Why Greece Is in Trouble

I just finished a terrific article from the latest (July 2011) issue of the journal Socialism & Democracy. It’s called “Bloodless Coup D’Etat: The European Union’s Response to the Eurozone Crisis,” by Steve McGiffen. If you have access to an academic library, you may be able to get it free online; if not, it’s here, but behind a ridiculously high paywall (you can but a subscription, at the “member rate” – open to anyone – for the price they charge for one article). So I’ll save you money by summing up the main points, but it’s well worth reading if you get a chance.

McGiffen’s basic point is that the crisis is caused by the conditions for joining the Eurozone, and is being used by finance capital to force all the member states to adopt neoliberal policies: reduced social security, an end to stable jobs, fewer government services, and everything we have come to know and love as “austerity.”

The euro has caused the Greek crisis (as well as the Spanish, Portuguese, Irish, Italian, and other crises) in two ways:

1. Immediately, by denying Greece the normal tool countries use to resolve balance-of-payments problems: devaluation of their currency. If Greece was still using the drachma, they could devalue it and pay off their debts. But they can’t devalue the euro.

2. More essentially, Greece was brought into the eurozone at a drachma-to-euro conversion rate that overvalued the drachma. The result was that exports from Greece to other countries in the zone became more expensive, and imports to Greece from Germany (in particular) became cheaper. So naturally Greeks began to use a lot of German imports, and stopped buying locally.

The whole history of the European Union is that countries sign treaties and sell them to their people on the basis of a feeling that Europe is a good thing, and that it will be convenient to travel without having to change money all the time. But the treaties always turn out to have economic restrictions built into them. Most basically, they take more and more policy decisions out of the hands of elected national governments and put them into the hands of the bankers – specifically, the European Central Bank, backed up by the non-elected European commission.

The “democratic deficit” in the EU is well-known; the European Parliament, the only elected part of the governing structure, has little power. But even the other parts of the governing structure have their hands tied by the treaties and the rules of the eurozone.

Yesterday the Greek finance minister made one of the points I make above – you can’t have a currency union without an economic union. Unfortunately, his solution was to turn over control of his country’s economy, as well as his currency, to the European Central Bank. That would mean the bank would be free to impose austerity everywhere – just what the neoliberals (and, more importantly, finance capital) want. Less for the workers, more for the capitalists – it’s that simple.

There is another solution — Greece could leave the eurozone and default on its external debt. That would be a good thing for the people of Greece; but then, that’s not really whom the Greek government seeks to serve. Instead, the EU will continue the losing struggle to bail out Greece in order to bail out the bankers, and they will continue to drag the world economy down.