TALKS on a Greek debt deal, it was reported yesterday, have ‘hit a snag’. The Institute of International Finance (IIF), and their creditors group representatives, Charles Dallara and Jean Lemierre, have walked out of the Athens crisis talks with the Greek government.
Not to worry – they left the talks because of ‘longstanding personal appointments’, or so it was said.
Their personal appointments are presumably more important than the consequences of failure. These are:– forcing Greece out of the EU, igniting a collapse of the euro, the eurozone, and a large number of EU banks, triggering a deep worldwide slump.
The inane excuses for the walk-out cannot disguise the fact that the ILF private creditors, mainly hedge funds, are refusing to accept a 50-75 per cent haircut, and are willing to bring down the EU and collapse world trade to prove the point that they are insured against a default, and that they are determined to get their money back.
However, a ‘haircut’ deal is vital for capitalism, to allow Greece to secure a new 130bn euro rescue package from the EU and IMF by March, to meet its next debt repayment deadline.
Now, there will be no deal before eurozone finance ministers meet on Monday to consider the crisis.
The Greek unelected prime minister Lucas Papademos is on record as stating that Greece may have to default on its debts in March. He has been urging the Greek trade unions to accept huge wage cuts so as to be able to repay as required.
Greek workers are however refusing to accept further wage cuts and more and more workers are recognising that the socialist revolution is the only alternative to collapse under capitalism.
The EU’s banks have been trembling at the prospect of a Greek default for some time.
In the eleven months to the end of November 2011, 161bn euros of bank deposits were withdrawn from eurozone banks. 61bn euros were taken out of Italian banks, 48bn euros from Spanish banks, 42bn euros withdrawn from Greek banks and 10bn euros withdrawn from the Irish banks.
It is crystal clear that a refusal of the IIF-represented hedge funds to make a sacrifice for the benefit of the banking system as a whole will touch off a massive run on the eurozone banks. This will spread throughout the EU banks, including those in the UK, and also undermine the US banking system.
Capitalist states that propose new state rescues of their banking system will risk provoking revolution.
In fact, when Greece is evicted from the eurozone there will have to be a state-imposed closure of banks to try to halt mass withdrawals. The response to this will be uprisings.
The ensuing credit crisis will make the crisis of 2008 seem insignificant, and the world economy will fall into a deep recession.
The heavy European exposure of the US and other banks means they’ll all be brought down as convulsions grip financial markets.
Greece has ‘over 328 billion euros’ in toxic debt, more than Ireland and Portugal combined. All the other eurozone countries are also deep in debt. Once one collapses, expect others to follow like dominoes.
Europe’s ‘megabanks’, long on debt and short on deposits, will collapse under the weight of these billions of dollars of debt. Defaults will be combined with attempts at ‘mass withdrawals’, by force if necessary, with angry masses of people demanding their cash.
The Lehman Brothers disaster was very quickly followed by the withdrawal queues at Northern Rock. This blow was only parried when the government guaranteed all banking deposits up to £35,000.
This time around the only guarantee will be the force of the state being used viciously to defend capitalism.
In 2008, at the start of the crisis, bank runs killed off Washington Mutual and other US banks. They almost sunk giants like Citigroup and Bank of America. In 2012, the crisis will break through the Richter scale.
Even Tory leaders like Cameron are now being forced to talk about a crisis of capitalism. The point however is to get rid of it through a socialist revolution. The situation when this will be done is now fast maturing. Get ready for it by building the revolutionary leadership to ensure victory.