Thursday, March 11, 2010

An "Economic Guernica" for Greece

by Joseph Halevi

Greece faces a veritable economic Guernica, a massacre, in the face of which the European Left shows an unforgivable passivity. What is imposed on Athens is meant as an example, to strike terror into Spain, Portugal, and even Italy. But even France, facing German directives, has melted down as if in a new Sedan test, which is also economic.

Last summer, Angela Merkel allowed Berlin to run deficits, tempering the Protestant fanaticism of the then Social Democratic Minister of Finance. Now with Schäuble in that ministry, we are back under the full biblical curse.

According to surveys, the European public opinion tends to accept the argument that deficit spending be balanced by drastic cuts. That argument is tantamount to equating the state to a family who spends more than it earns and then is forced to reduce its standard of living. The State might find itself in this situation if there were full employment as a natural tendency. Such a chimera aside, the deficit can always be financed, provided that the authority that runs it has control over both monetary and fiscal policies, which is impossible under the euro.

Of course, under the euro, capitalist relations within Europe are defined so there are those who can and those who cannot. Apart from ideological fanaticism, Berlin's rapid return to financial orthodoxy stems from a very simple vision. We, say the rulers of Berlin, won't give a dollar to Europe (in this case to Greece and the Iberian peninsula) because in the meantime our capitalism has gotten out of the crisis thanks to net exports. The wage freeze caused by unemployment makes us comfortable while our domestic mechanisms of subsidies, both at federal and state levels, facilitate the restructuring. These and wage deflation will enhance the inter-capitalist competitiveness of Germany.

Who cares about the denizens of Greece and the Iberian peninsula? The only concern is how to protect the financial values of the French and German banks that hold government bonds issued by those countries. Vague hints of possible loans to Greece are in fact directed only to that effect. The cuts imposed on Athens should reassure the markets, as they are indeed mostly successful, despite the upheaval that they are producing in the economy of the country. Thus came an extremely tight agreement among Paris, Berlin, Frankfurt (home to the Bundesbank and the allied ECB), and the rating agencies, which assess the solvency of the issuer of securities, the very agencies at which until a few months ago both France and Germany were pointing the finger as one of the main culprits of the financial crisis.

The "markets" are acting as loan sharks preying on Greece with the full support of those who criticized them first. 2008 never happened, the late Jean Baudrillard might say. Anti-financial populism of Merkel, Lagarde, and Sarkozy (as well as Tremonti) has shown of what stuff it is made. A makeshift product, it is mixed up with the myopia of French as well as German capitalism. Sinking Greece and forcing Spain and Portugal to follow it, Berlin, Frankfurt, and Paris are in fact striking at a group of countries which, at the outbreak of the crisis, that is until 2008, accounted for over 9% of Italian and over 10% of French exports, as well as 6% of German exports.

And now the crisis of new outlets looms, unseen, on the horizon, because the growing China is a net exporter to Europe. Meanwhile, Greece continues to be a recycling area for the German military industry: the acquisition of 150 Leopard tanks, concluded last October, has not been suspended, even while pensions and salaries are being cut.

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