The euro crisis: Major powers plan new bank bailout

With the major powers lurching back into recession, governments on both sides of the Atlantic are planning another huge bailout of the banks. There are significant differences over how such a bailout should be organised, but there is general agreement that hundreds of billions more in public funds must be allocated to cover the banks’ losses from a sovereign debt default by Greece.

As occurred following the Wall Street crash three years ago—except on an even bigger scale this time—the wealth of the financial elite whose speculative activities triggered the global crisis will be underwritten through the plundering of state treasuries. This will be carried out even as governments intensify their attacks on the working class in the name of “fiscal consolidation.”

To offset the new handouts to the banks, even more brutal austerity measures will be imposed in Greece and other highly indebted European countries that have already been thrown into slump and mass social misery, and social cuts will be expanded in the rest of Europe and the US.

This is the meaning of the demands coming out of last weekend’s International Monetary Fund meeting in Washington to “recapitalize” European banks and expand the reach of the €440 billion European Financial Stability Facility (EFSF) by having it underwrite far bigger sums to be pumped into the financial markets by the European Central Bank (ECB).

These measures—aggressively promoted by the US and the IMF against the resistance of Germany and other northern euro zone countries—are being linked to a scheme to “restructure” Greek government debt by means of a 50 percent discount on the value of Greek state bonds. The massive losses European and American banks would suffer as a result of such a “managed default” would be covered by the new bailout organized through the EFSF and the ECB.

German officials have come out against such a European-wide bailout scheme, the cost of which would be largely borne by Germany. Instead, Berlin is planning its own national bailout of German banks in connection with a Greek default.

Over the weekend, a number of American and British newspapers wrote of a so-called “big bang” and “shock and awe” plan to deal with the European debt crisis. The resources available to the EFSF would be leveraged to reach €2 trillion and the European Central Bank would be given carte blanche to print up euros and increase its purchases of the government bonds of Greece, Ireland, Portugal, Spain and Italy.

Stock markets in the US and Europe soared Monday and Tuesday in anticipation of a new bailout of the banks and speculators. The first wave of bailouts three years ago enabled major banks and corporations to dramatically increase their profits even as unemployment reached depression levels in the US and most of Europe. The gap between wealth and poverty has widened, with the bourgeoisie utilizing the crisis to drive down wages and dismantle the remaining remnants of the welfare state.

The most recent wealth report issued by Merrill Lynch and Capgemini concluded that the combined wealth of the nearly 11 million “high net worth” individuals increased by 17 percent in 2009 and 9.7 percent in 2010, reaching a total of $42.7 trillion. This sum is far higher than the combined state deficits of all the countries in Europe and North America whose people are being impoverished as a result of austerity programs.

In Germany, which has pushed relentlessly for the implementation of austerity policies across Europe, private fortunes have increased over the past 15 months by a total of €350 billion—exactly equivalent to the total debt of Greece. Der Spiegel magazine recently reported that the Swiss bank deposits of Greek multi-millionaires totals €600 billion euros—nearly double the country’s public debt.

Tensions between the US and Germany have intensified in the run-up to a key vote this Thursday in the German parliament on an extension of the existing EFSF. On Monday, US Treasury Secretary Timothy Geithner warned that Europe did not have “very much time” and needed to “get on with it.” President Barack Obama complained that Europe was “scaring the world” with its inaction.

The response from Berlin was prompt. German Finance Minister Wolfgang Schäuble declared that the government had no plans to expand its current commitment to the EFSF. Chancellor Angela Merkel, addressing the German association of industrialists, declared that Germany was opposed to any further stimulus measures or increase in debt.

As the economic crisis deepens and Europe, following the US, sinks into recession, conflicts between the trans-Atlantic allies are escalating. At the same time, rivalries within the European Union itself are intensifying. Some senior European political figures with a sense of history have already pointed out the dangers arising from a break-up of the euro zone.

In comments earlier this month, the finance minister of Poland, Jacek Rostowski, warned that a collapse of the European project could result in war within a decade. Rostowski told reporters that war is likely “not in the months ahead, but maybe over a ten-year time frame.”

This is the future that capitalism holds out to the world’s people: depression, dictatorship and war. The current crisis represents the failure of the world capitalist system. It must be replaced by a new system based on public ownership and control of the productive forces under the democratic control of the working people, and a planned economy geared to social needs, not private profit—that is, by socialism.

This requires the mass revolutionary mobilization of the European, American and international working class to break the stranglehold of the banks and corporations and establish workers’ governments. (WSWS)

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America: The land of poverty

The census bureau figures that came out Tuesday, showing the largest number of Americans living in poverty since records began in 1959, are a damning indictment of American capitalism and the entire political system.

In 2010 there were 46.2 million people—almost one out of every six residents—living below the official poverty line, including 16.4 million children. Of these nearly half, or 20 million, were described as living in deep poverty, subsisting on less than half the income the US government says is needed for basic food, shelter, clothing and utilities.

As it is the government’s poverty threshold—about $22,000 for a family of four and $11,000 for a single person under 65—is insufficient to maintain a decent standard of living. A more accurate measure would be twice the official poverty line, or about $44,000 for a family of four. More than 100 million Americans—one in three—are below this threshold.

The main factor behind the growth of poverty is the jobs crisis, which has only gotten worse since 2010, the year after the recession supposedly ended. Tens of millions of workers are jobless or forced to work part-time, low-wage jobs that are insufficient to keep them out of poverty.

The young generation is being hardest hit. Median income for ages 15-24 fell 9 percent last year. For those 25-34, nearly 6 million doubled up in households with parents and friends to save money, up 25 percent from before the recession. Of these, the poverty rate was at 8.4 percent; but the rate would have risen to 45.3 percent if their parents' incomes were not taken into account, according to an analysis of the census report by Bloomberg Businessweek.

The explosion of poverty over the last three years—along with home foreclosures, homelessness, hunger and the growing number of uninsured—takes place alongside of the accumulation of fantastic levels of wealth by the financial aristocracy that controls the economy and political system.

This is the culmination of a three-decade long process, in which the ruling class, under both Democrats and Republicans, carried out a conscious policy of transferring an ever greater portion of society’s wealth into the hands of the corporate and financial elite. In the name of the free market, they slashed taxes on the corporations and the rich, deregulated industry and the banks and backed a corporate offensive against the jobs and living standards of the working class.

In the aftermath of the collapse of Wall Street investment firm Lehman Brothers on September 15, 2008, three years ago today, the government handed trillions of dollars to the banks with no strings attached. The corporations and the banks are now sitting on a cash hoard of $2 trillion, while refusing to hire any workers.

The ruling class is pursuing a deliberate policy of high unemployment to further drive down wages and benefits and boost their profits. In the auto industry, for example, the corporations, with the backing of the Obama administration and the trade unions, are seeking to return conditions of work to what they were in the 1930s, with newly hired auto workers making poverty wages and lacking the most elemental rights and protections.

In the face of the worst social crisis since the Great Depression, the Obama administration has done nothing, responding with complete indifference to the ever growing levels of social distress. The new figures on poverty did not even rate a mention during the president’s stop in North Carolina where he promoted his phony jobs bill, which will provide further tax cuts and handouts to big business.

Far from providing any relief, the Democrats and Republicans are committed to slashing trillions from the very social programs that helped lift millions out of poverty in the 20th century. One of those targeted by Obama’s bipartisan deficit reduction committee is Social Security, which kept 20 million seniors and disabled adults out of poverty last year, according to the census report.

The ultimate aim of the corporate and financial elite is clear: the abolition of these programs and everything that does not directly contribute to their wealth.

Immediate steps must be taken to address this crisis. The Socialist Equality Party calls for:

1. The launching of a public works program to hire 20 million workers to rebuild the nation’s infrastructure and guarantee the right to a livable income to all workers and their families.

2. Requisitioning of wealth of the financial elite by imposing a 90-percent tax on all incomes over $500,000. The $2 trillion on the balance sheets of the corporations and banks must be confiscated and put into a publicly controlled fund to create jobs and eliminate poverty.

3. The grip of the financial aristocracy must be broken by nationalizing the banks and major industries and transforming them into public entities, controlled democratically by the working class.

The battle facing workers in the US is part of an international struggle. The plundering of the American people has come at the same time as capitalist governments around the world conduct a social counterrevolution, from Greece and the rest of Europe, to the Middle East, Latin America and Asia. Throughout the world, they claim there is no money for basic social needs.

Nothing can be done without the working class entering into mass social and political struggle. None of the social achievements of the past—decent wages, health care benefits, public education, pensions—was won without the most bitter struggle against the resistance of the ruling elite. The determination of the ruling class to turn the clock back to the 1930s must be countered with the mobilization of workers in every factory, workplace and neighborhood throughout the country.

The social rights of the working class depend on the reorganization of society, based on a democratically drawn up and scientifically elaborated plan—to meet social needs, not private profit. This is the fight for socialism.

The Socialist Equality Party is spearheading this struggle and we call on all workers and young people to join our movement and build it as the revolutionary leadership of the working class. (WSWS)

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