Tagged: Greece

Greek People Turn Out to Refuse Merkel's 'Tough Path'


Police try to disperse protesters during (Reuters/Grigoris Siamidis)

Greek protesters came out in full force in the streets of Athens today as German Chancellor Angela Merkel came and went to discuss further „painful“ budget cuts the country will now endure to win favor with EU bankers. Modest estimates put the number of anti-austerity, anti-Merkel protesters at 50,000, who marched throughout the city, some facing clashes with riot police throughout the day.

In Merkel’s first visit to Greece since its debt crisis erupted three years ago, she met with Prime Minister Antonis Samaras to finalize a $17.45 billion austerity program including pay cuts, tax hikes and slashed pensions

Meanwhile, protesters who filled Syntagma Square across from Parliament held signs that read „You are not welcome, Imperialisten Raus“ (Imperialists out) and „No to the Fourth Reich.“ Police fired teargas and stun grenades into the increasingly restless crowd who chanted anti-austerity slogans, while Samaras welcomed Merkel as a „friend“ of Greece.

Merkel has continually pushed for the extreme austerity measures in the recession torn country before the Troika of the European Union, International Monetary Fund and European Central Bank (EU-IMF-ECB) will give a $38.8 billion installment of bank bailout loans as well as a pending second bailout of $173 billion.

Merkel stated today, „I am deeply convinced that this tough path is worth it and Germany wants to be a good partner.“ And Samaras added, „The Greek people are bleeding right now, but they are determined to win the battle of competitiveness.“

Speaking to the rally in Syntagma Square, Alexis Tsipras, leader of the major opposition Coalition of the Radical Left (SYRIZA) said, “Merkel is here to support the ‘Merkelites’ of Greece: Samaras, Venizelos and Kouvelis,” Tsipras said. He added that, “The Europe of peoples will triumph over the Europe of memorandums and barbarism…The democratic tradition of Europe will not allow a European people, the Greek people, to become a guinea pig of the crisis and to turn Greece into a vast social graveyard.”

As the protest grew throughout the day clashes between protesters and police lead to at least 30 protester injuries and about 300 arrests, police said.

Some 7,000 police officers were deployed for the six-hour visit, including anti-terrorist units and rooftop snipers.

Riot police arrest a demonstrator during clashes in front of the parliament in Athens,

Tuesday, Oct. 9, 2012. (AP Photo/Nikolas Giakoumidis)


European Union demands further cuts in Greece

By Christoph Dreier
5 October 2012

Last weekend, representatives of the troika—the European Central Bank (ECB), European Commission (EC) and the International Monetary Fund (IMF)—returned to Athens to discuss a third package of budget cuts with the Greek government.

Officially, the troika has the task of preparing a report on Greece’s budgetary situation for the European Union (EU) and IMF as the basis for agreeing to a further bank bailout to Greece’s creditors, amounting to €31.5 billion (US$41.6 billion).

In reality, the work of the troika has less to do with preparing reports on austerity measures already adopted in Greece than on dictating the next package of social cuts. Loans promised by the troika last June will be withheld until the 2013 budget complies fully with EU demands.

Following weeks of talks with the troika, Athens presented an initial draft budget in parliament on Monday. The budget involves social spending cuts of more than €7 billion for the next year. The largest sums are to be slashed from public employees’ wages (€1.1 billion) and pensions (€3.8 billion). Additional cuts are to be made in social welfare, health care, education and public services.

These austerity measures are part of a two-year plan of cuts initially calculated at €11.5 billion, but now estimated to total €13.5 or even €14.5 billion.

Monday’s talks between Prime Minister Antonis Samaras of Greece’s conservative New Democracy (ND) party and representatives of the troika lasted just 35 minutes. The government was instructed to link its new budget with fundamental reforms of labour legislation and the liberalisation of markets before talks could continue.

The plans for such reforms had been presented by the troika some weeks ago. They include lengthening working hours, introducing a six-day week, and the facilitation of layoffs—all measures that will undoubtedly increase the already horrendous unemployment levels in Greece. One quarter of Greek workers and more than half of Greek youth are unemployed.

In addition, the troika rejected €2 billion of the €7 billion planned in cuts because they were too vague. Instead, the troika urged the government to implement further wage and pension cuts, as well as sacking 15,000 employees in public service.

The Greek government has already undertaken substantial attacks on social gains and ensured that austerity measures were concentrated on workers and the poor, but it had shied away from mass layoffs in the public sector. In part, this is because the Greek constitution forbids such lay-offs, but it is primarily that Greece’s coalition government can no longer rely on the collaboration of local authorities.

Administrative workers have frequently refused to implement the austerity measures dictated by the government.

According to a number of reports, Greek finance minister Yannis Stournaras lost his temper with troika representatives at the weekend. He turned on his interlocutors and shouted: “Do you really want to overthrow the government?” IMF chief inspector Poul Thomsen reportedly replied that it was not his problem whether the government coalition lasted or not.

The most recent austerity measures in Greece have already led to an unprecedented social catastrophe. According to the budgetary plan, the country’s economy will shrink in 2013 for the sixth year in a row. A recession of 3.8 percent is forecast for 2013, down from 6.6 percent this year. This means that the country’s economy will have shrunk by a quarter since the start of the crisis.

The state has already slashed €49 billion in wages, pensions and social spending since 2010. This has resulted in an explosion of joblessness, wage cuts of up to 60 percent, drastic cuts to pensions, and an education crisis. Communal soup kitchens in Athens now provide 8,000 people every day with meals. Patients are increasingly expected to personally finance medication and doctors’ visits—effectively excluding millions of Greek citizens from health care.

These cuts have not led to the reduction of public debt. On the contrary, according to the Greek Ministry of Finance, the extent of debt will rise to 179.3 percent of gross domestic product. In 2008, at the beginning of the debt crisis, and before the “bailouts”, this figure stood at just 110.7 percent.

The sole beneficiaries of the emergency loans awarded by the EU have been the banks and speculators. The banks get back their loans, including exorbitant interest rates, while the euro zone countries and the ECB are assuming the risks of a Greek sovereign default. In this fashion, capital was transferred directly from the budgets of euro zone countries, and especially Greek workers, into the vaults of the banks.

The most recent austerity package will plunge the Greek population further into poverty, without doing anything to resolve the country’s debt crisis. The ruthlessness of the troika, in cooperation with the Greek government, is an expression of the immense intensification of class antagonisms arising from the crisis of capitalism.


Greece-Germany: who owes who? (1) London 1953: cancellation of the German debt


1 October by Eric Toussaint

Since 2010, in the stronger countries of the eurozone most political leaders supported by mainstream media have flaunted their so-called generosity towards the Greek people and other weaker countries in the eurozone that are currently in the limelight (Ireland, Portugal, Spain…). In this context, measures that further destroy the economy of recipient countries and involve social regression on a scale unprecedented over the past 65 years are called ‘rescue plans’. To this we must add the ripoff of the March 2012 plan to reduce the Greek debt – a plan that involves a 50% reduction of debts owed by Greece to private banks whereas these same debts, if negotiated on the secondary market, had lost up to 65 to 75% of their value. While the government’s debt to private banks was reduced, there was an increase in what it owes to the Troika resulting in new measures of phenomenal injustice and brutality. This agreement to reduce the debt aims at burdening the Greek people with permanent austerity; it is an insult and a threat to all peoples in Europe and elsewhere. According to the IMF research unit, in 2013 the Greek public debt will amount to 164% of GDP, which shows that the debt reduction announced in March 2012 will fail to provide any actual relief of the debt burden weighing on the Greek people. It is in this context that Alexis Tsipras visited the European Parliament on 27 September 2012 and underlined the need for a genuine reduction of the Greek debt, referring to the cancellation of a large portion of the German debt through the 1953 London agreement. Let us take a fresh look at this agreement.

The 1953 London agreement on the German debt

The radical reduction of the debt owed by the Federal republic of Germany and its fast economic recovery so soon after WWII were achieved through the political will of its creditors, i.e. the United States and its main Western allies (United Kingdom and France). In October 1950 these three countries drafted a project in which the German federal government acknowledged debts incurred before and during the war. They attached a declaration to the effect that “the three countries agree that the plan include an appropriate satisfaction of demands towards Germany so that its implementation does not jeopardize the financial situation of the German economy through unwanted repercussions nor has an excessive effect on its potential currency reserves. The first three countries are convinced that the German federal government shares their view and that the restoration of German solvability includes an adequate solution for the German debt which takes Germany’s economic problems into account and makes sure that negotiations are fair to all participants.” |1|

Germany’s pre-war debt amounted to 22.6 bn marks including interest. Its postwar debt was estimated at 16.2 bn. In the agreement signed in London on 27 February 1953 these sums were reduced to 7.5 bn and 7 bn respectively. |2| This amounts to a 62.6 % reduction.

The agreement set up the possibility of suspending payments and renegotiating conditions in the event of a substantial change limiting the availability of resources. |3|

To make sure that the West German economy was effectively doing well and represented a stable key element in the Atlantic bloc against the Eastern bloc, allied creditors granted the indebted German authorities and companies major concessions that far exceeded debt relief. The starting point was that Germany had to be able to pay everything back while maintaining a high level of growth and improving the living standards of its population. They had to pay back without getting poorer. To achieve this creditors accepted:
First, that Germany should in most cases repay debts in its national currency (mark), and only marginally in strong currencies such as dollars, Swiss francs, pounds sterling.
Second, while in the early 1950s, the country still had a negative trade balance (importing more than it exported), they agreed that Germany should reduce importations: it could manufacture at home those goods that were formerly imported. In allowing Germany to replace imports by home-manufactured goods, creditors agreed to reduce their own exports to this country. As it happened, for the years 1950-1, 41% of German imports came from Britain, France and the United States. If we add the share of imports coming from other creditor countries that participated in the conference (Belgium, Netherlands, Sweden and Switzerland) the total amount reached 66%.
Third, creditors allowed Germany to sells its products abroad and even supported such exports so as to restore a positive trade balance. These elements are all present in the aforementioned agreement: “The payment capacity of Germany’s private and public debtors does not signify only the capacity to regularly meet payment deadlines in DM without triggering an inflation process, but also that the country’s economy could cover its debts without upsetting its current balance of payments. To determine Germany’s payment capacity we have to face a number of issues, namely,
1. Germany’s future productive capacity with special consideration for the production of export commodities and of import substitution;
2. the possibility for Germany to sell German goods abroad;
3. probable future trade conditions;
4. economic and tax measures that might be required to insure a surplus in exports.” |4|

Moreover, in case of dispute with creditors, German courts were declared competent. It was said explicitly that in some cases ‘German courts may refuse to enforce a decision of a foreign court or of an arbitral body,’ for instance when the enforcement of the decision would be contrary to public policy’ (Agreement on German External Debts, Article 17, (4)).

Another significant aspect was that the debt service depended on how much the German economy could afford to pay, taking the country’s reconstruction and the export revenues into account. The debt service/export revenue ratio was not to exceed 5%. This meant that West Germany was not to use more than one twentieth of its export revenues to pay its debt. In fact it never used more than 4.2% (except once in 1959). In any case, since a large portion of the German debts were paid in deutsche marks, the German central bank could issue money, or in other words monetise the debt.

Another exceptional measure was that interest rates were substantially reduced (between 0 and 5%).

Finally we have to consider the dollar grants the United States made to West Germany: USD 1,173.7 million as part of the Marshall Plan from 3 April 1948 to 30 June 1952 (i.e. about USD 10 billion at today’s value) with at least 200 million added from 1954 to 1961 (about USD 2 billion today), mainly via USAID.

Thanks to such exceptional conditions West German economy was able to recover very fast and eventually absorbed East Germany in the early 1990s. It is now by far the strongest economy in Europe.

Germany 1953 / Greece 2010-2012

If we attempt a comparison between the way Greece is treated today and the way Germany was treated after the Second World War, the differences are obvious and the injustice is flagrant. Here is a non-exhaustive list:
1.- Proportionally the debt reduction granted to Greece in March 2012 is far smaller that the one granted to Germany.
2.- Social and economic conditions associated with the plan (as well as with previous ‘rescues’) do not support economic recovery whereas they largely contributed to restore the German economy.
3.- Greece must privatise its assets to foreign investors whereas Germany was prompted to control key economic sectors along with a fast-expanding public sector.
4.- Greece’s bilateral debts (to countries that participated in the Troika ‘rescue’) have not been reduced (only debts to private banks) whereas Germany’s bilateral debts (starting with those towards countries that had been invaded or annexed by the Third Reich) were reduced by 60% or more.
5. – Greece must pay in euros while its trade balance with European partners (particularly Germany and France) is negative, whereas Germany paid most of its debts with strongly devalued deutsche marks.
6. – The Greek central bank is not allowed to lend money to the Greek government while the Deutsche Bank did lend to the German government and ran the printing press (though moderately).
7. – Germany was allowed not to use more than 5% of its export revenues to pay its debt while no limit has been set for Greece.
8. – The new securities on Greek debt that have replaced the previous set of securities owned by the banks are no longer within the jurisdiction of Greek courts, but of courts in Luxembourg and the United Kingdom (and we know how sympathetic they are to private creditors) while the German courts were declared competent.
9. – In terms in paying external debts, German courts could refuse to enforce decisions of foreign courts or arbitration bodies when they were contrary to public security. In Greece the Troika obviously will not have Greek courts invoking public security to suspend payment. Now as it happens both the huge social protests and the rise of neonazi groups are the direct outcome of measures imposed by the Troika and by the country’s repayment of debts. Whatever the outcry in Brussels, the IMF and the ‘financial markets’ the Greek government could legitimately invoke the state of necessity and public security to suspend payment of debts and cancel the antisocial measures imposed by the Troika.
10.- In the case of Germany the agreement contained the possibility of suspending payments while conditions were renegotiated in the case of a substantial change that reduced available resources. Nothing similar is mentioned in the case of Greece.
11.– The agreement on the German external debt explicitly mentioned that the country could produce goods it formerly imported so as to achieve a trade surplus and support local producers. But the philosophy behind the agreements forced upon Greece and the rules of the EU prohibit such support, whether in farming, manufacturing, or services, since this would contravene ‘fair competition’ with other EU countries (Greece’s main trade partners).

We could add that after the Second World War Germany received substantial grants, notably, as mentioned above, through the Marshall Plan.

We can thus understand why the Syriza leader, Alexis Tsipras, refers to the 1953 London agreement when he calls upon European public opinion. The utterly unfair way in which the Greek people is treated (as well as those other peoples whose governments enforce the Troika’s recommendations) must raise a fair amount of public outrage.
But let us face reality: the reasons that led Western powers to treat West Germany the way they did after WWII do not apply for Greece today.
A genuine solution to the tragedy of debt and austerity will require massive social mobilizations in Greece and in other EU countries as well as the accession to power of a people’s government in Athens. The new government (backed by popular support) will have to decide on a unilateral act of disobedience, such as suspending repayment and cancelling antisocial measures, to force creditors to major concessions and finally impose the cancellation of illegitimate debts. A citizens’ audit of the Greek debt must prepare the ground on which such decisions will be made.

Translated by Christine Pagnoulle and Judith Harris



|1| Deutsche Auslandsschulden, 1951, p. 7 and following in Philipp Hersel, El acuerdo de Londres de 1953 (III), http://www.lainsigna.org/2003/enero…

|2| 1 USD dollar was worth 4.2 DM at the time. West Germany’s debt after reduction (i.e. DM 14.5 bn) was thus equal to USD 3.45 bn.

|3| Creditors systematically refuse to include this kind of clause in agreements with developing countries.

|4| (Deutsche Auslandsschulden, 1951, p. 64 and following) in Philip Hersel, El acuerdo de Londres (IV), 8 de enero de 2003, http://www.lainsigna.org/2003/enero…

Eric Toussaint, associate professor at the University of Liège, is president of CADTM Belgium (Committee for the Abolition of Third World Debt, http://www.cadtm.org). Author with Damien Millet of Debt, the IMF, and the World Bank, Sixty Questions, Sixty Answers, Montly Review Press, New-York, 2010, of AAA. Audit Annulation Autre politique, Seuil, Paris, 2012.