would encourage other poorer Member States to follow suit and contribute to wrecking the eurozone and the EU itself.
For other Member States to bail out Greece is totally in contravention of the Maastricht Treaty and the Growth and Stability Pact. For the IMF to bail out Greece would show the weakness of the eurozone and be politically unacceptable.
IMF or EMF?
A plan to set up an IMF look-a-like EMF could not be made in time to assist Greece. An EMF would indicate to the world that the eurozone is weak. This requires a change to the EU Constitution or Lisbon Treaty which has only just been put in place. But, the Central Bank is supposed to be independent and there is a conflict between politicians and Bank officials who oppose an EMF.
Germany and France are at odds over a bail out and the electorate in Germany would not accept the burden placed upon them as they were promised this would not happen after giving up the Mark. An unbelievable scheme for Germany to purchase some Greek islands and the Acropolis would not have reduced Greece’s debt by a significant amount and would have laid bare the imperial aims and dominance of Germany within the EU.
For the Greek Government to tighten the belt and guarantee her borrowing powers it would have to promise massive cuts in public sector spending and sell publicly-owned institutions to get below 3% of GDP budget deficit by 2013. Obviously the primary targets would include pensions and wages which currently are just over 50% of Government expenditure. To head off growing resistance to such targets there would have to be labour laws put in place regarding the labour market and collective bargaining. The European Court of Justice has already passed EU legislation in these areas behind which governments and employers can attempt to shelter.
Who pays for crisis?
Like other Member States, including Britain, the retirement age is to be raised and a wage freeze imposed on public sector workers, and tax rises across the board. In other words to make the working and middle classes pay for the debt. The Commission is to send officials to Greece as though it were an EU colony to ensure austerity measures are carried out.
The only sane and rational solution is for Greece to leave the eurozone and not be hampered by EU Central Bank controls over interest and exchange rates. This path would be opposed tooth and nail by the EU leaders because it would lead to the inevitable break up of the eurozone and bring into question the end of the EU itself.
There is already considerable opposition in the form of a general strike and a series of sectional strikes in Greece to actual cuts, planned cuts and the Growth and Stability Pact. The situation in Greece is promoting unity of labour movement forces against the aims of the European Round Table of trans-national corporations, EU Commission and Germany’s Government in particular.
Here in Britain opposition is growing to cuts in many areas and concerted action is being built. Expressions of solidarity must be shown with those taking action in Greece.
It is clear that for Greece and other Member States in a similar situation the only course is to recover the right to self- determination, national independence and democracy.