“United” They Fall: Grexit Haunts Conflicting Eurozone

Conflicting eurozone is searching conciliation while being haunted by the specter of Grexit – Greece 's exit from the eurozone.

At the just concluded G-8 summit the conciliation effort produced an ad hoc understanding, and the witness was an isolated Angela Merkel. A deeper dividing line ran through the communiqué the summit produced.

Now, as the specter of Grexit appears larger Merkel and co. is airing a plan for a smaller divide and a stronger union. Jörg Asmussen, the former German deputy finance minister and, at present, the German board member at the European Central Bank, a Merkel-voice, has floated the idea of a federalized political and financial union within the EU: a politically integrated eurozone splitting the Union into two, with the core forming a “banking, fiscal, and political union”, temporarily abandon its expansion plans in the Balkans and Turkey, and the European parliament wielding more extensive powers.

Is it the dream of the German capital? The idea simultaneously shows aspirations and limitations of a section of capital in Europe that aspires to be all dominant but lacks the power to dominate. Materializing the plan is an almost impossible task now.

Merkel finds herself increasingly isolated, a show of disunity, while she represents a capital adamant to impose its diktat on the weak – prey to powerful capital. In the G-8 summit, Barak Obama kept a hand of friendship on the shoulder of François Hollande, the socialist French president.

In the coming formal and informal meetings in Europe , Hollande will stand closer to Mario Monti, the Italian leader. And, David Cameron will play the second fiddle, which will be, at times, insignificant, and at times, will not sound sweet to Merkel's ears.

Hollande will push the Germans to accept the idea of growth measures and eurobonds. But that's not acceptable to the Germans. Herman Van Rompuy, the European council president, appeared to lend support to the German agenda while Italy and Britain  are expected to back Hollande.

These testify Merkel's further isolation in Europe , fractures in the continent, and conflicting interests that dominating capital fails to unify.

The G-8 summit found a seemingly adamant Merkel. But Obama's choice was conciliation as he was in need of that posture. The German position carries risk of aggravating European crisis that in turn may push up the US jobless number. Obama can't afford the number ahead of his election travel. Cameron tried to act as a conciliator between contending parties. The Anglo-American alliance jointly encountered the Merkel position. She had to make a retreat.

The German leader considered that it was not the business of the G-8 to tell the EU states the way to handle their economy. But the summit communiqué iterated the right of the super-group to discuss the state of the European economy, and the German opposition was by passed. The super-group signaled: Europe is yet not a German domain.

The communiqué committed the G-8 to “take all necessary steps” to strengthen their economies. It said: “ Greece should remain in the eurozone”.

The official document declared in its opening paragraph: “Our imperative is to promote growth and jobs.” For the time being, the communiqué stands as a document of victory for Obama and Hollande. However, differences on policy issues persist.

Trans-Atlantic interests and power equation thus got reflected in the communiqué. But Grexit continues to rock the boat.

Grexit is an interesting issue! It unites, and it divides, it makes unsure, and it makes stubborn. Behind closed doors, the prime actors threat Greece to evict while publicly they assure Greek's membership in the zone. A section is scared of Grexit while another section calculates possible losses in case of the exit.

The interests differ as they are not sure of the way to deal with the issues emanating from a sick economy that is threatening the continents' economies. A weak scars a strong! The fear of chain-reaction of the Greece syndrome is now haunting eurozone politicians.

All bank-interests have united to threat the Greek voters. They are now warning Greece , and manipulating Greek politics so that pro-austerity politicians turn winner in the coming election. Their message is point blank: Voting for Syriza, the radical left coalition opposing austerity and bankers, will be a dangerous gamble.

In the task of warning the Greek voters Cameron has lent his voice to Merkel. He has issued a warning. In Chicago , he said: “We now have to send a very clear message to people in Greece : there is a choice – you can either vote to stay in the euro, with all the commitments you've made, or if you vote another way you're effectively voting to leave.”

A drama of denial and assertion preceded the Cameron-warning. It was reported that in a telephone conversation with Karolos Papoulias, the Greek president, Merkel suggested Greece hold a referendum on euro membership as part of the general election. But Merkel's spokesperson denied the report. However, the Greek interim Prime Minister Panagiotis Pikrammenos's office stated that the chancellor had presented the proposal during a telephone conversation with Papoulias. “It is true”, said a Greek government spokesperson.

Cameron and the German leader stood together. Grexit has united.

Jens Weidmann, the Bundesbank president, warned Europe 's central banks not to increase their exposure to Greece because of political uncertainty there before the elections. Is it a banker's way of bargaining or putting pressure on client?

Wolfgang Schäuble, the German finance minister, said Greece had to elect a government that continued to adhere to the international bailout program. “If Greece … wants to remain in the euro then they have to accept the conditions. Otherwise it isn't possible. No responsible candidate can hide that from the electorate”, Schäuble said. Ken Clarke, the British justice secretary, has warned: Greece will face a disastrous future, and may be forced to leave the euro if it votes for “cranky extremists”. A direct instruction to voters!

More threats to the Greek voters are there. Martin Schulz, the European parliament president, said a €130bn rescue package reached with international creditors in March could not be renegotiated. “ Greece […] shouldn't self-destruct”, said the German politician. “We want Greece to remain part of our family, of the European Union,” said Jose Barroso, European Commission president. “That being said, the ultimate resolve to stay in the euro must come from Greece itself.” The EC is insisting that Greece must honor the austerity measures. Juncker, the prime minister of Luxembourg , said: The coming election would be Greece 's last chance. If Greece fails to form a government that respects the conditions for previously agreed to financial aid to Greece set by the EU, IMF and the ECB, “then it is over”.

Jean-Claude Trichet, the former European Central Bank president, argued that eurozone states should be able to declare fellow members bankrupt, and take over their tax and spending policy. But the idea was dismissed by economist Nouriel Roubini as “totally undermining national sovereignty”. Roubini has missed the already undermined national sovereignty in Greece and Italy . [One can now easily perceive the way poor countries in the periphery are dictated, threatened, and manipulated, the way their sense of national honor is trampled. Junior employees from countries in center ask these peripheral countries: “Do it.”]

The threats, warnings, etc. reveal the higher level of stake in Greece with about €400bn in external debts. “Officially”, a press report says, “eurozone governments say they're not talking about a Greek exit. But it's a different story behind closed doors. Finance ministers meeting in Brussels last Monday threatened to evict Greece .”

Exact Greexit-chain reaction is unknown to all. There are assumptions and fears: From market melt down to political backlash to bankruptcies to recession, and a lot will follow.

The European sovereign debt crisis has also become a banking crisis. Spain is on the brink. The country can uncork bigger problem. The crisis has been exacerbated by the revelation that the Spanish deficit is larger than previously feared, putting pressure on its sick banking sector. Merkel summoned her Spanish counterpart, proud, conservative Mariano Rajoy, to meet her.

Banks in Italy and Portugal are in “solidarity” also. All of them are facing risks. They may drag down the German banking system. Britain is heavily exposed to the crisis. The US will not be immune to the Greek disease. The US Fed is becoming increasingly concerned about the situation in Europe .

Rating agency Moody's has already downgraded 26 Italian and 16 Spanish banks. Spanish banks were sitting on €148bn of bad loans in March. The proportion of bad loans of Spanish banks has risen to an 18-year high.

Fitch has put three Cypriot banks on rating watch negative. Fitch warned that Cypriot banks remain highly sensitive to Greece-risk.

A loss of confidence in the banks will be catastrophic. Fear of a full-scale bank run is high. The consequences will be serious.

Deposits in Greek banks have already come down by almost a third. Greek savers are withdrawing euros from their bank accounts. Recently, in a single day, about €900 million was withdrawn. The Greek banks, according to an analyst with Moody's, have become “economically insolvent”.

The European Central Bank has confirmed that a number of Greek banks have now been cut off from its refinancing operations.

Wealthy individuals in crisis-hit countries are moving billions of euros to areas they consider safer. There are signs that section of French rich are moving to London .

“And now”, Paul Krugman writes, “comes the moment of truth.” (“Apocalypse Fairly Soon: The Moment Of Truth In Europe ”, The New York Times , May 18, 2012 )

Terming the euro as a “grand, flawed experiment in monetary union without political union” Krugman assumes: “[T]he euro as a whole would blow up. Things could fall apart with stunning speed, in a matter of months, not years. And the costs — both economic and, arguably even more important, political — could be huge.”

He echoes the already widely expressed fear: “[A] euro breakup would have negative ripple effects throughout the world. For the biggest costs of European policy failure would probably be political.”

Euro was one of the biggest projects of capitalism in Europe . Now, a significant portion of capitalism in Europe – the eurozone – is struggling within, with self. Its intricate inefficiency is now coming out to view of the common persons. It's not its tragedy, it's one of its attributes. It dreams to encompass all and everything but it doesn't know to control the forces it nourishes and unleashes. Contradictions it is confronting now were created by none, but itself. It has widened the extent and consequences of the contradictions, to far flung areas, crossing oceans.

In the continent, it is barbarously waging a class war not only against labor, but also against broader society, not only in a single country, but in countries, and crossing the continent, it is endangering not only poor countries, but also its class allies – the uncouth rich – in those poor countries. It's its capacity that undermines its legitimacy. It's its power, a power that can try to survive only at the cost of others, class enemies and class allies.

It is intervening in countries' political system, and it is propagating non-interference. It is dictating countries, and it is propagating democracy. It's standing on fault lines, and it's sure of its destiny.

Grexit , Spain , Italy , Portugal , and euro-disunity and euro-unity are facilitating further shifts in the continental plates.

Protests In Spain Greece France And Britain

Eurozone is in turmoil. Protests in different forms, from election verdict to marches, against bankers are razing countries in Europe while an indefinite-Greece is making euroscape scene blurred.

Bankers are uncertain with the Euro-situation as they train the continent appearing sick. There is voters rejecting bankers, there is near-unprecedented police protest questioning profit, there is politics of people standing opposed to politics of bankers. It is like a torch alighted with the Parthenon Marbles in Greece and being relayed to Britain while the bankers yet don’t know the equation of politics with debt and austerity. The Euro-financial crisis and Euro-political problems are reacting with each other.

Peoples in France and Greece have rejected austerity measures in national elections, local election in Italy has conveyed the same message, Greece is nourishing its democracy in a political deadlock, people including police in Britain have demonstrated opposing austerity measures, Indignados are marching in Spain shadowed by banking crisis, a government in the Netherlands has collapsed, financial measures in Ireland and Portugal are being questioned, French economy is ailing. This is the reality in the continent.

Each political move and whisper, peoples’ each expression in Europe is making London’s FTSE 100 index, New York’s Dow Jones Industrial Average, Germany’s blue chip DAX index, the Paris stock market, the European EuroStoxx, Asian markets, Greece’s exchange jump or dance or sleep. None of these likes the political developments in France and Greece. Uncertainty dominates the continent.

Klaas Knot, governing council member of European Central Bank, said the risk of a double dip recession had become reality in Europe. De Nederlandsche Bank, the Dutch central bank, in its latest semi-annual risk report on the Dutch financial sector has warned that with an unresolved eurozone crisis Europe faces a lost decade: a longer period of stagnation. Weak economic growth, lower consumer spending, inadequate investment could create the scene. Countries in the periphery are turning vulnerable with weak public finance and economic performance, and frail banking sector. The Bank of France in its latest economic forecasts has warned that the French economy is part-way through a six-month period of stagnation.

Citing a poll, Bloomberg reported that 57% of its 1,253 investors, analysts and traders assumed that at least one country will abandon the euro by year-end. However, a Reuters poll found 35 of the polled 65 economists hoped that Greece will be in the euro at the end of 2013.

But the Greek-eurozone situation is near-hopeless. Public and politics often nullify pundits.

Concern over the Greece stalemate has been expressed by the Institute of International Finance. The IIF represented Greece’s creditors in its debt deal. If Greece were to quit the euro, the IIF’s members would be hit with huge losses. French bank BNP Paribas has calculated the impact of a Greek exit on its economy: an assumed Greexit would wipe out 20% of Greek GDP, push up inflation by 40-50%, and send the country’s debt/GDP ratio jumping to over 200%. A Greexit would be bluster to the Euro banking sector.

Now, it seems, Europe’s central bankers are preparing for exit of Greece from the eurozone. German central bank chief Jens Weidmann has warned: No new aid to Greece if bailout commitments are not kept by Athens. The Irish central bank chief Patrick Honohan doesn’t consider a Greexit would be fatal to the euro. EU Economic and Monetary Commissioner Olli Rehn is confident: Europe is “more resilient” to a possible Greexit.

Greece: People against creditors

Verdict of the Greek people suffering under creditors’ command has been proclaimed in the last election: Reject the arrangement of making bankers richer.

But, the mainstream politicians, mostly rejected by the people, are united in opposing the people’s verdict: reject creditors’ conditions – austerity. Under warnings from the IMF, the German Chancellor and the European Commission these politicians are exhausting their energy to form a coalition that would toe to the creditors. The deadline is May 17. Karolos Papoulias, the Greek president, is now striving to forge a coalition so that an immediate election can be avoided. This exercise – overturn people’s verdict – is the bourgeois democratic practice. Already three bigger parties – the centre-right New Democracy, far-left bloc Syriza and socialist Pasok – have failed to form a government.

A fresh poll, almost inevitable, is expected to be held by June 17 at the latest. A second election would change the Greek political dynamic that in turn would react in bankers’ headquarters.

Creditors in no phase of human history are concerned with plight of common persons. Greece is losing 922 jobs a day. The unemployment rate rose to 21.7% in February. In terms of number, it was more than a million. In the 15-24 age group, the rate was a record high: 54%. In February 2010, it was 15.2%. This forms a mirror of bailout-austerity measures imposed by creditors, and one of the central issues shaping politics in the country.

The European Financial Stability Facility, the €700bn bailout fund, has agreed to pay out the scheduled €5.2bn to Greece. As part of the bailout deal more than half of it will effectively be returned to the European central bank and other eurozone central banks within a week. Athens also lacks cash for salaries. As first installment, €4.2bn will be delivered and the fate of the rest will actually be decided by political development in Greece, a warning to the people: behave as the creditors command, otherwise, salaries and wages will be withheld.

Creditor created panic is driving the actors in the on-going political drama in Athens. But the people have defied the EU-IMF lordship. Aleka Papariga, the Communist Party general secretary, has called for new elections “to put an end to the mockery of” forming coalitions. While reiterating her party’s position to stay out of any government that might be formed she accused Syriza of irresponsibility and of undergoing continuous mutations. She added: “Under a leftist disguise it attempts to convince the people that workers and capitalists can coexist and prosper.” Syriza avoids taking a clear stance on NATO membership and major foreign policy issues, said Aleka. Adventurism sometimes is a powerful attraction.

Coming days will intensify political turbulence in Greece that will be nervously monitored in Brussels, and in eurozone capitals.

France: Aspiration will be compromised

Compromise will be the political mantra of Francois Hollande, the new socialist avatar of France. His jubilant supporters around the Palace de la Bastille thought history was in the making as he once declared the world of finance was his “real enemy”. But the reality under capital’s command is different.

Hollande will make his promised visit to Berlin within hours of his swearing-in for talks with Angela Merkel, the German Chancellor. Merkel is ready to welcome the moderate socialist with “open arms”. She said Franco-German cooperation was “essential for Europe”. The French leader also perceives the reality. Bank interest will enforce a compromise. Agenda of the Berlin meeting is nothing new: the old eurozone crisis and reaffirmation of the Franco-German partnership, which will flow along the undercurrent of competition.

Hollande adhering to status quo will turn Merkel’s competitor-ally. His election promise was: renegotiate the eurozone’s fiscal pact, the Merkel-Sarkozy brainchild. But the German leader is stubborn: no re-opening of the pact. Hollande favors joint EU investment in major projects while Merkel’s choice is structural adjustments to labor markets and pensions. Hollande prefers boosting growth with more funds to the European Investment Bank. Volition of the stronger economy shall prevail.

However, bankers are going to consider the issue of growth along with their loved austerity. Voters have alerted the bankers.

European Council President Herman Van Rompuy has invited EU leaders to a special summit on growth this month. It will be followed by a “growth pact” to be adopted at the EU summit in June. Merkel and Hollande will join together. It’s not only a compromise of the two leaders; it’s also a compromise with reality. It’s a lesson all bosses everywhere decline to learn; but, reality isn’t obedient to bosses’ dictates.

With the electoral promise to “change the destiny of France” Hollande now faces an ailing economy in home: faltering growth, coiling public debt, sick industries, record unemployment. The French voters rejected rightist policies. It was their protest. The French socialist’s electoral promises include creating 60,000 new jobs in education, tax those earning over €1million euros a year with a 75% rate. But he will have to encounter obstacles difficult to circumvent.

Britain: For public, not for profit

In England and Wales, police officers held one of the biggest demonstrations in recent times. Their demand: halt cuts and privatization of the service, and full industrial rights. There banners proclaimed: “Police for public, not for profit”. Their number: More than 30,000, claimed the Police Federation. Family members also joined the marchers.

Citing the participants, the British press said: There is anger as the rank and file officers face cuts to their pay, pensions and changes to their working conditions. A press report quoted one detective constable: “Our problem is we don’t have a union, so this march is the strongest action we can take. I think there are a lot of us wanting full industrial rights, and the right to strike.”

The incident is significant as it shows the way anger accumulates, fault line appears, expression gets organized, and expression denies to getting subdued. It’s a process within society. It’s not that Lenin was there, and he sent Bolshevik agitators there. Rather, there is an incident, now exposed, of “love” and betrayal – police officer infiltrating environment movement, etc. acting as falling into love with activists and continuing with following phases, provoking novice activists, then, betraying, and, then, getting exposed, then, at last, finding himself abandoned by all his loved, and, standing before a court of law. Elites and their lackeys in all lands are incapable to learn from incidents of “love” and betrayal, incapable to learn from struggle of the masses, which is not dependent on individual’s wishes.

There in Britain the emerging issues are, as one writes, mammoth wealth, the forgotten section of the society, “growing gap”, “democratic deficit”, “the cabinet stands accused of being divorced from normal people”, “fractures run deeper”, “the worsening plight of swaths of our society [flying] under the national radar”, eroding support for the homeless, victims of domestic violence, those with mental health problems, the elderly and alone, children in broken homes, “the spectre of a forgotten Britain becoming reality”. Serious questions shall emerge if one adds the way a section of media played with public mind by hacking telephones, by collaborating with powerful politicians, the way it made money and propagated its ideology. A careful scrutiny of the incident may impress upon that Lenin told very little about shameless, corrupt bourgeois press. But the revolutionary told brute facts now being confirmed by the incidents in Murdoch’s empire.

These incidents are influencing the British society, influencing the common people’s perception; but the bankers are training their might for further plundering, for further cuts.

Spain: Indignados again

Indignados are again on the march. Their slogan: “We need to take back all the wealth and redistribute it fairly”. They are in tens of thousands. Scores of cities across Spain are holding protests against politicians and bankers. It is one-year anniversary of the movement.

There is government crack down on the protest. Police is not going to tolerate encampments of the protesters. The time period for protest has already been dictated by the authority. One shouldn’t forget: It’s bourgeois democracy.

With youth unemployment at 50% in Spain the movement’s call for social justice, wealth distribution, human rights and peace is universal. Stop proposed budget cuts in health and education is one of the major demands of the Indignados. The demand has deeper root in the society. But, bankers and their political friends decline to recognize the root.

People in Portugal, Italy, Belgium, Germany, the UK are also participating in the movement.

However, the Spanish elites have their agenda. Promoting the collaboration between bankers, real estate lords and state further Bankia, the country’s fourth largest bank, has partly been nationalized. Most shares of Bankia were once sold to ordinary persons. Now, the ordinary share holders face large losses. Spain’s banks have already consumed about €16bn of public funds. Within the next few months they will hopefully consume another €50bn. It’s bankers’ boon.

It’s not a footnote: Nazis in Greece

Near-economic-disaster, common persons’ desperate condition, servitude by mainstream political leadership, sale out of democratic principles, weakness in political education, are fuelling rise of Nazis in Greek politics.

History tells capital, at times, needs help of Nazis, and capital embraces the help. At times of crisis, capital takes draconian steps. Nazis/fascists act as capital’s obedient tool to impose these steps. The Nazis create an environment of fear. They threat press as a step of muzzling down freedom of expression. At times, Nazis are taken casually, are considered tactical ally, and are appeased, only to get annihilated by the Nazis.

With 21 seats and 7% of the votes the Greek neo-Nazi party Golden Dawn is now threatening journalists, demanding that journalists should stand up when its leader enters a press conference, wanting to seal Greek borders with landmines, and promising to “rid the country of their stench” – immigrant workers. The neo-Nazi leader Mihaloliakos praises Hitler while his followers use an ancient symbol resembling the swastika as its logo, learn from books on Aryan supremacy, and are linked to racist attacks on immigrants. Greek journalist Xenia Kounalaki wrote that Greeks should ignore Golden Dawn. She has been threatened: She should “watch her back”. The mayor of Nemea Vangelis Andrianakos has also received threats from the Golden Dawn.

But, all these are not the concluding parts of the incidents in the continent as capital there still occupies space for manipulation. A lot of dramas still are to be staged there as contradictions are yet to sharpen further.