Euro crisis: Latvia and the PIGS

Two million people took to the streets of Athens last week in the country’s second general strike this month, protesting the austerity measures proposed by their socialist government. All of Greece came to a 24-hour standstill and the airport was closed as a result of the action. The only public transport was the commuter train so that protesters could reach the demonstration.

The crisis broke last autumn after Prime Minister George Papandreou took office and discovered the country was bankrupt. The conservative government had cheated to get into the European Union euro zone in 2001, cooking the books. What on paper — creative accounting courtesy of Goldman Sachs — was a budget deficit of 3 per cent and public debt 60 per cent of GDP, by 2009 had ballooned to 13 per cent and 125 per cent.

Initially, the EU tried to finesse the issue, declaring solidarity with Greece. But the financial sharks are sharpening their teeth, smelling blood. Their response to the Greek problem is naturally to rush to profit from it. Greece’s “credit rating” has already been lowered, meaning any new bonds will carry a much higher price tag for the government (read: people). That of course makes it all the harder for Greece (read: the people) to actually pay the bankers. And when the country defaults, the EU will be forced to cough up in any case. Win, win for the fat cats.

What EU leaders meant by solidarity was not that they were going to pour public money into Greece, as they have been pouring into their banks over the past year and a half, but that they intended to squeeze the money “owed” the banks out of the Greek people, relying on IMF oracles.

The European Parliament, the democratic facade for this, is really just the mouthpiece for the austerity seekers. Chairman of the EP Special Committee on the Economic and Financial Crisis Wolf Klinz has called for a commissar to be sent to make sure the Greeks deliver the required pound of flesh.

But who did the fiddling in the first place? The EU statistics agency Eurostat says that in 2001, Goldman Sachs secretly helped the right-wing Greek government meet EU membership criteria by masking the extent of public deficit and national debt. Once in Euroland, Greek consumers naively snapped up slick German goods and let their own industry atrophy. Now the debt trap is closing.

The traditional way out would be to devalue the drachma, in order to cut imports and stimulate exports, distributing the overall burden of adjustment to the nation as a whole — rich and poor. But there is no drachma anymore. Bound to the euro, Greece can neither stimulate its domestic market nor export successfully. Poverty appears to be the only solution. Or, at the suggestion of Josef Schlarmann, a senior member of the German Christian Democratic Party, sell off its islands and antiquities — presumably to rich German bankers. Greeks still resent Germany as their brutal WWII occupiers, and this clumsy faux pas has already set off a campaign to boycott German goods.

Whatever paper is used to cover the cracks, the outlook for Greece — and the EU — remains grim, because France and Germany are merely adding to their own liabilities while not reducing Greece’s, and Greece will be quite unable to cut its deficit by the requisite 10 percentage points of GDP.

The very fabric of the European Union is being torn asunder as the rich members turn their backs on the poor. The iron law of capitalism — the strong protect their own interests at the expense of the weak — is once again being played out. Squeeze the workers. Communist propaganda, you might say, but unfortunately true.

In an ideal Europe, workers in Germany would come to the aid of workers in Greece by demanding a radical revision of economic policy, making the banks sovereign and the bankers civil servants, building a real social democracy. The reality is quite different. The Greek financial crisis exposes the absence of any real community spirit in the EU. The solidarity declared by EU members is a solidarity of businessmen.

The EU now has an ersatz ideology of internationalism, rejecting the nation state as the source of all evil, cultivating “a pompous pride in Europe as the centre of human rights, giver of moral lessons to the world, which happens to fit in perfectly with its subservience to US imperial foreign policy in the Middle East and beyond,” according to Diana Johnstone, author of Fools Crusade: Yugoslavia, NATO and Western Delusions. In this cosy Euro brotherhood, Greece is portrayed as a picturesque Third World country, living the Aesopian carefree life of the cricket to the Germans’ ant. The likes of Portugal, Italy/Ireland, Greece and Spain are affectionately dubbed PIGS, a chilling throwback to Orwell’s Animal Farm.

But the storm clouds now gathering are not just over Greece; the entire western world is still very much in fiscal crisis. The investment bank Societe Generale recently published a frightening estimate of the real liabilities of Western governments, including off balance sheet debts. In every case the numbers, including unfunded pension fund liabilities, dwarf the official debt position. Greece is by far the worst because of what Otmar Issing, the German former chief economist of the European Central Bank, described with German tact as “one of the most luxurious pension systems in the world”. Its total net liabilities are 800 per cent of GDP – eight times the official position. For the US , it is 550, the UK 400, Germany 400, France 550, Italy 350 and Spain 250. In other words, the entire western world is insolvent and each country is facing its own day of reckoning – starting, appropriately enough, in Greece, the home of western civilisation.

Who cleans up the mess when bankers play casino capitalism and go broke? Ninety-three per cent of the people of Iceland rejected a proposal requiring them to cover the debt of their oldest and largest bank on 6 March. Covering the debt would have cost Iceland’s 317,000 citizens around $17,000 each. Iceland’s national referendum was the first (legal) expression of the people’s will to decide who pays when the financial elite fail. Greece’s (illegal) general strikes were the first truly democratic expression of the people’s will. The sharks should take heed. When the oxygen is used up, the water turned into a cesspool, their days are numbered too.

As the working class begins to wake up, it takes a page from its master’s book. It must be international. Last week saw a succession of strikes and protests throughout Europe: Lufthansa’s pilots, French air traffic controllers and oil refinery workers, protest rallies in Madrid, Barcelona and Valencia against the austerity measures of the Spanish Socialist Workers Party government. Trade unions in the Czech Republic announced that public transport would be halted this week. A one-day general strike of the public sector in Portugal protested measures to cut the deficit to 3 per cent of GDP by 2013. A truly pan-European movement is being born. The Independent‘s Sean O’Grady predicts such actions “promise to be just the start of the greatest demonstration of public unrest seen on the continent since the revolutionary fervour of 1968.”

The other lesson the workers are learning is that they must throw off their deadwood leadership. The aim of the unions is to regulate social tensions and ensure that they do not pose a threat to big business and the state. British Airways cabin crews were set to strike until their union put strike action “on hold”. The German pilots’ union, Vereinigung Cockpit, called off the strike at Lufthansa on its first day, as did the General Confederation of Labour in the strike against the oil giant Total in France. In both cases, the unions capitulated without having won any of the workers’ demands.

The most draconian cuts are being imposed by social democratic governments; in particular, the socialists in Greece, Spain and Portugal. In every instance, writes Christ Marsden, “they were elected with the support of the trade union bureaucracies, which have remained their allies as promised reforms have given way to austerity budgets.” The general strike in Greece is a sign that the corporate union leadership is being swept into action against the pseudo-socialist government by incensed workers, a portent of what will no doubt come. More communist propaganda, but unfortunately true.

A sad footnote to this is the case of the weakest new members from the ex-socialist bloc. Latvia’s 25.5 per cent plunge in GDP over the past two years is already the worst two-year drop on record ever, ahead of the Great Depression, with projections of even greater debt and the need for even great austerity measures, as the government madly continues to pursue the euro will-o’-the-wisp. Yes, Latvians are indeed corrupt, their post-Soviet elites stole, stripped and sold the shop to Western interests, and then transferred their ill-gotten gains abroad.

But worse yet is the outright theft carried out in broad daylight by Western banks, whose academic friends were hired to write the Latvia’s tax codes and who provided easy euro-denominated credit, so when the crunch came, they could move in and take whatever was left. Why invade such countries as Greece or Latvia with armies when you have bankers?

The real significance of the euro is now becoming clear: just as there are no national economies anymore, there is no national solution to the crisis facing workers in Greece, Spain, Portugal or anywhere else. They are forced into a common struggle against global capital. “Workers of the world unite!” never sounded so apt. And a mini-oracle to Goldman, Sachs, Klinz and Issing: Take your next winter holiday in sunny, profligate Greece at your peril.

Eric Walberg is a journalist who worked in Uzbekistan and is now writing for Al-Ahram Weekly in Cairo. He is the author of From Postmodernism to Postsecularism and Postmodern Imperialism. His most recent book is Islamic Resistance to Imperialism. Read other articles by Eric, or visit Eric's website.

11 comments on this article so far ...

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  1. MichaelKenny said on March 16th, 2010 at 3:00pm #

    Ah yes, we haven’t seen Mr Walberg’s elephants in action for some time! The Wall St banksters attack the EU and President Mubarak’s favourite Canadian stalwartly rallies to the support of the banksters! (What do you think Mubarak is paying him for?) Like blaming a rape victim for wearing “provocative” clothes! Don’t worry, folks, neither the EU nor the euro is in any real danger, but that won’t stop the false flaggers! The amusing thing is how these people have been smoked out. No more talk of Europe in America’s pocket. No more talk of Europe “complicit” in America’s numerous wrong doings. Now, it’s war! Fifth generation war, where each side tires to destroy the other’s economy. I’m guessing that the banksters believe that America can never pay its debts and want to engineer a “technical default” by crashing the dollar in the run-up to the 2012 election to unseat Obama, reduce America’s debt to worthless paper and, in addition, undermine China. But, of course, the want to restore dollar hegemony after a few years, the underpinning of the American Empire, and the success of the euro is an obstacle to that. If the euro is still in existence when the banksters crash the dollar, the euro will soar, investors will rush to the euro, Europe will become very rich and it will be impossible to restore dollar hegemony. Bye, bye American Empire! Thus, after Latvia, Greece is just one step in the war the Wall St banksters have declared on the people of Europe. The next attack will probably be on Spain. And later, they will try to foment a taxpayer revolt in Germany. The positive side of this is that the banksters see their position as so desperate that they have been forced out into the open (which was not the case in Latvia). Whose side are you on, American progressives? Are you with the bankesters who are ripping you off in the same way as they are ripping off ordinary Europeans, or are you with us, the ordinary people of Europe? The EU, and its euro, imperfect as it is, is the only protection we have against the American jackboot. That’s why people like Mr Walberg and Diana Johnstone wasnt to see it destroyed.

  2. Mulga Mumblebrain said on March 17th, 2010 at 3:22am #

    I’m afraid I feel a frisson of schadenfreude whenever I contemplate the fate of the Balts. You see, when I was a lad, the most vociferous anti-Communists in Australia were the ‘Captive Nations’ amongst whom the Balts figured prominently. At my school,where rabid anti-Communism was on the religious curriculum, I had a number of nasty confrontations with one Latvian proto-fascist, particularly after I acquainted myself with the Latvian role (along with other brave anti-Communists, from Bosnia, Croatia, Slovenia, Ukraine, Belarus, Lithuania and Estonia) in fighting with the Nazis. They were perhaps not as enthusiastic Jew murderers as the Lithuanians, but the Latvian Waffen-SS still marches in Riga. Now I know that it is wrong to take delight in the misery of others and that this capitalist ordained economic misery will probably only strengthen the fascists in Latvia, but I’m afraid I am a bastard with a long memory. Hopefully Latvia and the other Eastern Europeans, not to mention the rest of Europe will waken to the neo-feudal project being ruthlessly implemented by the parasite class, and the future as serfs being planned for their children, but I’m afraid I doubt it. Fascism seems to suit the psyche of a majority of humanity far better than socialism.

  3. bozh said on March 17th, 2010 at 9:09am #

    As person who left croatia in ’51, i had been surprised that there were so many asocialists there after tito’s death.
    That being one cause for the 4 serb aggressions against slovenia, croatia, bosnia, and kosovo.

    True socialists wld have never waged wars for greater serbia and greater croatia.
    There had not been a need for any disseverance. Continuation of what the communists set up or setting up a confederation was the right thing to do.

    It shld be noted that not all croatian communists were for the union wit serbs. I do not know if some serb communists were also for separation.
    Tudjman, a partisan general, had been one of the [former] communists who wanted total independence for croatia.
    He did aver that the socialist net wld remain!

  4. Andris said on March 18th, 2010 at 1:05am #

    I’ll disagree about Latvians and faschim/nazism first You must see the reality in Latvia and then You will understand our antibloschevism anticomunism way of thinking. You can’t tell about all nation according on just few criminals then it seems that one nation is more “guilty” then other, but not the nations make crimes the crimes are made by individuals. We are more socialists than someone can imagine because we spent quite a time in “socialism” during USSR time. The main thing is, that not Latvian Waffen SS marches in Riga, those are fighters for freedom of Latvia, at least they where thinking that they are fighting against bolscheviks to get back freedom for Latvia. Make guess – Why Latvians who where slaves of Germans in territory of current Latvia for more than 700 yrs fight against USSR together with the former enemy?! Ask this question to yourself and seek for answer in history!

  5. mary said on March 18th, 2010 at 4:16am #

    Here is someone in agreement Mulga.

  6. Andris said on March 18th, 2010 at 4:53am #

    mary, where are facts? I can write an article about anything too! FACTS FACTS FACTS???

  7. Andris said on March 18th, 2010 at 4:54am #

    This is to argue

  8. Andris said on March 18th, 2010 at 5:05am #

    And here too

  9. Mulga Mumblebrain said on March 19th, 2010 at 1:57pm #

    Andris, give up mate. Apologias for mass murderers are pretty poor,although we see a lot hereabouts for US and Israeli ones. I know fascism is on the march again, but I’d stick to marching up and down in Riga with your fellow thinkers, rather than wasting our time. On the other hand, if you branch out into hatemongering against Islam,I’d bet the Zionists will overlook your other indiscretions.

  10. Andris said on March 22nd, 2010 at 6:44am #

    Mulga Mumblebrain, I don’t give a s**t what the rest of the world is thinking, it matters to me, cause my grandfather was in legion, he was forced to join. At the end of WW2 he was sentenced for five yrs in USSR famous “filtration camps” after he spend his sentence time, he was forced to “join” USSR NKVD special task forces, he became a guard of the camp where he was sentenced. Since my childhood me and my family where called “nazis”, “fashists” and etc. etc. I didn’t had a bright future and only the collapse of Soviet Union made us free, free to think, free to honor our fathers and grand fathers who died on both sides where it Nazi Germany or Soviet Union. March 16th is a date to remember all fighters on both sides. I can’t tell you about everybody but the nazis an communists for me are equal cause half of my family members where forced to join or to work for Germany other half for Soviets and survived the part which was on German side, those who “went” to USSR died or they are “lost” somewhere there! Don”t judge and no one will judge you!

  11. Andris said on March 22nd, 2010 at 6:47am #

    Mulga Mumblebrain, I no what means war, I so what’s going on in Iraq and Afganistan – no one cares about them, that’s a great business plan….