Mrs Merkel’s shame: the Banker and the extreme right

In Athens, the interim cabinet of the new Prime Minister, Lucas Papademos, was sworn in after a long dispute on Friday. For the first time since the end of the military dictatorship, states Walter Baier, self-confessed right- extremists and anti-Semites belong to the so-called “government of national salvation”.  The right-extremist LAOS-party will be part of the cabinet with one minister and three vice-ministers. So, this is what it looks like, the team that is to assist Merkel and Sarkozy in pushing through their programme of blood and tears that is to be imposed for the sake of the financial markets on the Greek population.

According to the published list of cabinet members, Socialist Evangelos Venizelos remains Minister of Finance and Vice Prime Minister. Former EU-Commissioner for the Environment, Stavros Dimas from the Conservatives, becomes the new Minister of Foreign Affairs. His party colleague Dimitris Avramopoulos takes over the ministry of defence. He will be assisted by a vice-minister of the extreme Right.

The most prominent LAOS-representative in the government is Makis Voridis, heading the Ministry for Infrastructure and Traffic. He was the founder of the youth organisation of the Junta of the Colonels and the chairperson of the “Hellenic Front”, which was dissolved in 2005 and hit the headlines for their hunts of migrants in the inner city ofAthens. Internationally, the man drew attention by his joint public appearances with the right extremist French Front National of Jean-Marie Le Pen and the Belgian Vlaams Block.

Voridis’ party colleague Adonis Georgiadis, co-editor of an anti-Semitic pamphlet among others, is the new Deputy Minister for Development and Shipping.

The Central Council of Jews in Germany has sharply criticised this appointment. Politicians of the LAOS-group, “have repeatedly attracted attention by their anti-Semitic comments”, President of the Central Council, Dieter Graumann, said to the media. “That now ministers of this party are allowed to become members of a new cabinet is really very sad”.

Under these circumstances, 17 November, the anniversary of the rebellion of the Greek students of the Athens Polytechnic, which led to a popular uprising, is charged with a double symbolic meaning: on the one hand, as a day of remembrance of the victims in the struggle for democracy and on the other hand as a day of resistance against the dictate of the troika, that is, the International Monetary Fund, the European Central Bank and the European Commission.

In many European capitals people will gather in front of the Greek embassies to express their vigilance and their solidarity.

Walter Baier lives in Vienna, and is Editor of Transform! Europe magazine.

Crisis hits but profits are rising!

Economist Michael Burke examines the distribution of national income between wages and profits. In Greece & Ireland, profits are rising even with economic contraction. This highlights the content of ‘austerity’ policies- driving up profits by driving down wages.In countries like Britain, where the economy is stagnating not yet contracting, the ‘austerity’ policy is also designed to drive up profits at the expense of wages. It may also have the same effect on eonomic activity, driving it lower while increasing profits.

“In a previous article I examined the profit rate in the Irish economy which is rising even though the economy continues to contract. Yet at the same time Ireland’s level of investment is falling. Corporate incomes – profits – are rising even though total economic activity is falling. Arithmetically, this can only occur by reducing the income of labour – wages are falling both in absolute terms and as a proportion of total economic activity. It happens that the Irish Department of Finance set this out with some clarity. This is indeed is the thrust of the entire ‘austerity’ policy – a transfer of incomes from labour to capital across the industrialised economies of Europe, as well as in the US and Japan.

Who Is Paying for the Crisis?

The table below shows the Gross Value Added (GVA) of selected economies, and how this is divided between the compensation of employees and the gross operating surplus of the corporate sector. GVA is a measure of all the value created in an economy. It is the same as GDP except that it excludes the impact of taxes and subsidies. With some important qualifications the Compensation of Employees (CoE) is akin to labour’s share of that value added, while the Gross Operating Surplus (GOS) is akin to the level of profits in each economy. This provides an approximate measure of economic activity and its distribution as income: Value-Wages-Profits. In the table blow the profit rate is calculated as the share of GOS in Gross Value Added.

Table 1. GVA, Compensation of Employees, Gross Operating Surplus and the Profit Rate, €bn in 2010 (unless otherwise stated)

11 11 13 Table 1

The general tendency has been that the crisis-hit countries have the highest profit rates. This was an important factor in the build-up to the crisis. In nearly all countries the crisis was characterised by reduced investment by the corporate sector, which remains thedriving force behind the economic crisis. In these higher profit countries the fall in investment had a greater impact on aggregate demand as the corporate sector takes a bigger share of GVA. In turn, the fall in investment had a bigger negative impact on household incomes, especially through rising unemployment.

Profits and deficits

The profit rates should also be seen in relation to the public sector deficits that have caused so much turmoil. In all cases the public sector deficits are a fraction of the level of profits. In Greece the 2010 deficit was €25bn, in Italy it was €70bn, in Ireland it was €19bn (excluding an extraordinary bank bailout), and so on. The deficits could easily be covered in their entirety simply by extracting a fraction of the profit level from the corporate sector in each country. The same is true of Britain, where the profit level in 2010 was £475bn compared to a deficit of £137bn. (The British profit level is depressed and consequently the profit rate is lower because of the slump in the financial sector – a factor which also applies to a lesser degree in the US and even to France).

Who can pay for the crisis?

There are effectively three destinations for profits. These are investment, which raises future prosperity, or dividends for shareholders which are not invested or huge executive compensation and bonuses, both of which do not. The table below shows the level of profits, the level of public sector borrowing and the level of gross fixed capital formation (investment). In the last column the difference is shown between the level of profits and the level of public borrowing and investment combined.

Table 2. Gross Operating Surplus, Public Sector Borrowing and Investment, €bn in 2010 (unless otherwise stated)

11 11 13 Table 2

Table 2 shows that in all cases the current level of both the public sector borrowing and the current level of investment can be funded by the level of profits in each country and in the Euro Area. In most cases there is scope to fund both the deficit and significantly increase the level of investment. But the opposite has been happening.

The struggle over distribution of national income

In most recessions capital’s share of income falls. This is not because wages rise, but because profits fall at a faster rate than the fall in output. What then usually occurs is a struggle by capital to regain its lost share of income. It does this by cutting wages and benefits, by increasing unemployment and by reducing its tax burden – financed by reducing social welfare benefits. This is the content of ‘austerity’ measures.

Figure 1 below shows how this has operated in the Euro Area as a whole. Between 2008 and 2009 GVA in the Euro Area fell by €254. Confirming the idea that profits fall at a faster rate than output, Euro Area profits (GOS) fell by €227bn. Profits fell by over 6%, twice as fast as the fall in output. Wages (CoE) fell by €17bn.

Figure 1

11 11 13 Figure 1

However, this natural tendency for profits to fall at a greater pace than the fall in output is interrupted and diverted by a series of interventions, including rising unemployment, wages and benefit cuts as itemised above. In the period 2009 to 2010 Euro Area GVA rose by €188bn. Of this increase in output €139bn went to profits and just €53bn accrued to wages.

Because of inflation the real level of both wages and profits has fallen sharply – all these data are in nominal terms and do not take account of inflation. The ‘austerity’ offensive to increase the profit share has partly been successful, but the wage share of national income has not undergone any strategic reversal.

This is contrasted with Greece. Greek nominal GVA did not fall in 2009 at all as the Greek recession was shallower than most. GVA fell in 2010 by €6bn. This is shown in chart 2. The massive offensive against Greek workers and the poor means that the natural tendency for profits to fall faster than output has not operated. The level of wages fell by €4.4bn and profits fell by just €1.8bn. The wage share of national income has suffered a reversal.

Figure 2

11 11 13 Figure 2

Readers will be interested to know where Britain stands in relation to these examples, one of them the extreme case of Greece (and previously, Ireland). In 2009 British GVA fell by £38bn, shown in Chart 3 below. This was exceeded by the fall in profits, down £43bn and wages rose by £5bn. The entirety of policy since has been to reverse those trends. GVA rose in 2010 by €40bn. (It should again be stressed that these are nominal data, in real terms output is still over 4% below its peak and real wages have fallen).

Figure 3
11 11 13 Figure 3As a result of initial ‘austerity’ measures, £18bn of the increase in output has been claimed for profits. But it is widely understood that the real offensive in Britain only began in the new Financial Year, which began in April this year. What is being attempted is a decisive reversal of the wages’ share of national income.


Countries like Greece are experiencing a qualitatively sharper crisis than the European average. There is a high correlation between the likelihood of economies falling into this type of extreme crisis and their exceptionally high level of pre-crisis profits. Because the income of the corporate sector is a much greater factor in the economy, their investment strike hass a proportionately greater impact on total output and/or government finances.

Profits remain exceptionally high, so much so that they could finance the deficit while simultaneously increasing the level of investment.

Under normal working of a market economy the tendency is for profits to fall faster than output. The entire ‘austerity’ policy is to prevent this tendency from operating, and to reverse it by reducing wages even faster than the decline in output. In the Euro Area, to date this has only been achieved in Ireland and Greece.

In Britain, it’s too early to say whether a similar ‘austerity’ drive will achieve the same disastrous results. But it is clearly the aim of government policy to drive up profits even while the economy is stagnating. This can only be achieved by driving down wages.”

This article was previously published in the Socialist Economic Bulletin

Greek Debt Audit Campaign warns of turn to authoritarianism

The appointment of Loukas Papademos as Prime Minister of Greece marks a turn towards authoritarianism, says the Greek Debt Audit Campaign.
The appointment of the new government at our creditors’ behest, sealed by the EU and the bankers, results in nothing less than the dramatic collapse of democracy and the flagrant violation of the Greek people’s will, as was expressed in the parliamentary elections of October 2009. The new government, headed by Loukas Papademos, is neither a caretaker nor a transitional one. It is an uncontrolled, non institutional government; an instrument working on behalf of powerful interest groups coming to enforce the deepest austerity and the harshest of spending cuts.

Based on the latest press releases, the new government’s main goal is to strive towards voting through and imposing all the necessary measures needed to secure the instalment of the 6th tranche of the bail-out loan, worth 8 billion euros, most of which – must be noted – does not go towards paying wages or pensions, but towards servicing old debt which is expiring. The government’s main goals are therefore to pursue further dismissals of public sector workers, to shut down public utilities and businesses, to vote in new laws which will reduce pensions and abolish any tax exemptions, to appoint a Gauleiter in all ministries to oversee spending cuts etc. The parliamentary vote on the new bailout package will seal the fate of Greek people leaving them hostage in the hands of the bankers for decades to come.

The new government’s agenda comprises a Super Memorandum, much more reactionary than the previous ones. While consenting and submitting to our creditors and major stakeholders, the government of the Memorandum will lead the country to new records of authoritarianism aimed against society and new social movements. Servitude abroad and suppression within will be the new attributes of the government.

For these reasons this government has no legitimacy in the eyes of the people and must be overturned through social struggles!  The regime of impoverishment and servitude, imposed under the guise of servicing the public debt reinforces the need to open the books of the public debt, to move towards a complete moratorium on debt payments NOW and to pave the way to part or full cancellation of the public debt.  The severe, colonial terms imposed by the European Union, reminiscent of a loan shark, add an additional impetus to declare the public debt illegal, odious and unconstitutional.

The Greek Debt Audit Campaign calls on society to overturn the dictatorship of Memoranda. It calls on working people and all those affected by the terrible austerity policies to take part in the social struggles to undermine and deflect these policies!

  • Public audit of Greek public debt led by social and workers’ forces
  • Cessation of payments and debt cancellation
  • Overturning the government appointed by our creditors!
10th November 2011
(translation by Christina Laskaridis)

Message from Synaspismos Youth: Masks thrown off! Resistance!

As Greece awaited the announcement of a new prime minister, Neolaia Synaspismou (the Youth of Synaspismos) together with students, precarious employees and the unemployed, sent a message of resistance, against  the anti-democratic and reactionary political forces that wage war against workers and youth.

“They have understood nothing, given that they seem to believe that social rage will be reduced if there is a governmental coalition and a bigger parliamentary majority to ratify their measures.

The new government is merely the desperate last effort of the “ancien regime” to pretend that it does not hear the popular will, as it  was expressed in the recent huge demonstrations in 19-20 and 28 October.

For them, democracy is a menace for the “common national benefit” and the elections a very risky procedure. That’s why they appointed a government  that, without any popular legitimacy, is called upon to  take fundamental decisions that will bind the Greek society for the forthcoming 20 years.

For us, this government is nothing else than the guarantor of unemployment, authoritarianism and suppression, namely of the same policy that is being followed exactly in the same way in more and more countries of the Eurozone. At first it was Greece, Ireland and Portugal; afterwards it was Italy and Spain and  now France is ready to follow. It is the policy that tries to transfer the burdens of the crisis to the workers, leaving the capital intact, and always through a national discourse.

All of them are the same people who are afraid of the popular verdict, who do dare to use any kind of undemocratic means to suppress popular struggles, so as they can implement every aspect of the Memorandum.

However, the initiators of this “omertà” between the bankers and the bipartisan system make a mistake; they ignore History. They forget that, whenever governments ignored the people, they were overthrown by the people.

The time has come to give the final blow to a system which is collapsing. No matter which is the choice of the “Memorandum party”, the response of the society must be a total smashing of their blackmailing and their policies. The struggle for the overthrow of their policy is the only solution.

We call upon workers, the unemployed, the youth, to hit the streets, in order to defend their rights and overthrow the new government.

No tolerance to the Memorandum and its political exponents. Now it’s time for the people to decide!”

Neolaia Synaspismou – The Youth of Synaspismos  –