Greece – Too Big to Fail?

Paul Krugman – Learning From Greece: “The debt crisis in Greece is approaching the point of no return. As prospects for a rescue plan seem to be fading, largely thanks to German obduracy, nervous investors have driven interest rates on Greek government bonds sky-high, sharply raising the country’s borrowing costs. This will push Greece even deeper into debt, further undermining confidence. At this point it’s hard to see how the nation can escape from this death spiral into default.

Greece activates €45bn loans: “Papandreou’s move was immediately welcomed by markets across Europe where stocks marked a sharp rise after weeks of uncertainty. The premium on Greek 10-year bonds fell 60 basis points to 8.2% on the news and the euro strengthened slightly against the dollar and the pound.
But the Greek government’s request is likely to also lead to calls for further austerity measures, demands that will almost certainly worsen public unrest in Greece.”

With Greece facing austerity measures imposed by the international financial system the like of which haven’t really been seen before in Western Europe, we can expect to see the “public unrest” (read, “riots,” massive anger in the streets, police brutality, bombs) to dwarf that of the past year. Greek radical militancy has a long, proud and aggressive history and militants there will react with understandable fury to the social impact of the anticipated austerity measures. It looks like it may be a long, hot summer on the Mediterranean.

Update on the tensions and continued social crisis in Greece
“Greece is going to hell, it is going to hell and I am glad it is so that we can comeback and start things from the beginning” These were the last words of an anarchist comrade in Greece as we spoke about events that have taken place in recent weeks because of the austerity measures introduced by the Government to tackle Greece’s enormous debt.

Greece’s Premier has likened the Greek economic situation to that of a country in “wartime”, in which he announced that the public must come together in order to “survive”.

Although this wartime reference was used as a metaphor, Papandreou might only too soon find his Government locked in a state of war with the working classes.
(via Freedom Press.)

Austerity measures, IMF and World Bank-imposed policies, and structural adjustment programs have met with increasingly levels of resistance over the years, particularly in developing countries that have been most subject to these “measures.” But in recent years, as part of the broader alter-globalization movement, there have been more and more protests against the IMF and World Bank in the developed nations of the North as well:

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Since the first announcement that Greece would accept the €45b bailout, more information has come out about the anticipated role of the IMF, Europe’s anxiety about a financial failure in Greece leading to further failures in Portugal and elsewhere, uncertainty about German support for a measure that is unpopular with the public, and the response elsewhere in Europe and in the global financial community. And the situation – or at least the assessment – has worsened, with Greece now looking like it will need substantially more than the initially proposed €45b:

IMF chief Strauss-Kahn tries to ease Greece fears: “Inevitably, the prospect of IMF involvement in the Greek rescue has some people worried. The reputation is for painful cuts in public spending, which are unwelcome in their own right and seen by some critics as likely to aggravate an economic downturn.” [emphasis added]
(Via BBC News.)

Greek bailout ‘not limited to €45bn’: “The bill to bail out the stricken Greek economy could mushroom, after world leaders admitted that the €45bn (£39bn) already pledged was just the start.
The country’s finance minister, George Papaconstantinou, said that bailout talks at the weekend with the International Monetary Fund (IMF) and European partners had gone well, and he was confident Greece would secure the necessary aid by May to finance its crippling public debt without any problem.”
“Over the weekend, French and German leaders turned the screws on Greece, insisting that the €45bn international bailout would not go ahead without further austerity measures to slash the country’s ballooning budget deficit.
Lagarde also warned that contributors to the eurozone’s first rescue package would pull the plug if Greece did not honour the terms. She promised to hold Greece accountable for ‘unsuitable economic policies‘.” [emphasis added]

Merkel keeps Greece in suspense over rescue: “The German Chancellor was forced yesterday to issue an emergency statement promising aid to Greece — but her words failed to quell bond market speculation that Berlin might not support the eurozone’s €30 billion rescue package.
(via Times Online.)

It’s important to be clear about what these austerity measures and unsuitable economic policies really are. If past experience is anything to go by they will be a major curtailment of social welfare programs – health, education and welfare – combined with an unprecedented opening up of the country to exploitation by multinational corporations. In the past, the IMF and World Bank have acted like Viking raiders – raping, looting and pillaging.

Some Background

One of the better known instances of this kind of assaults, and of the popular resistance to such imposed economic measures, is what took place in Bolivia in the late 1990s:

The Politics of Water in Bolivia: “Etched deeply into the granite walls just inside the entrance of the World Bank headquarters in Washington are the words, “Our dream, a world free of poverty.” Earlier this month in Bolivia, the citizens of South America’s poorest country sent the bank a message once again that the poor aren’t too keen on the part of that dream that involves handing their water over to foreign corporations.
On January 10 the citizens of El Alto took to the streets en masse to demand that their water system, privatized in 1997 under World Bank pressure, be returned to public hands.”
(via The Nation.)

Some Reading

Along with the more general global financial crisis of which it is a part, the situation in Greece is fairly complex, and the role of the IMF and its bailout activities – and their often devastating effects – are similar difficult to make sense of with the limited information given in news coverage. Here are a few resources to consult to begin making sense of these issues and events.


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