And Portugal Makes Three - looks for ECB\IMF bailout

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Yesterday the acting prime minister of Portugal finally threw in the towel and declared the need for an ECB\IMF rescue of the kind that Greece and Ireland already succumbed to last year. So Portugal becomes the third Eurozone country to be press-ganged into the Bailout Brigade.

At the time of Ireland's fall into the clutches of direct rule from Frankfurt, the common consensus was that Portugal would follow not long after. That it has taken until the beginning of April for the inevitable to happen is testament to the desperate struggle of the then Prime Minister José Sócrates to stave off this fate.

But the steady, relentless creeping up of the margin markets demanded to hold Portuguese sovereign Euro debt, over its German analogue, gradually cut off Portugal's financial air supply.

The final act of the crisis came last week when opposition parties banded together to vote down Socrates' austerity budget, bringing down the government. In vain European finance ministers hoped to try and stave off the inevitable bailout until after the election necessitated by the fall of the government. But the rising bond yields and the unwillingness of Germany and other core countries to make significant changes to the bailout mechanism at last Friday's summit, meant that when the Portuguese central bank tried to sell short-term debt on Wednesday morning they were defeated by an impossible rate of 6% for 1-year bills.

So, now we are three. Portugal, Ireland, Greece, all subject to direct rule from the Eurozone core and the European Central Bank headquarters in Frankfurt. Just like Ireland, Portugal is now faced with the sham of going into an election where whichever party wins, their economic policy will be dictated by Frankfurt. The current composition of the Eurozone is increasingly beginning to resemble that of a new imperial space where the so-called peripheral regions are ruled as provinces of the core homelands.

At first sight, Ireland, Greece and Portugal together making up only 8% of population and 6% of GDP of the Eurozone (compared to Germany's share of roughly 25% of both) do not appear to have the collective weight to force a reconsideration of the current growing inequality within the European Monetary Union. But the ongoing removal of even the pretence of electoral democracy from an ever-growing section of its population threatens the political legitimacy of the entire Eurozone project. Further, economic leverage in capitalist society is as much to do with investment and debt, as local production figures.

During the period immediately following the introduction of the Euro in 1999, post-unification blues depressed growth rates in Germany and its economically interdependent immediate neighbours, France and the Benelux countries. Consequently Franco-German finance looked for areas in the Eurozone with higher rates of return, finding them in the peripheries, whether the property bubbles in Ireland and Spain, or other investment opportunities in Greece and elsewhere, then thought to be newly freed of relative risk thanks to monetary union. The enormous sums of Euro that Irish banks have lost and that, thanks to the government, we are all now supposed to repay, are the fictional assets of banks in Germany, the UK, Belgium and other European countries. The same goes for our fellow peripherals. Our supposed debts are due to maintaing the fiction supporting the account book assets of the banks and financial institutions of the core countries. Besides being outrageous on a moral level, on a more hard-headed practical level, it means we hold leverage far above the weight of our populations or GDP, should we have to courage to use it. A political turning of the table could transform these debts, the very instruments of our enslavement, into hostages held for use in the struggle for our deliverance from being the dumping ground for the losses of the core Eurozone bank mistakes.

But, the eternal question of politics arises, as always - "who is we?". At the moment the conventional framework for the negotiations between the peripherals and the core countries is that "we" is limited to the governing classes of the different countries. In each case these people have interests more in common with their local business class who depend on the free flow of European finance, rather than their working class majority populations. Those dining at the captain's table cannot be expected to have the same interests as those locked below decks in the hold, even when the ship is slowly sinking. But for those of us locked in the hold, who cannot join the negotations at the captain's table, we can, if we start to move together, rock the boat until it risks capzing. For sure it's a desperate measure, but desperate times means desperate measures and if non of the lower risk avenues for change are open to us, then we must have the vision and the courage to do what needs to be done rather than slowly rising tide of austerity drown our futures and that of the next generations.

The creation of a new collective movement prepared to rock the boat is not the work of a day. In the meantime, the immediate prospects of the ever-widening split between peripherals and core may well depend on whether Portugal's bailout will be sufficient to prevent the undermining of next-door neighbour Spain. Spain puts the S into PIGS in more than one way. With an additional 14% of the Eurozone population, and 12% of its GDP combined with a busted property bubble perhaps even more extravangant than Ireland's, Spain would increase the magnitude of hostage-debt at risk, accelerating the arrival internal economic and social crisis point that Europe must face, sooner or later. Either way, all we need to remember is that our debts are their make-believe assets - it's time for a reality check!
 

(NB all figures above from 2009 World Bank figures so subject to some slight relative movements for 2011, figures for which are not yet available)

WORDS: Paul B

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