Wednesday, 12 August 2020

The Greek crisis is the crisis of world capital


The Greek situation has bounced back into the headlines following the election victory in December 2014 of Siryza, the “radical” left group which had no scruples about jointly forming the new government with an openly right-wing party: uniting these two spirits apparently so far removed from one another was their anti-European, or rather anti-German nationalism, which holds Germany responsible for starving the Greek people, victims of the harshest austerity measures. ‘Starving’ is to be taken quite literally for the percentage of Greeks below the poverty level (i.e. with an income lower than 60% of the national average), which has risen from 14% in 2009 to the present 30% due to policies of deficit correction which, when government passed from the centre-right to Papandreu’s Pasok (end of 2009), had touched on 13% of the GNP.

In their negotiations with the “European Cerberuses” Siryza placed the weight of this suffering on the scales, requesting that the pressure be taken off, so that they were in a position to manage the social tension that might explode into open class warfare if the austerity measures were prolonged. The election campaign promised a series of interventions in favour of the neediest categories, the return of the thirteen-month pension payment, limits on the price of fuel. As to the measures relating to employment, which were to have been a particular characteristic of the government’s policy, Syriza promised a rise in minimum salary, 300 000 new jobs, re-employment of 100 000 civil servants who had been laid off, the recovery of collective work contracts and limits on the freedom to lay off employees.

The confrontation with the Eurogroup, however, ended with a real thrashing because of the habitual and foreseeable intransigence of Germany and her allies. Thus, the government of Athens had to draw up a new plan to submit for the approval of the Eurogroup, in which it was agreed to subordinate any rise in salary to budget restrictions and to collaborate with the OECD on a reform of labour laws, from which all that can be expected is the dismantling of remaining “guarantees” in the name of flexibility and productivity. On this front, therefore, “the about-turn… is total, almost embarrassing.” (1) 

Little or nothing remains of the proclamations regarding other points in the new plan. Privatization, which was supposed to be reversed, has had more or less free rein; the previously announced shift of taxation away from lower to higher income brackets and real estate has been completely abandoned; what remains is merely the declaration, of no real significance, of an “unremitting battle against tax evasion and corruption”. The inevitable chapter devoted to the “spending review” now foresees a reduction in the number of ministers, a restriction on early retirement and a check on health spending, all measures perfectly in line with the well-known European-style diet. As for the banks, bled dry by capital flight (70 billion in 5 years), with 33.5% of loans non-performing, the self-dubbed “lefties” threatened to nationalize them and place them under control by means of measures that would prevent foreclosure on a primary residence or seizure of current accounts or salaries due to bankruptcy: none of this has been confirmed and neither will the 11 billion euros from the Greek credit stability fund be touched, which Syriza stated that it meant to use for financing social measures. The country’s banking system now depends on emergency financing from the ECB, which since February has no longer accepted Greek debt bonds as collateral. The alternative to complete obedience to the diktats of the ECB, the IMF and the European Commission would thus be to strangle the Greek banking system and take a leap into the dark with unforeseeable developments.

Thanks to the commitments made by the Greek representatives after giving up their original intentions, the Eurogroup has conceded a further four months of financing from the ECB to allow maturing payments to be made. Nonetheless, in March relations with the ECB became particularly strained. The Greek government, accused of getting round Eurotower’s block on financing by selling public debt bonds to the banking system, in turn accuses the ECB of keeping the country “with a rope round its neck”. Greece thus continues to suffer from a liquidity crisis and has difficulty in meeting upcoming payments. The “war” behind the temporary, or surface agreements is thus still being waged but its outcome is already being signalled. The Syriza government opposes the diktats of the European bourgeoisie, pushing the Greek proletariat into the stranglehold of a national people’s war and condemning it to surrender, to new forms of subordination to domestic and international capital. The first concessions to the Troika will be followed by others, until these “defenders of the people” will be obliged to admit defeat and stand down, or agree, like their predecessors, to face the wrath of the Greek proletariat, who have once again been let down.

The origin of the Greek crisis is part and parcel of the mechanism of capital accumulation

This is the story of the recent developments in a pre-announced crisis and a defeat which, nonetheless, in no way solves the situation and does not exclude the, however remote, possibility of Greece’s bankruptcy and exit from the euro. It is, however, necessary at this stage to recall at least a broad outline of the origins of the country’s present difficulties.

In the years preceding the collapse of world production in 2008, Greece had recorded a growth in GNP which was amongst the highest in the Eurozone (around 30% since 2000), lower only than “super virtuous” Ireland (+40%). Whilst for Ireland the progress was due essentially to a flow of speculative capital into the country’s banking system, thanks to a taxation rate equal to that of a tax haven, for Greece the growth had been financed by the public debt and by the State’s heavy budget deficit and deficit in its current accounts. On a surface level, it is thus true that Greek society – the bourgeoisie and parasitic classes, given that the proletariat only gets the crumbs – had been living “above its means”, yet to no greater extent than the United States with their subprimes and unlimited spending allowed on credit cards, or the real estate bubbles in Ireland, Spain and elsewhere. Credit generally serves to push production beyond its limits, so that the subprimes kept the real estate market, building industry and, indirectly, USA’s consumer spending afloat, while the German banks that purchased Greek public debt bonds financed themselves with the returns and, at the same time, the German export business won large slices of the market for itself. The growth in GNP and the public debt depended on a cycle of expansion which, in countries with advanced capitalism, in view of the surplus of loan capitals compared to the possibility of investment in production with satisfactory profit margins, was fuelled by speculative bubbles (in credit, in real estate, in finance itself). What is more, in a general context where valorisation was problematic, the structure of Greek capitalism was not particularly attractive to investors, so that, rather than creating value, the country’s role was to realize plus-value produced elsewhere. When the cycle of expansion suddenly came to a halt in 2008, Greece was left with the debts and few resources to repay them with.

The problem of the debt reflects the difficulty in accumulation

The debt crisis only reveals the surface of the problem. International “aid” should have put the country in a position to finance itself independently on the market and honour the loans it had negotiated with the banks and other States, as well as dealing with the repayment schedule and interests. In fact, the Greek debt has already been restructured on two occasions, is modest from a quantitative point of view and the deadlines have been postponed over time (60% is due in 25 years) at relatively low rates of interest. (2)

The conditions established by the “Troika” in 2012 for the restructuring of the debt included policies of adjustment to the government budget and removal of the deficit in foreign exchange. Up to the present Greek governments have carried out their assignments dutifully: “Today Greece has a primary balance[a net budget margin remaining after paying interest on the public debt – ed.] of about the same entity as Italy’s and superior to that of the Eurozone. There has been an increase in income from taxes, whilst expenditure has been cut. Wages have fallen from 180 towards the end of the last decade (base 2000=100) to 120. The decrease in demand linked to containment of the public debt and lower wages has greatly reduced imports, thus the foreign debt.” (3)

The price paid for achieving these fine results has, however, been a 25% crash in GNP so that, whilst in 2010 the debt amounted to 140% of GNP, today it has reached 180%. At the same time unemployment has risen to 25.8% (1.2 million at October 2014), the risk of poverty affects 23.1% of the population, 230 000 small and medium-sized businesses have gone bankrupt, since 2008 the stock market has fallen by 83.8% and compared to 2009 fiscal pressure has risen nine-fold for free-lance workers and seven-fold for employees. These are the figures of a society on the verge of collapse.

The crash of the Greek economy, which had been sustained mainly by the public sector, now involves growing tax difficulties: in 2014 income fell by 1.3 billion, with as much as 1 billion in January 2015 alone. Those conditions which, with a positive state balance, should have been a guarantee for dealing with debts, started to fail. The evolution marked a turning point which broke the precarious balance on which Greece’s “salvaging” relied and opened the doors to Syriza’s victory and the present crisis.

In the meantime, the structure of the Greek debt has changed radically: now loans weigh far more heavily (80%, as against 20% in 2008) compared to bonds and 90% of credit is due to public institutions (EU and IMF loans, and bonds held by the ECB and national banks). On the other hand, the exposure of foreign banks has been drastically reduced (in 2013 those in the Eurozone were one tenth less exposed than in 2008). From 2013, when it appeared that the situation in Greece was stabilizing, a return in exposure was recorded, especially by Anglo-American and German banks, but the basic fact remains that French and German banks – the most exposed – were saved by the intervention of the ECB and their national banks, which assumed most of the risk (4).

The fact that all this deployment of national and international financial armies essentially aims to save the banking systems is confirmed by the nature of the keenly desired “Quantitative Easing”, announced as the “Saviour of Europe”, which finally saw the light of day in the manger of the ECB: as well as purchasing State bonds – with the precise exception of Greek ones, rated “junk” – the ECB will provide liquid funds in exchange for bonds to four of the large “systemic” banks, including two GermanLandesbanken laden with speculative dealings at risk, a French bank and a Spanish one. The trick of privatizing profits, making losses public and filling holes in bank balances with income from taxation, continues in a general climate of hypocrisy: yet, whilst the banks are paying nothing for their excessive speculation in the pre-crisis phase, in order to earn its “aid” Greece must flay its proletariat to the bone, with the risk of killing the beast.

If it were not a question of the blood and flesh of millions of proletarians, it would be laughable: of all the generous “aid” provided to Greece (254 billion from the EU and the IMF), only 11% has gone to the country’s economy, the rest serving to pay off creditors and the interest due to them. The banks having been saved and the risk of a systemic crisis having been avoided, it would seem that now Greece can safely drown without causing too much damage, yet this will not solve the difficulties with which world capitalism is struggling.

It is not only Greece that faces the problem of the debt: it is the world debt that has grown considerably since the 2008 crisis up to the present.

The fact that still today, seven years after the outbreak of the crisis of overproduction in 2008, the debt has grown 40% throughout the world, means that the crisis has not been overcome in the least, and that Greece is just a particular symptom of a European and world crisis. Then the burden rested mainly with businesses and the financial sector; today it is the States that take responsibility for most of the debt and for managing it. From 2007 to today, the highest portions of the debt compared to GNP have shifted from business enterprises and financial institutions to States, whose debts have grown by 76% as against the 11% of banks and finance companies. The burden of the State debts is loaded off onto the tax systems and public balance sheets and takes the form of harsher taxation and cuts to welfare spending.

Thus, the problem is not the debt in itself but the absence of growth rates in the economy capable of increasing the denominator in the debt-to-GNP ratio. In other words, the growth rate in production (plus-value), determined solely by live labour, is not sufficient to compensate for the debt’s rate of increase, determined by the level of interest rates, i.e. of the quota of plus-value devoted to income. The Greek case is merely the personification, at a more problematic level than average, of the difficulties of valorisation which, taken as a whole, characterise the mode of capitalist production in this period of history. Greece’s chances of escaping from the crisis depend on a new phase of expansion in world production and the role she is assigned in it by the stronger imperialisms.

In connection with this, a Chinese expert in strategic investments has declared: “China has no interest in prejudicing relations with Europe by rushing to help Greece, a country that is of little interest from the point of view of natural resources and private investments […] The weight of Athens in Europe carries no particular influence, the industrial sector is not strongly oriented towards export and the technological sector is not highly developed.” (5)

If Syriza was hoping for support from China in its standoff with the Europgroup, that is its answer. For Chinese capitalism, the Greek government must obey its master and its master is Germany. China, now the third largest investor in the world after the United States and Japan, is not interested in Greece in itself, except as a possible way-station on a new “silk road” for Chinese-European exchanges through the Balkans, which would have its hub at the port of Piraeus. From this point of view, the launch of privatisation and concessions for the management of port activities already assigned to Chinese companies by the previous governments are essential to Beijing’s strategy in Europe, which hinges on Germany and aims at keeping the area stable under German guidance. As far as the Greek case is concerned, China has taken sides unequivocally and is pressing the Greek government to respect and confirm the agreements already made. From a geopolitical point of view, too, Syriza has no allies and lacks the strength and lack of scruples to launch into a pro-Russian adventure and up the odds in its match against the EU and the United States. From an economic, as well as from a geopolitical point of view, the country has little room for manoeuver and no real sovereignty outside the limits conceded by the balance of power between the great imperial poles of interest. In the context of an ongoing crisis, Greece’s main fault is to be one of the weakest links in the chain of potential bankruptcies weighing on the future balance of world capitalism.

There is only one prescription for capital: intensify exploitation of the proletariat

The root of the debt problem, from the point of view of the interests of Capital, too, is growthwithout growth there is no solution to the debt problem. But no “expert” on capital can offer convincing answers to the question of why growth is absent, or at least now fails to record past growth rates. The post-war phase of expansion ended once and for all with the crisis in the mid-Seventies, after which, amidst peaks and dips, the growth in world production and trade was accompanied by a progressive decline in growth rates, more markedly in the old capitalist countries but also common now amongst new international competitors. From the capitalist point of view, the truth of the Marxist law on the declining increases in production, reflected by the tendency for the profit rate to fall, cannot be acknowledged: it would mean acknowledging that this mode of production is transitory and that a critical point has been reached in its evolution.

For the same reasons, the “solutions” open to capital are unable to get to the root of the problem but merely move round it. The policy of containing the budget deficit has revealed its disastrous effects on Greek society and continues to prostrate the economies on the periphery of the Eurogroup. In theory, making the debt lighter, implementing cuts on state spending and salaries, reducing consumer spending and the foreign debt should lead to a smaller tax burden and encourage economic recovery. Where it has been applied, in particular in Greece, this prescription has resulted in disastrous outcomes: the debt-to-GNP ratio has increased and no kind of recovery has taken place (or been proclaimed for the future), apart from a modest positive sign in 2014, after years of decline. 

The other solution, the mirror image, suggests deficit spending to launch consumer buying and investments again and criticizing excessive austerity. As one Italian analyst wrote, in the country’s main economic daily: “Europe desperately needs strong growth to cut down the enormous numbers of its unemployed and increasingly numerous poor, to escape deflation, which in January bordered on -0%. To succeed in this, it needs to be reasonably strict and make many reforms and even more investments.” (A Cerretelli, “Il rischio del default e la bandiera del realismo”, Il Sole-24ore, 25/2/2015).

Both solutions get the terms of the issue completely upside down. The debt is a product of the crisis of the mechanism of capitalist accumulation: it is not responsible for it. Its increase reflects the growing weight of the financial sector: this is the means by which production is forced forward, pushed beyond its limits, fuelling speculation and all sorts of adventures. On the other hand, the drop in investments and consumer buying is also produced by the crisis, and not the cause of it. This means that too much has been invested and consumed and this expansion, driven to the extreme by the use of credit tools, has generated an enormous debt, a mass of dead labour represented by financial bonds which claim a quota of plus-value on real production. Overcoming the crisis can only come about by means of the massive destruction of fixed and circulating capital, but also debt. The latter prospect is one to which financial capital, an independent force dominating real capital, opposes strong resistance in order to contain losses as far as possible. It is a vicious circle, because financial returns will not increase as long as there is no recovery in the mechanism of accumulation, as long as the extraction of plus-value fails to recover at a higher level of concentration and organic composition. It is significant that at present returns on bonds, both public and those of large business companies, are close to zero, when not actually negativeThe big absentee is plus-value! A lot of liquidity is circulating but there are scarce opportunities to make profitable investments. 

It is therefore no use continuing to try and reduce the debt or relaunch investments and consumer buying, flooding the banks with liquid assets by means of ultra-expansive moves and monetary bazookas from the central banks, if the mechanism of accumulation is hindered by an excess of production capacity, by too high a ratio between capital in the form of machinery and raw materials (constant capital) and the valorisation factor represented by the use of human labour (variable capital), and by the fall in profits in relation to the growing amount of capital used. 

The problem does not arise from the size of the debt but where the new value produced proves to be insufficient to satisfy the “right” of the financial sector to claim it as its own. The reimbursement of Greece’s debts – with interest – is based today on the exploitation of the live labour of the Greek proletariat, on the compression of direct wages and all the indirect forms of income from employed labour, on its being rendered extremely flexible and extremely precarious. This is basically the content of the reforms on the side of offer (reduction of salaries, cuts in welfare, flexibility of labour), invoked by all bourgeois factions as the key to solving the crisis (6).

To get back to Greece…

The depth and duration of the crisis have sparked off competition between States, causing the weaker capitalisms to succumb. Greece does not possess a capitalist structure strong enough to allow the independent re-launching of production, nor can she depend upon technological sectors competitive on the world markets. Her recovery can only come about thanks to worldwide recovery – increasingly uncertain and precarious – that would re-launch her vocation as a tourist and commercial destination, hinging on her ports and sea transport. But the basic condition for this is that the proletariat be reduced to a production force enslaved by even harsher conditions of exploitation

Probably the new governors of Greece hoped they would not have to undergo the confrontation with the Eurogroup alone, and that their initiative would open up the path for a turning point in European politics: “if” a coalition of States in favour of abandoning or easing off austerity were created, “it would be” possible to counterbalance the weight of Germany and her allies and “it would be” possible to launch a policy for restoring public spending and investments. Apart from the paternal claps on the shoulder from some heads of government, actually little inclined to assume a tough attitude towards the Germans, the Greek representatives even attracted the hostility of Portugal and Spain, who had surrendered to the harshest conditions and where elections will be held this year. Any concessions would, indeed, provide breathing space for movements opposed to austerity (such as the Spanish Podemus, the Cinquestelle in Italy, the various populist and nationalist parties). And so the perfect picture of a quarrelsome little European family, with its unblinking lady chancellor ruling with an iron rod, has, for the umpteenth time, put pay to the illusion of a “people’s Europe”, as an alternative to the “bankers’ Europe”! 

A similar alternative does not, of course, exist. In a phase like the present one when accumulation is problematic, Capital has no alternative but to crush the proletariat beneath increasingly cast-iron and repressive legislation. This is equally true both for Greece, which has been cohabiting for years with the debt in her balance of payments, and for Germany, who, whilst remaining in the context of the Eurozone, enjoys a position of absolute privilege and continues to accumulate surplus in foreign exchange. The formula Germany would apply to Greece and to all the other countries in the Eurozone is the one that she has partly adopted at home and which has allowed her to strengthen her lead in Europe and rank first in terms of exports: raise the average profit rate, limiting wages and at the same time increasing the competitive edge of her companies. The single currency has made it impossible for the other members of the Eurozone to fight the invasion of German goods by means of competitive devaluation (7).

The law of increasing poverty applies equally to the opposite poles of capitalist development and is not a Greek prerogative. From 2000 up to the present, German wages have increased very little in real terms but above all the portion of indirect wage that was covered by welfare has fallen drastically. Today, in order to keep their right to unemployment benefits, millions of German unemployed are obliged to accept any type of offer on any condition, with pay that can plummet to one or two euros an hour. This is the secret of German success: the return of exploitation to a level equal to that of the industrial revolution for a considerable portion of her proletariat. German capitalism has taken the lead again not because of technological progress or because productivity has increased thanks to a rise in the size of the labour force – already large – but because it limits the value of live labour and at the same time extends employment by adding more and more forms of precarious and temporary work

If a formula like this is applied for great Germany, why should little Greece be spared it? Forcing the hardest of conditions on the Greek proletariat means disciplining one’s own proletariat, showing it that there are no limits to the depth to which the hellish conditions of proletarians can plunge. The truth is that the attack on the Greek proletariat is merely the expression of the most advanced attack on the proletariat throughout Europe. In this context, the clash in the Eurogroup represents just the momentary insubordination of a bourgeois fraction towards the imperialism dominating the area, motivated by the difficulty of managing the social crisis and differing points of view on the treatment that should be reserved for the proletariat. 

The trick which the Greek proletarians have fallen victim to by placing their confidence in Syriza (actually highly “patriotic” and very close to Italy’s own “Renziani”) (8) derives from a superficial interpretation of the crisis, according to which it would suffice to combine the “reforms on the side of offer” with the re-launching of investments and consumer buying to set off a new cycle of expansion. The illusion of a “gentle” escape from the crisis and a return to the good old days of “consumer well-being” has disappeared in the face of German intransigence. On the other hand, those who, like Syriza, are able to win over the proletariat with vain promises are providing a very useful service to capital, by preventing the anger from finally being channelled towards open class warfare. The increasingly patriotic nature of their claims, the emphasis on the national, folk character, is preparing the way, as during the period of Weimar, for the affirmation of quite different forces, far more radical in their interpretation of the hostility towards a Europe crushed beneath Germany’s iron heel.

The story gives us the umpteenth confirmation of social democracy’s historical function: to offer a pacific solution to the contradictions of capitalism, to disarm the proletariat, push it into the arms of the most extreme nationalism and prepare it for war, the extreme bourgeois solution to the contradictions of capitalist development.

The task allotted to the Greek bourgeoisie by international capital is to reduce its proletariat to obedience, obliging it to accept the brutal decline in its living conditions and, if necessary, crush any attempt at self defence with an equal degree of brutality. Syriza will thus have to announce its political failure and vanish from the scene, or else carry out the task of social democracy to the bitter end: to defend the instances of Capital at the cost of the proletariat. In this perspective, the proletariat, in Greece as elsewhere, has no alternative: either to give in or to face the harsh trials that await it by means of open class war, which, as we wrote in 2010, “requires strategic preparations and internationalist, not national, tactics; it demands a militant, centralized, political organization and organisms of economic defence that have distanced themselves from the whole of the democratic or Stalinist front […] under the guidance of a political, class organization, the international communist Party. Without all this, defeat will be inevitable, in Greece as elsewhere” (“Ultimatum to the Greek proletarians”, il programma comunista, n.1/2010).



1- V.Da Rold, “Il brusco risveglio per Syriza”, IlSole-24 Ore, 25/2/2015.

2- In absolute terms, the burden of the Greek debt is modest: Greece’s public debt has mostly been restructured and 80% is in the hands of the Institutions or, if you prefer, those of the Troika: the European Central Bank, the European Commission, the International Monetary Fund. More precisely, 60% is due over 25 years (average) and the remaining 21% is due over 13 years (average). With such a ‘long-term’ debt, there are no real problems of renewal except for very low amounts, though high for the precarious state of Greece’s public accounts. Moreover, on the 80% of the restructured debt, the interest payable is 2%. For some this is an ‘extortionist’ rate, in actual fact it is tiny: Germany pays around 2% on her debt and Italy 4%.(G. Arfaras, “Il compromesso possibile e la debolezza strutturale della Grecia”, official website of the geo-political review Limes).

3- G. Arfaras, idem.

4- “Debito pubblico: chi è (ancora) esposto al rischio greco”,, 31/1/2015. And again: “As to international debts, we must remember that around 2/3 of Greek State bonds are in the hands of different public entities: the European Stability Mechanism, ESM (142 billion euros), the countries of the Eurozone (53 billion), the International Monetary Fund (34 billion) and the European Central Bank (20 billion). If these debts remained in euros, the Greek public debt would increase by at least 50% in the new devaluated dracma – Commerzbank estimates – to 230% of GNPThere are no great risks for the European banking system, since after the peak of the debt reached during the 2011 crisis, the foreign banks adjusted their credit with Greece, which fell from over 300 to 50 billion euros, most of which probably covered by international collateral guarantees. Now, as far as the European banks are concerned, Greece can go to hell, the euro along with her, because from that moment onwards it will be clear to everyone that the single currency is no longer reversible.(V.Da Rold, Il Sole-24 Ore:

5- Mara Monti, “Se Pechino si tira fuori dal dossier su Atene”, Il Sole-24ore, 7/2/2015.

6- “The large public debt was run up because of senseless expenditure and lack of a tax base. The public debt signed abroad has ended up in the hands of foreign institutions. The latter are asking for it to be reimbursed, which is possible if growth is relaunched and the state accounts remain positive. This means that growth does not come through public spending but by reforming offer – a flexible labour market, privatization, etc.(G. Arfaras, cit.).

7- Luca Ricolfi, “Gli squilibri mai corretti e il silenzio dell'Europa”, Il Sole-24 Ore, 22/2/2015.

8- “Con Syriza e Podemos, la sinistra europea riscopre la patria”,


International Communist Party

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