Two
days ago Greece suffered its second debt-rating blow
in a week, when Standard & Poor's downgraded two top banks and
warned that the Greek economy was actually
in worse shape than it had predicted. Last week,
Fitch Ratings lowered its rating on Greece thus raising fears of a
potential default. On Monday the Greek government started a
'counter-attack' against the negative perspective of the country's
economic situation. In a televised address Prime Minister George
Papandreou outlined sweeping changes to increase competitiveness and
combat corruption and tax evasion.
Athens has come
under strong pressure these days from the European Central Bank and
the bureaucratic leadership of Brussels to adopt radical measures to
rebuild its economy after the recent downgrades. Indirectly, but
clearly, the EU asks from the newly-elected Greek government to send
the bill to the middle and lower classes; to exercise a strict
economic policy of austerity, reduce social spending and freeze
salaries for at least four years.
The major problem is
that Europe's economic leadership, as well as these uncontrollable
rating agencies, pretend to ignore the actual reasons which brought
Greece and possibly other countries in the near future on the
edge of fiscal precipice. It shouldn't surprise anybody. The appeal
to public debt and deficit is a known tactic of neoliberalism,
especially in times of financial disorder.
The advocates of
uncontrollable, devouring, Capitalism, try to suppress the fact that
among the major factors for public deficits burgeoning, is the
continuous feeding of Capital's tremendous profits - benefits through
scandalous tax exemptions and various sponsorships as a result of the
existing corruption between the State and the capitalist private
sector. Its characteristic that the Greek State loses around 1.2
billion Euros as a result of tax exemptions on ship-owning companies,
while between 2005 and 2009 the profits of the country's 300 largest
Cos. and banks were increased by almost 365%. "Some 300 companies
and banks in the last five years benefited from a reduction in tax
rates," Finance Minister George Papaconstantinou had said last
November.
Furthermore, the
Greek State loses around 2 billion Euros every year from the tax
evasion of employers who promote uninsured labor, thus contributing
to the devitalization of the pension system. This amount is
infinitely small related to the profiteering of Greece's creditors
mainly foreign or local banks. It should be noted that from the
annual budget of 2009, almost 42 billion Euros had been withheld for
this purpose. As a result of this social spending has been
significantly reduced, in favour of those who benefit from the high
rates of Greek government bonds.
An obvious question
comes to my mind: Doesn't the European Union carry any
responsibilities for this situation? Nobody can deny that national
governments, including Greece's, committed significant mistakes
in their economic policies. But, on the other hand, the bureaucratic,
pro-capitalist, elites in Brussels, Frankfurt or London cannot behave
like Pontius Pilate. Furthermore, they were the captains of Europe's
route to economic neoliberalism during the last decade a route
which brought the EU in today's crisis. The so-called Stability and
Growth Pact (SGP) is in danger due to the financial circumstances
while there is a need for a generous institutional reform of the
Eurozone. Because, unfortunately, the recent economic crisis exposed
the Union's actual impotence to foresee and, moreover, face such
negative economic situations.
The victims of
national debt throughout the years aren't few. From Yugoslavia (1991)
to Ukraine (1994) and from Indonesia to Zimbabwe, the onerous
conditions set by their foreign creditors led to strict austerity,
tax increases, rapid salaries decreases and job cuts thus destroying
their economies. Greece, or any other EU member-state, is not going to be their next victim.
The 'Priesthood' of rating agencies
Standard & Poor's,
Fitch and Moodys are regarded as the three major rating agencies
which provide opinions to investors on the ability and willingness of
issuers to make timely payments on debt instruments. According to an
official testimony by U.S. Senator Paul. S. Sarbanes, who since 2002
had publicly noted their controversial function, credit rating
agencies play a very important role in the capital markets, thus
having crucial impact on world economic structure (03-07-2006). On
November 2004, the Washington Post wrote that "from their Manhattan
offices, they can, with the stroke of a pen, effectively add or
subtract millions from a company's bottom line, rattle a city budget,
shock the stock and bond markets and reroute international
investment". It's characteristic that until the day of their
collapse, banking giants like AIG and Lehman Brothers were given very
positive investment-grade ratings from the above agencies.
The article was quite
revealing: "Without their ratings, in many cases, factories can't
expand, schools can't get built, highways can't be paved. Yet there
is no formal structure for overseeing the credit raters, no one
designated to take complaints about them, and no regulations about
employee qualifications. The big three ostensibly function as
a disinterested priesthood. When a company, town or entire nation
wants to borrow money by selling bonds, the market almost always
requires that the rating companies bless the move by running a kind
of credit check. Bonds they deem safe get a good rating. The higher
the rating, the lower the interest rate the borrower must pay"