Tag Archives: European Central Bank

Greece’s Syriza government signals pension cuts

By Christoph Dreier
April 25, 2015
World Socialist Web Site

 

https://anticap.files.wordpress.com/2012/06/greece-austerity.jpg

image from: anticap.wordpress.com

At Friday’s meeting of European finance ministers in the Latvian capital of Riga, no agreement was reached with the Greek government on the repayment of loans. Greek Finance Minister Yanis Varoufakis made clear, however, that his government was ready to impose extensive pension cuts and labour market “reforms” in order to reach an agreement with the troika (European Union, International Monetary Fund, European Central Bank).

Even before the finance ministers’ meeting, Varoufakis published a comment on his blog in which he made far-reaching concessions to the troika. He assured it that negotiations since Syriza’s election victory in January had already brought “much convergence” between Greece and its “European partners.” The remaining differences, he said, were “not unbridgeable.”

He went on to assert that the Syriza-led government would promote entrepreneurialism, create an independent tax commission, continue the privatization of state property and “rationalize the pension system (for example, by limiting early retirement).”

The elimination of early retirement benefits is one of the central demands of the troika. The retirement age was already raised to 67 in 2012. Numerous exemptions, however, have allowed most workers to retire earlier. The “limiting” of exemptions means nothing less than the blanket enforcement of the higher retirement age.

Such a lengthening of the work life of Greek citizens amounts to a massive pension cut. And with the official jobless rate at 25 percent, few workers are able remain employed until they reach 67. Entire families already depend on a single pension to survive.

Syriza (Coalition of the Radical Left) previously declared pension cuts a “red line” that it would not cross. The fact that Varoufakis threw this line overboard in the run-up to the finance ministers’ meeting made clear that there were no limits to the attacks on the working class the supposedly “left” government was prepared to carry out in order to reach a deal with the troika.

Prime Minister Alexis Tsipras, the leader of Syriza, added his own assurances that his government would adhere to the reactionary policies of the EU. At an EU summit on Thursday, he signed onto the so-called “ten-point plan” for immigration policy. The plan provides for the ramping up of police and military operations to block migrants from reaching European shores and lays the foundations for a large-scale military intervention in Africa.

At the meeting, Tsipras met with German Chancellor Angela Merkel for over an hour. The German newspaper Die Zeit reported that Merkel insisted Greece quickly implement the demanded reforms, while Tsipras protested that his country had already made “enough sacrifices.”

Tsipras expressed the hope that Greece and the EU could still come to an agreement by the end of April. Greece urgently needs an outstanding tranche of loans amounting to over 7.2 billion euros. In order to pay back wages and meet loan commitments, the Syriza-led government has already plundered the public treasury.

After the meeting in Riga, Varoufakis said it was necessary for a deal to be reached quickly. “We agreed that an agreement will be difficult,” he said, “but it will happen and it will happen quickly because that is the only option we have.”

Despite the groveling of Syriza, EU representatives showed little willingness to compromise. Eurogroup president Jeroen Dijsselbloem said after the meeting that there could be no paying out of loans if the Greek government did not submit a detailed “reform” program. Everyone was certain, he said, that the time for an agreement was running out. The responsibility for that lay with Greece.

Dijsselbloem added that “significant differences remain” between the EU ministers and Greece. Austrian Finance Minister Jörg Schelling reproached the Greek government for presenting no concrete proposals. He said, “I strongly urge that we now get something on the table that can be decided upon.”

Reuters reported that the Slovenian finance minister, Dusan Mramor, met with Varoufakis behind closed doors and suggested a “Plan B.” The Greek finance minister later called him “anti-European.”

According to those present, the finance ministers’ meeting became hostile. As Varoufakis, in a conference call, clarified the details of loan payments in the coming week, one of his interlocutors denounced him as a “time-waster, gambler and amateur.”

Tsipras was also rebuffed. French President François Hollande warned him to speed up the imposition of social cuts. After a short meeting with Tsipras, he said, “Greece must continue to provide the necessary information and show that it can make decisions about reforms.”

EU officials have made it more than clear that they are not prepared to make any concessions and intend to make an example of Greece. The social assault is to be carried out whatever the cost and serve as a model for the entire continent.

EU, Syriza prepare to suppress popular opposition to austerity in Greece

By Kumaran Ira
April 20, 2015
World Socialist Web Site

 

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Photo credit: anticap.wordpress.com

This weekend’s meeting of the International Monetary Fund (IMF) and World Bank in Washington focused on the Greek debt crisis, amid fears in financial circles of a Greek default or exit from the euro, and of rising working class opposition in Greece. The “Troika” of the European Commission (EC), European Central Bank (ECB), and IMF are seeking to create the political conditions for Syriza to continue imposing austerity.

After the meeting, ECB president Mario Draghi called for resuming talks with Syriza to avoid a Greek default. He said, “The short-term danger of contagion is difficult to assess, but we have enough buffers in place. And even though they were designed for different circumstances, they are sufficient. But we are entering uncharted waters.”

His uncertain and pessimistic appraisal of the situation notwithstanding, Draghi praised Syriza and his informal talks with Greek Finance Minister Yanis Varoufakis in Washington. He said there had been progress in “formulating a well-functioning policy dialogue” in talks with Syriza.

Draghi was praising Syriza’s capitulation to the EU’s austerity agenda and its coordination with the EU to impose new attacks on the working class. As Syriza negotiates the next tranche of €7.2bn in loans from Greece’s Eurozone partners, the Troika is pressing Syriza to present detailed plans for labor market reforms and cuts to pensions.

Behind the scenes, collaboration is developing between Syriza and the EU, designed to massively escalate attacks on the working class.

Dutch Finance Minister Jeroen Dijsselbloem, the president of the euro group who has distinguished himself by his aggressive threats against Greece, said: “Let’s not go into a game of chicken to see who can stick it out longer. We have a joint interest to reach an agreement quickly,” he said.

“We have been worried about previous payments they were to make and yet they managed it, so I don’t know when it becomes really dangerous. But I think it is in our joint interest to stay away from that point,” he added.

As Greece teeters on the edge of bankruptcy, Syriza and ruling circles internationally are preparing for a brutal confrontation with the working class.

Already on Thursday, around 4,000 mine workers employed by Canadian-owned Eldorado Gold mine in northern Greece staged a demonstration in Athens, protesting Syriza’s decision to revoke the company’s licence. Workers fear a shutdown of the mine and the loss of all their jobs. The march was the first major labor protest since Syriza came to power. The miners waved banners reading “Yes to mines, yes to growth,” and chanted slogans, forcing police to shut down major roads.

“The honeymoon is over. We’re done with the period when Greek public opinion would agree with everything that the government does,” said Nikos Marantzidis, a professor at the University of Macedonia.

Syriza is now preparing to take the explosive step of cutting off pensions as well as wages for Greek public-sector workers. After repaying almost €2 billion in loans to the IMF in March and April, it needs to pay IMF €950 million euros by May 12, and plans to tap the Greek public sector’s remaining cash reserves, for a total of €2 billion.

This is reportedly not enough for Athens to meet both its debts to the IMF and its wage and pension bill. According to Reuters, “Without a political agreement with the euro zone next week, Athens is likely to have to choose between making wages and pension payments to its people or reimbursing the IMF.”

Whatever the short-term outcome of the financial crisis—whether it be a Greek default or exit from the euro (“Grexit”)—Syriza and its EU partners are preparing for savage repression against the workers. They are discussing the imposition of de facto military dictatorship in Greece.

Syriza has made clear that it wants to strengthen the police and that the false, pseudo-left rhetoric on which it was elected will not prevent it from mounting police crackdowns. Last week, after Public Order Minister Yiannis Panousis issued a call for law and order, Syriza ordered police to smash an occupation of university buildings in Athens by a handful of anarchist protesters.

Yesterday, Financial Times columnist Wolfgang Münchau wrote a comment titled, “Greek default necessary but Grexit is not,” warning that he had “never seen European financial officials so much at a loss.” While advocating deeper social cuts, Münchau was deeply concerned about the implications of a Greek default or exit from the euro zone: “Grexit would bring incalculable economic risk to the country itself, and would harm the EU’s geopolitical ambitions and its global reputation.”

He continued, “My understanding is that some eurozone officials are at least contemplating the possibility of a Greek default but without Grexit [Greek exit from the euro]. The complexity is severe, and they may not have had the time to work it out. But it may be the only way to avert utter disaster.” He warned that a decision not to pay pensions and public sector wages will be “politically suicidal for the Syriza-led government.”

Whatever happened, Munchau wrote, Athens needs time to prepare military-style measures: “Both Grexit and the option of a default inside the euro zone would stretch the resources of even the most organised government. It would require military-style preparation: exchange controls, temporary closure of land borders and airports, overnight bank recapitalisation, and logistical planning to convey money from A to B on D-Day. Is the Greek government really so smart it can just wait until the fateful moment arrives, and then manage this whole process in real time with no script?”

In fact, Syriza has been preparing for scenarios of Greek default or Grexit since Tsipras began touring international capitals and financial centres, two years ago, as he was groomed to be an acceptable Greek prime minister to Washington and the EU. Discussions of such a scenario appeared in the right-wing Greek daily Kathemerini, which said that if Athens decided to default or exit the euro, it would seek to do so over a weekend, when global stock markets are closed. It wrote that Greece would “deploy its military as soon as early morning Saturday and close its borders, preparing to stamp euros as drachma as an interim solution once a public announcement has been made.”

Outgoing Greek Finance Minister Filippos Sachinidis said he doubted whether, under these conditions, “we will be able to continue functioning as a modern democracy.”

Asked about such events by Time magazine, Tsipras replied: “We have a plan. There is a team of economists who lay out the plans, update and communicate them … I would not like to talk about them.” He added, “We are fully aware of the consequences. We are fully aware of the consequences that it will have on the country and Europe in general.” That is, while the bourgeois media and political circles were aware of the plans, Syriza’s voters and workers in Greece and internationally were to be kept in the dark.

The comments now circulating in the financial press are a warning to the working class. Those who doubt that a pseudo-left party such as Syriza is capable of brutal repression against the working class are deluding themselves.

EU, demanding deeper cuts, rejects Syriza’s austerity list

By Robert Stevens
March 31, 2015
World Socialist Web Site

 

240a4-6a00d8341d417153ef017ee3f50e8c970d-800wiGreek Prime Minister Alexis Tsipras addressed the parliament last night, once again making clear his readiness to implement austerity measures dictated by the country’s international creditors.

Tsipras told parliament that the debt Syriza inherited from the New Democracy/PASOK government was larger than had been presented. It was now time to face the truth, he declared.

Syriza, he said, was ready to make an “honest compromise” with creditors, without acting simply as their “mouthpiece.”

Tsipras’s bluster notwithstanding, he could not say anything of substance about the state of negotiations with Greece’s creditors from the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF) earlier that day—the ostensible purpose of the parliamentary session. To do so would be to make clear not only the attacks on the working class he had offered to carry out, but also the even deeper attacks being demanded of him by Europe’s rulers.

New Democracy leader Antonis Samaras mocked Tsipras, saying he had imagined he’d get money without terms and instead had obtained terms without money.

On Friday, Syriza submitted a further list of austerity proposals, as stipulated in its February 20 agreement to extend by four months the austerity programme of the previous governing coalition. On Sunday evening, the cabinet approved the list.

Athens needs the measures to be accepted by what is now known as the Brussels Group in order to access any of the €7 billion of outstanding loans being withheld. Without access to these funds, it will be unable to repay any more of its €315 billion debt.

However, despite intensive negotiations over the weekend, including a ten-hour session on Saturday, no agreement was reached.

Among the main austerity measures being demanded of Syriza by the Brussels Group are changes to Greece’s labour laws to make it easier for employers to fire workers, as well as further cuts to pensions. The Financial Times reported that these are “two areas that monitors have insisted are essential to finalising the bailout programme.”

However, Tsipras said in an interview with the RealNews Sunday newspaper, “There’s no prospect of taking any recessionary measures, whether it’s cutting wages and pensions or liberalising regulations on mass dismissals.”

According to a Bloomberg News report, Greece submitted a 15-page list that “relies on taxing capital transfers and fighting tax evasion.” The document states that privatisations currently in place would raise €1.5 billion this year, down from €2.2 billion projected in the 2015 budget prepared by the previous government. It forecasts a primary budget surplus of at least 1.2 percent of gross domestic product.

But such proposals are of little interest to the European ruling elite, who are demanding that Syriza go much further and specify cuts that will further decimate the living standards of the working class and poor.

Reuters cited a senior euro zone official who said, “Greece did not submit a reform list on Friday.” The official added that Syriza’s proposals “lack detail, and much more technical work will be needed for them to flesh them out into something sufficiently comprehensive and credible to be put to the Eurogroup.”

An unnamed EU diplomat said, “The list is much too vague, not credible and not verifiable.”

On Monday, the German Finance Ministry said the government would not sign off on further loans to Greece unless the Greek parliament passed concrete austerity measures. Spokesman Martin Jaeger said, “We need to wait for the Greek side to present us with a comprehensive list of reform measures that is suitable for discussion with the institutions, and then later in the Eurogroup.” He cautioned that any progress “depends on the quality of the Greek list and how far they cover the elements that are already mentioned in the [extended austerity] memorandum.”

A Greek newspaper report said Syriza included specific privatisations in the proposals. Deputy Prime Minister Yannis Dragasakis, who has just returned from a trip to China, stated on his return that the sale of a 67 percent stake in the Piraeus Port Authority would be completed in a matter of weeks, raising around €500 million. China’s Cosco Group, which already controls two piers at the strategic port, is among five preferred bidders. Also set for completion is the sale of 14 regional airports.

The Brussels group meeting ended with no agreement. According to sources, there are no plans to meet again this week—leaving Syriza to draw up yet another austerity list for sometime in April, while Greece’s financial crisis intensifies. German Chancellor Angela Merkel told the media that Greece’s proposals must “add up.”

Syriza has made a concerted effort to deepen its ties with China and Russia, both of which have geostrategic interests in the region. Senior Syriza representatives, as well as Defence Minister Panos Kammenos of Syriza’s right-wing coalition partner, the Independent Greeks, have warned that one or both countries could be approached as alternative sources of funding for Greece. The leader of Syriza’s “Left Platform”, Energy Minister Panagiotis Lafazanis, is in Moscow. On April 9, Tsipras will visit for talks with Russian leader Vladimir Putin.

On Friday, the rating agency Fitch downgraded Greece’s unsecured currency bonds. Fitch said progress since February’s agreement “has been slow” and it remained “unclear when the earliest disbursement could take place and what will be required for this to happen.”

Fitch added that it was “likely that the Eurogroup will want the Greek government to demonstrate they have implemented some part of this list before funds are disbursed. This pushes back the probable disbursement date well into April at the earliest.”

Since it was elected on an anti-austerity ticket, Syriza and the country’s banks have been systematically cut off from normal funding streams by the ECB. When bank and company debt is factored in, total debt levels are now at around half a trillion euros.

With Greece’s banks all but insolvent, the Syriza government’s projection of a budget surplus has been dismissed as fantasy. Holger Schmieding, chief economist at London-based Berenberg Bank, said, “After capital flight of €50 billion within three months, it is difficult to see how Greece could muster any growth at all this year. And after the plunge in tax revenues in January and February, Greece is on track for a primary deficit, not a surplus.”

Since 2010, Greece has been used as the test case for imposing mass austerity throughout Europe. The continent’s ruling elite now insists that the pauperisation of Greece’s population be stepped up. Syriza’s perspective, based on the interests of sections of the Greek ruling elite and the affluent upper-middle class, of an amicable restructuring of Greece’s debt within the EU is in tatters.

Massive police mobilization against anti-austerity protest in Frankfurt, Germany

By Christoph Dreier and Alex Lantier
March 19, 2015
World Socialist Web Site

 

German police launched a massive crackdown on protests against austerity in Europe on Wednesday. Between 10,000 and 20,000 people in Frankfurt participated in a demonstration that coincided with the opening of the new headquarters of the European Central Bank (ECB).

Sixty buses from 39 European cities came to Frankfurt for the rally. A special train from Berlin brought almost 900 demonstrators.

Police responded with a massive deployment of 8,000 officers, the largest mobilization in the history of the Frankfurt security forces. They completely blocked off the new, €1.3 billion ($1.4 billion) ECB building, ringed it with barbed ware and transformed the entire city into a high-security area.

Police ran identity checks throughout the city the night before the protest, and numerous buses carrying demonstrators were stopped and searched by police.

Police fired tear gas, water cannons and rubber bullets against groups of protesters on the way to the central demonstration locations. Clashes broke out as protesters set police cars alight. According to organizers, at least 130 demonstrators were injured, while police reported that 15 officers were injured in scuffles or by stones thrown by protesters.

Police carried out mass arrests—350 people by noon, according to a police spokeswoman. On Uhlandstraße, police surrounded about 200 demonstrators, mostly Italians, and checked their papers. Police repeatedly attacked the surrounded demonstrators with pepper spray.

At 2:00 pm, the Frankfurt Fire Department reported that there were 47 fires. It was reported that there were attacks on fire trucks.

Protesters held up signs that read “European Monetary Fascism” or “Caviar for All,” protesting the leading role of the ECB in imposing austerity in Europe, particularly in the indebted euro zone countries of southern Europe such as Greece, Spain and Italy. The ECB has cut credit to these countries’ banks and governments, citing the global economic crisis and their high indebtedness, causing a credit crunch and forcing them to apply for bailouts. The bailouts have been made conditional on deep cuts in social programs that have reduced tens of millions of people to poverty.

The organizations designing these cuts—the so-called “troika” consisting of the ECB, the European Union (EU) and the International Monetary Fund (IMF)—are widely hated across Europe.

“It’s important to be here and show that the troika’s policies are not being done in our name,” said Judith, a 30-year-old protester. “We can’t always make cuts at poor people’s expense and call them lazy Greeks, but we need to stand by in solidarity with them.”

The opening of the bank itself appears to have been a debacle, with ECB chief Mario Draghi speaking to only 19 invited guests. The Hessen state’s economy minister, Tarek Al-Wazir of the Green Party, and Frankfurt’s Social Democratic Party Mayor Peter Feldmann spoke, while media representatives were largely excluded.

“People are going through very hard times,” Draghi noted blandly in his official remarks, saying that the ECB had become a “focal point” for public anger. “That may not be a fair charge—our action has been aimed precisely at cushioning the shocks suffered by the economy,” Draghi claimed.

“We must listen very carefully to what all our citizens are saying,” he added.

Draghi’s democratic posturing is a pack of lies. In fact, European officials have repeatedly stressed that they intend to continue ruthlessly imposing austerity in complete defiance of popular opposition. After the election of a government led by the pseudo-left Syriza party in Greece, which campaigned on the basis of promises to end EU austerity policies in that country, EU officials have said that they intend to continue with austerity demands in defiance of election results.

German Foreign Minister Wolfgang Schäuble, one of the leaders in the European austerity drive, bluntly stated: “Elections change nothing… There can be no democratic choice against European treaties.”

The only way forward to fight the EU austerity diktat is to mobilize the working class internationally in a struggle for socialism. The bankruptcy of attempts to resolve the crisis on a capitalist basis has been exposed by the abject capitulation of Syriza to the EU’s austerity demands.

Shortly after its election victory in January, having campaigned on the basis of pledges to end austerity, Syriza declared its readiness to negotiate new social cuts in Greece with the ECB and the other European institutions.

While the Frankfurt protest reflects broader opposition to austerity in Germany and throughout Europe, the perspective of the protest organizers themselves offers no way forward and is not, in fact, opposed to austerity.

The demonstration was organized by the “Blockupy Alliance,” founded in 2012, which includes unions, pseudo-left groups such as the Attac antiglobalisation movement, and the German Left Party. It was also supported by Syriza in Greece and its Spanish ally, the Podemos Party.

Podemos and the Left Party have both hailed Syriza’s agreements with the EU to continue imposing austerity measures against the working class. On February 27, for the first time, the German Left Party voted in favor of an extension of the EU-led financial bailout for Greece, which is responsible for the social devastation of the country and will allow the ECB to continue imposing austerity measures.

The deputy president of the Left Party fraction in parliament, Sahra Wagenknecht, summed up the perspective of the organizers of the demonstration. “The ECB could put the whole of Europe on a sustainable course of growth and combat deflation without using up the savings of the middle class, producing new speculative bubbles or fueling a global currency war,” said Wagenknecht, who spoke at the demonstration.

The Left Party and its allies across Europe, including Syriza, are seeking only to secure tactical shifts in the policy of the EU and euro zone institutions such as the ECB. As Syriza’s sudden repudiation of its pledges to end austerity makes clear, this is a dead end for the working class.

European Union press Syriza to deepen its austerity program for Greece

By Robert Stevens
March 7, 2015
World Socialist Web Site

 

240a4-6a00d8341d417153ef017ee3f50e8c970d-800wiAfter the Syriza-led government’s decision to sign the February 20 Eurogroup statement and capitulate to European Union (EU) demands for more austerity in Greece, EU officials are stepping up their threats against the country.

Since then, the “troika”—the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF)—have insisted that until Syriza begins actively imposing austerity, it will not receive another cent in loans.

This week Greece paid back €300 million to the IMF, but by the end of the month it must pay a further €1.5 billion. An additional €4.5 billion in maturing Treasury bills (T-bills) is due to be paid this month. More than €6 billion in debt repayments to the IMF falls due in August, immediately after the four month austerity extension expires. All told, Greece must pay back a total of €22.5 billion to its creditors in 2015.

Greece cannot meet these repayments, and without external funding, a default on its debt of around €320 billion is again a possibility.

Bloomberg reported the analysis of Nicholas Economides, a professor at New York’s Stern School of Business, who said, “Greece has already run out of money and lives with emergency compulsory borrowing from pension funds and from European agricultural support money in transit to farmers. Unless there are new loans from Europe or alternatively the ECB allows Greek banks to buy more Greek debt, Greece will default at the end of March.”

The Economist noted, “Syriza’s climbdown in late February has bought time but it has not brought any money from Greece’s creditors. None will be available until the government shows that it is sincere in its promise to complete the reforms that creditors still insist upon.”

This week Spain’s finance minister, Luis de Guindos, said he believed Greece would be unlikely to access capital markets by June and will require further loans of between €30 billion and €50 billion from its European creditors.

Since Syriza’s election in January, the European Central Bank has tightened the screws. The ECB no longer accepts Greek sovereign bonds as collateral for loans and banks are forced to rely on the emergency liquidity assistance (ELA) scheme, which has a high interest rate and will only be available temporarily. The ECB has also limited the amount of short-term T-bills that Athens can issue.

As a result, Greece’s banks are more or less insolvent with even more deposits withdrawn from them in December and January (€17 billion) than at the height of the euro zone financial crisis in May and June 2012. According to official figures, outflows from the banks continue, with a weekly rate of between €2 billion and €3 billion withdrawn in the first three weeks of February.

Tax revenues are down €2 billion in January and February, compared with 2014. Under these conditions it is impossible for Greece to pay for any extended period the €4.5 billion monthly bill for the wages of public sector workers and state pensions.

On Thursday, the ECB refused to countenance a relaxation of the rules that have cut off funds to Greek banks. ECB head Mario Draghi said the bank would only lend further funds to Greece if it was able to satisfy the Eurogroup, IMF and ECB of its strict adherence to the February 20 agreement.

In a desperate response Friday, Prime Minister and Syriza leader Alexis Tsipras contacted European Commission President Jean-Claude Juncker to request an emergency meeting. Juncker gave Tsipras short shrift. He advised Tsipras that any further discussion would have to wait until after Monday’s meeting of the euro zone’s finance ministers.

Juncker gave an interview Wednesday to Spain’s El Pais. Tsipras “still has to tell the Greeks that he is going to have to break certain promises,” he said.

With Syriza having already signed off on everything demanded by the troika, including a clause that the government make no “unilateral” moves to implement any of the programme it was elected on, it is functioning as a tool of the EU’s austerity agenda. According to a S ü ddeutsche Zeitung report, Juncker and Tsipras were in “permanent telephone contact.”

The February 20 agreement was conditional on Syriza supplying the Troika with a list of “reforms” that must first be approved by them and then implemented.

For discussion at Monday’s meeting, Greek Finance Minister Yanis Varoufakis presented a list of seven measures that his government proposes to immediately carry out, to tackle the “humanitarian crisis” and “alleviate extreme poverty.” They are highly targeted measures, introducing food allowances for 300,000 households, the reconnection of domestic electricity supplies and some free electricity for 150,000 households, and a rent allowance for fewer than 30,000 households.

Syriza’s initial budget to deal with the social crisis, outlined in its Thessaloniki election programme was €1.8 billion—a figure barely enough to scratch the surface of the staggering social devastation caused by five years of brutal cuts in living standards.

Now, following a month of negotiations with the troika, the total cost allotted is just €200 million, or 11 percent of the Thessaloniki programme. Even this must be approved next week by the troika. Varoufakis’s letter assures them that it will be “fiscally neutral,” with €200 million of savings to be made elsewhere.

According to excerpts of an interview with Tsipras to be published in Saturday’s Spiegel, he said on Friday, “The ECB has still got a rope round our neck.”

Tsipras added that if the ECB refuses Athens permission to issue additional short-term treasury bills, “the thriller we saw before February 20 will return.”

None of this pathetic posturing will wash with the representatives of the ruling elite. Speaking on Friday to the influential German business daily Handelsblatt, Klaus Regling, head of the European Stability Mechanism, which facilitates the EU’s loan agreements, said, “The new Greek government’s communication has, at times, been irritating in recent days.”

He warned, “Greece must pay back these loans in full. That’s what we expect and nothing has changed in that regard.”

Even as the representatives of the global financial aristocracy demand that Greece be bled white, the conditions facing millions worsen. Unemployment is entrenched, and rose again in December to 26 percent, more than double the euro zone’s average of 11.3 percent. The number of jobless has barely shifted since reaching a record level of 27.9 in September 2013.

Hundreds of thousands of people rely on food banks and soup kitchens to get a regular meal, with many people requiring handouts three times a day. Others resort to scavenging.

Speaking to the Daily Telegraph, a priest at a church involved in food distribution in west Athens said, “The local councils can’t cope, so people come to us for food. We’re feeding 270 people and it is getting worse every day. Today we discovered three young children going through rubbish bins for food. They are living in a derelict building and we have no idea who they are.”

Last month, two teachers alerted Athens City Council that they were being asked to teach starving children. One of the teachers reported that one of the pupils involved had not eaten for two days.

Stock markets rise after Greece signs new austerity agreement

By Robert Stevens
February 24, 2015
World Socialist Web Site

 

Europe’s stock markets rose Monday in response to the four-month extension of austerity agreed Friday between the Greek government and the euro group.

Stocks shot up in all the main markets save London, closing at their highest levels in seven years. Japanese equities hit a new 15-year peak. The FTSE Eurofirst 300 rose by 0.6 percent and Germany’s Dax by 0.7 percent. London’s FTSE 100 rose sharply and was due to reach a record level, before falling only due to a plunge in the shares of the crisis-ridden HSBC bank. Greece’s own stock markets were closed for a public holiday.

The financial aristocracy believes Greek Prime Minister Alexis Tsipras’ deal will allow it to continue raking in billions of euros in profits by savaging workers’ living standards in Greece and across Europe. Commenting on the austerity deal, Erik Nielsen, global chief economist of UniCredit, said, “Europe has drawn the line in the sand—and markets had absolutely no problem with that.”

Summing up the results of less than a month of talks, in which Greece’s Syriza-led government did not win even minor concessions, Nielsen called it a “complete political surrender” on Syriza’s part.

The first condition of the agreement was for Syriza to submit further proposals by Monday evening to the European Commission, European Central Bank and International Monetary Fund “troika”, detailing how it would strictly adhere to the austerity programme agreed to by the previous New Democracy/PASOK regime.

Syriza complied totally with this humiliating demand. To ensure that its proposals would not be rejected, Syriza officials spent the entire weekend and Monday in talks with troika representatives, honing a suitable austerity agenda. One Greek government source told the Guardian, “It will be put over this evening although when exactly that will be we just don’t know. Right now they are drawing up and crossing out [proposals] … It is changing all the time.”

In the end, Syriza left nothing to chance. On Monday evening, Athens stated that it would instead submit its proposals on Tuesday morning.

This followed a warning in Monday’s Financial Times, which noted: “Euro zone officials have for weeks complained that [Greek Finance Minister] Mr Varoufakis’s reform proposals were not sufficiently detailed and had not come with estimates of how much they would affect the economy and government budgeting. Officials who have seen the weekend submission from Athens have indicated it is similarly vague.” [emphasis added]

Another official acknowledged Athens’ proposals amounted to “a list of actions to be taken” without a detailed breakdown of numbers.

Reuters reported Monday evening that a government official said Syriza’s list “will include reforms to fight tax evasion, corruption” and “measures to reform [the] public sector, [and] cut bureaucracy”. Also included are “reforms to regulate tax arrears and bad loans.”

Syriza uses these standard euphemisms (“reforming public sector, cut bureaucracy”) because, like the right-wing New Democracy government before it, it is a reactionary bourgeois party trying to cover up its plans to cut workers’ jobs and pay and increase productivity.

Syriza’s capitulation has only fueled demands for further concessions from the European Union.

The German government, which has insisted that Greece carry out the troika’s austerity directives to the letter, has responded to Syriza’s capitulation with even more vociferous demands. Foreign Minister Frank-Walter Steinmeier said, “The ball is in the Greek government’s court. If Athens wants to see changes in individual points, then that is okay. But if these changes lead to further spending, then they need to save elsewhere or look to gather more revenue.”

The statement issued by the euro group Friday stipulated, “The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the [EU, ECB and IMF] institutions.”

Among those who Syriza first turned to as a supposed counter to the austerity being demanded by Germany was European Commission President Jean-Claude Juncker. Not only did Juncker endorse the German position before the ink was barely dry on Friday’s deal, he was leading the chorus for Syriza to tear up any promise it had made to alleviate the social devastation visited on the Greek people over the past five years.

Speaking Monday to Wirtschaftswoche, Juncker said Syriza cannot raise the minimum wage because “It’s very difficult claiming privileges that other states don’t have.” He said Spain, Ireland and Portugal had already passed through a “vale of tears,” and that Greece could not be treated differently, “especially on raising the minimum wage.”

As Syriza desperately tried to make its proposals “sufficiently comprehensive to be a valid starting point” ahead of negotiations on a harsher austerity package in April, IMF head Christine Lagarde insisted that Syriza had to tackle “vested interests, protected professions, rigidity in some markets.”

She said, “I hope that the structural reforms that are so needed in the country can be implemented. … There’s been a lot of talk about it, but now it’s time to get on with the work.”

In fact, there is every indication that Syriza’s capitulation to the EU austerity diktat will only fuel the collapse of the Greek economy and the drive for deeper attacks on the working class.

Greece’s banks remain in deep crisis, with their access to funds cut off by the ECB. Due to fear of a financial collapse as Greece’s previous credit agreement with the troika was due to expire, €1 billion were withdrawn from Greek bank accounts last Friday.

According to JP Morgan, outflows from Greek banks last week total €3 billion. In just under two months, €25 billion in deposits have been withdrawn from Greek banks. J.P. Morgan estimates that on this basis, the banks will run out of collateral to obtain new ECB loans in just eight weeks. This is down from the 14 weeks it estimated only last week.

Alan McQuaid, chief economist at Merrion Stockbrokers, described the latest deal as “kicking the can down the road,” adding that “it’s better than nothing and for the time being it will be seen as positive, assuming they can deliver these reform promises today.”

Peter Dixon, equity strategist at Commerzbank, cautioned, “We have cleared the first hurdle, but Greece has to come up with a serious set of measures now. Over the course of the next few months, we will be having more discussions and possibly a lot more market volatility.”

Gary Jenkins, chief credit strategist at LNG Capital said Syriza “now have four months to try and demonstrate that they have an action plan which is acceptable to their European partners and to their own people. It is not inconceivable that we are all back here in four month’s time with a heightened risk of either a Greek exit [from the eurozone] or default—or both.”

Sharp market falls over euro and oil price slump

By Nick Beams
January 6, 2015
World Socialist Web Site

 

Stock Market DropEuropean and US equity markets fell sharply yesterday as a result of another drop in oil prices, fears of financial instability in Europe over Greek debt and the signs that global deflationary pressures are increasing.

In the US, the Dow Jones index finished the day 331 points down, a fall of 1.86 percent, while the S&P 500 was down by 1.83 percent. The Vix, a measure of market volatility, jumped by 12 percent. Earlier in the day, European markets fell by around 3 percent.

Currency markets also exhibited instability. The US dollar hit a nine-year high against a basket of currencies, while the euro touched a nine-year low, amid concerns over whether the Greek election, to be held on January 25, would spark political instability if the opposition SYRIZA coalition were to win.

The first issue before the incoming Greek government will be to sign off on a new debt agreement. The country was given a two-month extension, to the end of February, on the present bailout plan.

The main factor in the fall in US markets appears to have been the further sharp decline in oil prices, continuing the downward trend that started in June, which was accelerated by the Saudi-led OPEC oil cartel’s decision not to cut production levels.

West Texas intermediate crude yesterday fell below $50 a barrel, its lowest level for five years, while Brent crude, regarded as the global benchmark, dropped by more than 6 percent to under $53 per barrel. The price of oil is now heading down to the levels reached in 2008-2009, when the global financial crisis saw it plummet from $100 per barrel to around $40.

The falling oil price is indicative of the deflationary pressures in the world economy as a result of continuing stagnation in Europe and clear signs that the Chinese economy is slowing.

The drop in the euro was set off by a comment by European Central Bank (ECB) president Mario Draghi during an interview published last Friday. Draghi said the risk of deflation in Europe was higher than six months ago, indicating that the ECB is getting ready to extend its so-called quantitative easing when its governing council next meets on January 22.

The euro fell further on a report published over the weekend in the leading German news magazine Der Spiegel that German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble had reached the conclusion that it was no longer necessary to keep Greece within the euro zone at any price and that a Greek exit would not create a financial crisis, as it threatened to do in 2012.

“The danger of contagion is limited because Portugal and Ireland are considered rehabilitated,” Der Spiegel quoted an unnamed government source as saying. Thus, Germany regarded a Greek exit as “bearable.”

Following the article, the Merkel government said it was working on the assumption that no matter if SYRIZA won the election, the next Greek government would continue to abide by agreements reached with EU institutions.

Under the austerity program dictated by the “troika”—the ECB, the International Monetary Fund and the European Commission—the Greek economy has contracted by 25 percent over the past six years. Even assuming a growth rate of 2 percent per year, the Greek economy would not attain the levels it reached in 2007 until after 2027.

SYRIZA, the “Coalition of the Radical Left,” has abandoned any commitment to repudiate international debts, or restore previous cuts. It now talks of debt “renegotiation,” while insisting that Greece remain within the euro zone.

The financial markets have taken SYRIZA’s measure and recognise that a SYRIZA government of itself is no danger. There is the underlying fear, however, that any election victory could spark a movement from below that could begin to break out of the political straitjacket that has so far contained the working class.

One of the factors that may have led German authorities to consider a Greek exit “bearable” is that Greece’s debt has largely been transferred to public institutions. Consequently, German banks would not be as heavily impacted as they would have been three years ago.

It is estimated that more than 80 percent of Greece’s debt is now held by official creditors, including the International Monetary Fund and the European Stability Mechanism, which functions as the euro zone’s rescue fund.

While the prevailing view in financial circles, at least to this point, is that the euro zone would be able to “handle” a Greek exit, other powerful forces, in the form of deflation and the prospect of a third recession since the financial crisis, are stretching the monetary union.

Inflation figures will be published tomorrow and there are indications that they may record a negative result for the year, after an increase of just 0.3 percent for the year to November. Fears of a negative outcome were increased following yesterday’s news that German inflation had fallen to a five-year low.

Draghi is insisting that the threat of deflation, which increases the level of real debt and interest payments for banks and financial institutions, must be countered by further quantitative easing, involving, in some form, ECB purchases of sovereign debt. However, German Bundesbank president Jens Weidman, who sits on the ECB’s governing council, strenuously opposes the purchase of government debt.

According to former German foreign minister and Green Party leader Joschka Fischer, the policy differences threaten to turn “politically explosive” because they are “becoming a conflict between Germany and Italy.”

Those conflicts are set to intensify. This time last year, the official view was that Europe was starting to recover. But after a brief upturn, growth began to fall, most significantly in the so-called core countries, France, Italy and Germany.

Economic stagnation brings rising debt levels. Despite the imposition of austerity measures, Italy’s debt ratio has increased from 116 percent to 133 percent of gross domestic product (GDP) over the past three years because GDP is not rising fast enough to keep pace with interest costs.

As an article in yesterday’s Wall Street Journal noted, 2014 was supposed to have been the year when the euro zone exited the debt crisis, as growth returned to the region. Instead, “the eurozone is arguably now in greater peril of breaking up than ever before.”