Greek Parliament approves Austerity Package

While the Greek government surrendered to the IMF and World Bank demands for more spending cuts, the streets of Athens saw an increase in protests with thousands of citizens taking on police.

Associated Press
June 29, 2011

Greece’s lawmakers approved a key austerity bill Wednesday needed to avert default, despite a second day of rioting on the streets of Athens that left dozens of police and protesters injured.

The passage of the bill was a decisive step for the country to get the next batch of bailout loans from international creditors due from last year’s financial rescue. Another bill has to be passed Thursday for the government to secure the money.

The bill to cut spending and raise taxes by euro28 billion ($40 billion) over five years has provoked widespread outrage, coming after a year of deep cuts that have seen public sector salaries and pensions cut and unemployment rise to above 16 percent.

While deputies voted, stun grenades echoed across the square outside the Parliament building and acrid clouds of tear gas hung in the streets. Authorities and emergency services said 21 police and 15 protesters were injured and transferred to hospitals, while 26 people were detained.

The European Union and International Monetary Fund have demanded both bills pass before it releases euro12 billion of bailout funds — without the money, Greece was facing defaulting on its debts by the middle of next month, potentially triggering a banking crisis, particularly in Europe, and turmoil in global markets.

“We must avoid the country’s collapse with every effort,” Prime Minister George Papandreou said in his speech prior to the vote. “Outside, many are protesting. Some are truly suffering, other are losing they privileges. It is their democratic right. But they and no one else must never suffer the consequences and for their families of a collapse. We must do everything so that there is no freeze in payments.”

The Greek vote was greeted by a sense of relief in Europe’s capital cities, who have been fretting about the impact of a potential Greek default both on their banking systems and on the future of the euro currency itself.

“That’s really good news,” German Chancellor Angela Merkel said when told of the outcome of the vote on her way out of an economic forum in Berlin. Germany is Greece’s biggest creditor.

Equally, relief was the main response in markets too. Soon after the vote, the euro was trading at a fairly elevated level around the $1.44 mark while stock markets around the world were posting big gains.

In Greece, the main Athens stock market closed up 0.5 percent at 1,264, while borrowing costs eased some 80 basis points from a morning high, with the yield on 10-year bonds settling at the still high 16.55 percent.

“The fact that the Greek parliament has passed the government’s medium-term fiscal plan clearly reduces the chances of a near-term disaster,” said Ben May, European economist at Capital Economics.

The unpopular package of spending cuts and tax hikes passed by 155 votes to 138, with five opposition deputies voted “present” — a vote which backs neither side.

A sole deputy from the governing socialists, Panayotis Kouroublis, dissented over government plans to sell a further stake in Greece’s state electricity company and was soon expelled from the parliamentary group by Papandreou.

In a dramatic vote, socialist deputy Alexandros Athanassiadis, who had previously vowed to vote against the bill, overturned his decision at the last minute and backed the package, saying he had been swayed by the prime minister’s comments in parliament.

A conservative deputy broke ranks with her party’s line to also vote in favor, bolstering the government’s majority of five seats in the 300-member parliament.

In the run-up to the vote, violence engulfed the square outside for the second day, while services across the country ground to a halt in the last day of a 48-hour general strike. Riot police fired volleys of tear gas at swarms of young men who were hurling rocks and other debris as well as setting fire to trash containers.

After a lull in the fighting around the time of the vote, the riot started up again with intensity.

Protesters threw flares and orange and green smoke bombs, and a few sprayed fire extinguishers at police, who picked up rocks and tossed them back. Heavy clouds of tear gas wafted over the chaotic scene in front of parliament.

Greeks Enraged as the Parliament is set to approve Austerity plan

Thousands of Greeks arrive at the Parliament’s building to press their representatives to reject the new austerity package.

Reuters
June 28, 2011

Anti-austerity protests turned violent in Athens on Tuesday as the European Union warned Greek lawmakers the country faces immediate default unless they back an unpopular economic plan this week.

Hooded youths throwing stones and wielding sticks set fire to garbage bins and a telecoms truck outside parliament and riot police fired teargas to disperse them. Trade unions began a 48-hour strike against the EU/IMF-imposed measures.

Progress was meanwhile reported in talks to persuade European banks and insurers to voluntarily roll over maturing Greek debt under a planned second rescue package designed to give the euro zone country a breathing space.

Growing market confidence that the Greek parliament will approve the austerity program and that a French plan to roll over Greek sovereign bonds will help avert a default lifted global stocks and the euro despite the mayhem in Athens.

The EU’s top economic official, Olli Rehn, stressed that any further assistance for the debt-crippled nation hinged on parliament adopting a raft of spending cuts, tax rises and privatizations in crucial votes on Wednesday and Thursday.

“The only way to avoid immediate default is for parliament to endorse the revised economic program … They must be approved if the next tranche of financial assistance is to be released,” he said in a statement.

“To those who speculate about other options, let me say this clearly: there is no Plan B to avoid default,” Rehn said, dismissing widespread reports that Brussels was working on a fallback plan to keep Greece afloat.

The blunt alternative was underscored by Bank of England Governor Mervyn King, who told British parliamentarians that policymakers were working on ways to limit the damage from a potential default on Greece’s 340 billion euro debt pile.

“What we’re doing is to say there is sufficient concern in the market about the possibility of default for us to think about contingency plans and the consequences of this event,” King said.

He urged greater transparency about sovereign exposures to prevent a sudden, broad-based loss of confidence in European banks in the event of a Greek default, which could trigger a new credit crunch.

By nightfall, several hours of clashes involving hundreds of youths had subsided and central Athens had been reclaimed by thousands of peaceful protesters denouncing measures they say hit salaried workers and the unemployed while sparing the rich.

Some 5,000 police were drafted in, mostly to protect the colonnaded parliament building on Syntagma Square, focal point of weeks of mass demonstrations, some modeled on the encampment of unemployed Spanish “indignados” in Madrid.

ROLLOVER PROGRESS

The EU and IMF have said Greece must enact both the five-year austerity plan, with 28.6 billion euros in savings, and key implementing laws for structural reforms and state asset sales to secure the next 12 billion euro slice of aid in July.

Without that, Athens would run out of money within weeks unless it received some outside lifeline.

Risk premia on lower-rated euro zone government debt fell on news that German banks had agreed in principle to use a French proposal as a basis for negotiating private-sector participation in a Greek debt rollover.

The euro also hit a session high against the dollar, with fears of a Greek default offset by signs that European authorities and banks are making progress on a debt rollover.

Prime Minister George Papandreou’s Socialists hold a narrow majority with 155 seats in the 300-member legislature, but a handful of lawmakers have defected and others are threatening to vote against some or all of the measures, putting the outcome in doubt.

One possible scenario that could cause trouble would be if parliament approved the five-year austerity plan but voted down some of the implementing bills, for example on privatizations.

Conservative opposition leader Antonis Samaras underlined his opposition to the economic plan despite massive pressure from fellow center-right European leaders to back it.

“This policy is wrong, it has exhausted the Greek people and Greek society,” he told parliament. “If we perpetuate this mistaken policy we will only make things worse, both for Greece and for Europe.”

If Greece approves the legislation, euro zone finance ministers meeting in Brussels on Sunday are likely to agree to release the next aid tranche, with the IMF following on July 5.

Attention will then switch to putting together a second rescue package for Greece of about the same magnitude as the initial 110 billion euro bailout agreed last year.

The new program would involve some 30 billion euros in private sector participation via a “voluntary” rollover of maturing debt, a similar sum from privatization revenues and an expected 55 billion euros in new official funding.

Euro zone banks and insurers are considering a French plan outlined by President Nicolas Sarkozy on Monday under which private bondholders would reinvest half of the proceeds of maturing Greek debt in new 30-year bonds paying 5.5 percent interest plus a bonus linked to Greece’s GDP growth rate.

Of the other half, 30 percent would be cashed out and 20 percent would be invested in zero-coupon AAA securities with deferred interest that might be issued or guaranteed by the euro zone rescue fund, officials and banking sources said.

French banks have the largest foreign private sector exposure to Greece, followed by Germany.

Two sources close to the negotiations told Reuters that German banks had agreed to use the “French model” as a basis for talks with the German Finance Ministry on Thursday. German Deputy Finance Minister Joerg Asmussen also called the French plan a good basis for discussions.

Credit ratings agencies withheld comment pending details of the scheme.

Standard & Poor’s said on Monday it was too soon to judge the ratings impact of the private debt rollover being put together for Greece, which it had not yet seen, but did not rule out avoiding a downgrade to default.

Asked if he could imagine a solution in which private creditors voluntarily contributed to a Greek rescue package without triggering an S&P downgrade, Moritz Kraemer, head of European sovereign ratings, told Austrian television:

“It is conceivable depending on the situation. That is why I say it is not possible at all to draw a final conclusion on this in the current situation.”

In Berlin, visiting Chinese Prime Minister Wen Jiabao said Beijing had faith in the European economy and the euro and was optimistic that Europe could overcome its temporary challenge.

As in the past, he gave a vague commitment to buying euro zone debt without specifying countries or amounts.

US media demands Greek-style austerity for American workers

WSNM

In recent days, the US media—led by the standard bearer of American liberalism, the New York Times—has insisted that workers inseek truth the US, like their brethren in Greece, have been living the good life for far too long and must accept a drastic and permanent reduction in their living standards.

In a May 9 piece, Times columnist Thomas Friedman denounces workers in the US and Western Europe for believing in the “tooth fairy” and expecting government services without paying for them. In America, Friedman says, the baby-boom generation, which supposedly had inherited the prosperity of the post-war years, had “eaten through all that abundance like hungry locusts.”

“After 65 years in which politics in the West was, mostly, about giving things away to voters, it’s now going to be, mostly, about taking things away. Goodbye Tooth Fairy politics, hello Root Canal politics.”

Describing what he has in mind, two days later Friedman wrote about his meeting with Greek Prime Minister George Papandreou in a rooftop restaurant in Athens. Praising Papandreou for defying mass protests, theTimes columnist hails the government for carrying out a “revolution,” including raising the retirement age and slashing wages and pensions for public sector workers, imposing regressive consumption taxes and wiping out two-thirds of the country’s publicly owned companies.

Another May 11 article, appearing on the front page of the Times, is entitled, “In Greek Debt Crisis, Some See Parallels to U.S.” Its author, David Leonhardt, led the newspaper’s campaign to promote Obama’s health care overhaul, explicitly supporting limits on medical treatments ordinary people could receive. (“In truth, rationing is an inescapable part of economic life”).

“It’s easy to look at the protesters and the politicians in Greece—and at the other European countries with huge debts—and wonder why they don’t get it,” Leonhardt writes. “They have been enjoying more generous government benefits than they can afford…

“Yet in the back of your mind comes a nagging question: how different, really, is the United States?… Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.

We, the people, are.”

It is rich to hear demands for sacrifices and lectures about “the people” living beyond their means, particularly from the likes of Leonhardt and Friedman. The latter, who is paid $50,000 per speaking engagement, is married to the heir of a multi-billion dollar real estate fortune. According to theWashingtonian magazine, the couple owns “a palatial 11,400-square-foot house” in suburban Washington, DC, valued in 2006 at $9.3 million.

In these circles it is taken for granted that massive cuts must be imposed on the living standards of the working class, but not a word is said about the hundreds of billions that are funneled into the personal fortunes of the financial aristocracy and the subordination of the entire economy to increasing their piles of wealth.

The events of the last several years have revealed to the world that the greatest burden on society is not ordinary working people but the anti-social activities of an unproductive and parasitic financial elite. The grotesque consumption and appropriation of social wealth by this oligarchy is not a minor factor in the crisis of the global capitalist system itself.

The bankrupting of whole countries—chiefly through the transferring of the bad debts of the financial speculators onto the books of various governments—is being used to demand austerity from workers and ever-greater riches for the elite.

The four biggest US financial firms—Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase—made money from trading every single day during the first quarter of the year, according to their financial filings. The banks, which all benefited from the Wall Street bailout, reaped hundreds of millions in profits from betting on the movement of currency, commodity and sovereign debt markets, including in relation to Greece.

At the same time, the value of corporate shares has risen, chiefly through a campaign of job cutting, wage and benefit concessions and a staggering 3.8 percent increase in worker productivity in 2009. As a result, corporate CEOs, who took stock options in lieu of pay increases when profits were down, are now cashing in, according to an Associated Press report, entitled, “America’s top CEOs are set for a once-in-a-lifetime pay bonanza.” Yahoo’s Carol Bartz, for example, received a $47.2 million package during her first year on the job, 90 percent of which came from stock awards and options.

While these vast personal fortunes have been made, there has been no recovery in the wages and benefits workers have lost during the recession. The Organization for Economic Co-operation and Development (OECD) reported that real wages fell last year by 2.7 percent in Japan and Ireland, 1.1 per cent in Germany and 0.8 percent in the US.

The unbridled greed of America’s ruling elite—and the complete subservience of the political establishment, from Obama on down, to its needs—can only be compared to the ancien régime in France. The parasitism and extravagance of the aristocracy became a major factor in the country’s breakdown, and ultimately the eruption of the French Revolution in 1789.

Workers must reject the demand for austerity. The working class did not create this crisis and must not pay for it. Instead, the ill-gotten gains of the ruling elite must be confiscated and used to meet the interests of society as a whole, instead of gutting social programs and destroying jobs.

This must include a multi-trillion dollar program of public works to put the unemployed to work—at decent wages and full medical care—to rebuild the cities and suburbs, repair the nation’s infrastructure and provide high quality housing, medical care and education for all.

In the midst of the Great Depression, the founder of the Fourth International, Leon Trotsky, argued in the Transitional Program that it is “impossible to take a single serious step in the struggle against monopolistic despotism and capitalistic anarchy—which supplement one another in their work of destruction—if the commanding posts of the banks are left in the hands of predatory capitalists. In order to create a unified system of investment and credits, along a rational plan corresponding to the interests of the entire people, it is necessary to merge all the banks into a single national institution. Only the expropriation of the private banks and the concentration of the entire credit system in the hands of the state will provide the latter with the necessary actual, i.e., material, resources—and not merely paper and bureaucratic resources—for economic planning.”

The nationalization of the banks, however, will produce positive results, Trotsky explained, “only if the state power itself passes completely from the hands of the exploiters into the hands of the toilers.”

For this to be realized the working class must build its own mass political party, independent of and irreconcilably opposed to the two parties of big business, and dedicated to the fight for a workers’ government to replace capitalism with socialism.