WHEN it comes to desperate, mindless optimism the French president, Francois Hollande, is a world leader.
In a speech given in Japan over the weekend, Hollande confidently declared that the debt crisis in the eurozone had ended, insisting that: ‘You must understand the crisis in the eurozone is over’ before adding ‘Europe has become more stable’.
He obviously believes that if you say something loud enough and long enough then it will eventually come true.
Unfortunately for Hollande and his analyst friends at the European Central Bank, the universe is not susceptible to wishful thinking.
At the same time that he was making his speech, some very worried economic analysts, who are not at all concerned with wishful thinking only with getting their money back, have pointed out that the debt crisis throughout the capitalist world is in fact much worse than hitherto expected.
What is worrying these money men is that the usual method used to measure the debt-to-income ratios of countries has seriously underestimated the amount of state debt.
This measure calculates a nation’s debt as a ratio between the country’s gross domestic product (GDP) and its debt and is intended to measure a government’s ability to repay the debt.
The banks are now saying that this method totally underestimates this ability, for the simple reason that GDP reflects the whole income across every economic activity of a nation but a government can only repay its sovereign debt out of government income and money raised through taxation.
When this method of calculating debt-to-income ratios is applied, then the figures for state indebtedness become astronomical.
According to calculations Ireland, Greece and Portugal have a debt-to-income ratio in excess of 300%.
In Ireland the total state debt for 2012 was 192 billion euros which was 340% of the government income, while for Greece its debt ratio is a staggering 351% and Portugal 302%.
Out of the 27 EU countries, Britain comes in at number six in the debt ranking with a ratio of 212%.
As for the mighty US economy, it turns out to be in an even worse position than Greece.
According to reported figures, its debt of $16 trillion is the equivalent of 105% of GDP but in excess of 560% of government income!
Behind all these dry figures and percentages lies the inescapable reality that the capitalist countries are not just technically bankrupt but practically bankrupt.
They have absolutely no chance of repaying even a fraction of their sovereign debt – a debt vastly increased when they were forced to assume the massive debts of the banking system in order to stop the banks from going bust.
All they are doing is pumping more and more air into this gigantic debt bubble by artificially producing currencies that have no value and that only inflate it to the point that it bursts, producing a crash far exceeding that of 1929.
The capitalist class have no option but to try and survive this crash by making the working class pay, by driving down living standards for workers and youth throughout the world to below subsistence level – in short, by declaring an all-out war against workers and every gain they have ever made.
The massive threat to the capitalist class is that it confronts a powerful and undefeated working class that is not prepared to accept starvation and homelessness as the price of keeping this bankrupt system staggering on.
Throughout Europe and the world, workers have been driven by the crisis along the road of socialist revolution – what is urgently needed is building a revolutionary leadership that matches this revolutionary situation and can lead the working class to the victory of the European socialist revolution as part of the world socialist revolution.
Only the WRP is building this leadership – join us today.
