LIVING BEYOND THE WORLD'S IMAGINATION

22 Sept 2021

Sabadell bank and Spanish trade unions prepare to sack 1,900 workers

Santiago Guillen

The onslaught on jobs amid the COVID-19 economic crisis continues its course. Sabadell Bank has announced its intention to dismiss 1,936 workers, or 12.5 percent of the workforce. This is on top of the trade union-sanctioned dismissal of 1,800 workers last November.

Sabadell Bank is Spain’s fourth-largest financial institution by volume of assets. Its assets are valued at 223 billion euros, with 2,402 branches, over 20,000 employees and 11.9 million clients. Even as the pandemic triggered the worst economic crisis since the Great Depression of the 1930s, it earned 220 million euros in the first half of the year, up 51.5 percent over the same period last year.

Sabadell bank sign (Wikimedia Commons/MJaundoo1)

Presenting a profit report in the first half of 2021 with lucrative dividends for shareholders, Sabadell’s financial director Leopoldo Alvear boasted: “We are already seeing tangible results in the improvement of efficiency and cost savings that we hope will continue to have a positive evolution in the next quarters.” His “cost savings” were a reference to €100 million in cuts, including the plan to dismiss 1,900 workers and close 500 branches.

By the end of 2021, Spanish banks are set to destroy 18,000 jobs, or one in ten jobs in the banking sector in 2020. Since the 2008 global economic crisis, Spanish banks have laid off 105,065 workers and closed 23,673 bank branches, while earning profits of over €100 billion.

The banks have resorted to trade union-sanctioned redundancy schemes, known by their acronym ERE in Spanish. This year, Santander bank, the world’s 16th largest banking institution, dismissed 3,600 workers. BBVA, the 42nd largest bank in the world, with around €676 billion in assets, dismissed 2,935. CaixaBank, Spain's third-largest lender by market value, dismissed 6,452 workers. At Liberbank, management is preparing to dismiss 1,000 of its 9,660 staff.

The banks have been able to launch this offensive against jobs due above all to the role of the trade unions. These are not “workers’ organisations,” but a labor police force comprised of upper-middle-class executives tasked with isolating and suppressing the class struggle, inseparably integrated into the capitalist parties and state.

The announcements of these mass sackings follow a scheme now familiar to workers. First, management declares that hundreds or thousands of workers will be sacked. The unions then claim to be surprised and outraged by the numbers and start negotiations with management. In the final act of the whole well-staged process, an agreement is reached, with the initial number of job losses slightly reduced. The unions then present it as a great victory for the workers, while management claims the unions were “hard” negotiators but are satisfied with the result.

The unions then reap the rewards for their corporate services. For each ERE they receive a commission for each dismissal, which can reach up to 10 percent, in addition to fees they charge workers for legal advice. In short, the unions benefit in proportion to the number of jobs they destroy!

Ultimately, tens of thousands of jobs are destroyed through what the unions present as voluntary redundancies, financed at taxpayers’ expense. The working class ends up paying the state to subsidise corporations to fire workers through the medium of the trade unions! More and more higher-paid jobs are eliminated, a process that serves to cut wages and benefits for the entire working class.

The same thoroughly scripted process is now unfolding at Sabadell.

Two weeks ago, the main trade union at Sabadell Bank, Workers Commissions (CCOO), reacted to the mass redundancy announcement by stating that it was “disproportionate, unreal and an insult to the entire staff.”

CCOO was careful not to call a strike. Instead, it claimed, “there are alternatives, as the composition of the workforce allows undertaking a restructuring based on early retirement and voluntary redundancies.” In other words, the trade union is accepting the framework of mass redundancies even before negotiations begin! On Thursday, CCOO staged a small protest at Banco Sabadell headquarters in Oviedo, as the bank was presenting its annual “Economic Research” awards.

CCOO will not defend jobs. Barely a year has passed since they last negotiated a mass redundancy affecting 1,800 workers in December 2020. When the bank announced the plan, the union posted a statement welcoming it as a “positive plan.” CCOO stressed that the proposed conditions guarantee that there will be no forced dismissals, and that “a significant number of people can leave the bank with conditions far superior to those that have been offered up to now.”

Mass anger is developing against corporate-union redundancy schemes. Aware of this opposition, the unions are consciously setting out to sabotage workers struggles, ensuring that workers remain isolated from their class brothers and sisters—even within the same industrial sector.

Earlier this year, the General Union of Workers (UGT) and CCOO called a one-day strike at BBVA to let off steam in response to an ERE targeting over 3,000 workers. The strike was the first in 30 years. Facing mass support for the strike, UGT and CCOO quickly closed off further strike action, fearing that it would extend to other banks where layoffs were being executed, and accepted a 10 percent reduction of the workforce.

In June, the unions organised two strikes on two different dates at CaixaBank against the ERE affecting thousands of workers. Just a few weeks later, in early July, they agreed to the mass redundancy. CCOO posted a statement claiming that, “After months of arduous negotiations, workers’ labour representatives have managed to transform the wildest ERE in the history of the Spanish financial sector into the best of the moment. […] The 8,291 dismissals initially proposed by management has ended up being reduced to a maximum of 6,452 voluntary terminations.”

The working class can take forward its fight to preserve jobs and conditions only by breaking with the PSOE-Podemos government, the trade unions and their pseudo-left apologists. These include groups like the Morenoite Workers’ Revolutionary Current (CRT), which reacts to each betrayal by calling on workers to form a “united front” with the trade unions—the same organisations enforcing the attacks at the behest of big business.

This cascade of EREs marks the beginning of deeper attacks on the working class that will intensify in coming months. The banks are set to benefit from the European Union’s COVID-19 pandemic policy of prioritising profits over human life to pay for the 750-billion-euro bailout fund.

Spanish banks and corporations are to receive 144 billion euros. In exchange, the PSOE-Podemos government is enforcing its “herd immunity” policy—reopening the economy, sending workers back to non-essential work and forcing children back to school, which has already cost the lives of over 100,000 people and 4.9 million infections—nearly 10 percent of the population. Thus the banks managed to maintain profits of over €3 billion in 2020 and expect an 18 percent increase in 2021 over those obtained before the pandemic, in 2019.

Rising gas prices threaten a “winter of discontent” in Britain

Robert Stevens

The British media is filled with warnings that the huge rise in global gas prices will provoke a “winter of discontent” due to the desperate situation confronting millions of working people.

According to trade association Oil & Gas UK, the price of wholesale gas has more than quadrupled since this time last year. It has jumped by 250 percent since January and 70 percent since August.

The natural gas price hike is due to a combination of global events. Gas storage is low in most countries, particularly in Europe, and this has been exacerbated by the reopening of economies. Moreover, there is increased demand for gas in Asia, especially China, which has been moving away from coal and becoming more reliant on gas-fired power plants.

A view of empty shelves at a supermarket in London, Monday, Sept. 20, 2021. Retailers, manufacturers and food suppliers have reported disruptions due to a shortage of truck drivers linked to the pandemic and Britain's departure from the European Union, which has made it harder for many Europeans to work in the U.K. (AP Photo/Frank Augstein)

These shortages have attracted the attention of the financier parasites in the imperialist countries, who have made a killing in the natural gas futures markets. Investors have been slow to unwind speculative positions they developed previously amid supply bottlenecks, driving up gas prices. This orgy of speculation is driven by the multi-trillion pandemic bailouts by the Fed, European Central Bank, Bank of England, et al.

A growing narrative in the media pins the blame on the Putin administration in Russia. Typical was a Financial Times article on Monday headlined, “Why some see the hand of Russia in Europe’s gas price crisis”. The Guardian also referred to “Russian gas games” and complained, “As shipments of gas have turned from Europe towards China, flows of pipeline gas to Europe from Russia have failed to make up the shortfall.”

The situation in Britain is particularly acute, with its energy market overexposed to the gas shortage. Less than 1 percent of Europe’s stored gas is held by the UK—which has among the lowest gas storage capabilities in Europe.

Gas shortages have raised the spectre of a shutdown of large sections of the UK economy, including its food and drink sector, due to the crisis at fertiliser producer CF Industries. Its plants produce most of the carbon dioxide (CO2) used in food production and cold storage. Moreover CF's CO2 is used by nuclear power stations for cooling, and in the National Health Service for procedures including invasive surgery and endoscopy.

The US-owned company was forced to halt production at two of its factories in Cheshire and Stockton-on-Tees on Monday night due to soaring gas prices—for the second time in 24 hours. The firm supplies 60 percent of the UK’s food grade carbon dioxide supply. It’s impact on the meat industry was immediate as carbon dioxide is used when slaughtering pigs and chickens to stun them. Poultry producers forecast that if production was halted for any length of time it could result in shortages, including for Christmas, the most profitable time of year.

CF’s shutdown comes amid a worsening shortage of basic consumer goods in supermarkets, with UK supply chains hit due to Brexit, the coronavirus pandemic, and an unprecedented shortage of long-haul lorry drivers. On Monday, Richard Walker, managing director of frozen food retailer Iceland, warned, “This is no longer about whether Christmas will be OK. This is more about keeping the wheels turning and the lights on so we can actually get to Christmas.”

Production didn’t resume at CF until Tuesday afternoon, after its US-based chief executive, Tony Will, flew to Britain for crisis talks with Conservative government Business Secretary Kwasi Kwarteng. The talks saw the government agree to paying the entire operation costs of one of CF's plants for the next three weeks at a cost to the taxpayer of 'ten of millions' of pounds. Even so, it is estimated that it could still be three more days before the factories start producing CO2 again.

The entire cost of the gas price increase and the economic fallout will be borne by the working class, with millions facing a massive increase in their bills and a threat to their jobs.

Already this year, seven energy firms have collapsed, with over a million domestic households forced to seek a new supplier. It is estimated that the 60 or so UK energy companies could be reduced to 10 by the end of the year, with all smaller supplies going to the wall and the “Big Six” corporations making a killing. The risk of more energy suppliers collapsing increased yesterday as British wholesale gas prices surged by 16 percent, with markets closing at a record high.

It is expected that the larger suppliers who take on the customers from the collapsed firms will charge them the maximum allowed under the energy price cap—£1,277 a year for a typical household. Millions of the poorest households who use pre-paid meters will be hardest hit. The price increase takes place shortly before the planned end of the £20-a-week uplift in Britain’s main social security benefit, Universal Credit, affecting millions.

The Daily Mirror warned, “Ministers have insisted they will not remove the price cap on energy bills after wholesale gas prices soared. But the cap itself is being raised on October 1—followed by the £20-a-week benefit cut biting for the first time between October 13 and November 12, depending on people’s payment date.”

The newspaper cited research from the Resolution Foundation showing that “out of 4.4 million households on Universal Credit, a staggering 40% are on pre-payment meters—compared to just 10% of families not on benefits. Those customers will face a 13% or £153-a-year rise in the price cap—more than the £139 rise in the price cap more broadly.”

The price cap will likely be reviewed again next April, with the Times reporting, “analysts are predicting that the regulator will have to allow another significant increase in bills then, if wholesale prices remain as high as forecast.”

This social catastrophe unfolds as around a million workers are due to be forced off the Job Retention Scheme, under which the state pays a proportion of employees’ wages, at the start of October. Many of these workers will not have jobs to go back to.

Food costs rose by one percent last month and inflation is now approaching 5 percent—the highest level in a decade. Rent costs are up massively, with the average rent at £1,053 per month—an increase of almost 7 percent on the same time last year, and 2.3 percent up on August’s figure.

Since Larry Lamb, the former editor of Rupert Murdoch’s Sun, first borrowed from Shakespeare to warn of social crisis and working-class militancy in the late 1970s, the ruling class has warned of a “winter of discontent” in times of acute crisis. But the present situation is worse than anything that went before, with the UK already seeing a growing number of struggles by workers across all sectors of the economy against the destruction of pay, terms and conditions.

Writing in the Sun on Tuesday, Liam Halligan, the Economics and Business Editor of the right-wing GB News, warned, “As inflation rises this autumn, if wages don’t keep up—and for many they won’t—workers will get angry.”

Wealth-X report: Billionaire wealth surged during pandemic

Trévon Austin

A new report from research firm Wealth-X found that the global COVID-19 pandemic has intensified the growth of social inequality and witnessed an unprecedented accumulation of wealth among the most privileged layers in society. For the first time in human history, the world had more than 3,000 billionaires in 2020.

This amounts to a 13.4 percent increase in billionaires since 2019, currently totaling 3,204 individuals, with a median wealth of $1.9 billion. Billionaires’ collective wealth swelled to $10 trillion, a 5.7 percent increase from 2019.

Amazon CEO Jeff Bezos (AP Photo/John Locher, File)

“Viewed in aggregate, the global pandemic delivered a windfall to billionaire wealth, boosted by the flood of monetary stimulus and swelling profits in key sectors that coined a new wave of younger, self-made billionaires,” the report said.

Billionaire wealth has increased steadily since 1990, but one-third of these wealth gains have occurred during the pandemic. US billionaire wealth increased nineteen-fold over the last 31 years, from an inflation adjusted $240 billion in 1990 to $4.7 trillion in 2021.

The parasitic growth in wealth was most pronounced in the United States, the center of world capitalism. The ranks of billionaires in all of North America grew by 17.5 percent from last year. In fact, North America’s 980 billionaires account for 30.6% of the world’s billionaires.

The US was the top billionaire country in 2020. According to a report from Americans for Tax Fairness (ATF) and the Institute for Policy Studies Program on Inequality (IPS), American billionaires have seen their collective wealth surge by 62 percent, approximately $1.8 billion, since March 18, 2020. Following North America, Asia saw its number of growing by 16.5%, for a grand total of 883. Asia’s billionaires saw their collective net worth grow to $2.6 trillion, a 7.5% increase.

The good fortune of this tiny layer of the world’s population over the past 18 months is all the more appalling when contrasted to the growing immiseration and impoverishment of billions of workers around the globe. As a few thousand billionaires amassed enormous sums of wealth, workers around the world lost $3.7 trillion in earnings during the pandemic, according to a report from the International Labor Organization (ILO).

The report estimated an 8.8 percent year-by-year decline in global working hours from 2019 to 2020, equivalent to 255 million full-time jobs. This is approximately four times greater than the recorded loss during the 2008-09 global financial crisis.

The lost working hours were due to massive cuts in working hours and unprecedented levels of job loss, impacting some 114 million people and their families. Significantly, 71 percent of these job losses came from “inactivity,” meaning at least 81 million people around the world left the labor market because they could not find work.

Women have been more adversely affected by the pandemic than men. Globally, employment losses for women stand at 5 percent, versus 3.9 percent for men. Women were much more likely than men to drop out of the labor market, most commonly due to childcare concerns. Younger workers have also been devastated. Employment fell by 8.7 percent among workers aged 15-24 years old, compared to 3.7 percent for adults. Generation Z, the oldest of whom is 23, has become the most unemployed generation and is on track to experience the same financial struggles as millennials.

In the US alone, the official poverty rate rose by 1.0 percent from 2019 to 2020, according to the US Census Bureau. The poverty rate grew to 11.4 percent, marking the first increase in the official poverty rate after five years of consecutive decline. In 2020, there were 37.2 million people in poverty, approximately 3.3 million more than in 2019.

At the same time, median household income in 2020 dropped by 2.9 percent from the previous year. This is the first statistically significant decline in median household income since 2011.

Over 86 million Americans have lost jobs, almost 38 million have been sickened by the virus, and over 675,000 have died from it. Between 2019 and 2020, the real median earnings of all workers fell by 1.2 percent. The total number of people reporting earnings decreased by about 3 million, while the number of full-time, year-round workers decreased by approximately 13.7 million.

The chief obstacle to solving the world’s burning social questions—whether the devastating impact of COVID-19 or the widespread growth of poverty—is the private profit interests of the capitalist ruling class. Every action these vultures have taken in response to the pandemic has been driven by the effort to protect the wealth and privileges of a few. To save lives and avert even further disaster, workers must fight for a policy based on the interests of the working class, the vast majority of society.

Three children dying of COVID-19 every day in the US

Genevieve Leigh

According to the latest data from the American Academy of Pediatrics (AAP) another 225,978 children were officially infected with COVID-19 and at least 20 died in the last week alone. Since July 1, a staggering 1.47 million children have been infected, 4,561 have been hospitalized and 145 have died.

Over 100 children have died from COVID-19, or roughly three children a day, in the last five weeks in the US. The time period coincides with the forced reopening of K-12 schools and college campuses throughout the country.

Children lost to the pandemic: Kimora "Kimmie" Lynum, top-left (family photo), Makenzie Gongora, top-right (GOFUNDME), Kali Cook, bottom-left (Karra Harwood/GoFundMe), and Ryland Lee Daic, bottom-right (family photo).

Perhaps even more alarming, the latest AAP data shows that multiple states have quietly changed their parameters for tracking child infections, hospitalizations and deaths in order to obscure the data. Alabama, for example, changed their definition of “child cases” from ages 0-24 down to 0-17. In Missouri and Hawaii the definition for “child cases” was adjusted from ages 0-19 to 0-17. Similar changes were made in other states.

Florida has stopped reporting child hospitalizations altogether. Arkansas has stopped reporting child deaths and hospitalizations. Nebraska has completely removed their COVID-19 dashboard from public view—that is, the state is no longer reporting child cases, hospitalizations, or deaths.

In other words, the available data for how the new Delta variant is affecting children is being manipulated to under-report the severity of the situation.

Even with the efforts to play down the impact on children, the available data is incredibly damning. Over two weeks, from September 2 to September 16 there was a 9 percent increase in the cumulated number of child COVID-19 cases. Local reports reveal devastating stories of the young lives unnecessarily taken by the pandemic.

Alexia Jade Garrison (Image Credit: McClure Funeral Home and Cremation Services)

On Thursday, September 16, 17-year-old Alexia Garrison, high school senior from Illinois passed away from COVID-19. Alexia’s father, Jason Garrison, told WCIA that his daughter had not been vaccinated, and she had no pre-existing conditions.

Her father reported that his daughter had mild symptoms throughout her quarantine period after catching the virus. After she was no longer showing any symptoms, she returned to school. Alexia collapsed in her home late Wednesday night and was pronounced dead early Thursday morning. The family is being told that COVID pneumonia was the cause of death.

Danny Rees (Image Credit: GoFundMe/Tammy Rees)

On September 14, 13-year-old Danny Rees from Fort Atkinson, Wisconsin died after testing positive for COVID-19. Danny’s mother, Tammy, told Channel3000 that her son had been congested for two days prior to his death. His mother thought he only had a cold before he suddenly stopped breathing while resting at home.

The Fort Atkinson School Board approved a mask mandate Thursday night following his death.

Addison Wishart (Image Credit: GoFundMe/Sina Trotman)

On September 12, 17-year-old Justin Leming, a high school student from Soddy-Daisy, Tennessee, died from COVID-19. On September 4, Addison Wishart, only 4 years old, from Evans, Georgia, was recovering from abdominal surgery when she contracted COVID-19 and died.

The deaths of these children are beyond tragic. Their families and friends are dealing with unimaginable grief and pain from the loss of their loved ones at such a young age. It is hard to overstate the impact that such tragedies are having on society. How does a parent of elementary school youth explain the death of a friend, a teacher or a bus driver? How do they promise their children that they are safe after such tragedies?

Parents and workers are being put in impossible situations. The forced reopening of schools has purposefully coincided with the cutting off of federal unemployment benefits and the scrapping of the eviction moratorium, threatening millions of families with destitution and homelessness unless they send their children to unsafe schools and return to unsafe workplaces.

This campaign to reopen schools has been spearheaded by the Biden administration and the Democratic Party with the full backing of the Republicans. The ruling class is carrying out this campaign in direct opposition to science, which clearly shows that the reopening of schools is not safe under the current conditions and children are susceptible to contracting and spreading the virus. Closing schools and non-essential businesses for a relatively brief time is one of the key tools for stopping the spread of COVID-19 and saving lives.

While it is true that children die at far slower rates than adults, children are dying every day from the virus.

For those children who contract the virus but do not die, there is mounting evidence of long term symptoms and complications from COVID-19. Innumerable stories are emerging of severe cases among children. Just a brief review of some of the more harrowing cases include the following:

Eduardo Cortes, 8, from San Diego, California, contracted COVID-19 from his parents, who were unvaccinated. Both parents had contracted the virus several weeks prior. Cortez was hospitalized a month later with Multisystem Inflammatory Syndrome (MISC). According to reports from the family, Cortes’ fever reached a staggering 106.1 degrees.

MISC has affected about 4,000 children since April 2020. There have been 80 cases diagnosed in San Diego alone. Doctors do not know why some kids are susceptible to MISC, while others are not.

Elijah “E.J.” Johnson,18, has been admitted to a pediatric ICU in Missouri just one month after he scored two touchdowns in his first high school football game of the season. His mom told local reporters that he is now fighting to breathe due to COVID-19 pneumonia complicated by blood clots.

Elijah was not vaccinated. His mom has been vocal on Facebook about Elijah’s situation, “because the youth are being exposed and transmitting the virus more and more. ... his school doesn’t have a mask mandate, it’s optional.”

Christian Davila, 17, from Myrtle Beach, South Carolina was placed on life support due to COVID-19. Davila has been at MUSC’s Shawn Jenkins Children’s Hospital for three weeks. According to local reports he’s only been awake for the last week and a half of his stay. He is now regaining strength. “To walk into a hospital and see your son laying on a ventilator and nothing you can do about it, it floors you,” his dad told ABC-4 News.

“When we first heard about this COVID, you know, I thought it was nothing serious, nothing more than just the flu, you know, media hype whatever, but after watching what my son’s gone through over the last month, it’s totally changed my mind,” his father added.

Pediatric cases are on the rise in South Carolina. As of Thursday, there were 36 children hospitalized with COVID-19 statewide, 16 in the ICU, six on ventilators and two on life support.

1-year-old Ava Amira Rivera was placed on life support due to COVID-19 after being airlifted to a Texas hospital 150 miles away from her home because of a shortage of pediatric beds in the Houston area. “My heart sank to the floor,” her mom told reporters.

The Biden administration, union bureaucrats and politicians on both sides of the aisle have repeated the chorus ad nauseam that “we must learn to live with the virus.” But this is a lie. All of these deaths and infections were preventable. Had the proper measures been taken at the start of the pandemic, the virus could have been contained and eradicated. Now, due to the negligence and criminality of the ruling class, both Democrat and Republican, more dangerous strains of the virus are developing.

The fact of the matter is that all factions of the ruling class—from Republicans, who are demanding an end to every mitigation measure, to Democrats, who claim that reopening can be carried out safely through “mitigation”—are opposed to the measures that are necessary to eradicate the virus, including the shutdown of schools.

In the country's largest school district, New York City, Democratic Mayor Bill de Blasio unilaterally announced on Monday that unvaccinated children who are known to have been exposed to COVID-19 in classrooms will no longer be required to quarantine. These moves come just one week after schools reopened in the largest district in the US with roughly 1.1 million students.

The Democrats are working closely with the trade unions, and in particular the American Federation of Teachers (AFT) in every state, to keep the schools open no matter the cost. AFT President Randi Weingarten has declared that “the number one priority is to get kids to be back in school.”

These efforts have been accompanied by a massive campaign in the corporate media to downplay the dangers posed to children and to promote the idea that things are “back to normal.”

There is, however, nothing “normal” about child deaths and infections from COVID-19. Opposition to these deadly policies is brewing among workers, parents and students across the country and in fact, internationally.

What is necessary is a common fight to close all K-12 schools, universities and nonessential workplaces with full compensation for those affected, in combination with a mass vaccination campaign, universal testing, contact tracing, isolation of infected patients and other public health measures, as part of a broader strategy to eradicate COVID-19 on a world scale.

IG Metall union agrees to cut 2,600 jobs at Siemens Energy in Germany

Peter Schwarz

On Tuesday, the IG Metall trade union, its works council representatives and Siemens Energy management agreed to cut 2,600 jobs in Germany. Five locations are affected: In Berlin, 602 jobs will be eliminated, in Mülheim more than 600, in Erlangen 565, in Duisburg 326 and in Görlitz 124. A total of 7,800 jobs worldwide are to fall victim to the axe.

The job cuts are the result of negotiations by a conciliation board requested by the company’s management. According to paragraph 76 of the federal Works Constitution Act, the conciliation board is composed of an equal number of representatives of management and the works council, plus an “impartial” chairman.

Demonstration of Siemens workers on the avenue of Kurfürstendamm in Berlin (source WSWS)

With the agreement of the works council and the union to the job cuts, exactly what the WSWS had predicted has come to pass. We had long warned that the so-called workers’ representatives were preparing for a sell-out and that their protest demonstrations were only intended to deceive workers and blow off steam.

On July 14, we wrote that “IG Metall and the works council will hide behind the alleged neutrality of the chairman of the conciliation board in order to press ahead with the planned redundancies against the resistance of the workforce.” IG Metall is unreservedly prepared “to cut wages, social benefits and jobs.” With the help of external consultants, it had drawn up its own alternative concept and was now trying to “convince the company and its shareholders that its proposal would prove to be more profitable than the board’s own plan.”

When IG Metall called for a rally in front of the conciliation board meeting place on August 23, we stated in a German-language article: “The aim of the action was not to defend the jobs, but to continue cooperation with management. ... Otto and IG Metall are not pursuing the goal of defending the wages and jobs of the workforce, but of ‘helping to shape the transformation,’ i.e., restructuring Siemens and other corporations so that they will continue to yield high profits in the future.”

That is exactly what happened. The 2,600 jobs that IG Metall and its works council representatives have now agreed to eliminate are only slightly below the 3,000 figure that Siemens Energy originally announced. It can be assumed that the company had deliberately set this figure too high in order to be able to subsequently make a “concession” to the union.

Nevertheless, the leading IG Metall representative in Berlin, Jan Otto, described the result as a “strategic partial success.” He justified this by saying that 136 fewer jobs would be cut at the Berlin gas turbine plant than originally announced, that the reduction would be extended to 18 months—due to unfulfilled orders—and that the company had promised to invest hundreds of millions in the future of the site.

Manfred Bäreis, chairman of the Erlangen works council, also called the 565 job cuts in Erlangen “sustainable.” He said the job cuts were being made “on a voluntary basis.”

As usual, the job cuts are to be carried out via a “social plan” and without “compulsory redundancies.” This means that workers who do not “voluntarily” accept severance pay, early retirement or being moved into a transfer company will be put under personal pressure until they are worn down and resign.

Although the Siemens workforce demonstrated its willingness to fight at numerous demonstrations, IG Metall and the works council never intended to wage a battle to defend the jobs. They are pursuing a completely different strategy.

They are trying to prove to the corporations and the government that they have better plans for defending the interests of big business in the global struggle for market shares and profits. They want to convince them that their profits and stock prices will rise faster if they work closely with unions.

There is an inescapable logic to this. In order for Germany to remain competitive as a business destination, wages must be lowered, jobs must be cut and productivity increased. Instead of uniting the international working class, which is fighting against the same corporations and financial interests worldwide, IG Metall is dividing them and playing one location off against the other.

Jan Otto, the Berlin IG Metall leader, is an expert in this form of corporatist class collaboration. While the conciliation body negotiated the jobs massacre at Siemens Energy behind closed doors, he organised one so-called “transformation summit” after another.

On September 2, IG Metall held a “transformation conference” in Berlin, attended by IG Metall Federal Chairman Jörg Hofmann and Mayor Michael Müller (Social Democratic Party, SPD), the top candidates of Berlin’s political parties—Franziska Giffey (SPD), Kai Wegener (Christian Democratic Union, CDU), Klaus Lederer (Left Party) and Bettina Jarasch (Greens)—as well as hand-picked functionaries from the factories.

The conference ushered in “a new era for IG Metall,” Otto proclaimed. “We want to expand our mandate to include an activating and successful industrial and transformation policy.”

A transformation summit followed on Sept. 10 at Berlin City Hall, to which Mayor Michael Müller (SPD) and the city’s senator for economics, energy and business, Ramona Pop (Greens), had invited high-ranking union officials and top managers from Siemens Energy, Stadler, Bayer, Daimler, Biotronik, Alstom and other corporations. IG Metall was represented by Jan Otto and Regina Katerndahl.

On its website, IG Metall celebrated the summit as a “clear commitment from industry and trade unions” that it made sense “when decision-makers discuss the transformation of Berlin as an industrial location directly with social partners from the trade unions.” At the summit, he said, “many business models for the future” had emerged. One “exciting aspect was the idea of using Berlin as a real laboratory.”

The job cuts at Siemens Energy show what is meant by a “real laboratory.” On the day the agreement was announced, German Economics Minister Peter Altmaier (CDU) and lead CDU candidate Kai Wegener met with works council representatives at the gas turbine plant that had agreed to the cuts. They assured them, “Politics stands by the works council and their union.”

The Siemens Energy sell-off underscores once again that defending jobs, wages and social rights requires a break with the trade unions. Workers must build independent rank-and-file committees to organise the struggle and establish contact with workers in other plants and countries.

Siemens Energy is just the tip of the iceberg. In the German auto industry alone, half a million jobs are up for grabs. The ruling class is using the coronavirus pandemic to impose harsh social attacks. While countless workers are losing their income, livelihood or even their lives, it is using the pandemic for a new offensive of enrichment.

China’s Evergrande set to default on debt payment

Nick Beams

Tomorrow is looming as crunch day for the beleaguered debt-burdened Chinese property developer Evergrande when interest payments on two bonds fall due.

Evergrande is up for a payment of $83.5 million in interest on an 8.25 percent five-year bond and a $36 million payment on another debt on the same day.

China Evergrande Centre [Wikimedia Commons]

Financial markets have priced in the prospect of payment as unlikely with one of its bonds trading at less than 30 percent of its face value. Whatever the outcome of events tomorrow, the prospect of default will continue to hang over the company as, according to the Financial Times, it has $850 million due in interest payments falling due before the end of the year.

On Monday the Evergrande crisis triggered significant falls on global share markets with Wall Street experiencing its largest one-day fall since May. At one stage the Dow was down by 972 points before paring back some of the losses to finish down by 614 points, a 1.8 percent decline.

The S&P 500 index dropped by 1.7 percent with the tech-heavy NASDAQ down by 2.2 percent after falling by more than 3 percent at one stage during trading.

The sell-off was halted on Tuesday, with the S&P 500 and the Dow only marginally lower for the day. This was largely on the back of assurances from major finance houses that the Chinese government had the situation under control. As Bloomberg commented: “Wall Street analysts are putting their faith in the Chinese Communist Party.”

It cited a list of statements to the effect that China was not facing a “Lehman moment” – a reference to the collapse of the New York investment bank which led to the financial crisis of 2008.

A comment by Judy Zhang of Citigroup was typical of many. “We do not see the Evergrande crisis as China’s Lehman moment given policymakers will likely uphold the bottom line of preventing systemic risk to buy time for resolving the debt risk and push forward marginal easing for the overall credit environment.”

But despite these reassurances the Evergrande crisis does have implications for the Chinese financial system and the economy as a whole.

As the Wall Street Journal columnist James Mackintosh commented, “Evergrande is the Chinese economy in miniature.”

“Both have operated for decades on the principle that it was worth borrowing to build, in Evergrande’s case mostly housing, in China’s case not just apartments, but roads, rail, airports and other infrastructure.”

The Evergrande debacle was sparked by a decision last month to tighten credit regulations for highly leveraged companies, particularly in the real estate sector. It was motivated by the fear that the escalation of debt, which it had previously encouraged, was getting out of control and had to be scaled back lest it provoke a financial crisis.

The government had for some time been seeking to halt debt accumulation, largely to little effect. But the new regulations, characterised as “three red lines,” introduced more stringent measures. Financial authorities declared that borrowers had to meet three criteria: the ratio of liabilities to assets had to be less than 70 percent; net debt to equity ratios had to be below 100 percent and cash levels had to be at least equal to short-term debt.

Evergrande failed on all three. Its business model has depended on the continuous inflow of money and the expectation of a continued rise in the price of apartments.

It sold dwellings off the plan, either through a significant deposit or a full payment and then used the money obtained to finance further projects. The company is reported to have a total of $300 billion in debts with 778 projects under way in 223 cities. It supplemented its cash flow with short-term borrowings, often from firms in the so-called shadow banking system, and even raised money from its own employees to finance day-to-day operations.

For a time, it appeared to be riding an endless property boom and moved into other areas including bottled water, professional sport and electric vehicles. It is now trying desperately to sell of some these assets in order to alleviate its cash-flow crisis.

But with a credit crunch imposed by financial authorities and a falling housing market it is now running out of cash to complete the construction of many apartment block projects.

According to an estimate from Barclays, there are as many as 1.6 million people who have put money into the purchase of apartments they may now never receive.

The crisis is not confined to Evergrande, which has been described as the “tip of the iceberg.” The credit rating of the property development Fantasia Group was downgraded by the rating agency Fitch earlier this month and Guangzhou R&F has also had its credit rating downgraded. Earlier this year, China Fortune Land Development, a company that specialises in the development of industrial parks in the northern province of Hubei, defaulted. This cost Ping An, China’s biggest insurer $3.2 billion.

Morgan Stanley has estimated that property development firms defaulted on $6.2 billion of risky debt in the year to mid-August, more than the previous 12 years combined.

Evidence of the broader crisis in the property market was visible this week when television programs around the world showed videos of 15 uncompleted apartment blocks being demolished because the developers had run out of money to complete them.

Despite assurances that Evergrande will not provoke a financial crisis – at least in the very short term – numerous commentators and analysts have pointed to the flow on effects of the Evergrande crisis both for the Chinese economy and the world economy as a whole. It is estimated that property development and related industries account for more than 25 percent of the Chinese economy.

“This is a threat to global growth,” Ilya Feygin, a managing director at WallachBeth Capital told the Wall Street Journal. “What if things worsen? That means a hit to the financial system in China [and] overall economic activity around the world because of China’s importance.”

The dangers contained in the rise and rise of Evergrande have been known for some time, but the belief has been that the Chinese government would ensure that they were contained. Now that assessment is at least being questioned.

Goldman Sachs analysts have called on financial authorities to send a “clearer message” on how they intended to stop Evergrande from causing “significant spillovers” to the rest of the economy. Citigroup said officials may commit a “policy error of overtightening” and economists at Société Générale have said there is a 30 percent possibility of a “hard landing.”

Ding Shuang, an economist at Standard Chartered in Hong Kong said: “Even though most people don’t expect Evergrande to collapse all of a sudden, the silence and lack of major actions from policy makers is making everyone panic.”

In a note published on Sunday, Goldman Sachs economists pointed to the longer-term issues for Chinese property development because of its key role in the economy.

“With policy makers showing no signs of wavering on property market deleveraging, the latest headlines regarding Evergrande suggest that housing activity may deteriorate further in the absence of the government providing a clear path towards an eventual resolution,” they said.

Some of the companies hardest hit in the stock market sell off triggered by Evergrande have been those involved in the mining and refining of basic metals. And for good reason. Rapid calculations published in the FT noted that the Chinese real estate sector accounts for the consumption of around one fifth of the world supply of copper and steel.

At the start of the week, iron ore futures in Singapore fell by as much as 11.5 percent to below $100 per tonne. Back in May the ore price was around double this level. Last week iron ore prices fell by 20 percent in their worst week since the financial crisis of 2008.

This is not entirely due to the Evergrande crisis. But the growing problems in the Chinese property market is feeding into a general assessment that, far from experiencing a bounce back as governments scrap public health measures to deal with the pandemic, the world economy is entering a downswing.