WHY GREECE AND WHY NOW?

       THERE IS SOMETHING PROFOUNDLY SUSPECT IN THE ROLE OF CREDIT RATING AGENCIES ACTING AS THE SHOCK TROOPS OF TURBO-CAPITALISM

By TERRY MOORE

      Only a few short weeks after heavily defeating a right-wing incumbent government, Greek socialists find themselves staring into the political and economic abyss. How has it come to this? Why is it now that Greece is shown to be economically bankrupt with burgeoning deficits and with almost universal clarion calls from international organisations for Greece to savagely cut its public expenditure.

            How did US-based credit ratings agencies such as Moody's, Fitch and Standard & Poor, achieve the power to strike down sovereign Governments' economic policies simply by downgrading their ratings of a specific country's government bonds. What is it about central bankers that they appear incapable of standing up to the nefarious credit rating agencies' and their hold over market-makers in New York, London and Tokyo.

            Furthermore, why is that socialist governments are the primary victims of  the current negative speculation in the international bond markets which is costing them vast sums in extra credit costs. The very same funds which should be used to alleviate the economic crisis in countries such as Greece.

            One extremely perverse outcome of the current situation is the the self-same credit ratings are experiencing a crisis of confidence, with heavy criticism of their failure to spot (the private sector) problems that led to the global financial crisis, as well as suffering from falling revenues and rising compliance costs. Yet these self-same arbiters of international money markets are now brazenly undermining the public finances of several countries and risk a double-dip recession in Europe.

            The behaviour of the credit rating agencies over the past 20 years is one of an incestuous relationship with many dubious individuals and companies as well as well-founded criticisms of the methods they employ to maximise revenues. In addition there are numerous criticisms of sharp practice  and allegations of outright blackmail. For example, Moody's has been caught out continually downwardly negatively rating a massive German Re-imsurance company simply because the German company didn't see why it should pay Moody's seven-figure sums when it was already paying two other credit rating agencies for the same service.

            These are the ratings agencies that continued to give sub-prime mortgage aggregation vehicles a triple AAA rating even as the US property market went belly-up in 2007. The collapse of multi-billion dollar businesses such as Enron and World Comm happened completely under their radar. They even rated Japan as a bigger risk than Botswana for a short time at one stage.

            Is it just coincidence that Spain and Portugal are the latest targets of the ratings agencies and currency speculators as their economies and public expenditure levels are heavily criticised in international currency markets. The common threads that unite the three countries is that they are socialist governments, they are members of the euro-zone and all three have recently seen off attempts by the centre-right to win power.

            Whilst the centre-right have won power in France, Germany, Italy, Poland, Sweden, and most of the new Member States, Spain, Portugal, Greece and the UK are the socialist administrations that have bucked the trend. It is surely not coincidence that the three members of the eurozone and the UK are the countries that are in the speculators sights. Whilst the centre-right Government in Ireland escapes criticism despite having the worst public finances in the euro-zone.

            Italy under its centre-right coalition government has public sector debt at a level of 114% of    Gross Domestic Product (GDP) whilst Greece's is 112%. Spain at 56% and Portugal at 77% have public debt to GDP ratios lower than the Eurozone area average, yet why are the centre-left led governments suffering so much more at the hands of international capital.

            Let blame be cast where it should be in Greece, with the centre-right heavily responsible for deceiving international supervision. Whilst there has long been suspicion of the methodologies utilised by Greek economic statisticians, the national statistics produced under a Greek Conservative  Government have become as reliable as a Fleet Street journalists expenses claim.

            A budget deficit of 12.7% of Gross Domestic Product is clearly unsustainable. Whilst state pensions at a level of 96% of pre-retirement earnings are clearly unsustainable, especially with an ageing population.

            There has to be a day of reckoning in Greece and it appears that the public sector will pay a heavy price.  Not all of this is undeserved, the Greek public sector has become bloated with most appointments and promotions heavily dependent on party affiliations coinciding with the respective parties holding political power.

There is a long history of tax evaders not fairly contributing to the Greek Treasury.  However, freezing the wages of public servants is not necessarily a wise mood. For a recovery programme that is heavily dependent on ensuring that the State starts to maximise its revenues after years of massive tax-dodging levels, it is perverse that the Government will be freezing the pay of the very people who will be central to their plan, i.e. tax collectors.

            For many years Greece has also suffered at the hands of dynastic politics at the national level. The Papandreou family has controlled the leadership (through the PASOK party) of the centre-left for many years and the Conservative New Democracy movement the plaything of the Karamanlis family. The sins of the fathers really have verily been visited on their sons.in this instance.

            The unlikely external saviour of socialist principles in Greece may actually be its membership of the eurozone. Such membership is also shoring up the defences of Spain and Portugal in the face of avaricious currency speculators. Taking on the European Central Bank is a markedly different beast than Norman Lamont's Tory Treasury. When push comes to shove the European Union and the European Central Bank will simply not let its eurozone members be picked off one by one.

            Whilst Germany insistence on a 'no bale-out' clause for all eurozone members means that there will be no transfer of direct funds between e.g. Germany or France and Greece, the parallel membership of the European Union will mean that Greece will get the financial support it needs to ensure its economy does not collapse completely.

            Whilst, Greece will have to swallow a bitter pill and undertake a fundamental reform of its public sector (unfortunately long overdue), it's EU membership is likely to act as a partial salvation and  shield it from the worst consequences of the seedy activities of financial carpetbaggers skulking in the dark recesses of the global financial marketplace.

            It is also true that Greece almost certainly should not have been allowed to join the eurzone in the first place because of its utilisation of extremely moody national statistics, it will actually be the eurozone that will shield it from the worst excesses of free market ideologues that would have won out if Greece still had the drachma and would have had to have gone cap-in-hand to the International Monetary Fund.

            Finally the pernicious role of credit rating agencies in assessing sovereign debt should be the subject of investigation by the EU and the US Securities Exchange Commission. Their is emerging a great deal of evidence that they are abusing their dominant positions, they are acting as the shock troops of turbo-capitalism and that, true to the perennial role of capital in society, they are only motivated by their own bottom line at the expense of public welfare.