Some Explanations on the Greek Malaise

My opinion is that the poverty of Greece is not related to the extraordinary lifestyle that Greeks have lived. The OECD statistics will indicate that a Greek worker works over 2,000 hours a year, which is more than the German average of roughly 1,400. Greece is facing higher unemployment rate, but that would not be the fault of the “lazy” Greek workers themselves. It has to do with the relatively high cost of producing goods and services as a result of the relatively high inflation rate and price level. The high price level is caused by the Greek demand for higher wages at low productivity rates. Now, we could argue that the Greeks are at fault for over-borrowing, under-producing and over-consuming, but as we know, it always takes two to dance.

We know that the main beneficiaries of the Southern European debt crisis are the Germans (and to smaller degree the Dutch and the Austrians). Why are these Eurozone countries doing so well? Because they did the opposite of what the Southern Europeans have been doing. In Germany we have had over a decade of repressed wages despite high productivity. The German workers have been producing more and at lower cost. If the cost for labor is low, so are the input costs for producing goods and services. Germany attracted huge amounts of foreign investments, and could sell goods and services all across Europe especially in Greece and Italy, accumulating huge Euro reserves. These Euro reserves were stored in German and French banks, who are not stupid enough to just hoard the cash, but they were buying up the subprime mortgages from America and- you guessed it- Greek bonds. The relatively low interest rate allowed the Greeks to borrow a lot of funds from German and French banks to live above their means. The collapse of the mortgage bubble inflicted huge losses on the balance sheets of the banks and wealthy investors, so they quickly tried to recoup their money by increasing the interest rate on Greek bonds. One could see that the Greek debt was rising fairly quickly, and almost all of the debt is owned by foreign entities. Notice that Japan has far higher debt levels than Greece, but shows no affect, because almost all creditors are Japanese banks, corporations and individuals, who have a vital interest in sustaining low interest rates and keeping their own country’s economy stable. Not the case in Greece. With lower debt levels than in Japan, but with the creditors far removed physically from the debtors, the creditors had every interest to wring out as much money out of the Greeks as they possibly could. Should we be blaming the debtors?

I would lay the blame at the feet of those countries that have not shown solidarity, and not gone along with the social contract that is supposed to define the European Union. If the Southern European countries are raising wages (and mostly they did that in response to high inflation, so it is mostly about preserving living standards), then so should the Germans and other more productive Northern European countries. There is this stereotype that northern Europeans are more productive, because they work harder. I would say they are more productive, because they are collectively willing to accept smaller wage increases than Southern Europeans, which concentrates all the capital in that country. It is a competition that can only temporarily have winners and losers. Why? Because the primary customers of Germany’s products are the Southern Europeans. All these goods and services need to be exported, because the German workers have been gaining wage increases below the rate of inflation and also have a frugal mentality, which explains why 50% of the German economy consists of exports. The German export markets are collapsing, and the German economists are already predicting losses for many companies and the economy at large, which significantly reduces the ability of Germans to raise the funds for bailouts. Ironically, it is the German workers that are also punished, because not only do they not receive generous wage increases (their bosses have told them it was necessary to hold them low to “stay competitive”), but they also pay for the Greek bailouts through the nose. None of it, of course, ends up in the pocket of the Greek workers but flows straight into the hands of the creditor banks, who are sucking dry the welfare states. So if the German workers, the Greek workers and all the other European workers are screwed, who wins? The 1%. All European countries are going for massive austerity to make the people pay for the crimes by the 1%.

What all Europeans and all Americans have to understand is that the enemy can not be defined in nationalist terms. This is an extremely dangerous development. The enemy has to be defined in class terms. A small group of banker elites are accumulating the majority of the world’s resources, and they do so on the backs of all working classes. They picked Greece as a test case, but will move on to all European countries until no more can be raided from the once so generous welfare systems. All European governments are scared as hell about the judgments of creditors and rating agencies, which sets up a false dichotomy. It sets up the false notion that the workers are at fault for the crisis, and the 1% that collects the interest deserves all the money they got. This is nonsense. What happened is plain theft. And the only way to drive this point home is when the working classes of the countries and the timid governments decide to implement some drastic changes that could sustain the standard of living of all people, and severely curtail the power and influence of the banks and the superrich.

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One Response to Some Explanations on the Greek Malaise

  1. Pingback: Greek 1 Year Bond Passes 1,000% - I Love London Ontario / Love Local / Buy Local

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