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Greek crisis triggers debt tsunami

A debt tsunami is now sweeping across Europe to Portugal, Spain and Italy and onwards to the shores of the United Kingdom, before crossing the Atlantic to the United States of America, triggered by the financial earthquake that hit Greece yesterday.

Share markets plunged after credit rating agency Standard and Poor downgraded the long-term credit rating of Greece’s government and banks to junk status, the first eurozone member to have its bonds declared worthless. Markets fear that many banks are stuck with worthless Greek bonds and that the world is heading for renewed financial meltdown.

S&P’s action was its response to the decision by the two biggest trade unions in Greece to call a 24-hour strike against the government’s austerity measures for May 5. This will be the third joint strike of the Greek General Confederation of Labour (GSEE) and Federation of Civil Servants (ADEDY) against the government’s budgetary measures since the beginning of the year.

This further deepening of the crisis undermined the bail-out deal for Greece cooked up between the eurozone countries and the International Monetary Fund, prompting the IMF to toss a further $10 billion into the pot. But the additional strings attached can only provoke further anger from Greek workers.

Early warning of the arrival of the tsunami in Britain has now been delivered to the parties contending to be the next government following next week’s General Election. Whilst all of the parties are keeping quiet about the detail of their plans to reduce the government deficit, the Financial Times and the Institute of Fiscal Studies have been doing their sums.

Both the IFS and the FT have identified black holes amounting to more than £30 billion in each of the manifestos of the three main parties.

The FT says the “next government will have to cut public sector pay, freeze benefits, slash jobs, abolish a range of welfare entitlements and take the axe to programmes such as school building and road maintenance – or make a set of equally politically perilous choices”. It has built a computer game enabling its readers to play at being Chancellor, to get the measure of the job he or she will have to do to attract investors to finance its debt.

The IFS said no party had come "anywhere close" to making clear where the axe would fall after the general election. This, it said, was despite the parties' plans implying the deepest cuts in spending since the 1970s and – in the case of the Conservatives – the biggest one-year reduction in public spending since demobilisation at the end of World War II.

The parties are keeping quiet because they too fear sparking a Greek-style revolt (actions taken or planned by university, college and school teachers against cuts are a sign of what’s to come). Never mind New Labour’s “hard choices” to be made, there’s a conspiracy amongst them all.

The IFS, the FT and the rest of the media and the political parties offer no choice at all. Somehow or other the cost of the debt must be paid by the millions of people being persuaded to vote for bailing out the capitalist system with the destruction of their jobs, pensions, health, education and social services.

But there is another way. We can build a better kind of democracy around a different kind of economy. A network of People’s Assemblies can oppose the next government and refuse to accept the cost of bailing out the banks and of putting profits into shareholders’ pockets.

They could decide to cancel the debt, outlaw speculation, close the profit system, and turn the private financial sector into a public service like, but even better than, the NHS.

Vote with your feet – take the revolutionary road on May 22nd.

Gerry Gold
Economics editor
28 April 2010

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