THURSDAY’S announcement that Portugal had finally been forced into asking for a massive 90 billion euro (£79 bn) bailout from the European Central Bank (ECB) means that it has now joined Ireland as the second EU state to have effectively declared itself bankrupt in the space of one month.
Next in line for a gigantic bailout is Spain, the fourth largest economy in the Eurozone, that is if the EU manages to avoid implosion. Meanwhile, Belgium and Italy are waiting in the queue!
At the heart of this collapse of entire capitalist economies, and their fictitious values, lies a quite simple, but massively profound crisis.
For years in the lead up to the banking collapse that emerged onto the scene in 2008, world capitalism had experienced an inflationary boom.
Fuelled by low interest rates, the capitalist class embarked on a frenzy of credit-led expansion.
They forgot that credit is simultaneously debt.
What appeared as a credit crisis, or credit crunch as the bourgeois press dubbed it, was in reality a debt crisis of gigantic international and historical proportions.
This led to the situation where Portugal was repaying 4.23 billion euros a month in interest on its loans while it had only four billion euros in cash reserves.
Under pressure from the financial oligarchies, desperate to ensure that they got paid back regardless of the cost to the Portuguese workers and rural poor, the previous socialist Party government launched a total of three austerity packages of savage cuts to welfare and public spending at the same time as driving up taxes and public transport costs.
When the working class fought back with a series of general strikes, the government was forced to resign and call an early general election – due in June – leaving the country run by an interim government at present.
None of this has fazed the EU bankers who have made it quite clear that, whatever government is elected, the austerity measures that were rejected by the Portuguese workers will not just be reintroduced but intensified come what may.
A leading German finance minister and spokesman for the financial oligarchy said bluntly about these austerity measures: ‘Now they will be determined from outside.’
The message is clear: the bankers and the international financiers are taking over and intend to grind the Portuguese workers and rural poor into the dust to ensure that they get their money back.
In order to grind them down even more, at the same time that Portugal is forced to beg for a bailout, the ECB has hiked its interest rates up from 1% to 1.25%.
This might not sound a massive increase but it will be enough to push countries like Portugal, Spain and a host of others over the edge of the financial precipice and onto the rocks of bankruptcy, where they will join Ireland and Greece.
The interest payments not just of governments but of ordinary people are being pushed well beyond the level at which they can be repaid.
Tory Chancellor George Osborne has used Portugal to argue that it proves that the savage cuts being introduced by the coalition are necessary to stave off the collapse of British capitalism.
In fact, Portugal proves that even the most severe cuts to the living standards of workers along with the destruction of welfare and public expenditure is simply not enough for capitalism today.
It requires the working class and the poor of the world to bear the full brunt of the economic crisis of capitalism, through endless cuts, mass unemployment and military interventions to grab oil and gas resources.
The working class of Portugal – along with workers all over the world – have demonstrated that they are not prepared to suffer the fate that capitalism has in store for them.
The crisis is driving forward world revolution. The urgent requirement is to build revolutionary parties, sections of the International Committee of the Fourth International, in every country, to lead the developing world socialist revolution to its victory.