Fight Racism! Fight Imperialism! 227 June/July 2012

The failure of the reactionary pro-austerity political parties in Greece to form a government endorsing the European imperialist agenda after the 6 May elections sent shock waves through European capitals and international financial markets. Syriza, a coalition of radical left organisations committed to halting the brutal austerity programme imposed on Greece as the condition for their last bailout package, took 16.8% of the vote, coming second only to the right-wing New Democracy party with 18.9% and well ahead of the other ruling class party, PASOK, with 13.2%. Anti-austerity left-wing parties got, in total, 27% of the vote. Further gains are expected for Syriza in the new election on 17 June. The long, courageous resistance of the Greek masses against austerity has been given political expression.* This is a development that threatens to stall the process of consolidation of European imperialism throughout the eurozone. DAVID YAFFE reports.

European imperialism requires a strong euro, powerful financial institutions and a growing economy if it is to challenge US imperialism’s international dominance. However, massive state intervention to save the imperialist banks after the economic and financial crisis broke out in 2008 precipitated a ‘sovereign debt crisis’, which is most severe in the weaker eurozone economies. The EU fiscal pact of 30 January 2012, to enforce budgetary discipline throughout the eurozone, reinforced the brutal austerity programmes already imposed on these countries as the condition for bailout packages. These measures demanded by the dominant eurozone countries led by Germany are seen as key to maintaining the strength of the euro and creating the fiscal and political union necessary for a strong European imperialist bloc. Their problem is that these measures are not only failing to alleviate the crisis, but the austerity programmes are creating political resistance that is now threatening to derail the whole process.

As the neo-liberal chief economics writer for the Financial Times Martin Wolf has pointed out, in shrinking economies ‘austerity is merely begetting more austerity’ (Financial Times 9 May 2012). According to the IMF the ratio of gross public debt to gross domestic product will rise, not fall, in every year from 2008 to 2013 in Ireland, Italy, Spain and Portugal. It will briefly fall in Greece only because of debt restructuring. Growth will fall in real terms this year in Greece, Italy, Portugal and Spain and rise by just 0.5% in Ireland. Only growth in Germany of 0.5% in the first quarter of this year prevented the eurozone from going into recession (two quarters of negative growth). Eurozone GDP was flat despite further falls in southern Europe and stagnation in France. In March, unemployment in the 17 countries of the eurozone increased by 169,000 to 17.37 million. The unemployment rate was 10.9%, the highest level in its history. Most shocking are the rates of unemployment for young people under 25: 51% in Greece and Spain, 36% in Italy and Portugal, 30% in Ireland and 22% in the eurozone as a whole.

The economic and social conditions resulting from the destructive impact of the austerity programmes are inevitably engendering political resistance, especially in the southern eurozone countries, with developments in Greece leading the way. Stronger European countries such as France have also given some political expression to this resistance, with the Left Front anti-austerity coalition led by Jean-Luc Melenchon receiving more than 11% of the vote in the first round of the presidential election. Even the eventual winner in the second round run-off, François Hollande, was forced to commit himself to renegotiating the eurozone fiscal pact in order to defeat the incumbent President Nicolas Sarkozy. However, Hollande, a vacillating social democrat, will compromise on this position at the first opportunity.

Failure to strengthen and widen the influence of the anti-austerity left parties could have serious political consequences. In both Greece and France, the growing social crisis has also produced a polarisation of class forces shown by the entry of the neo-fascist and racist Golden Dawn party into the Greek parliament with 7% of the vote and the strong showing of Marine Le Pen’s racist National Front in the first round of the French election with 17.9% of the vote. Both nationalist groups are anti-austerity parties. They will rapidly advance if the left forces fail to make political gains in the battles ahead.

Greek resistance and Syriza

Greece is a small imperialist power that is a member of NATO as well as the EU. It spends twice as much on defence, as a proportion of GDP, as any other EU member. Around 15% of Germany’s and 10% of French arms exports go to Greece. Since Turkey’s invasion of Cyprus in 1974 Greece has spent €216bn on armaments. Greece’s arms trade has been associated increasingly with bribery and corruption (The Guardian 20 April 2012). This is important when assessing the programme of Syriza and other radical left forces. In no way can Greece be regarded as some kind of ‘colony’ of European or US imperialism.

It is difficult to interpret exactly what Syriza is arguing in relation to the eurozone fiscal pact. After all not only is it a coalition of different radical left groups, but often the points made seem to depend very much on the audience. Soon after the election a Syriza representative told Greek TV: ‘Our aim is to form a government of the left that will liberate the country from the shameful loan agreement it has signed up to’. They say that they will not take part in a government that will enforce the policies of that agreement or, as it is often referred to, the ‘Memorandum’. Nevertheless, one of the top aides of Alexis Tsipras, Syriza’s leader, could also say that ‘we will not proceed with any unilateral action that might question Greece’s membership of the eurozone’. He continued by saying that accepting ‘destructive austerity’ was not part of the deal to enter the eurozone. No one, he said, has the right to say ‘either you accept austerity or leave’. Tsipras himself says that they are ‘not against a unified Europe or monetary union’.

Tsipras also presents the argument as one of class conflict when he says that he wants Greece to stay in the euro, but he is also fighting capitalism: ‘On the one side there are workers and the majority of people, and on the other are global capitalists, bankers, profiteers on stock exchanges, the big funds. It’s a war between peoples and capitalism…and as in each war what happens on the front line defines the battle. It will be decisive for the war elsewhere’ (The Guardian 18 and 19 May 2012). What happens in Greece will have a dramatic impact on the battles in other countries and that is why it is important to understand the enemy. Tsipras has already visited Paris and Berlin to have talks with other radical left forces.

We have argued that the dominant imperialist powers within the eurozone are using the fiscal pact to sustain the euro and create the fiscal and political union necessary for a strong European imperialist bloc. In other words, fighting austerity in Greece means confronting European imperialism. It involves taking an anti-imperialist stand at home and throughout the eurozone. That is why all communists and anti-imperialists in Greece must join with Syriza in a united front to defeat the austerity pact and prevent any concessions being made to narrow national interests. In this context the standpoint of the Communist Party of Greece (KKE), which won 8.5% of the vote in May, is indefensible. Its sectarian refusal to join in a united front with Syriza because, it says, Syriza is an opportunist organisation which does not support Greece’s exit from the EU, plays into the hands of right-wing and national chauvinist forces. There is a lot at stake and the European imperialists are already mobilising in support of the Greek pro-fiscal pact parties, in advance of the 17 June election.

European imperialists still divided

Political divisions both within and between the dominant eurozone countries on how to manage the crisis remain. The imperialists must protect their investments and limit the inevitable losses to their international banks while responding to the political pressures and divisions among their own populations faced with debilitating austerity programmes. The developments in Greece vividly expose these tensions. There is fear that protective measures already in place, eg the eurozone’s firewall of around €700bn, will be insufficient to protect Spain and Italy from the effects of a disorderly exit of Greece from the eurozone.

An informal EU summit on 23 May, that saw the first appearance of the new French President François Hollande, only served to expose these divisions, and panic the international markets. Hollande strongly backs common eurobonds – pooling eurodebt liability – which would ease the funding costs for the eurozone’s deeply indebted periphery. Germany sees this burden-sharing arrangement as taking pressure off the southern eurozone countries to drive through the structural reforms (austerity), as well as potentially increasing German borrowing costs by diluting its creditworthiness across the eurozone. Hollande indicated that France might refuse to ratify the fiscal pact unless eurobonds were brought into play. France will hold elections for the National Assembly in mid-June and Hollande will stay firm, at least, until then. There were further disputes over German-backed austerity measures against France’s promotion of growth policies, given the record levels of eurozone unemployment. For the present Angela Merkel, the German Chancellor, is standing her ground.

Meanwhile the pressure on Greece was ratcheted up. Rumours were spreading that eurozone countries and international banks were drawing up emergency plans for Greece leaving the eurozone. Citigroup’s chief economist said the chance of Greece leaving the eurozone is as high as 75%. Even Britain’s Prime Minister, David Cameron, had got in on the act. Speaking before the NATO summit in Chicago on 20 May he said, with old-style colonial arrogance: ‘We have to send a very clear message to the people of Greece: there is no choice – you can either vote to stay in the euro, with all the commitments you’ve made, or if you vote another way you’re effectively voting to leave.’ He was concerned, he added, to make the threat of Greek ejection from the euro credible by showing the Greeks that preparations are being made for their departure. A few days later the head of the IMF, Christine Lagarde, in an interview with The Guardian (26 May 2012), joined this millionaires’ chorus, warning the Greek people not to expect any sympathy with their plight from the IMF. Unbelievably, she said she had more concern for people in ‘low-income countries’, such as Niger, forced by the IMF to ‘strengthen the budget and reduce the deficit’ than ‘people in Greece who are trying to escape tax.’ This is from an organisation that laid sub-Saharan Africa to waste in the 1980s in the interests of imperialism.

A Greek exit from the eurozone, especially a disorderly one, says Martin Wolf, is likely to trigger bank runs in Portugal, Ireland, Italy and Spain and even further afield, possibly causing collapses in the prices of financial and other assets. One estimate of the cost of Greek withdrawal from the eurozone was $330bn, or 2% of eurozone GDP, for an orderly withdrawal and up to $1 trillion for a disorderly collapse (The Guardian 17 May 2012).

Whatever the impact of these threats and scaremongering on Greek voters, it is certainly causing panic in international markets. Investors are withdrawing funds from the weaker eurozone banks. Some €3bn was withdrawn from the Greek banking system between the election and mid-May. Large European funds are dumping euro assets because of rising fears over a possible Greek exit and resulting turmoil. The euro hit a 22-month low on 24 May at $1.2514, amid speculation that Greece could soon exit the monetary union. The euro has already fallen 5% against the dollar this month.

Britain shouting from the outside

Britain was back into recession in March. Revised figures show it was worse than originally thought, with growth declining by 0.3% in the first three months of this year. Britain is one of the imperialist countries most vulnerable to any significant deterioration in the economies of Europe resulting from a Greek exit from the eurozone. Europe accounts for 50% of British exports and exports to Spain have fallen 8% and those to Italy have fallen by 7% in the first three months of this year. British economic growth has been stagnant over the last year and is still more than 4.3% below its pre-recession peak of four years ago. The economy is in its longest depression for 100 years. British companies have £754bn on their balance sheets and are not investing because of the uncertain profit outlook in Britain and internationally. Britain’s gross indebtedness (private and public) in mid-2011 was a staggering 507% of GDP.

However it is the weight of banks and financial institutions in the British economy that really exposes Britain’s economy to any significant banking collapse in the eurozone. The assets on UK banks’ balance sheets amount to some 500% of Britain’s GDP. At the end of 2011 Britain’s international investments, including financial derivatives, amounted to £10,965bn or 7.3 times Britain’s GDP. Of these, loans and deposits abroad of UK banks (‘other investments’), a gigantic usury capital, are £4,100bn or 2.7 times GDP and financial derivatives are £3,619bn or 2.4 times GDP. These assets are matched by even greater liabilities of £11,166bn. Still, Britain had net earnings of £21.5bn on its international investment account, vital for the balance of payments and the standard of living of the British people. British banks are big creditors of eurozone banks and major lenders to Spain and Italy. Being a big player in the financial derivatives market, Britain is most vulnerable to a run on eurozone banks. So it is little wonder that the British Prime Minister has been running around like a headless chicken, shouting from the outside, demanding that the eurozone countries get their act together.

On 17 May Cameron blustered from the sidelines: ‘Either Europe has a committed, stable, successful eurozone with an effective firewall, well-capitalised and regulated banks, a system of burden sharing and supportive monetary policy across the eurozone or we are in unchartered territory which carries huge risks for everyone.’ The Governor of the Bank of England Mervyn King summed up Britain’s vulnerability: ‘We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country’s history, the biggest fiscal deficit in our peacetime history and our trading partner, the euro area, is tearing itself apart without any obvious solution.’ This then explains the vitriol poured by the British ruling class on the actions of the Greek people who are fighting for a future without poverty, hunger and despair.

* For a discussion of the €130bn bailout package, see David Yaffe ‘Eurozone crisis: turning the screw’ in FRFI 226 April/May 2012 at on our website. For an assessment of the outcome of the 6 May election, see Michael MacGregor ‘Greek elections: for a united front against austerity!’ in this issue. See also Michael Karadjis’s ‘Greece, SYRIZA, the Communist Party and the desperate need for a united front’ in Links at for a history of the left organisations involved in the election.