Greece: colony of the banks?

Submitted by Matthew on 1 June, 2011 - 12:19

Greece now faces a threat that its tax collection and privatisation programme could be taken out of the hands of its elected government and put under the control of commissioners appointed by the international banks.

It would be a throwback to the days of high imperialism, when from 1881 onwards the financial affairs of Turkey and its subject nations were controlled not by its own government but by an internationally-appointed Ottoman Debt Administration.

In a way it would be only a formalisation and nailing-down of what already exists informally. In Greece, Portugal, and Ireland, the three countries subsisting on European Union/ IMF bailout schemes, all the main parties feel obliged to support the drastic cuts programmes dictated with the bailouts.

Elections make no difference to that. In Greece, where no elections are scheduled soon, the only nuance is that the main opposition party, the right-wing New Democracy, says it wants even more cuts, in place of tax rises introduced by the current government.

The EU and the IMF stepped in because the aftermath of the 2008 global financial crash had left those governments so heavily indebted that international financiers would no longer lend to them except at unaffordable rates of interest. Without EU/ IMF intervention the governments would have been unable to pay their debts falling due.

The bailouts were not to save the peoples of those countries from economic catastrophe. Huge cuts in social spending were demanded from the government as a condition for the bailouts.

The EU and IMF were really “bailing out” the German, French, British and other banks which held Greek, Portuguese, and Irish debt.

In Greece especially, the bailout has not solved the initial problem, but worsened it. Greek government debt is now traded internationally at even lower prices (higher interest rates) than before the bailout. It is even more impossible for the Greek government to raise fresh loans on the international markets.

So the EU and IMF are intervening again in Greece. Many economists advocate a “restructuring”, which is a polite way of saying that the Greek government should fail to make the debt payments due, only with a promise that it will make those payments eventually.

The fact that these countries are in the euro complicates things. When many countries of the South defaulted on debt in the 1980s, the debts were in dollars. Defaulting on them did not destroy the credit system within the country, run in pesos or other local currency. A Greek, Irish, or Portuguese default now would also disrupt the credit system within the country.

Most economists not working for international governments or agencies now predict that Greece, at least, will eventually have no choice but to quit the euro. In other words, the working people of Greece will suffer huge cuts, supposedly to avoid the country defaulting and quitting the euro, and then get default and euro-exit anyway.

Euro-exit brings costs. A restored separate currency, drachma or whatever, will initially lose value rapidly compared to the euro. Imported goods, or goods dependent on imported inputs, will become much more expensive for working people within the country. A euro-quitting capitalist government will use the exit to squeeze working people even harder.

It will have benefits as capitalist policy. The production costs of Greek capital, because they are in drachmas, will decrease compared to international competition, and Greek capital will begin to be able to get enough export and tourist-trade income to restore its creditworthiness.

The entire drama is driven by the big banks’ greed. Whatever happens to anyone or anything else, they have to get their money back with all the interest due!

That tells us the way out. The big banks and financial institutions should be expropriated — taken over, preferably by the European Parliament, in European public ownership, but in any case into public ownership.

Their books should be opened to public inquiry, revealing all the “special vehicles” and tax dodges. Day-to-day administration should be taken over by new managers, elected by and accountable to the workers.

The whole financial sector should be integrated into a public banking, insurance, and pensions service, under democratic control.

The deployment of its huge assets into productive investment should be decided democratically, on the basis of social priorities, and not by private-profit calculations.

Add new comment

This website uses cookies, you can find out more and set your preferences here.
By continuing to use this website, you agree to our Privacy Policy and Terms & Conditions.