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IMF and the European Commission: Screwing Workers Hand in Hand

by r------ Fri Feb 6th, 2009 at 05:49:01 AM EST

What Europe are we working towards?

Well, this is the one we have:

...Last week ended with the Lithuanian police firing tear gas and rubber bullets at demonstrators. Some of them were throwing stones at the Parliament building in Vilnius in protest of the government's austerity plan. Five thousand people had responded to calls from the trade unions. The demonstration was marked by 80 arrests and some 20 injured. The scenes resembled those seen on Tuesday 13 January in neighbouring Latvia. In Riga thousands assembled in front of Parliament in a peaceful demonstration demanding early elections. By the end of the protest clashes had caused injuries to eight people and led to the arrests of 126 more. These demonstrations are the largest the Baltic States have known since leaving the Soviet Union in 1991.

The motive?

Well, The Baltic countries are, like many new EU entrants, being battered by the Anglo-American financial sector meltdown, having participated, as many former Eastern-bloc nations in deference to US and UK cold war "benefactors," did. As in the US, the UK, Ireland and Iceland, their financial sectors are collapsing, real estate bubbles bursting, and severe recession is setting in.

Time to go after those who drove these poor countries off the cliff, right? Not if French Socialist Party luminary Dominique Strauss Kahn, hand in hand with the European Commission, were to have their way:

The EU will stump up €3.1 billion of the package to the country, the latest European country and second EU member state to be forced to go cap in hand to Brussels and international financial institutions in the wake of the crash. The IMF meanwhile will deliver €1.7 billion, with another €1.8 billion coming from Nordic countries Denmark, Finland, Sweden and non-EU nation Norway...

The monies...will buttress the Latvian economy up to the first quarter of 2011... in return for an agreed package of swingeing austerity measures, which the European Commission and the presidency of the council of economic and finance ministers described in a statement as "the Latvian authorities' firm commitment to implement a major programme of economic adjustment."

Wide-ranging structural reforms and wage reductions, particularly in the public sector have been approved by the country's parliament.

As part of the loan agreement, public sector wages are to be slashed by 15 percent in 2009 alongside deep cuts to government expenditures of 1 billion Latvian lats (€1.41 billion) alongside cuts to income tax and increases in VAT rates...

Latvia has opted for the cuts and a maintenance of its existing exchange rate peg, rather than let the lat slide in order to stay on track for eventual euro adoption.

"This will also help meet the conditions for the adoption of the euro," the EU statement continued.

Unbelievable. We're potentially on the cusp of a deflationary spiral, and what do the European Commission and Dominique Strauss Kahn, the economics guru of the French Socialist Party, propose? Hooverism, pure and simple, for Latvia (and Lithuania, and pretty soon Estonia too, not to mention Hungary). All in the name of protecting the wealthy. How else to view the income tax cut coupled with VAT increases, on top of slashing wages of working people if or laying them off? Someone try to tell me the European Commission is not party to anything less than protecting the rich and screwing the poor in these countries. Oh, and the almighty Euro adoption "carrot." (Note to those not in the Eurozone yet: if this is what you have to do, on top of the crazy inflation criterion which will further kill your prosperity, is probably a rotten carrot by the time you get there.)

Something tells me the Euro adoption is going to quickly become unpopular in most places it hasn't yet become popular...With representatives on the left like that, who needs neo-liberal reactionaries?

The result? Riots in the the streets. Surprise, surprise, the logical result of lack of adequate responsiveness to the will of the people. Does one expect more from the European Commission and the IMF? And, after all, we all know how successful the IMF has been...more succesful in transfering wealth from poor to rich, making the former even more destitute while lining the latter's pockets, that is. That we accept this intervention on EU soil is reprehensible; that it come from a so-called "socialist" even moreso.  

The proper response to the economic crisis on Europe's eastern border with Russia is not to punish the weak, but to punish those who have profited from the artificial, anglo-American boom. But, that's not what is being done:

As in all three Baltic countries, Lithuania has reduced public spending to 40% of the GDP these last years. At a time when domestic spending is suffering, there is little room to manoeuvre to get it moving again. And worse still, Riga finds itself cutting civil servant salaries by 15%. It's a measure dictated by the IMF's terms, which, along with the European Commission... A measure little appreciated by the Free Trade Union Confederation of Latvia (LBAS). LBAS president Peteris Krigers complained, "The government's and IMF's attitude has neglected Latvian society."

He continued, "Instead of asking the unions and the employers to participate in creating an economic stabilisation plan, and thereby reducing the risk of making incorrect decisions, we are only told about these decisions once they have been made." Moreover a union report accuses the IMF's plan of "breaking collective agreements in hundreds of businesses [...] which is a violation of the recommendations of the International Labour Organization".

What's that? The European Commission is participating in screwing workers rights in Eastern Europe? And people wonder why European institutions are increasing rejected, not just by the nativist Right, but also by the Progressive Left.

And what's that? Dominique Strauss-Kahn, billed by many as a front-runner for the Socialist Party's nomination for President in 2012, actively undermining the interests of vulnerable working people in Europe? And the Parti Socialist wonders why it is severely distrusted by those who should naturally be its supporters.

You forgot to mention that Dominique Strauss-Kahn is a leading member of the French Socialist Party. In fact, you forgot to mention the French Socialist Party. You're slipping ;)
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Feb 6th, 2009 at 07:19:46 AM EST
(?) I caught three references to the PS. Not as to DSK's current status, though.

In general:

I gather that Latvia has a choice between severe wage reductions and devaluation. Devaluation is probably the better option. What's galling about the IMF package are the income tax cuts and the raising of the VAT. That's the opposite of what would be effective. Seems like naked favouritism towards the rich, although I haven't looked into the distribution of the income tax cuts.

by nanne (zwaerdenmaecker@gmail.com) on Fri Feb 6th, 2009 at 07:34:10 AM EST
[ Parent ]
Have to get a few pokes in on DSK while Jérôme is abroad....you know, while the cat isaway and all that.

The Hun is always either at your throat or at your feet. Winston Churchill
by r------ on Fri Feb 6th, 2009 at 07:49:39 AM EST
[ Parent ]
This diary bothers me less than your previous one, which I intend to deconstruct at some point in the future...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Feb 6th, 2009 at 10:07:00 AM EST
[ Parent ]
Just don't stifle talent, J ;-)

You can't be me, I'm taken
by Sven Triloqvist on Fri Feb 6th, 2009 at 10:44:15 AM EST
[ Parent ]
The institutions are mare for screwing, that's what they do...

The new Lithuanian government started its austerity program with little VAT and corporate profit tax raises, pushing public wages down and further social cuts (say, for child support). But it does not save money for its own salaries, government reorganizations (like moving the agricultural ministry to Kaunas) or ideological reforms.

On the other hand, the previous Kirkilas' government did not attempt much to look attractive either - apparently they willingly wasted a lot of public days (for example, buying two warships for the price double of what Latvia or Estonia payed). So there is much food for distractive finger pointing - what a nice game.

The core Baltic economic problems come bare to see in these hard-credit times. The trade balance is horrible, thus they need persistent investment flows. That's what global free trade and glorious egocentric capitalism means eventually there.

by das monde on Fri Feb 6th, 2009 at 08:41:02 AM EST
BTW, what does Lithuanian media report about the background of the protesters and/or rioters there and in Riga? (I don't yet dare to believe that it is leftist in nature, given what happened in Budapest two years ago and how confused Western media was about the situation.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 6th, 2009 at 12:57:46 PM EST
[ Parent ]
The media is not particurlarly sensational about the riots, for what can I tell from far. As a first reaction, TV news gave Riga events brief time. Among official demonstration organizers there are worker unions ant the left party "Frontas", but they are not particurlarly pressed for responsibility about riots. There is some dialog between the government and the unions. But the simplistic noise of right-wing commentators is pretty annoying. They seem all Lithuanian troubles in not erridicating the Soviet past.

A couple of interesting aspects: Vilnius is supposed to be the European Cultural Capital 2009, on the occation of 1000 years of first mentioning of Lithuania in mediavial writings. But the project is practically doomed, as the new government stopped financing it.

Besides, the "FlyLAL Lithuanian Airlines" went bankrupt last month... so it became tricky to get to the Cultural Capital at all. The bankrupcy was pretty ugly: just before Christmas they offered 50% of their shares to the government for free - but deep in 27 million euro debt; then they negotiated with a Swiss group; after that failed - "sudden" bankrupcy. A few thousand of passengers were left stranded, with little chance of compensation. Their main creditors: the "FlyLAL" group itself. Their charter or ttechnical service sections are doing quite fine. What a buisiness model: a lot of managing, little expertise, evil outsourcing...

by das monde on Sat Feb 7th, 2009 at 12:30:00 AM EST
[ Parent ]
It's a clusterfuck, though the Commission's role in it is little more than enabler.

The present neolib Commission is a creation of an overwhelming Council majority of present and recent neolib governments - and no EP majority wanted to kick commissioner candidates for this.

Here we have a combination of the IMF continuing its longstanding and self-perpetuating disaster capitalism policy (pushing reforms during crises, reforms that will of course give birth to future crises, when they push further); and brainwashed national political elites only too willing to implement the worst version of reforms, adding detail going beyond the IMF's demands. Voters in Lithuania who voted for at least two of the main governing parties last fall let themselves be duped, yet again: these parties campaigned with neolib reform plans, which they can now execute to a fuller extent by pointing to IMF pressure...

As for what goes on in Hungary, rather don't ask in detail... During the October crisis, when the EU/ECB provided a safety net without strings attached and the IMF with reform demands, there was a media row between the local 'left' and 'right', which forced the IMF to issue a denial that the government's specific reform plans would correspond to specific demands made, claiming it was all very general. (Then again, not much of the talk was public...)

And indeed, this month, without any IMF pressure, the 'Socialist' PM proposed the same idiocy as in Lithuania: pro-business tax cuts balanced by a VAT raise... Meanwhile, there was another row regarding the leader of the opposition, who attacks 'reform' plans as unsocial at every turn at home. But when he went to some business forum in Brussels, he proclaimed that the government is wasting its chance to attempt sweeping reforms while the crisis allows it... something the PM of course interpreted as a confirmation that his reforms would be the right thing after all.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Feb 6th, 2009 at 12:51:14 PM EST
BTW, our lame Commission also managed to do something for workers this week.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Feb 6th, 2009 at 12:54:06 PM EST
[ Parent ]
Poland's not in anywhere near as bad shape as the Baltics, or even Hungary, so a lot less 'austerity', and so far it mainly seems to concern cuts in the defense budget, and to a lesser extent some infrastructure projects.

DoDo mentions that the Lithuanians voted for neo-libs, just wondering - what was the alternative? In Poland they did the same, with the other option being the twins. In the first match up the Kaczynskis won by campaigning against Tusk's neoliberalism, after two years swing voters decided that while they may not like the PO's economic ideology, they really hate the twins on everything else. And surprisingly enough, the PO has been a lot less neo-lib than predicted or promised, though that's not saying much since they used to sound like a Grover Norquist wet dream.

by MarekNYC on Fri Feb 6th, 2009 at 06:50:47 PM EST
just wondering - what was the alternative?

Well - Lithuanians really had a wide spectrum of choice, even if many not too redible...

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Feb 6th, 2009 at 07:11:34 PM EST
[ Parent ]
There was the Lithuanian choice, and here is the outcome.
by das monde on Sat Feb 7th, 2009 at 12:32:57 AM EST
[ Parent ]
Thanks, I wasn't really paying close attention then, rather preoccupied with working on the American election. An extra question, how genuinely left is the left when it is in power?

 Just a note relevant to your comment on the Polish post-communist victory in 1993, and DoDo's comment about the large percentage of votes going to parties that didn't get into parliament:

In 1993 the postcommunists got 20% of the vote but 37% of the seats. The various right wing parties got 35% of the vote but 8% of the seats, since most of them didn't make it in, and the electoral system was a sort of proportional one with 5%/7% threshold and heavy favouring of those that got more votes. The remaining votes were a non-communist genuinely leftwing party (8%), soon to be coopted and destroyed by the postcommunists, the peasant party - a direct heir to the old puppet party of the communist era, well on its way to turning itself into a patronage/single interest group got 15/29, and the left-liberal branch of the post-solidarity camp with 11%. The left, the peasants, and much of the right ran against shock therapy. In power the post-communists in alliance with the peasants continued them with increased corruption and cronyism.

by MarekNYC on Sat Feb 7th, 2009 at 01:02:50 AM EST
[ Parent ]
DoDo's comment about the large percentage of votes going to parties that didn't get into parliament

I only highlighted it in the data, it was askod who noted it.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Feb 7th, 2009 at 07:23:03 AM EST
[ Parent ]

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