Guns, not butter for Greece

By Nicky Dempsey

The leading countries of the European Union, led by France and Germany have insisted that the Greek government must respond to the financial crisis by a series of ferocious attacks on working class living standards. Job losses have mounted rapidly as pay has been cut, welfare and pension entitlements slashed and the retirement age suddenly increased. Yet one area of spending is exempt from this otherwise absolute requirement to reduce government spending, the military budget.

In what the Reuters news agency describes as “a bizarre twist to the Greek debt crisis, France and Germany are pressing Greece to buy their gunboats and warplanes, even as they urge it to cut public spending and curb the deficit.” France is looking to sell frigates, helicopters and fighter aircraft for €3.5bn while Germany is looking for back payments of €520mn plus €300mn for a submarine which failed sea-worthiness tests. It is reported that the deficit negotiations were used to strong-arm the Greek government into making the purchases.

The German and French governments have led the calls for ever-deeper cuts in Greek pay and social welfare spending. As a result the Geek economy, which had initially experienced a shallow recession, declining by half the average rate of the EU, is now turning down once more. The decline has been led by an investment strike, falling by 25%, more than 10 times the decline in the economy as a whole. Unemployment has soared, with the biggest rise in the first quarter of this year since records began in 1998, up to 10.3 per cent. The renewed economic decline reflects the direct impact of the austerity policies  adopted in the middle of the 2009, as these charts show. 

Before then, Greece had been climbing out of recession faster than the EU as a whole. The Bank of Greece has bemoaned the fact that cutting public sector pay has dramatically reduced tax receipts thus widening the public deficit once, and gone on to argue that therefore further assaults on pay and welfare will be required.

A prolonged period of wrangling between France and Germany had preceded the recent agreement to provide emergency funds to Greece. This will now be done in conjunction with the IMF, thereby significantly increasing the influence of the US in the EU generally and in the Aegean region in particular. This represents a victory for the US and a setback for the EU nationalist tradition most closely associated with Gaullism.

Greece already has one of the highest proportions of military expenditure in the industrialised countries and more than half the ‘hidden’ government expenditure revealed by the financial crisis was military spending. A renewed build-up of the Greek military forces comes at a time when the US is concerned by the modestly independent line being pursued by the Turkish government on relations with Iran and Hamas, as well as Syria and Sudan. Despite remaining an ally of Israel, the AKP government in Ankara has suspended certain military co-operation with Israel as it attempts to normalise relations with the Arab and Muslim states. A clear signal is being sent to Turkey about its independent line, and although the immediate beneficiaries are French and German arms manufacturers, the political signal is being sent by the US.

At the same time, Greek popular sentiment against both the wars in Iraq and in Afghanistan has been among the strongest in the European Union, in part reflecting the history of resentment against the military dictatorship and the strength of Greek left wing parties and social movements. A renewed military build-up is also designed to be a clear signal to a population struggling to cope with the ferocious attacks on Greek workers: It will be the generals who gain from this crisis, and you will be the ones to pay.
That attack cannot be reversed without a prolonged struggle. But it is not inevitable that the US, the EU leaders and the Greek generals have the final say in it.