Nothing better illustrates the intersection of economy and psychology than the psychodramas swirling around the efforts of the new Greek government to lower the costs of its borrowing. Like virtually all other capitalist governments, Greece’s has a long history of postponing the politically difficulties of facing of its economic contradictions by borrowing. Having enabled its richest elites (corporations and families) to evade taxes for many years, the state tried to shift its costs onto the mass of Greeks. Being well organized and politically sophisticated, the Greek people fought back enough to limit that shifting and to secure some state-financed gains and jobs for themselves. The Greek state would not tax or socialize the wealth of those corporations and rich families. Likewise it would not cut its massive subsidies to those corporations nor its provisions of services, subsidies, and civil service jobs to the Greek people. For many years, the governments’ resulting “historic compromise” entailed ever more borrowing. Not only did that postpone resolving (or even admitting) the basic contradictions, it also shoveled vast fees into the Greek and European financial enterprises that handled Greek national debt.

As always, such borrowing reaches limits if and when the borrower’s underlying production of new wealth do not rise far enough and fast enough to manage the mounting costs of servicing the mounting debt. Greece has had problems and delays in securing the economic advantages of its position within the European Union. The global capitalist crisis exacerbates those problems and delays. Hence Greece’s capacity to service its debt has not kept up with the costs of doing so. Rolling over its current debt (getting creditors to renew loans as they come due) is thus more problematic. Its creditors are demanding higher interest rates to compensate them for the greater riskiness entailed by Greece’s constrained capacity to service its debt.

The new Greek government does not want to pay higher interest rates as that will strain its own finances still more. It lacks the political strength to attack the corporations and the wealthy or the Greek masses. It wants to do what previous Greek governments have done: renew the historic compromise by means of renewed loans. It wants the other European countries – who undertake the same compromises, albeit to differing degrees, in their countries – to support the Greek government’s renewal of its compromise.

The entire psychodrama unfolding in Europe over the Greek debt renewal is thus a dance around the debt renewal compromise. So long as these societies and their political leaderships can avoid the contradictions of their political economies by borrowing, they continue to do so. And when they no longer can, the capitalists will use those national debts as a club to try to force the mass populations in their countries to knuckle under and accept the resulting costs (higher taxes, reduced government services, and reduced government payrolls). The postponed class struggle will then be joined.