Greece on the brink as default passes

The International Monetary Fund has announced that Greece is in arrears of $1.7 billion and ineligible for more financial aid.

This does not mean Greece is bankrupt yet but it appears to cut off the possibility of borrowing more money in the immediate future.  The IMF action came after the troika of the IMF, the European Central Bank and the European Commission rejected one final proposal from Greece for resolving the debt impasse.

Since 2010, Greek governments, finding their country close to bankruptcy, and hemmed in by the rules of membership in the Euro currency group and the European Union, have accepted harsh austerity requirements imposed by the troika, in exchange for further loans to keep the government and economy afloat.  These loans have mostly gone to pay off banks and hedge funds to whom Greece owes money, not to support services needed by the people.

The austerity measures, which have included reductions in pensions and wages, layoffs of government workers, cuts in vital services including health care and schools, and the large scale privatization of state assets have shrunk the Greek economy by 25 percent and caused widespread hardship for workers, youth, the elderly and retirees, and other vulnerable populations. Forty four percent of the population now lives below the poverty line. 

Similar policies have been imposed on other European countries, but Greece is the most extreme case and now has become the focus of resistance to the tyranny finance capital.

In January, Greek voters threw out the coalition of the right wing New Democratic Party and the centrist PASOK (Pan Hellenic Socialist Pary), whom they blamed for the crisis, and brought in a coalition of the leftist SYRIZA Party and a smaller conservative party, ANEL. SYRIZA, and the new Prime Minister, Alexis Tsipras, had campaigned on a platform of resistance to the austerity program. However, Greek public opinion still opposed the idea of  the exit of Greece from the Euro currency zone.  So Tsipras and his government have been negotiating with the troika with the goal of resisting further austerity measures but staying with the Euro.

The issue has become political both within Greece and beyond. Even though it is clear that the Greek debt is unpayable and that austerity measures, by shrinking the Greek economy even more, make it even more so, the troika, representing the interests of European finance capital, is determined to punish the Greeks. 

Greece owes about $1.7 billion on past bailouts which was payable by midnight June 30 Athens time. It could not pay this unless it could access $8.1 billion in loans which is being held up by the Troika, not to be delivered unless Greece imposes yet more austerity measures, including especially more pension cuts.  Tsipras refuses to cut pensions (previous governments had already cut them 44 percent, leading to suicides) and take other measures that would further harm the most vulnerable, but has offered other mechanisms of balancing the budget including increased tax collection. But the Troika and conservative politicians such as German Chancellor Angela Merkel want to force Greece to submit so that other debtor states are not encouraged by its example.

When talks broke down on Saturday, Tsipras announced that Greece would not accede to the troika’s demands.  He announced, and the Greek Parliament approved, a referendum to be held on Sunday July 5 on whether to accept the troika’s last offer, and made it clear he himself would be voting “no”. He also announced the closing of all banks for at least a week to prevent a run on them, though they will be briefly reopened later this week to allow pensioners to cash their checks. Tsipras also announced other currency controls and limited ATM withdrawals to $73 per day per customer.

If Greece is forced out of the Euro zone (and Greek Finance Minister Yanis Varoufakis says he will fight such a move in court), stocks of the old Greek currency, the drachma, will have to be put back in circulation, disrupting trade relations and imposing more hardships.  But the hardships imposed by the troika’s demands are also unbearable and will not get Greece out of debt anyway.

The reverberations of the Greek developments are worldwide. Stock markets everywhere have the jitters, but there is also support for Greece.

Two winners of the Nobel Prize for Economics, Joseph Stiglitz and Paul Krugman, rallied to Greece’s defense. Krugman supports the probable “no” vote in the referendum even if it leads Greece to be kicked out of the Euro zone.  Stiglitz warned that if the Troika drives Greece to the wall, it would probably turn to Russia and China for economic and political support.

In Spain, Portugal and Britain, protests against austerity dictates of the troika have been growing. Regional elections in Spain produced wins for left-wing candidates running on platforms opposed to austerity.  The left in all these countries is rooting for the Greek working class to triumph over the troika and finance capital.

Although the Greek Communist Party (KKE) denounced the positions of both the Troika and SYRIZA government, many of the communist and left wing parties of Europe focus their anger on the Troika.

The Belgian Workers Party (communist) came out firmly in support of the stance of the Greek government, stating that if Greece is forced to submit, next it will be the turn of the Spain, Ireland, and even of Belgium.  Similar statements of support for the Greek working class came from the two communist parties of Italy and the Communist Parties of Spain, Portugal, Austria, and others.

The ALBA-TCL group of countries in Latin America, which include Cuba, Venezuela, Bolivia, Ecuador, Nicaragua and several small Caribbean states, spoke for the Latin American left through a statement released via Telesur TV:

“The Bolivarian Alliance for the Peoples of Our America – People’s Trade Treaty (ALBA-TCP) expresses its strong support and solidarity with the Greek people and government, which are facing the fierce siege of global financial capitalism and its European representatives, who with unscrupulous ambition aim to break the choice of this country for a decent and fair life, the center of which is the protection of true democracy and human rights, not the privileges and destructive consequences of neoliberal transnational capital…”

The Obama administration has expressed concern. We in the United States should urge that our government use its decisive weight within the IMF to defend the Greek people.

Photo: Anti-austerity sign at the Greek parliament in Athens.  |  AP