Michael Roberts looks at the human cost of bailing out the banks across Europe.
King Juan Carlos of Spain was flown back from Botswana in a private jet after he broke his hip while hunting elephants. He fell over on the way to the toilet in the early morning. Maybe he did not wake up properly: he had told the Spanish public just a few weeks earlier that he could not sleep for worrying about the 50% rate of youth unemployment and the grave economic crisis. Such is the empathy of the rulers towards the ruled as the impact of the Eurozone debt crisis deepens. After all, we are all in it together.
The response of Juan Carlos was lack of sleep and shooting elephants. The response of Dimitris Christoulas, a retired chemist in Greece was more tragic. The cash-strapped Greek pensioner shot and killed himself outside Parliament in Athens. In a suicide note found by police, he said: “This Tsolakoglou Government has annihilated all traces for my survival, which was based on a very dignified pension that I alone paid for 35 years with no help from the state… I see no other solution than this dignified end to my life, so I don’t find myself fishing through garbage cans for my sustenance.”
Tsolakoglou is a reference to George Tsolakoglou, a military officer who was appointed by the Germans in 1941 as Greek Prime Minister. Mr Christoulas correctly identified the nature of the current banker-led Greek Government as collaborationist. It has agreed to a crippling destruction of Greek living standards, public services and jobs in order to bail out Greece’s creditors, Europe’s banks, insurance companies and hedge funds – and to lie down before the neoliberal policies of the dreaded Troika (the EU Commission, the ECB and the IMF).
Unfortunately, Mr Christoulas’s act is not an isolated one. The suicide rate in Greece used to be the lowest in Europe, but it has soared during the crisis. Last year, the number of suicides in Athens alone jumped over 25% from a year ago. “This is the point to which they’ve brought us. Do they really expect a pensioner to live on €300 a month?” asked 54-year old Maria Parashou. “They’ve cut our salaries, they’ve humiliated us. I have one daughter who is unemployed and my husband has lost half of his income.”
This Greek tragedy is now playing out in Spain, Portugal and Italy too as the “bond vigilantes” (Europe’s financial institutions) demand yet higher and higher interest rates for lending money to their governments, while the Troika demands yet more “fiscal discipline” and austerity for the bulk of the people.
Italy’s neo-liberal economist Prime Minister Mario Monti’s appeals for sacrifices (as we are “all in it together”) sound very hollow when Italians find out how their politicians squander their taxes. In 2007, former Justice Minister Clemente Mastella took his son to see the Italian Grand Prix at Monza. Instead of driving or taking the train like everyone else, they went by state jet. The one-day plane ride from Salerno to Milan cost taxpayers 20,000 euros.
Italy has almost 1,000 national lawmakers. The majority have a base salary of €11,283 per month before tax, plus €3,503 for expenses which they do not have to itemise. By contrast, the lowest-earning Italian households live on less than €8,000 per year, or €667 per month, after taxes. The poorest families have already lost almost 12% of their real income between 2006 and 2010, more than double the national average.
Spain is now in the cross-hairs of finance capital. The Spanish Government has been forced to agree to the most draconian reduction in its budget ever, to try to get the Government’s deficit down from 8.2% of GDP in 2011 to 3% by the end of 2013. Given that the economy will contract by around 2% this year, there is not a snowball’s chance in hell of achieving that target. Yet the cost to the Spanish people is immense, with the unemployment rate hitting 24% and average real incomes from work and pensions being slashed, while house prices plummet and rents rise. The conservative People’s Party, fresh from a landslide victory in a general election, is now demanding that regional governments destroy their services in education and health to meet the Troika targets.
It’s the same story in Greece, Portugal and Italy, where right wing or “technocratic” unelected governments are imposing austerity measures, along with so-called reforms in labour and product markets. “Reforms” mean destroying employment protection rights; cutting benefits and deregulating markets – yet again! There is no genuine reform of the system, no programme for investment, employment and growth – and without that, no amount of austerity will revive these economies, let alone get public debt levels under control. This year, the Portuguese economy is set to contract by more than 3%, Italy and Spain by 2% and Greece by 6%. Despite the pain inflicted on the Europe’s people, the austerity option is not working.
Soon the Eurozone governments will have to decide whether to provide the likes of Greece, Portugal and even Spain with yet more funding to meet the obligations of their governments and banks to bondholders. It remains to be seen whether they will cough up enough money to do so, or call it a day with the euro.
The alternative – negotiating a restructuring, or “orderly default” – on all this debt is not even considered. That’s because it would mean that Europe’s financial sector would not get its kilos of flesh for its shareholders – and yet it is the greed and speculation of finance capital that caused the crisis in the first place! Ireland’s public sector debt was doubled to bail out its banks after they collapsed when the global property bubble burst. Irish bank bondholders (European banks, pension and hedge funds) are being paid back in full under the instructions of the Troika, a burden for the Irish taxpayer that will last more than a decade.
The alternative policy of default would have to be accompanied by pan-European public ownership of the banks (wiping out compensation for shareholders and bondholders), so that the banks can provide credit to small businesses and households. This could be combined with pan-European state-driven infrastructure and environment projects to create jobs and public services, not destroy them.
The current Eurozone governments have no intention of doing any such thing: but their electorates may have something to say about that. The newly-elected right-wing Spanish PP Government failed to win the recent regional election in impoverished Andalucia, where the United Left doubled its share of the vote to form a coalition with the Socialists.
Even in Italy, neo-liberal economic Prime Minister Mario Monti, heralded as a saviour by the media and establishment when he took the job, has seen his popularity fall fast from 62% to 44%, with now two-thirds of Italians opposing his labour “reforms”. In Greece, the two collaborationist coalition parties (the conservative New Democracy and the Blairite PASOK) look like failing to gain a majority in the coming election. Instead, the anti-Troika parties will hold the balance of power and could provide an alternative if they stopped squabbling with each other.
Above all, in France, the Party of the Left candidate, Jean-Luc Mélenchon, has shown the way forward against austerity in a barnstorming campaign for the French presidency (see page 24). Mélenchon has put huge pressure on the Socialist candidate Francois Hollande, who is set to win, to break with Troika policies. If the left win the parliamentary elections in June, it could increase the momentum for an alternative policy for Europe. For if there is no break with austerity and the grip of the Troika, Europe faces a decade or even a generation of impoverishment and misery