European economic crisis

On the most recent meeting of the European Council in Brussels

August 01, 2011

By Juan Chingo
Friday, July 22, 2011

After a last-minute agreement between Merkel and Sarkozy, after seven tense hours of meeting up to the night of July 20, on the following day, the people in charge of the euro zone, gathered in an emergency summit in Brussels, reached an agreement on a new "bailout" plan for Greece, acknowledging for the first time that Greece will not be able to repay all of its debts and accepting a partial default, the first one taking place in an advanced capitalist country in decades. Claiming for their part that Greece is in a unique situation, a dubious matter, they are, in fact, taking Greece out of the capitals market for ten years, by the euro group’s taking charge of Greece’s rehabilitation, with a new loan at lower rates than the current ones and a promise of investments, in what the European Council is pompously and extravagantly calling a Marshall Plan.

Although the plan involves a real breath of fresh air for Greece and its government, it only entails a slight reduction of the debt burden – 21% – in the framework that keeps all the Draconian attacks on the Greek workers and people. In other words, the announced restructuring is too limited to reestablish Greece’s ability to pay, which is why Greece will continue to be dependent on the trickle of funds from its European partners, in exchange for international economic tutelage and a reinforced need to fulfill its commitments, especially the privatizations. In plain language, the plan involves the subjugation of the Greek masses to thirty more years of being bled dry.

Next to these measures, the plan advances in real participation of the private sector, at the same time that the conditions of operation of the European bailout fund, the European Financial Stability Facility (EFSF), are being relaxed, permitting it to extend preventive credits and refinance the banks of countries with problems, although they have not been bailed out, at the same time as the purchase of bonds in the secondary debt market, but only under the order of the ECB and under circumstances of extreme financial instability, well thought out measures, taking into account the fragile situation of Spain and Italy, countries where the destiny of the euro is at stake. The weakest point of all this is the fact that the new conditions and tasks granted to the EFSF are being carried out without contributing a single euro more to its already overburdened funds, which is why it remains to be seen if they will be effective in achieving their aims.

The European leaders’ agreement, better than what was expected by bourgeois analysts, takes the euro zone, for the time being, from the abyss, where it was after the spread of the contagion to Italy, the third-largest economy of the EU, in recent weeks, by temporarily easing the tensions in the sovereign debt market, although at a high price. However, despite the positive reaction of the markets and the triumphalism of many commentators, the agreement is still far from being a long-term solution for achieving the stability of the euro zone.

22 /07/2011