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Austerity in Greece Meant to Break Workers’ Resistance

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Toronto. On Wednesday, June 15, in Athens, Greece, opposition groups and unions called a general strike. Tens of thousands of people are expected to be there. They’re going to make a ring around the Parliament buildings to prevent Parliament from enacting further austerity measures, measures demanded by the European Union and international banks. Now joining us to talk about how Greece got into this predicament and some alternatives is Leo Panitch. Leo is the author of the book In and Out of Crisis: The Global Financial Meltdown and Left Alternatives, and he teaches political science at York University. Thanks for joining us.

LEO PANITCH, COEDITOR, SOCIALIST REGISTER: Hi, Paul.

JAY: So retrace the steps a bit. We’re told the reason Greece–we’re told by mainstream press, anyway, the main reason Greece is in this situation is pensions are too high, people retire too early, and it’s time for the Greek people to pay up like everybody else. So what’s the cause of the crisis to start with?

PANITCH: Well, in capitalist terms that’s probably right, but that’s what’s wrong with capitalism. Why shouldn’t Greek pensions be what they are? Why shouldn’t people be able to retire at 60? No. I think one has to trace this back to the fact that Greece indeed, when it was admitted to the European Union, was a state that never had much of a modern bureaucratic structure. It was very clientalist. Almost all the states in the old Ottoman Empire were. They haven’t been very good at collecting taxes. And the main capitalists in Greece haven’t wanted them to be very good at collecting taxes. And this goes back to the famous ship builders and ship owners, you know, the Aristotle Onassises that people knew so well in the old Kennedy days, that, you know, have been the key political force inside Greece. It’s true that Greece has run a fiscal deficit and that the Greek parties, including PASOK, which was a new party after the dictatorship in the mid ’70s, which promised that it would modernize Greece and had a very, very radical, really socialist program–.

JAY: The party that Papandreou–.

PANITCH: That Papandreou is now head of and his father was the founder of. And he was here in Canada teaching at my university during the military dictatorship. And the current prime minister of Greece was born in the United States while Papandreou was teaching down there. So–you know, while his father was teaching there. So there is a problem in terms of Greek’s finances, but that problem existed before the crisis. It was aggravated considerably by the fact that Germany is the big exporter in Europe’s free trade zone. That’s what the European Union is, a free trade zone. And Greece got the money through transfers from the EU, from the European Commission for a while, but mostly from borrowing from German banks to buy German goods. Right? And they were very heavily in debt when the global economic crisis hit. That global economic crisis was made in the United States in the American mortgage market, but Deutsche Bank was very heavily invested in the American mortgage market. Deutsche Bank owned almost all of black Cleveland’s mortgages. They’d been foreclosing black Cleveland. Well, Deutsche Bank is in a precarious situation. They were bailed out, as were other banks, mainly by the Fed, not only by the European Central Bank.

JAY: The American Fed.

PANITCH: The American Fed. And when they saw a situation in which Greece would not be able to repay its debt, they were very worried that they would face a liquidity problem, and maybe even an insolvency problem, not from Greece alone, but insofar as that would have knock-on effects, especially to those other countries in Europe which also have been the importers of German exports and borrowed very heavily in order to be able to buy those imports. Now, what’s very important here is that it wasn’t primarily the states that were borrowing that money; it was private banks borrowing that money, lending it to Greek consumers and corporations who were importing this stuff. But the state then bailed out those banks, right, in order to make them solvent or guarantee their debt.

JAY: Not so unlike what Iceland did.

PANITCH: Not so unlike what Iceland did. That’s right.

JAY: Now, the people in Iceland said no, we’re not going to pay [crosstalk]

PANITCH: Yes, and people in Greece have been saying no. And the demonstration today, you need to remember, follows on a long series of demonstrations which did peter out a bit after there was a firebombing of a bank and some people died. And that was a moment at which the demonstrations, you know, began to calm down a little. And they’re now coming back. And the reason they’re coming back, very clearly, is, you know, what–the medicine that has been applied to these countries on the periphery of Europe is as draconian or more draconian than during the debt crisis imposed by the IMF, the US Treasury, and the Federal Reserve on Latin America in the 1980s, with very similar requirements, that is, the privatization of what state assets are left, the privatization of the port of Greece, for heaven’s sake. That’s what’s being demanded here, as well as enormous cutbacks in state expenditure. The rate of unemployment, which was, you know, really below 5 percent in Greece, 5 to 6 percent before the crisis blew in 2008, is now pushing over 20 percent. This is Depression level that’s going on here. It’s very, very serious. And some of what has gone on in the Arab uprisings has been a problem in Greece for a long time. There is a tremendous overeducation relative to the amount of hiring that goes on. So, for instance, amongst teachers, when I was in Greece last, a couple of years ago, there were daily demonstrations outside the Ministry of Education by highly educated young people who are trained to be teachers and don’t have jobs. Now, you can imagine how much worse the situation is now.

JAY: So what’s the alternative? Your book is Left Alternatives. So what’s the left alternative? A lot of people are saying Greece should default. And Standard & Poor’s issued a recommendation lowering the Greek credit rating today. Apparently, now, if you want to insure Greek debt, it’s twice as much as it would cost to insure Pakistan’s debt, and they’ve said if Greece tries to even restructure the debt, they’re going to consider it a default. So why not default?

PANITCH: Well, Pakistan is assured of getting loans from the United States, at least from the American Defense Department. Now, Greece, you know, has certainly had those loans as well. One of the things that the Greek left regrets most of all is the way in which the American Defense Department had placed itself during the Greek Civil War in the 1940s and, you know, really has never left, despite left-wing governments that–. And that’s one of the reasons, often, that, you know, you find activities in Greece that are so anti-American, you know, having to do with that type of military influence. [incompr.] Greece will default. I mean, it’s not a matter of whether they should default. There is no choice. All you read in the media, all you see in the media is hard bargaining. It’s hard bargaining. You know, what will be the cost to Greece of defaulting? It will happen. No question it will happen. So whereas after the Asian crisis, when, you know, the great booming East Asian countries, Korea and Thailand and so on, you know, experienced a tremendous outflow of capital, after that, the knock-on effects were such that they got the banks to restructure debt in a whole bunch of countries which felt the knock-on effects of this, as they apply structural adjustment programs to those countries as well. And they did so without the kind of hard bargaining. They were trying to stop the bleeding. In Greece’s case, what they are afraid is that if the default takes a form that doesn’t involve very, very heavy costs, and certainly the German and French banks are insisting no cost to themselves–.

JAY: They want–"heavy cost" meaning heavy cost for the Greek people, not [crosstalk]

PANITCH: Yeah, to some extent for the German budget and the European budget and the French budget, and to some extent perhaps even for the American budget, because a lot of the quantitative easing that the Fed is doing is flowing into these banks to keep them liquid in case there’s a default on that debt. So there’s no question it’ll default, and all that’s going on is, you know, what the arrangement will be, you know, how serious it will be, and how severe the penalties will be so that others won’t default.

JAY: So what are the global implications with the inevitable Greek default?

PANITCH: Well, they may not be great. It’s by no means the case that Greece is a big player in the world. And it’s a matter of whether it sets an example or not, what kind of an example it sets. That’s–you know, this is all about school–schoolyard discipline is what is going on here. So what can the Greeks do?

JAY: So the banks have to make this painful for Greece so that others don’t follow its example.

PANITCH: Of course. You know, there’s nothing new about this. You know, this has been done throughout history.

JAY: So what are the Greek people demanding? What is the Greek left putting up as an alternative?

PANITCH: Well, you know, there’s no easy answer to this. Even the most left-wing, the most progressive, the most creative of new independent socialist parties in Europe, which I take to be SYRIZA, which is a collection of left parties in Greece, broke from the old Soviet communist tradition a long time ago, wasn’t related to that communist party that was tied to Moscow, etc. The most creative people are in it. They are not calling openly for a default. They are not calling openly for leaving the euro. In fact, they are opposed to leaving the euro.

JAY: Why?

PANITCH: You know, the Greeks like to be able to travel to Paris. They are indeed dependent on German imports. How would they pay for their imports? These are very, very serious questions, and they raise large questions for the whole world, especially for a small country in terms of going on its own. So it would only be very viable if there were a balance of political forces in Europe more generally which would be able to support Greece in a different alternative. You know, this goes back to the weakest-link thesis when the Russian Revolution happened. You know, the Russian Revolution had had the effect of producing a revolution in Germany [incompr.] trigger, we perhaps wouldn’t have had Stalinism. But in the face of being isolated in that way, with the kind of hardball that will be played, it’s understandable why the left in Greece hesitate so rhetorically. You will find people increasingly, I think, increasingly, from all the reports I hear, increasingly saying that they ought to even leave the euro. They probably would not prefer to leave Europe. But the implications of that are enormous.

JAY: And what about the demand to start making the elite of Greece pay taxes?

PANITCH: Well, of course. And it isn’t only the elite of Greece, however. You know, it isn’t only the elite of Greece at all that doesn’t pay taxes. You know, your average working-class guy will try to get out of paying property taxes. But the party system runs on the basis of you vote for me and I’ll find a way for you not to pay your property taxes. Right? So you can’t blame the people in that sense. This is the structure of that system. And yes, of course it also applies to the wealthy. It applies more to the wealthy because they ought to be paying much more. But it is, I think, part of the political culture of that society, and not only that society by any means, as we know. But that’s not the fundamental problem. That problem existed before this crisis. This problem existed when people were rushing to give Greece money, to lend them money. So it’s only in the context of the still very precarious nature of the Western banking system that this is a problem. But one needs to see it as a problem because of the precarious nature of the banking system. This is not a story that’ll be answered with bad guys and good guys; this is a systemic problem that has to do with the financial volatility of global capitalism. And there’s no way in which there won’t be recurrent Greeces, and recurrent suffering as in Greece around the world, unless we get out of that system.

JAY: Whether it’s Greece or whether it’s Spain, the solution being offered is austerity. But I don’t understand how austerity leads to anything but deeper recession, more unemployment. And how does that solve anything?

PANITCH: Well, it breaks the back of this militant working class, which is the most politicized and demonstration-prone working class in Europe, without any doubt. It has been for a long, long time. The student movement, you know, including, you know, the left of the student movement, is, you know, to be found in medical schools, in engineering schools. This is a student movement in which the Greek police are not allowed on campus. Now, that’s a law that goes back to the dictatorship, where, you know, the dictatorship did terrible things, as in Chile, with the students. But a law was then passed, and those students hold the state to that law. So when there are, you know, demonstrations of this kind, people go on to the University of Athens campus, and the police are not allowed to follow them there. There’s a very militant culture there, and what the austerity will do will break it. In the same way, at the time of the IMF crisis, as it was known, in Britain in 1976, Thatcherism was introduced by the Labour government before Thatcherism and began to break the public sector union. Right? And you now see a balance of forces in England, in the United Kingdom, in which Labour is–I mean, the labor unions are very weak. Now, there’s again been a response to Cameron’s austerity there as well, and one hopes it’ll lead now in other directions. But the effect of the austerity is not to get Greece going again. The effect of the austerity is to change the balance of class forces in that society.

JAY: So we’ll see in this general strike and in the coming days whether the Greek people go along with being broken.

PANITCH: That’s right. That’s right.

JAY: Thanks for joining us, Leo.

PANITCH: Good to talk to you, Paul.

JAY: And thank you for joining us on The Real News Network.

End of Transcript

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