The Greek Tragedy.

European Tough Love.

The banks are opposed to a Greek default in order to avoid a cash haemorrhage, which is the same reason that the financial institutions are opposed to regulation and taxation, in one way or another. The natural option is austerity, the rape of the Greece, it only costs the poor who are mostly too disillusioned to participate in politics and the mega-rich are left unscathed whilst near a majority can be persuaded it is all necessary if the fear of deficits is just ramped up. The austerity measures will fail and only succeed to turn Greece into a basket economy. And yet no bank or financial institution has been allowed to fail. With the exception of Lehman Brothers which was losing around $8 million a minute at one point and then Dick Fuld walked away with $500 million from that year alone. Just think of the millions of American homeowners, many of which are black and poor, have lost their homes or have been left desperate to save a mortgaged property. We might think of it as tough love, love for the rich and tough for the poor as Noam Chomsky once noted.

It was clear before the vote that Greece is the point of a showdown between the people and the banks, even if it is still unclear what is going to happen in Greece and Europe as a whole. The general strike in Greece lasted two days and it was accompanied by huge demonstrations in opposition to the vote for €78 billion worth of spending cuts and privatisation stipulated by the European Commission. As the country is about to raped by the banks, the right-wing press ramble on about the "Greek Gravy Train" and the "flaws" in the Greek character which led to the crisis, a suspicious line of thought indeed. It isn't over yet, but the future does not look bright. For around 10 or 15 years there will be little economic growth in Greece, if any at all. The standard of living for the average person will go into steep decline and in the end the country will still have to default. No doubt Portugal, Ireland and Spain will be affected in just the same way. Unsurprisingly, the Eurosceptics are filled with the glee that is particularly devoid of compassion for the people affected.

The destructive consequences of the 1929 Crash laid waste to entire countries. Today there is the potential for serious political turbulence, no one should forget that it was back in 1967 that the Greek state was seized by a military junta which ruled with the support of the US for several years. Nor should we forgot the ways Fascism came to power in the midst of the economic and political crises of the 1920s and 30s. Though I am not saying that as a direct result of these measures we will live to see the resurgence of Fascism. The devastation may not be on the same scale as the Great Depression, which is a result of the bailouts, but the cuts will hit ordinary people hard and the reaction is not easily predicted. The core of democratic institutions are under threat in Greece from Big Finance. The Greek people took to the streets and have been on the streets fighting, but so should the people of Europe take to the streets against the measures that are hitting each economy. As Richard Murphy pointed out, there was no real choice in this instance.

The impact of economic factors on politics should not be underestimated. When we look back in history we find that the opening for democracy in Greece, the first of it's kind in the world, came about as a result of the advent of iron-based equipment which converged with popular struggle. The landowners had sought expansion through debt-bondage, which trapped small farmers into arrangements that would leave them without land or freedom if they could not repay the loan. It was the abundance of iron and the simplicity of the production process increased the availability of iron tools and weapons in Greece. The small farmers were able to form militias, for which peasants could serve as infantry and rowers on warships. All of which enabled popular uprisings which brought down the dictatorship and the aristocracy before going on to defeat the Spartans who took the side of conservatives in the country. Just as bronze had empowered only an aristocracy, iron had the potential to empower the masses and now we find that finance has the potential to empower a new aristocracy.

The different genres of narrative around the 2008 financial crisis typically exclude systemic risk, the contradiction internal to capital accumulation. As David Harvey points out the problem back in the 1970s was the excessive power of organised labour which necessitated the repression of unions through legislation and that in turn led to stagnant wages for many people. All the while the financialisation of the economy picks up speed and really accelerates in the 1980s. It is important to keep in mind that financial innovation is at the heart of the capitalist system, which is the reason for the greater focus on innovation and that focus has the potential to empower financiers at the cost of others. The insufficiency of demand which would result from the stagnation of wages is bypassed through credit, which would explain why the debt per household has exploded over the last 30 years. A huge amount of that debt is within the housing market, with absurd results in the US and ultimately the finance crisis was half-solved at the expense of a sovereign debt crisis.

In Franco-German financial institutions, where much of the Greek debt is held, there are hopes it can consistently profit regardless of the socio-economic consequences and even significant losses incurred by the systemic mania. In the case of a Greek default the French and German banks holding the debt could easily go under, which would necessitate another round of bailouts for the banksters. We should also note that the amount of trade between Greece and Germany increased dramatically after Greece joined the Euro. Germany has done very well out of exporting to Greece, where several industries have been decimated by the influx of German goods. Rationally, the Germans should bailout Greece in the way that the US bailed out Germany for free after it defaulted just after the Second World War. In fact, Germany is the country which defaulted in the last century more than any other country in Europe and in each instance the Germans were bailed out.

It used to be that the interest rates on loans were the only kind of insurance as it were, then people like Nigel Lawson came around to tweak the regulations and guarantee that the bank would be able to get its money no matter what. It might seem time to call for no bailouts, the banks are not too big to fail and so on. The problem there is that the banks generated a speculative housing bubble and when it all came crashing down the people who flip the bill are not the masters of the universe. To willingly fling open the door to the black abyss and then leap into it would not be advisable. You should keep in mind that the people calling for this are the same people who don't believe in universal health-care and the provision of any kind of safety-net. American and British banks gambled with equity on other peoples' homes and created imaginary capital in doing so, the most appropriate way to deal with this within the system is to impose regulations and restructure the financial sector.


Greece has not been bailed out, but the banks have been and the European country that has defaulted more than any other in the last century is Germany. Germany was excused from reparations to countries that it had invaded. The loans and occupation costs Germany had pressed out of the countries it had occupied in World War II were not paid back. Especially not to the Greeks. Germany didn't even pay back the US for the loans that were used to pay the reparations levied on Germany after World War I. As Albrecht Ritschl said, Germany was the biggest debt transgressor of the 20th Century. The decision on Greece has been delayed on the next bank bailout in the EU, the package could be around €160 billion which is meant to further the cuts that have already bled public services dry in the country. But it is true that a default on the debt is inevitable, it is only a matter of when and how at this point. The default should have come earlier rather than later, which is what is most likely to happen.