European Central Bank extends credit on fears of Greek bank collapse
By Robert Stevens
20 June 2015
The European Central Bank (ECB) intervened again Friday to prop up Greece’s banks, as savers, fearing their imminent collapse, withdrew record amounts of deposits.
Following
the collapse of talks between Greece and its creditors—the European
Union (EU), the ECB and the International Monetary Fund (IMF)—over the
terms of a further spending cuts programme, billions of euros in
deposits were withdrawn from Greek banks. This week alone €4.2 billion
were withdrawn, including €1.2 billion on Friday.
To
stave off financial collapse and a default on its overall debt of over
€300 billion, Greece’s Syriza-led government requested that the ECB loan
Greece’s Central Bank an additional €3.5 billion. The ECB, which loaned
the Greek banks another €1.1 billion of “Emergency Liquidity
Assistance” on Wednesday to reach a total of €84.1 billion, released additional money Friday, though it is unclear how much. According to some reports, it was just enough to tide Greece over until Monday.
Speculation
mounted that Greece could even be forced to impose capital controls and
limit deposit withdrawals as early as this weekend. The Financial Times commented
that fear of Greek default on its €1.6 billion debt repayment to the
International Monetary Fund at the end of June “is rapidly being
overtaken by a separate—and possibly more dangerous—ticking time bomb:
the solvency of Greece’s banks.”
The ECB’s strategy is to keep Greece faced with imminent collapse with the aim of ensuring that a deal is signed after Monday
evening’s emergency summit of EU leaders, convened by President of the
European Council Donald Tusk. It is an extraordinary and reckless
example of brinksmanship—threatening not only the decimation of the
Greek economy but a potential domino effect that could impact on the
entire European economy.
It
is a strategy that the dominant sections of the European bourgeoisie
have all endorsed. The institutions will not tolerate any impediments to
their strategy of continent-wide attacks on the working class, with
Athens to be made an example of.
The Wall Street Journal reported
that Syriza has already offered austerity measures in the order of €2.5
billion to be implemented over two years. The European Union is
insisting on €3 billion in fiscal savings in this year alone, including
savage pension cuts.
Syriza’s latest proposal, presented at Thursday’s meeting,
was for the introduction of a “deficit brake”. This would automatically
cut spending across the board if the Greek government’s budget went
into deficit. This was bluntly dismissed by euro zone officials,
however; IMF head Christine Lagarde declared that there was an urgent
need for dialogue “with adults in the room.”
This
is the severest indictment of Syriza’s claims that it could safeguard
the livelihoods of Greek working people through an “honourable
compromise” with the financial oligarchy.
The
representatives of the world’s billionaires are demanding ever more
brutal cuts in order to ensure that the entire gigantic cost of the 2008
global financial crash is paid for by the working class for decades to
come.
In
his latest blog, Finance Minister Yanis Varoufakis summed up some of
the indices of the social catastrophe this has already produced in
Greece. Since 2010, “Wages fell by 37 percent, pensions were reduced by
up to 48 percent, state employment diminished by 30 percent,” and
“Consumer spending was curtailed by 33 percent,” he wrote.
“Around
1 million families survive today on the meagre pension of a grandfather
or a grandmother as the rest of the family members are unemployed in a
country where only 9% of the unemployed receive any unemployment
benefit. Cutting that one, solitary pension is tantamount to turning a
family into the streets.”
The Financial Times, which has repeatedly solidarised with Syriza’s call for a slower imposition of austerity, editorialised Friday that “The time has come for Tsipras to accept the deal from Europe.”
It
warned that the alternative was far worse. “Given Greek banks’
dependence on funding from the European Central Bank, default could then
push Greece out of the Eurozone,” it wrote. “The destruction of
Greece’s financial system would rip the life out of its economy and do
unknowable damage to its political system.”
Syriza
is not rejecting austerity, but seeking the most favourable political
terms for it to be implemented. Tsipras and Varoufakis argue that if
Greece is allowed to carry out less austerity now, it will be able to
pay back more of its debts later based on an assumed recovery of the
economy.
However,
even were a last-minute accord reached on its terms, this would not
fundamentally alter the attacks raining down on the working class. The Daily Telegraph recently pointed out that it would take Greece more than 40 years, to 2057, to pay back its astronomical debts.
A
central plank of Tsipras’s pose of offering an alternative to years of
austerity was that his government would function as more efficient tax
collectors. But with fear of a Greek default ever more pronounced, the
level of unpaid tax is rising with the resulting decline in state
revenues fuelling Athens’ crisis. New figures revealed that unpaid taxes
rose to €1 billion in May, bringing the total this year to more than €5
billion. Total outstanding unpaid tax stands at more than €77 billion.
In an attempt to strike a better deal with the EU, ECB and IMF, Tsipras attempted to
secure the support of Washington against the hard-line demands of the
EU, to no avail. The failure of this strategy means that Tsipras is now
relying on an attempt to play the “Russia card”.
Even
as the ECB was in session, Tsipras was speaking before Russian
President Vladimir Putin, as a guest of honour in Moscow. His speech
followed the signing of an agreement to build an extension of a pipeline
that would carry Russian gas to Europe via Greece. The possibility of
Syriza receiving financing from Russia was also broached.
Deputy Prime Minister Arkady Dvorkovich told Russia Today, “If financial support is needed, we will consider this question.”
Syriza’s
orientation to Moscow and China has major implications, as Greece is a
longstanding member of NATO. Tsipras even visiting Moscow at such a time
was viewed as an implicit threat. US magazine Foreign Policy wrote
with concern, “So far, Russia has largely stayed out of the European
financial crisis. But the Greek conundrum provides a tasty incentive to
dive in. If Moscow does, it would transform a five-year economic crisis
into a geopolitical one.”
Tsipras’s
speech, speaking alongside Putin only days after the EU extended
sanctions against Russia for six months, contained an implicit threat.
“The economic centre of the planet has shifted. There are new economic
forces that are playing a role,” he said. “Russia is one of the most
important partners for us.”
Greece was strategically important and “still preserves the status of centre of stability in the region,” he added.
Tsipras
seeks only to establish the best terms for the Greek bourgeoisie, and
he remains committed to securing a deal with the EU. To this end,
Tsipras is shoring up alliances domestically. On Tuesday,
he met with Stavros Theodorakis, the leader of To Potami (The River)
and Fofi Gennimata, the new leader of the social democratic PASOK.
Together the latter control 30 deputies.
Tsipras
is seeking a hedge against possible rebellion within his own party, if
he reaches a deal on the institutions’ brutal terms. Theodorakis is on
record that he will back any deal that is struck with the EU.
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