The Financial Crisis in Greece: The Toppling of Capital’s Golden Idols

As far as Marxism is concerned, to treat the crisis of the European Monetary Union as though it were just an, admittedly severe, regional financial crisis which is being experienced by a group of European States, and which was triggered by the already “technically bankrupt” Greece, this is a reading of the facts and their causes that only does not explain what is happening, but does not even identify the increasing tendency to bring forward ever more extreme solutions to the general crisis that eventually broke out in 2009 in the heart of financial capitalism, the United States of America; a crisis which, having been stanched with the most incredible example of the acquisition of private debt the history of capitalism has ever known by transmuting it into public debt, has dragged on, through its various highs and lows, up to the present day.

The apparent stabilisation in 2010 was accompanied by loud declarations that the crisis was over, that the revival was ‘just around the corner’, that the figures all indicated growth. The finance markets, bringing much comfort to the saver-speculating public, extolled the re-ascent of the stock market figures, previously heavily in the red, as a sign of spectacular growth to come, a growth set at half last year’s increase and defined as “relatively robust” by the president of the European Central Bank. And this was all accompanied by a relentless optimism, and relentless talk about having had a ‘lucky escape’, because the crisis was passing.

But in fact the crisis, not only in its financial but above all in its productive components, is not only far from being over but is clearly and very definitely still with us, even if not in as violent and obvious a form as over the past two years.

Apparently something is different, is manifesting in a different way, and the underlying problems, still totally unresolved, downplayed and brushed under the carpet, are all focalised in Europe, as an expression not just of political unity – by now totally broken down and contradictory – but above all of monetary unity.

It is therefore relevant, in the light of the Greek affair in particular and regarding Europe under the single currency in general, to cast some light on the clash going on in the financial field, which is as ruthless and vicious as if a war was going on, although it hasn’t reached that stage, yet.

From the moment the Euro appeared on the scene it was a potential alternative to the financial might of the Dollar; it was the financial expression of a group of States, crisis ridden and weak as a unitary form, but powerful in terms of future potential and of the sum of the productive capacities of the individual countries belonging to the Union. However, this was a false indicator. As we are seeing now, and as in fact was pointed out at the time, there is an underlying weakness: financial power and political power are not separate from each other but are indissolubly conjoined at State level. This was a well-known fact, and Marxism has no need to disagree. It was said that Europe was an economic giant – which later events would prove wrong – but a political dwarf – which perhaps wasn’t quite correct, at least as far as some of its component States is concerned.

The devastating events of the past two years have shown that only those who can impose their will at a political level can hope to resist for longer by imposing their decisions, their plans on the others. The Europe of the Euro hasn’t had sufficient time to move beyond the phase of monetary to political structuring. With hindsight all are now aware that that is never going to happen and the Utopia of a United States of Europe was, and remains, a petty bourgeois chimera.

Restricted within the orbit of small scale politics, conducted mainly at the national level by the component states, European unity on the monetary level is becoming ever weaker and its future less and less certain.

It seems a long time ago that China, the main holder of the United States public debt, seemed about to shift to investing in the Euro, which appeared, because of the difficulties being faced by the Dollar, as a currency strong enough currency to possibly guarantee the US currency. And this, very broadly, is the central factor in the conflict that is currently underway.

To concentrate on the vicissitudes of the Euro, or of the financial and political disaster of a group of States that have subscribed to the Euro, is however to lose sight of the overall framework of this crisis; which hasn’t shifted from the Western centre of Europe towards the middle, but has simply encountered, during this particular phase, the serious weakness of a monetary form which isn’t supported by a unitary continental State. At the present moment the USA, China, Europe, the emerging States and Russia are each going through the crisis in ways that reflect their own characteristics, and in relation to their respective points of departure when it broke out; but none are unaffected, or can be said to be immune from the consequences.

This umpteenth breakdown is happening in a specifically defined area, and for now it favours the interests of the world’s biggest imperialism, which is keen to draw attention to the Euro’s plight and take every possible advantage to ensure its own supremacy and own survival: even if, or rather especially if, it is at its ‘competitors’ expense.

The pernicious machinery of finance, and especially the banking sector in which the “private” clearly prevails over the collective interest, also concurs in this process. The European banks, due to the great amount of money available, linked to the second mandate consenting to a loan from the FED, have for some time been financing themselves in dollars then exchanging the Dollars for Euros, accumulating liquidity and keeping the exchange rate with the Dollar low: essentially the German, French and English banks this is. The “strong” part of the Euro zone sees this tactic as a way of maintaining a substantial base of monetary liquidity if Greece’s bankruptcy should cause a domino effect throughout the weaker areas. This however causes a weakening on the “home front”, that is, it is the same “strong” Europe’s banking system which is abandoning the European front. The United States currency is kept at a low exchange rate which favours precisely the United States, which stand to gain most if the European plan runs aground.

And yet from a certain point of view the tactic has a definite goal. Clearly global finance is expecting further chaos, maybe another two years of deepening recession: it is compelled to “accumulate munitions” to try and counter the new impending disaster. With financial followed by an economic war being the prospect in view, the weaker partners, Greece followed by the others, all those who would get in the way of mounting an all-out defence, all those likely to succumb in the face with the violent struggle to come, will have to be abandoned. This would sanction the closing down of the European Central Bank, glutted with junk State-bonds, and consequently the ending of the monetary union. A decision along these lines, after a month of doubts, hesitations and initiatives costing billions, is assuming corporeal form despite the ‘policy makers’ mounting a last ditch resistance. It is therefore no accident that the specialised press in Germany, and the great economic theoreticians in the United States, are continuing to ram home the message about the need to let Greece fail, and to put a stop to a European currency “open to all of its States”.

But the bankruptcy of Greece will only be the first act in the shake-up of the financial system.

At the beginning of June, 14 months after Greece’s first official bail-out, with the economic and financial indicators continuing to show a steady decline, the ‘policy makers’ hypothesized getting the French and German banks involved to underwrite a new issue of public bonds, in other words to refinance the Greek debt with a further loan, thus extending the deadline for repayment, and having recourse therefore to “private” intervention – as they like to call it. The European Central Bank doesn’t agree with this scheme: in 2009, after the flaring up of the financial component of the crisis had already shown how much ‘creative’ accounting was going into balancing the public debit, it made major interventions to alleviate the debt situation in Portugal and Ireland; and in 2010 it managed the rescue package for Greece which drained the French and German banks of a major part of their credit to the Greek State.

That first massive payout involved certain conditions which hit the Greek people extremely hard. Wages went down, unemployment went up, growth and investments were drastically reduced. But the debt would still go up instead of going down, and the interventions had clearly worsened the situation.

Also not of much use was the lowering of the rate of interest on repayments of the 2010 loan, and the extension of the repayment deadline – tantamount in itself to a declaration of “semi-bankruptcy”. In the Spring of 2011 another loan would be required. A plan to raise 100 billion Euro, eventually not considered enough, and then 120 billion would be put forward, with the figure hypothetically broken down into 60 billion from the EU and IMF, 30 from “private” sources, and 30 from “privatisations”.

For the ECB, the plan risks generating losses of interest on the 45 billion bought back from the banks.

The decision doesn’t materialise: come the 11th June and the German Chancellor, Angela Merkel, after a long, awkward and uncertain phase, makes the peremptory assertion that Greece must be “saved” in order to prevent an even worse crisis than the one in 2009 triggered by the failure of Lehman Brothers; a crisis which would spread to the entire global economy, and thus affect Germany as well.

If an economic system, the Greek one, whose gross national product makes up 0.5% of the gross global product, really does threaten, in the case of bankruptcy – that is, the inability to honour its debt, or even just the interest on that debt – to induce a financial crisis like the one in 2008-9, then whoever makes such a claim would either be aiming either to induce a panic and destabilisation, and from a head of State this would hardly be expected, or else the general conditions of the financial system have really reached the point where an economic system’s sheer magnitude no longer counts when it comes to evaluating systemic risks, in a world that lives and works in a morass of paper symbols and fictitious values. Maybe the pressure of dealing with this worrying and critical situation has given Frau Merkel a glimpse of this terrible truth.

At the end of June these ‘policy’ declarations had once again been overtaken by events, rendered redundant by the European financial crisis. The risk will have to be run of a collapse, which seems inevitable if the rescue package policy is continued.

To alleviate the pressure of the debt – and of the interests on the debt – there is talk, off the record, of a return to the drachma. The effective devaluation which would be the result could restore economic equilibrium by balancing the prices of imports and exports. Even if, we add, it could open up the prospect of a Weimar Republic type scenario: but that would the people’s problem.

It’s just an idea that’s floating around at the moment, and won’t come to anything as long as other official voices still ring out in Europe, but financial and economic theoreticians are already starting to examine the prospect of the ending of the Euro as the general currency of the European bloc.

The immediate future for Greece and maybe for other countries in the Eurozone seems marked out. But then it will be the turn of the others, of the “productive” juggernauts, with Germany to the fore, whose “strength” and “integrity”, will be put sorely to the test. In the war that is already underway there won’t be any winners, not even the strong States that are the main influence on the fate of Europe and the World.

There will be no recovery, no salvation because the capitalist crisis will not permit it. Within the capitalist system no means exists, no financial alchemy that can save any country, let alone little Greece, from the precipice of deflation, i.e., devaluation, “spending deficits” and monetary austerity to declare bankrupt whoever can’t honour their debt.

And of course it will be the proletariat throughout the world which will take the brunt of it all; especially if unable to stop another world war, which would temporarily nullify all accounting in a massive bankruptcy-regeneration of the universe of capital.