Re: [OPE] Class Analysis of Greece and the EU

From: Gerald Levy <>
Date: Sat May 15 2010 - 06:55:18 EDT

Open letter to European policymakers: The Greek crisis is a European crisis
and needs European solutions
<snip> The Greek population is being asked to make painful cuts which will
only depress incomes output and
employment further, even as interest rates are driven up to crippling
levels. <snip>
Greece’s fiscal catastrophe has four causes. First, there is the past fiscal
weakness of the Greek state, in particular
the inability to generate tax revenues, as a share of GDP, in line with its
European neighbours, but also inexcusable
statistical manipulation. <snip>
Only the first of these reasons calls unambiguously for Greeks to accept the
pain of fiscal austerity. <snip>
This is quite a concession!!! And it is also self-contradictory since the
reason as cited above is very far
from an unambiguous call for austerity!!! It seeems to me that once you
concede the need for austerity,
the struggle is all but over.


Due to strong differences in wage setting, Greek nominal unit labour costs
increased by more than 30% since the start of EMU – and the increases in
Italy, Spain, Portugal and Ireland were even higher – whereas in Germany
they rose by just 8%. Monopolistic price setting is also critical, enabling
firms to pass on higher wage costs or imported prices onto domestic prices.
Such wage and price divergences are not sustainable within a monetary union
where exchange-rate adjustments are no longer possible. But this requires an
adjustment from both ends. Wages and prices in Greece and other countries
need to fall in relative terms, but they must increase faster in Germany,
whose aggressive wage moderation policies are deflationary, export
unemployment and threaten to explode the monetary union. This is the only
way to rebalance the euro area while avoiding the huge risk of a
deflationary spiral.

I'm sure this argument is being turned on its head by corporations and the
i.e. as a rationalization for wage _cuts_, rather than wage increases, in
the rest of the EU.

The author also concedes that wages need to fall in Greece and this, like
the concession
regarding austerity, plays right into the hands of the Neo-Liberals and the
capitalist class.


On the contrary it is in Europe’s vital interests to resolve the Greek
crisis on the basis of rising incomes
across the continent<snip>

This, again, is self-contradictory: a call for rising incomes across the
continent is not
consistent with the call for wage decreases in Greece.


 The future of the euro area as a whole is at stake. There is a serious risk
of a falling Greek domino knocking
over a series of other countries. Portugal and other countries now stand
where Greece was a few months ago.

The furure of the working class, rather than the future of the Euro, should
be our concern.


    * Greece accepts enhanced supervision of its public finances and
announces a longer-term fiscal consolidation package designed to have as
limited negative effects on demand as possible in the short run (notably
drastically reducing tax evasion), but primary fiscal surpluses in the
medium run; it couples this with a time-limited freeze on wages and
administered prices and policies to increase product market competition.

The demand for a wage freeze is reactionary and the historical experience
has been that
when there are both wage and price controls the state allows exemptions to
firms to raise
their prices over the ceiling and this causes inflation and a decline in
real wages.

In solidarity, Jerry


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Received on Sat May 15 06:57:11 2010

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