Tuesday, 21 June 2011
Beware of Greeks bearing austerity measures.
So, George Papandreou, the Greek Prime minister, has won a vote confidence in the Greek parliament. The MPs will next be asked to approve a package of 28 billion euros of savings - this includes austerity measures, tax rises and privatization. These were demanded by the Eurozone ministers before the, agreed, 12 billion euros loan would be released, so that Greece can avoid bankruptcy.
The immediate crisis is over and it is expected that the measures will be agreed, despite the fact that the Greeks are not happy with the arrangement for they know there is no end in sight for these austerity measures - so large are their debts. No doubt there has been a collected sigh of relief throughout the global financial institutions as they will be fully aware that, had Greece defaulted, the knock on effect could have been equal to, or worse, than the global banking crisis that started with Northern Rock in 2007.
Once again a threat to these financial institutions has caused fear and dread amongst even the most powerful nations of the world because of the intricacies and interdependence of the global banking system. It is a system that cannot be allowed to fail because the economies of these nations will be so impacted it would oblige their governments to use the taxes collected from ordinary taxpayers to bail out the banks and/or potentially defaulting nations like Greece.
What is most galling is that so much of global financial activity is little more than gambling. Financiers speculate on future events using the money of pension funds and ordinary savers, however, not only can these bets threaten the global financial system if things go wrong, but also greatly increase the cost of essentials such as food and oil if they are successful.
Much of this activity is unnecessary, it just provides the opportunity for the well placed to make huge sums in a short period of time and provides the excuse for senior banking staff to demand grotesque bonuses [relative to the earnings of those whose money they are using as their gambling stake]. A route out of this bizarre situation is needed as it is recognized that these unstable conditions will continue, regularly, whilst customer's savings are used to fund these speculative ventures.
Al Murray, the Pub Landlord, had a habit of wearing a 'what happened to the £200 billion?' T-shirt after the last banking collapse which caused by the sale of packaged 'sub prime' mortgages in the US - implying that speculators ferreted away the missing billions from the banking system. This is quite plausible since money does not actually disappear - it exists somewhere, even if it has been converted into something more enduring in value by now.
The Greek debt crisis is essentially about the Greek government spending more money than it raises and its people not being prepared to reduce their standard of living by introducing a stringent austerity budget. These debts - as with those of Portugal, Ireland and Spain - have been required, primarily, because these nations joined the eurozone which removed their ability to allow their currency to fluctuate in accordance with the strength of their economies.
Although the value of the EU nations working together for their mutual benefit can be recognised, there is no need for them to share a common currency, have political union or use the same internal legal system. This Union's primary beneficiary are the global corporations who, in the main, do not have to adjust their products to meet different national requirements. However, more importantly, they can influence, by fair means or foul, the EU laws enacted, thereby providing themselves with beneficial trading conditions - an activity, with which, their smaller rivals cannot hope to compete.
These laws, once in place, are very unlikely to be changed because the EU Parliament does not operate in the same way as the House of Commons, where an incoming government is free to repeal laws introduced by its predecessors. To change EU laws an intensely bureaucratic system needs to be followed, the outcome being that time is not available to alter all but a few - and the committee members charged with the task, are most likely to be acting with the aim of benefitting the few rather than the many.
The Greek crisis coupled to the banking crisis demonstrate that these global and international organisations are the root cause of the majority of our, non-natural, difficulties. Unless you are amongst the few beneficiaries of this system, our, our children and grandchildren are unlikely to have any kind of hopeful future until these institutions have to had their powers severely reduced or entirely removed.
It seems as if the Unions have, at long last, come to the same conclusion. After suffering at the hands of Blair and Brown under New Labour, who fully embraced these global institutions, yesterday Dave Prentis - general secretary of the public sector union Unison, amongst others, threatened to work to create chaos until the attempt by the Coalition to privatize much of their current responsibilities is withdrawn.