The Greek social-democratic government of PASOK is facing a massive general strike today and a crucial Parliamentary vote tomorrow Thursday (May 6th).
One aspect of the Greek situation that has received very little attention in the Irish and International Press is the fact that Greece is one of the major arms purchasing states in Europe spending billions of € in all kinds of weaponry.
One almost secret aspect of the Greek Government discussions with the IMF has been this issue of arms procurement. The IMF Chairman Dominique Kahn has apparently indicated that Greece cannot continue buying submarines, ultra modern aircraft and the most up-to-date weaponry while receiving €110 billion of loans.
In the latest available public statement, Greek Minister of Defence Venizelos had announced last February that the Greek defence budget, incorporating procurement, maintenance and wages for the armed forces was an incredible €6 billion – or 2.8% of the GDP – a higher percentage than either France or the UK.
Leaked information from the IMF talks indicates that they are discussing a cutback of around €700 million for the current year. Every flight of a military aircraft, and there are dozens every single day, is estimated to cost the Greek taxpayer around €35,000!
In another development, the Greek Ministry of Defence has been negotiating with Germany to get back some of the €2billion spent on two German submarines – one of which has proven to be unusable….. while most analysts expect that defence expenditure will be cut by around 10% by the end of the year, opinions on the feasibility of such a measure are as yet very divided.
Martin Wolf in the Financial Times tells us that the package agreed on Sunday “is overtly a rescue of Greece, but covertly a bail-out of banks.”
“Greece is being asked to do what Latin America did in the 1980s. That led to a lost decade, the beneficiaries being foreign creditors. Moreover, as creditors are now paid to escape, who will replace them? This package will surely fail to return Greece to the market, on manageable terms, in a few years. More money will be needed if debt restructuring is unwisely ruled out.
For other eurozone members, the programme prevents an immediate shock to fragile financial systems: it is overtly a rescue of Greece, but covertly a bail-out of banks. But it is far from clear that it will help other members now in the firing line. Investors could well conclude that the scale of the package required for tiny Greece and the overwhelming difficulty of agreeing and ratifying it, particularly in Germany, suggest that further such packages are going to be elusive.”
“If the eurozone is willing to live with close to stagnant overall demand, it will become an arena for beggar-my-neighbour competitive disinflation, with growing reliance on world markets as a vent for surplus.”
Also, from the Financial Times, Adam Tooze, author of Wages of Destruction The Making and Breaking of the Nazi Economy on the role Germany must take in order to resolve the crisis in the Eurozone:
“Consolidation clearly must come. But it must be co-ordinated. While others contract, Germany’s role ought to be that of a growth locomotive. A low-inflation, export-driven model of growth was an appropriate policy in the face of Germany’s national disaster in 1945. It was contained within the Bretton Woods system thanks to America’s accommodating current account balance. In 2010, such a policy is fundamentally at odds with Germany’s role as the anchor of the eurozone. The challenge for the German political class is to complete the modernisation that it has achieved in so many other areas of policy. It must overcome the last legacy of the Adenauer era in its knee-jerk commitment to fiscal conservatism. In this crisis, authoritarian China has demonstrated a remarkable aptitude for global economic leadership. It would be a tragedy if Europe’s leading democracy, a title to which Germany can rightfully lay claim, were to continue to abdicate its responsibility.”
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