Greece is the latest in a line of countries squeezed by the ongoing financial crises continuing to ripple around the world. It is an important case to watch, more so than say Iceland or Ireland, as the situation in Greece is closer to the economic positions of the UK – both have governments who form an important part of economy, and are financially overstretched. This is a case of irresponsible governments, not banks. However, one has to be careful that responses to such crises are not in danger of propping up the underlying capitalism.

Mainstream commentary has focused on the corruption of Greek politicians or used the opportunity to bash the Euro. Rarely is it admitted that the problem lies with the globalization of capital itself. Greece, like most western nations in trouble, is a victim of the illusory promises of trans-national capital – the vast funds of money that come from pension, hedge and international investment funds. Its government, lured by the smell of cheap money, has borrowed heavily on international markets to run up incredible amounts of debt. 2010 government debt is expected to stand at 120% of Greece’s gross domestic product [GDP]. It is hardly any wonder the markets have spooked, with the result that nice cheap money is being withdrawn from the country leaving the new left-wing government unable to cover existing expenditure, let alone future promises. Ultimately the process starts with the notoriously secretive defence budget. Nobody knows how many billions are funneled into it, and for a long time nobody asked, making a mockery of budgeting altogether.

In 2001 Greece joined the Euro, a condition of which is a budget deficit less than 3% of GDP. It was allowed to breach this, and the equally dubious public budgets were tacitly accepted by the rest of Europe. Since 2001 it has only been in the financial years 2007-8 that Greece actually reduced its public debt to less than the 3%. In 2009, with a shrinking economy, it jumped to 12.7%. Despite a 4% growth rate in the years up to 2007, boosted greatly by the spending on the 2004 Olympics, unemployment and inflation remained well above the EU average. None of this mattered, as Greece only accounted for 3% of the European Union economy. The EU was actually a major source of financial aid, to the tune of 3.3% of Greece’s GDP. It propped up the desired story that the Euro was good news for peripheral economic powers such as Greece.

Effectively, Greece was receiving the tacit support of the economic superpower that is the European Economic Union through the Euro. In the good years there was no need for investors to question that Greece might be anything other than the slightly errant younger brother in the European family. So borrowing money from the international markets was not that hard for the Greek government. With 40% of GDP coming from government spending, it needed it. Like with the UK – and there are important similarities between the UK and Greek financial systems – and many of the other financially crumbling nations, growth, it turns out, has been largely funded by debt. The deflation of the western credit boom has not come to an end. Debt-laden nations rather than banks are those now the facing the firing line. And previous Greek governments have been depending on such credit to such an extent that the only option has been to go bust.

There are two factors of international capitalism at play here. Firstly, there are the existing funds from where Greece sourced the money to plug holes in its budget in previous years. In the light of the financial troubles in other countries, investors began scrutinizing every country. It has been fairly obvious that Greece is the weakest link in the European Union with its open flouting of rules. Already risk adverse, they began pulling their money out with the result that Greek government debt bonds fell in price. Once a downward spiral begins then it picks up momentum as more and more investors follow suit. In a downward market like this one raising new debt is very difficult. Greece has got to the point where it was becoming ever more expensive, if not impossible. Those who lend to countries which are essentially bankrupt charge higher interest rates for the risk.

The second effect is the sharks are now circling. Where there is weakness then there is the potential for profit through short selling. What is happening at the moment is a repeat of what happened when George Soros forced Sterling out of the European Exchange Rate Mechanism in the 1992. By altering the market place itself through enormous speculations, sharks in the financial world are attempting to force a profitable crisis in the Euro by striking through Greece (there is an $8bn bet the Euro will fall in price because of Greece). This is why there has been so much emphasis on whether Berlin and Paris will back a bail out of the Greek debts. It is fair to say that Europe is pretty angry.

Euro-sceptics point out that the traditional way out for countries in this situation is to devalue the currency, so reducing the amount of debt owed. The Euro-zone does not have this option. This is an argument in favour of local currencies allowing smaller zones to respond more effectively to their needs rather than being put at the mercy of global forces who do not care about the effect on the ground. However, where ever the solution comes from what matters is that Greece’s government is in hock to foreign creditors and needs their good will. The only way it can regain it is by convincing them it has changed it profligate ways.

That means the end of spurious budgets and overspending, and much greater scrutiny. Its partners in the European Union are finally likely to enforce this as the result has been to draw attention to all the other EU nations suffering similar financial ill-health. The financial sharks are asking the question whether, even if Greece is bailed out, there are the funds to help bigger states such as Spain or Italy. The UK’s position is similarly shaky

There is a pressing question to be asked here: what should be the response of anarchists in a nation living beyond its means? The real solution is to move the country away from its reliance on international capital.

A start down this road would be to ensure that the first of the financial cutbacks come from those who created the mess in the first place by forging a reliance on foreign capital for their own benefit – the rich elites of the  industrialists, bankers, politicians and generals. To look beyond the traditional faces of money to the many anonymous speculators that make up the real face of global capitalism.