Across Europe: growing crises and potential for fightback

Europe - the gathering economic storm

Corporate chiefs and political leaders around the world have welcomed 2010 with a growing sense of foreboding as economic crisis continues to stalk the globe.

The international credit rating agency Moody’s warns that “political and social tension” will grow in the coming year. “On balance, the risk of social unrest looks higher in 2010 than 2009,” predicts Sam Wilkin, senior consultant at Oxford Analytica, which advises corporations on global developments.

During the last year economic chaos led to demonstrations and riots that forced out governments in Iceland and Latvia. A year ago, governments were splashing cash on bailing out bankers and other industries. Now they are rushing to slash welfare spending, attack workers’ rights and increase taxes for ordinary people.

Global attention is currently focused on Greece, with the European Union and the International Monetary Fund demanding austerity measures to deal with a budget deficit. The country has seen its international credit rating downgraded. There are predictions it may be forced to quit the euro.

Some claim the crisis is coming to an end. Major economies such as Germany and France have officially come out of recession, as have Ireland, Sweden and Japan.

But governments have “left” recession by imposing drastic cuts on working people. For workers the crisis continues – and the cuts to jobs, pay and public spending will have a lasting impact for years to come.

And it’s not true that the future looks rosy. Credit rating corporations have issued a series of warnings to Britain that it must slash spending now or face a rating cut. It’s a message both Labour and the Tories have accepted.

Here, Socialist Worker looks at what is at stake around Europe – and the potential for resistance.
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Greece – on the brink of turmoil

Greece took centre stage in the global economic crisis at the end of last year. Government debt, a spiralling budget deficit and the downgrading of its credit rating led to widespread panic about the future of its economy.

Fears over whether Greece can repay its debt are putting the newly-elected social democratic Pasok government under pressure to abandon its promises not to cut wages.

But prime minister George Papandreou has been trying to avoid provoking a new explosion in a country that saw riots in December 2008.

And Greece is also seeing mass strikes by workers angry at how the state is handling the recession.

So the government uses rhetoric about “making sure ordinary people don’t pay for the crisis” – at the same time as it pushes through budget cuts worth around four billion euros.

For most of 2009, economic “experts” spoke of the “green shoots of recovery” that would soon stabilise the economy and allow governments to stop spending vast amounts of money to save the banks from collapse.

Some were optimistic and spoke of the need for an immediate “exit strategy”. Others were more cautious and argued for a continuation of state support for the financial system.

In reality it was necessary to intervene to prevent new defaults – and the real question was whether governments were in a position to do so. The Greek government was not.

It had to borrow 60 billion euros during 2009 – not only to subsidise the bankers but also the tourist and construction industries that form the main pillars of the economy.

But the recession deepened. State revenues were reduced, unemployment costs went up and the deficit grew.

The government borrowed more money from the banks. For a time the strategy seemed to work – handing massive profits to the bankers and offloading the burden onto the state budget.

But then the European Central Banks started talking about cutting off Greek banks from cheap funds.

The stability of the euro took priority over the needs of a minor capitalism on the edge of Europe.

Unmanageable

Or so it seemed. But once the threat of a Greek bankruptcy became imminent, the guardians of the euro had a rethink. A Greek default on debt repayments would trigger a crisis for the euro.

Ruling classes all over Europe are worried at the prospect of Greece repeating the experience of Argentina in the early 2000s – where unmanageable government debt precipitated a major banking crisis and led to prolonged economic and political upheaval.

So European leaders have joined their Greek counterparts in working out a plan to avert the crisis – by forcing the burden onto workers. The Pasok government is submitting its so-called “stabilisation plan” to the EU.

This aims to force down public sector wages by 7 percent and cut up to 100,000 jobs for temporary workers.

For every five people retiring from the civil service there will be only one replacement. Hospital funding will be cut.

Even government ministers admit that wages and pensions in Greece are already too low, way behind the European average, and cutting them will not solve any of the problems.

No wonder there is resistance. The demonstrations on the anniversary of the 2008 December uprising were huge, despite a massive police operation and media hostility.

On 17 December there were no papers in Greek kiosks – because media workers joined teachers and other workers in a day of strike action.

It was the first general strike resulting from mass pressure from below since the 1970s. And it is very unlikely be the last in the coming months.

Panos Garganos
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Ireland – resistance as bubble bursts

The “Celtic Tiger” boom in the 1990s was supposed to be the success story of European neoliberalism. But now the country is undergoing a traumatic economic crash.

Despite the latest figures showing Ireland technically coming out of recession, the economy’s structural weaknesses are coming back to haunt it. It’s boom had been fuelled by US investment, as multinationals used Ireland as an entry point into Europe.

At one stage Ireland attracted a quarter of US investment in the EU, despite having just 1 percent of the EU’s population. But the money dried up as US companies sought cheaper opportunities elsewhere.

The Irish state responded by encouraging a property bubble. By 2006, construction accounted for 20 percent of gross national product.

One in seven workers were employed in the building industry.

Tiny villages were transformed into huge commuter towns as houses, hotels and office blocks were thrown up.

Irish banks lent well over £100 billion. They came to believe that they could walk on water.

This led to huge bribery scandals, as developers paid backhanders to get planning permission and influence for construction projects.

At the same time, the Irish ruling class assumed that by acting as a slightly shady “back office” for the City of London they could attract highly mobile finance to Dublin.

In 2006 alone around £450 billion flowed into hedge funds based in the massive Irish Financial Services Centre building. Some 70 percent of these funds were actually held in a tax haven in the Cayman Islands.

While the speculative boom continued, the union leaders helped hold down wages. They claimed that in return they gained influence in the corridors of power.

Collapsed

That whole edifice has now collapsed. The bosses’ party Fianna Fail is in government in coalition with the Green Party, which had previously portrayed itself as left of centre.

Together they are pushing through cuts. They want to slash benefit payments, wages and jobs to pay for the £13 billion bank bailout.

There are almost daily protests against the government from across trade unions and community groups.

Nearly 300,000 workers struck against the cuts on 24 November last year. Even police officers walked out.

But the union leaders called off further action. Instead they tried to trade 15,000 redundancies and new forms of flexibility for a promise to withdraw the pay cuts.

The government, of course, did not go back on the cuts.

The trade union bureaucracy is desperately trying to hold back the rage of workers.

But the increasing pressure on them, and the growing strength of rank and file organisation, means confrontation is likely.

Simon Basketter
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Iceland – a year after the collapse

Working class people in Iceland are paying a heavy price for the country’s economic collapse. The pensions of people in their 60s have been cut by 20 percent. Middle-aged workers have had 28 percent or their pension contributions removed while workers under 25 have lost all they paid in.

Official unemployment stands at 10 percent – but thousands more people are working short hours. More people are using buses to avoid high fuel costs, but the buses come less often.

That may not sound like a big deal until you have to wait 30 minutes in the freezing winter winds.

Mortgages on flats in the estates around the capital, Reykjavik, are up by 50 percent. Some 20,000 people are expected to default on their mortgages.

McDonalds has left the country. Coca-Cola has been a hugely popular drink in Iceland since the 1940s – but not any more, because 7 Up is cheaper.

Basic foods have become very expensive. Even “skyr”, the low fat, high protein curds eaten by almost everyone in Iceland since the tenth century, haven’t escaped. The flavoured varieties are now a luxury, and most people have replaced them with plain, bitter skyr. Dried fish, another staple, is extremely expensive.

In the capital’s flea-market, Kolaport, food producers sell directly to the people priced out of supermarkets. The market started out in the 1980s as a few stalls set up in an underground car park. It became so popular because it was needed – but it’s still not enough.

Between 1,500 and 2,000 families in Iceland accept food donations every month – but in December the food banks were empty and calling for donations.Now Reykjavik is planning to cut almost £500,000 from playschool funding.

The kindergarten council is trying to claim that this won’t affect the children – only the nursery teachers’ holidays and the cleaning! Rural schools are also likely to close.

Scandals

In December, people demonstrated to demand fair treatment for house owners. There is also a campaign to force the government to reject International Monetary Fund conditions attached to its bailout loan.

It is a mark of public fury that two people who were involved in the banking scandals have been jailed for fraud – even if only for eight months with poxy fines.

If ordinary Icelanders are to have any kind of happy New Year they will have to get rid of everyone who thinks they should pay for this mess.

Sarah Ensor
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Spain – the miracle turned mirage

There is a battle going on in Spain over who will pay for the crisis. The government and the bosses are stepping up the pressure for “reforms” aimed at making working class people pay for the economic turmoil.

The government has proposed reform of labour laws to allow firms to put workers on short-time working, with the state making up some of the shortfall in workers’ wages.

And the country’s main business federation is pushing for measures to make it cheaper to fire workers – arguing that this would encourage firms to hire more.

Not so long ago, Spain’s booming construction industry made it the single largest creator of jobs in the EU.

Now the idea is that workers can choose between no job at all or reduced wages.

Unemployment has reached almost 20 percent – second only to Latvia in the EU. Around four million are out of work.

Last month, many parents were unable to buy their children Christmas presents for the first time in years.

And things look set to get even worse. Credit ratings agency Standard and Poor’s downgraded the outlook for Spain’s economy to “negative” last month, based on worries about the state of public finances.

And Moody’s, another ratings agency, put Spain at the top of its “misery index”, based on public finance deficit, inflation and unemployment.

But workers have taken to the streets to resist. Tens of thousands marched in Madrid last month, demanding government action on unemployment, low wages and job security.

The deteriorating situation for many working class people was shown in one of the banners, which simply read, “I want to make it through the month.”

Many who took part called for a general strike to resist the government’s plans.

Those at the top of the unions are not backing this. But as attacks on workers intensify, radical and militant action will be the best way to resist them.

Sadie Robinson
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Credit rating agencies – The people who can wreck economies

Governments cower in fear of the judgement of credit rating agencies.

Agencies such as Standard & Poor’s, Fitch and Moody’s can slash the rating of a country in a second.

This has a dramatic impact on the economy, as cash floods out and governments try to make cuts.

Even rumours of a rating downgrade can have devastating results. But these are the same agencies that played a central role in the so-called “sub-prime” mortgage debacle that sparked the current economic crisis.

They made huge profits from giving great ratings to junk debts, allowing subprime lenders to spread their poison throughout the system.

These agencies are leeches making money out of other people’s misery.

No one elects them – yet their actions can devastate the lives of millions.

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