Europe and the Greek contagion

The crisis in Greece is bound up with the global capitalist downturn. Instead of a nationalist response there could be an international fightback, writes James Turley

After eight months of increasingly fervid speculation, the European Union has finalised a bail-out package for struggling Eurozone economies.

And for all the strenuous denials from Berlin and Brussels that such economies - first and foremost, Greece - would not be rescued, the package that has been announced is substantial: firstly, €110 billion to bail out Greece; secondly, €500 billion from EU member-states, all told, and an additional €250 billion from the International Monetary Fund as an emergency reserve for everywhere else.

This is, by all accounts, a spectacular turnaround. The core EU nations have long enjoyed a global competitive advantage through the wide space created by Europe’s open market. Germany in particular sustains a massive industrial base, selling to countries like France (10.2%), US (6.7%), Netherlands (6.7%), UK (6.6%), Italy (6.3%), Austria (6%), China (4.5%), Switzerland (4.4%). When the crisis started to bite at the borders of Europe, Germany, France and the rest were equally keen on insulating themselves from the ill effects. The Greek government was told to take the begging bowl to the IMF - and sharpen its already punishing austerity measures.

Alas, for Angela Merkel, the Greek ‘contagion’ could not be so easily quarantined - after all, Greece is in the euro zone, and will be for the foreseeable future, so Greek problems are also European problems. Any disaster in Greece immediately poses the question: who is next? At which point, the list of EU candidates facing the possibility of their own sovereign debt crisis is growing: eg, Portugal, Spain and Italy.

Exactly how much money rides on the comparatively modest Greek economy at the moment became abundantly clear on May 6, when - with speculation over the Greek situation reaching fever pitch - the Dow Jones plunged 9% in half an hour. The immediate trigger for that collapse is believed to be an error at one particular bank, which erroneously saw an automated transfer of $16 billion (rather than million) worth of shares. Given the increasingly common use of automated trading on the world’s stock markets, however, it is significant that a computer glitch could have such harmful effects just now. Market turbulence continued the next day, where the London stock exchange fell significantly - bad news from the continent exacerbated by the inconclusive outcome of the general election.

And so it was that, on Friday May 7, the Bundestag approved its share of the Greek bail-out package, effectively making it a reality. The German government nodded through this enormously unpopular message only two days ahead of an important regional election - another index of the intense capitalist pressure EU states are under to sort this mess out.

Domino effect

This unlikely scenario is the effect of a number of mechanisms. Firstly, the background to the Greek crisis is the accumulation of significant levels of state debt, which was hidden using fraudulent (ie, astute) accounting practices at the time of Greece’s entry into the euro. Euro zone rules stipulate that government budget deficits must not exceed 3.2% and national debt not exceed 60% of GDP; the Greek government, with the collusion of US investment bank Goldman Sachs, hid enough of its bad figures to sneak in. Debt, of course, has to be paid for in interest. As recession bit, tax takings dropped - and financing government borrowing became more and more difficult as interest rates soared. In the case of Greece to 20% and even 38% as the country was rated as a basket case.

Secondly, there is the pervasive influence of financial speculation. With the invention of the credit default swap, one of the many dubious derivatives, it became possible - in theory and, before long, in practice - to profit from the failure of debtors to meet their payments. The flipside to this process is that buying these derivatives in great numbers reflects badly on that country’s financial stability, and so the activity of speculators is a self-fulfilling prophecy. At the moment, betting on the collapse of national economies is an alarmingly easy way to make a quick buck.

Throw in the international dimensions of the crisis, and you have a potential domino effect - a Greek default, followed by a Portuguese default, and so on ... which could ultimately lead to a run on the euro. In that respect, it was obvious from the start that the Greek bail-out was not going to be enough - the Greek crisis would not have been half the headache for the international bourgeoisie if it was not simply one aspect of a serious structural crisis in the euro zone. Much more was clearly needed - and the new package appears to have stabilised the markets somewhat.

However much of this bail-out money is actually needed, it is only a temporary solution. That debt has not been paid off, but simply shifted around - the core EU economies, meanwhile, are not in a position to keep pouring money out of their own coffers. The Greek deal, then, has a lot of strings attached; principally, Greek prime minister George Papandreou is expected to make budget cuts of an order shocking even to bourgeois commentators.

Exactly how successive rounds of summits and talks continue to find yet more limbs of the Greek economy to amputate is a matter of some speculation; but so, for once, is the question of whether the operation is even possible. On one level, the concern is an orthodox economic one - with austerity measures so harsh, and the cash going straight to creditors, how exactly is the economy ever to recover?

The other side to the trepidation of the bourgeois class is: can this Greek government successfully impose this on this Greek population? Papandreou has been locked into pursuing austerity measures ever since he acceded to power last October - and he is already facing mass resistance. Though the largest union federations, the private sector General Confederation of Greek Workers (GSEE) and the public sector Civil Servants’ Confederation (ADEDY), both supported the election of his Panhellenic Socialist Movement (PASOK) mass pressure, in no small part channelled through the Communist Party of Greece (KKE), has forced the trade union bureaucracy to organise a string of general strikes. The latest, on May 5, coincided with the EU’s discussions over the Greek bail-out package. As I write, more protests are planned for this week, with events around the European bail-out fund gathering pace.

The resistance

That the international bourgeoisie doubts Papandreou’s ability to defeat the anti-austerity struggles - at least with this latest prescription for social carnage - testifies above all to the well organised and well disciplined character of the Greek workers’ movement. The KKE has not suffered quite so severe decomposition as its more illustrious fraternal parties elsewhere; it remains a significant political force in the unions, and has marshalled that influence into a sustained campaign against what is, after all, a social democratic government. Though it remains an ‘official communist’ party, and therefore intellectually hamstrung, with the Kremlin no longer issuing orders it is now able to act on its own initiative.

So it has a strategic policy for the working class - a great “people’s front” of “the workers, the self-employed, the craftsmen, the small tradesmen, the small and medium-sized farmers, the young people”. It is all these folks’ “patriotic duty” to build “our own Greece”.[1] Given the source, the nationalism is hardly surprising, and a substantial portion of the blame goes to the EU in the KKE’s view. This is a line shared to an extent with groups to its left, which tend also to be flatly opposed to the EU. Antarsya, a coalition of “anti-capitalists” including the Greek sections of the Fourth International (Usec) and the British Socialist Workers Party-dominated International Socialist Tendency, campaigns for an “anti-capitalist exit” from the European Union.

Both arguments are tempered with nods in the direction of internationalism - that the KKE unfurled two huge banners at the top of the Acropolis, reading (in English) “Peoples of Europe - rise up” signals the party’s (rather muted) awareness that the Greek crisis is not just a matter for Greeks; meanwhile, Antarsya welcomes “the proposal for coordinated action of solidarity and against the cuts on a European level by forces of the anti-capitalist left and the movements”.[2]

The problem is that these two things are flatly counterposed. Firstly, a successful revolution in Europe - that would last longer than months - would have to be a European revolution, covering the whole continent. This, in the last analysis, has nothing to do with the EU - it was true in Marx’s time as much as it is true of ours. It does not matter how successful defensive struggles in Greece become; there comes a point where the government has been rebuffed in all its efforts and thereby the question of power is posed, and the Greek workers will be objectively faced with the task of constructing a society in their own interests.

An isolated country - Greece, Britain or any other - would face only wrack and ruin if it attempted to defend workers’ rule under conditions of capitalist boycott and resistance and the large-scale flight of capital. Starting the revolution in one place or another then hoping for it to spread elsewhere is a strategy doomed to failure - the revolution can only be a coordinated seizure of power, building upon substantial international organisation.

In this respect, the EU has imposed a certain unity on its member-states - unity of a degree and kind amenable to the capitalist class, of course, but unity of a sort. Our problem with the current set-up, which pitches smaller economies in a radically unequal relationship with the core countries, is not that it is too much unity, but not enough - that is, the core powers attempt to have their cake and eat it, exploiting the structural imbalance of the EU’s institutions to profit from the economic links, while retaining an effective stranglehold on political power.

Seizing on the EU as a particularly egregious agent of the capitalist offensive in several countries, the European left has all too readily fallen into advocating models of an “anti-capitalist exit”, which are chimeras. The only anti-capitalism capable of superseding capitalism - that is, communism - demands the ever closer unity of peoples. Anti-EU leftism is, at best, a crab-scuttle sideways in relation to this strategic objective rather than a stride towards it; in reality, it can only encourage illusions in ‘national roads’ to socialism, and is thus a step backward.

The European capitalist class has, in effect, two roads open ahead of it. The first is to restrict membership of the euro to the countries highest up the pecking order in the EU - those in particular who can keep up with Germany. Hardly an attractive option - a great deal of political capital, not to say capital proper, is invested in the current set-up, and paring down the euro zone is not likely to be a painless process for anybody concerned. The second is to centralise economic decision-making, and tighten fiscal controls over member-economies. This amounts, in practice, to handing over even more power to the core countries, and is understandably a hard political sell - both in countries like Greece, which do not appear to have much to gain from continued euro membership in the next decade at least (apart from sustained austerity measures comparable to the crippling regime of reparations imposed on Germany after World War I), and in Germany itself, where the capitalist media often portray Greeks and others as leeches on German prosperity. The bail-out fund, of course, is a move in the latter direction.

The job of the workers’ movement is not to choose between these non-solutions - but to press its own policy for the radical reorganisation of society on a continental scale. Dutiful statements of solidarity are not sufficient expressions of internationalism - what is needed is the firmest possible political unity in the battle to replace capitalism with socialism. We should fight for genuine democracy on the terrain of the EU alongside the terrain of our national polities, which are every bit as rigged against us as the Brussels bureaucracy. Against the mendacious advocacy of unity by capitalist states fighting for position in the global pecking order, we fight for an indivisible Europe under the rule of the working class - as a key step towards the overthrow of capitalism throughout the world.


  1. inter.kke.gr/News/2010news/2010-05-05-strike
  2. www.antarsya.org/index.php?option=com_content&view=article&id=310:communique-dantarsya-answer-antarsya-to-npa-and-swp&catid=62:2009-05-03-17-02-46&Itemid=119