Tag Archives: Zoe Konstantopoulou

this is the EU — so take it or leave it… #5. Greece and the tyranny of Brussels

“In the euro area, the countries in the periphery have nothing at all to offset austerity. They are simply being asked to cut total spending without any form of demand to compensate. I think that is a serious problem.

“I never imagined that we would ever again in an industrialised country have a depression deeper than the United States experienced in the 1930s and that’s what’s happened in Greece.

“It is appalling and it has happened almost as a deliberate act of policy which makes it even worse”. [Bold highlight added]

— Lord Mervyn King, former Governor of the Bank of England. 1

“The Greek people have been living through hell during the last six years, and unfortunately they trusted that Tsipras [PM] would put an end to the extreme austerity measures, which are combined with a total undemocratic regime. Unfortunately, instead of putting an end, he put his signature to a third memorandum, which is even worse than the previous two…

“People are back on the streets protesting for their rights and dignity because right now they’re being asked to pay taxes which amount to almost the totality of their revenue. They’re asked to give up their homes… They’re asked to surrender public property, which is privatized at very, very low prices. And, they’re also asked to give up democracy”

— Zoe Konstantopoulou, lawyer and former Speaker of Hellenic Parliament. 2

*

On 13th July [2015], the democratic elected Greek government of Alexis Tsipras was brought to its knees by the European Union. The “agreement” of 13th of July is in fact a coup d’état. It was obtained by having the European Central Bank close down the Greek banks and threaten never to allow them to open up again, until the Greek government accepted a new version of a failed program. Why? Because official Europe could not stand the idea that a people suffering from its self-defeating austerity program dared elect a government determined to say “No!”.

So begins the call for “A plan B in Europe” put together by a group of prominent European left-leaning politicians from Parti de Gauche (France), Die Linke (Germany), Red Green Alliance (Denmark), Socialist Party (SP) (Ireland), Bloco de Esquerda (Portugal), and Syriza (Greece). Top of the bill is Yanis Varoufakis (a principle author, I imagine, given some of the polemical flourishes within this signed but otherwise uncredited page-long call to action).

The piece continues:

We must learn from this financial coup. The euro has become the tool of economic and governmental dominance in Europe by a European oligarchy hiding behind the German government, delighted to see Mrs Merkel doing all the « dirty work » other governments are incapable of undertaking. This Europe only generates violence within nations and between them: mass unemployment, fierce social dumping and insults against the European Periphery that are attributed to Germany’s leadership while parroted by all the “elites”, the Periphery’s not excluded. The European Union has thus become an agent of an extreme right wing ethos and a vehicle for annulling democratic control over production and distribution throughout Europe. 3

Click here to read the full statement.

*

Now let us go back nine months – back to the eve of the Greek referendum during the dog days of last summer, and just before the extraordinary ‘oxi’ vote which momentarily reverberated across our western hemisphere.

Yanis Varoufakis [3:45 mins in]: Let me tell you something which is probably unknown. Ever since we declared the referendum and we incensed our European partners we had the most interesting proposals coming from Brussels. Perhaps this referendum and the impasse it represents concentrated several minds in Brussels and we’ve had some really good proposals – proposals we would sign on the dotted line for.

Paul Mason: You have a proposal you would sign on the dotted line for?

Varoufakis: Yes, we do.

Mason: Where is it?

Varoufakis: Well, I’m not going to tell you. It’s somewhere in this building. But the crucial part of the story is that before this proposal becomes a genuine negotiating document which we can sign off on Monday, the people have to empower us with a “no”.

From the Channel 4 news interview embedded above broadcast on July 3rd 2015 that is also available here.

You can find the same clip here on Varoufakis’ blog.

Shortly thereafter [July 5th] the people of Greece, perhaps in light of Varoufakis’ advice, went to the polls and voted overwhelming in favour of rejecting the Eurogroup deal with its demands for increasing doses of “austerity” and ‘Washington Consensus’-style ‘conditionalities’ — the enforced privatisation of public services and other forms of so-called ‘deregulation’. To which the response from Brussels was to immediately double down by issuing still harsher neoliberal demands. With this, the mask of European social democracy fell away completely.

Nobel laureate economist, Paul Krugman, was one who helped to promote the hashtag #ThisIsACoup when he wrote in the New York Times:

This Eurogroup list of demands is madness. The trending hashtag #ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.

Left Unity (which has a loose alliance with political parties Syriza and Podemos) also sent a message of support to the Greeks:

The people of Greece have resisted every threat, every piece of establishment propaganda telling them a No vote would mean ruin, and asserted their democratic rights. This will be a No heard around the world.

Now is the time to celebrate – and to step up our solidarity ahead of the Troika’s next move. Come along to what will now be a victory rally at the TUC’s Congress House, organised by Greece Solidarity Campaign.

And the Greeks had indeed empowered their government with a resounding ‘no’, but instead of fighting on, Syriza under Tsipras’ leadership swiftly capitulated in what must be one of the fastest political U-turns of all time. In response, Varoufakis resigned, refusing to criticise his friend Tsipras, and also declining an invitation to join a small breakaway faction who hoped to restore the party’s anti-austerity ticket on which Tsipras and Syriza had stood little more than six months previously.

So there is a mystery here that remains. Varoufakis, who prides himself on openness, has simply never explained what actually happened during those most momentous days in early July. Specifically, what became of that proposal from Brussels he was so keen “to sign on the dotted line”. Surely he owes the Greek people a fuller explanation.

Moreover, while Varoufakis was quick to attribute blame for the Eurogroup failures on the inflexibility of Wolfgang Schäuble and fellow German Karl Lamers, he has to a large extent absolved other key players including, most notably, President of the ECB, Mario Draghi for their part in “the coup” (his words).

I have consistently defended Varoufakis and Tsipras and been scathing of others on the left for being too hurried in passing judgement and unduly hypercritical (as many earlier posts testify). Caught up in the drama, like others hoping Syriza’s election signified the beginning of truly revolutionary reforms, I confess that I became a cheerleader for both.

With the benefit of hindsight it is clear that Syriza and Varoufakis were both tremendously guilty of an over-reliance on the efficacy of “reasonableness” (more here), because ‘reasonableness’ only ever makes headway when it engages with opposition that is principled and reasoned. Against the irrational, it is blunt, and against the unscrupulous it becomes a danger to itself. Yet Syriza and Varoufakis seem incapable of learning this simple lesson. This is what Varoufakis wrote in the abstract to his “Confessions of an Erratic Marxist” [December 2013]:

Should we use this once-in-a-century capitalist crisis as an opportunity to campaign for the dismantling of the European Union, given the latter’s enthusiastic acquiescence to the neoliberal policies and creed? Or should we accept that the Left is not ready for radical change and campaign instead for stabilising European capitalism? This paper argues that, however unappetising the latter proposition may sound in the ears of the radical thinker, it is the Left’s historical duty, at this particular juncture, to stabilise capitalism; to save European capitalism from itself and from the inane handlers of the Eurozone’s inevitable crisis. 4

Throughout the crisis, he and the party he once represented at the Eurogroup meetings have been chewed up and spat out time and again and yet his response has been to remain unruffled and reasonable in his continued fight (hardly the right word) “to save European capitalism from itself”.

Today Varoufakis leads a parallel campaign Democracy In Europe 2025 made up of lecture tours and larger academic-style conferences making speculative calls for a Plan B in Europe. Beyond the well-meaning rhetoric, the movement is entirely bereft of strategy. And my immediate question to Varoufakis is actually this: why must we wait until 2025 to bring democracy (a gift of the ancient Greeks) back to Europe? After all he knows better than most that a week in politics is an exceedingly long time – so a decade might as well be an aeon.

Here then, to redress the balance of earlier posts (at the risk of angering readers and friends alike), I present the condemnatory appraisal courtesy of political commentator James Petras, who in March 2015 (a mere two months after Syriza were elected) wrote the following:

The vast majority of Greeks, who voted for Syriza, expected some immediate relief and reforms.  They are increasingly disenchanted.  They did not expect Tsipras to appoint Yanis Varoufakis, a former economic adviser to the corrupt neo-liberal PASOK leader George Papandreou, as Finance Minister. Nor did many voters abandon PASOK, en masse, over the past five years, only to find the same kleptocrats and unscrupulous opportunists occupying top positions in Syriza, thanks to Alexis Tsipras index finger.

Nor could the electorate expect any fight, resistance and willingness to break with the Troika from Tsipras’ appointments of ex-pat Anglo-Greek professors.  These armchair leftists (‘Marxist seminarians’) neither engaged in mass struggles nor suffered the consequences of the prolonged depression.

Syriza is a party led by affluent upwardly mobile professionals, academics and intellectuals.  They rule over (but in the name of) the impoverished working and salaried lower middle class, but in the interests of the Greek, and especially, German bankers.

They prioritize membership in the EU over an independent national economic policy.  They abide by NATO, by backing the Kiev junta in the Ukraine, EU sanctions on Russia, NATO intervention in Syria/Iraq and maintain a loud silence on US military threats to Venezuela! 5

[bold highlight added]

Click here to read the full article by James Petras.

*

By latest estimates total Greek debt is 384 billion euros, or US$440 billion. That’s approaching nearly twice the size of Greece’s annual GDP.  A decade ago, in 2007-08 before the global crash, Greek debt was roughly half of what it is today, in terms of both total debt and as a percent of GDP.  Greek debt was actually less than a number of Eurozone economies.  So Greece’s debt has been primarily caused by the 2008-09 crash, Greece’s six year long economic depression [that] followed, the extreme austerity measures imposed on it by the Troika during this period which has been the primary cause of its long depression, and the Troika’s piling of debt on Greece to repay previously owed debt.

Contrary to European media spin, it’s not been rising Greek wages or excessive government spending that has caused the US$440 billion in Greek debt. Since 2009 Greek annual wages have fallen from 23,580 to less than 18,000 euros. Government spending has fallen from 118 billion euros to 82 billion.

writes Jack Rasmus in an extremely detailed overview of the state of the Greek crisis in light of the recent parliamentary vote (passed by a narrow margin of 153 to 145) to implement the latest demands of “the Troika” in order to ensure another tranche of unpayable loans. “Bailouts” that, as Rasmus explains at length, are then returned directly to the creditors:

As a recent in depth study by the European School of Management and Technology, ‘Where Did the Greek Bailout Money Go?, revealed in impeccably researched detail, Greek debt payments  ultimately go to Euro bankers. For example, of the 216 billion euros, or US$248 billion, in loans provided to Greece by the Troika in just the first two debt deals of May 2010 and March 2012, 64 percent (139 billion euros) was interest paid to banks on existing debt; 17 percent (37 billion euros) to Greek banks (to replace money being taken out by wealthy Greeks and businesses and sent to northern Europe banks), and 14 percent (29 billion euros) to pay off hedge funds and private bankers in the 2012 deal. Per the study, less than 5 percent of the 216 billion euros went to Greece to spend on its own economy. As the study’s authors concluded, “ the vast majority (more than 95 percent) went to existing creditors in the form of debt repayments and interest payments”.  And that’s just the 2010 and 2012 Troika deals. Last August’s third deal is no doubt adding more to the totals. 6

[bold highlight added]

Click here to read Jack Rasmus’ full article published in Counterpunch.

The cycles of debt-repayment might literally be never-ending, because Greece will never be able to fully repay all of its (odious) debts. It is a situation compounded because Greece’s already floundering economy is completely suffocated by the Troika’s imposed “austerity” regime.

But this disastrous situation is no accident. The trap in which Greece finds itself satisfies two neo-liberal objectives. Firstly, Greece becomes so impoverished that it is forced to sell state assets at rock-bottom prices. Secondly, the sustained wealth transfer from the pockets of the ordinary Greeks into the hands of the bankers helps to prop up a failed financial system.

Setting the bizarre academic justifications aside, and overlooking the deeper reasons Greece became so indebted in the first place, what we see is how the Troika – two thirds of which is the EU – has put the sanctity of debt repayment far above the sanctity of human well-being. So whenever Greece comes up gasping for air, the IMF and the EU repeatedly pushes it back under again:

The media persists in calling the looting of Greece a “bailout.”

To call the looting of a country and its people a “bailout” is Orwellian. The brainwashing is so successful that even the media and politicians of looted Greece call the financial imperialism that Greece is suffering a “bailout.”

writes former Assistant Secretary of the Treasury for Economic Policy and former Associate Editor of the Wall Street Journal, Paul Craig Roberts in a recent article entitled “We Have Entered The Looting Stage of Capitalism”. In the piece, Roberts explains the EU’s role and the IMF’s apparent policy shift as follows:

Having successfully used the EU to conquer the Greek people by turning the Greek “leftwing” government into a pawn of Germany’s banks, Germany now finds the IMF in the way of its plan to loot Greece into oblivion.

The IMF’s rules prevent the organization from lending to countries that cannot repay the loan. The IMF has concluded on the basis of facts and analysis that Greece cannot repay. Therefore, the IMF is unwilling to lend Greece the money with which to repay the private banks.

The IMF says that Greece’s creditors, many of whom are not creditors but simply bought up Greek debt at a cheap price in hopes of profiting, must write off some of the Greek debt in order to lower the debt to an amount that the Greek economy can service.

The banks don’t want Greece to be able to service its debt, because the banks intend to use Greece’s inability to service the debt in order to loot Greece of its assets and resources and in order to roll back the social safety net put in place during the 20th century. […]

The way Germany sees it, the IMF is supposed to lend Greece the money with which to repay the private German banks. Then the IMF is to be repaid by forcing Greece to reduce or abolish old age pensions, reduce public services and employment, and use the revenues saved to repay the IMF.

As these amounts will be insufficient, additional austerity measures are imposed that require Greece to sell its national assets, such as public water companies and ports and protected Greek islands to foreign investors, principally the banks themselves or their major clients. […]

In other words, Greece is being destroyed by the EU that it so foolishly joined and trusted. The same thing is happening to Portugal and is also underway in Spain and Italy. The looting has already devoured Ireland and Latvia (and a number of Latin American countries) and is underway in Ukraine.

The current newspaper headlines reporting an agreement being reached between the IMF and Germany about writing down the Greek debt to a level that could be serviced are false. No “creditor” has yet agreed to write off one cent of the debt. All that the IMF has been given by so-called “creditors” is unspecific “pledges” of an unspecified amount of debt writedown two years from now.

The newspaper headlines are nothing but fluff that provide cover for the IMF to succumb to pressure and violate its own rules. The cover lets the IMF say that a (future unspecified) debt writedown will enable Greece to service the remainder of its debt and, therefore, the IMF can lend Greece the money to pay the private banks. […]

We have entered the looting stage of capitalism. Desolation will be the result. 7

Click here to read Paul Craig Roberts’ full article.

The overarching agenda of the EU – a plan rarely mentioned above a murmur – is to fuse its member nations under unelected technocratic governance for the benefit of a few corporations and the oligarchs who own them. So the notion that sticking by the EU is some sense an act of European solidarity is extremely misguided. Having already sold many of its people down the river, however, we are rapidly approaching a critical and perilous moment.

The far-right is now on the rise in many parts of Europe – Greece being an example, although thankfully Golden Dawn remains very much a minority party. And this swing towards ring-wing extremism is a direct consequence of the EU’s savage economic policies combined with its abject failure to save refugees and resolve the so-called “migrant crisis” (more in a later piece). As this alarming political shift occurs, the EU does next to nothing to address it. No debt relief for Greece or the other struggling member states. No let up on enforced “austerity” or privatisation. Neo-liberalism to the bitter end. But then, after Greece was collectively punished for the insolence of its ‘oxi’ vote last summer, only the most dewy-eyed believers can remain in serious doubt of the EU’s callous indifference towards the plight of its poorest citizens.

*

1 Quote taken from “Euro depression is ‘deliberate’ EU choice, says former Bank of England chief” written by Mehreen Khan, published in The Telegraph on March 1, 2016. http://www.telegraph.co.uk/business/2016/03/01/europes-depression-is-deliberate-eu-choice-says-former-bank-of-e/ 

2 Quote taken from an article entitled “The Ugly Truth Behind the Greek Bailout” written by Robert Hunziker, published by Counterpunch on May 10, 2016. http://www.counterpunch.org/2016/05/10/the-ugly-truth-behind-the-greek-bailout/ 

3 From a statement entitled “A plan B in Europe” from Plan B for Europe. https://www.euro-planb.eu/?page_id=96&lang=en. The statement continues:

It is a dangerous lie to assert that the euro and the EU serve Europeans and shield them from crisis. It is an illusion to believe that Europe’s interests can be protected within the iron cage of the Eurozone’s governance “rules” and within the current Treaties. President Hollande’s and Prime Minister Renzi’s method of behaving like a “model student”, or in fact a “model prisoner”, is a form of surrender that will not even result in clemency. The President of the European Commission, Jean-Claude Juncker, said it clearly: « there can be no democratic choice against the European treaties ». This is the neoliberal adaptation of the « limited sovereignty » doctrine invented by the Soviet leader Brezhnev in 1968. Then, the Soviets crushed the Prague Spring with their tanks. This summer, the EU crushed the Athens Spring with its banks.

We are determined to break with this “Europe”. It is the basic condition needed to rebuild cooperation between our peoples and our countries on a new basis. How can we enact policies of redistribution of wealth and of creation of decent jobs, especially for the young, ecological transition and the rebuilding of democracy within the constraints of this EU? We have to escape the inanity and inhumanity of the current European Treaties and remould them in order to shed the straightjacket of neoliberalism, to repeal the Fiscal Compact, and to oppose the TTIP.

We live in extraordinary times. We are facing an emergency. Member-states need to have policy space that allows their democracies to breathe and to put forward sensible policies at the member-state’s level, free of fear of a clamp down from an authoritarian Eurogroup dominated by the interests of the strongest among them and of big business, or from an ECB that is used as a steamroller that threatens to flatten an “uncooperative country”, as it happened with Cyprus or Greece.

4 From “Confessions of an Erratic Marxist in the Midst of a Repugnant European Crisis” written by Yanis Varoufakis, published on December 10, 2013. http://yanisvaroufakis.eu/2013/12/10/confessions-of-an-erratic-marxist-in-the-midst-of-a-repugnant-european-crisis/ 

5 From an article entitled “Lies and Deceptions on the Left: The Politics of Self Destruction” written by James Petras, published by Global Research on March 22, 2015. http://www.globalresearch.ca/lies-and-deceptions-on-the-left-the-politics-of-self-destruction/5438105

6 From an article entitled “Greek Debt Negotiations: Will the IMF Exit the Troika?” written by Jack Rasmus, published in Counterpunch on May 26, 2016. http://www.counterpunch.org/2016/05/26/greek-debt-negotiations-will-the-imf-exit-the-troika/ 

7 From an article entitled “We Have Entered The Looting Stage Of Capitalism” written by Paul Craig Roberts, published on May 25, 2016. http://www.paulcraigroberts.org/2016/05/25/we-have-entered-the-looting-stage-of-capitalism-paul-craig-roberts/ 

1 Comment

Filed under analysis & opinion, austerity measures, Germany, Greece, neo-liberalism

what next for Greece? 3 big questions that can be boiled down to one

Since the Greek people registered their defiant “no to austerity” at last weekend’s plebiscite, like many, I have been struggling to understand what that vote really means and where this is now heading both for Greece and the rest of the Eurozone. In searching for answers I have found that three different questions are inclined to separate out; questions that involve one another in a vaguely hierarchical fashion a little like Russian dolls. I have therefore decided to try to address each of these nested questions in turn beginning with the outermost first.

*

1. Whose fault? (and who should pay?)

“The Greeks have been living beyond their means for years,” said one man, visiting Berlin from Osnabrück, Lower Saxony.

“I used to play in a volleyball team in the 1970s and 80s and we traveled all over the world. I’ve been to Istanbul and I’ve been to Brasil and I’ve never seen a country like Greece.

“The people there simply don’t work enough. I’d see them crowding cafes at four o’clock in the morning.”

“I’m completely on the side of the CDU [Christian Democratic Union]. Where has all the money gone? We pay our taxes, they don’t.” 1

The quotes above were part of an article sent to me by a friend living in Germany – a friend who happens to spend the other half of his time living in Greece. The remarks, he says, perfectly exemplify the sorts of opinions he most frequently hears. The Greeks caused the crisis, they should pay what they owe, and follow the rules like the Germans would. It’s all exceedingly simple, and all extremely badly informed.

Like many ‘good Europeans’, the German people are being held hostage to two falsehoods. One is that the crisis came about primarily because of indolence, inefficiency and impropriety. Put baldly, that Greeks are a bunch of lazy tax cheats. The only part missing here is the word untermensch; the tinge of latent bigotry is unmistakeable.

I have argued against this nonsense many times and so it pains me to have to repeat myself at all. But the facts are there for anyone who cares to look. Figures that unequivocally prove that Greeks work extremely hard: harder on average in fact than Germans do. Their productivity is lower and so perhaps there is an issue over efficiency, and tax revenues are indeed harder to secure, but this is very much a problem that gets far worse as you climb the social ladder (as it does in every society).

In any case, none of this was the actual cause of the Greek “debt crisis” – an offshoot of the wider banking crisis – which in fact originated because corrupt government officials negotiated with corrupt EU officials (unless we believe it takes only one to tango), helped along by corrupt men at Goldman Sachs, when Greece signed on to the euro. None of this will come as news to those who have followed the story closely, even if it is suddenly back in the newspapers again:

Goldman Sachs faces the prospect of potential legal action from Greece over the complex financial deals in 2001 that many blame for its subsequent debt crisis.

A leading adviser to debt-riven countries has offered to help Athens recover some of the vast profits made by the investment bank.

The Independent has learnt that a former Goldman banker, who has advised indebted governments on recovering losses made from complex transactions with banks, has written to the Greek government to advise that it has a chance of clawing back some of the hundreds of millions of dollars it paid Goldman to secure its position in the single currency.

The development came as Greece edged towards a last-minute deal with its creditors which will keep it from crashing out of the single currency. 2

Click here to read the full article in yesterday’s [July 11th] Independent.

The second lie is that the Greek people have ever been bailed out at all:

Only a small fraction of the €240bn (£170bn) total bailout money Greece received in 2010 and 2012 found its way into the government’s coffers to soften the blow of the 2008 financial crash and fund reform programmes.

Most of the money went to the banks that lent Greece funds before the crash.

That comes from a Guardian article, which goes on to point out (as many others have previously done):

Less than 10% of the bailout money was left to be used by the government for reforming its economy and safeguarding weaker members of society.

Greek government debt is still about €320bn, 78% of it owed to the troika. As the Jubilee Debt Campaign says: “The bailouts have been for the European financial sector, while passing the debt from being owed to the private sector to the public sector.”3

Yes, more than 90% of the bailout money went straight back to the creditors – much of it German money to prop up German banks.

As Paulo Nogueira Batista, one of the Executive Directors of the IMF, has recently admitted:

“One of the major problems of the programmes that were proposed was that they [“the Troika”] put too much of a burden on Greece and not enough of a burden on Greece’s creditors. So for example, the first programme of 2010 was presented as a bailout of Greece, but in reality it was more of a bailout of the private creditors of Greece. Greece received enormous amounts of money but this money was used basically to allow the exit of, for example, French banks [and] German banks…”

*

For a more complete analysis, I refer readers to a previous article based around two excellent documentary films made by Harald Schumann and Árpád Bondy. The second of these, On the Trail of the Troika, was first broadcast on March 9th 2015 on ARD (German Public TV) as Macht ohne Kontrolle – Die Troika and has since been uploaded on youtube with both English and Greek subtitles. It is embedded below:

*

Parallel to this overarching question of who is responsible for the debt is the question of who should now repay it. To the (wo)man on the street – and especially those auf der Strasse – this tends to be treated as if it were the self-same question, but it isn’t, and for the simple reason that a debt that cannot be repaid will never be repaid. In ordinary life we know this is true, which is why in our private lives we are disinclined to lend money other than to those we most trust. After all, it is very much the responsibility of every creditor to lend their money wisely, and this applies to banks and global institutions no less than it applies to you and me. But there are also international laws determining the legitimacy of debts.

In the case of Greece (and the other Eurozone debtor nations including Spain and Portugal), it is well known that the debts cannot possibly be repaid (as the IMF has recently conceded – for more information see my update on the previous post). There are also grounds for arguing that much of the debt is odious, and so the Greek government is not only justified but legally sanctioned to repudiate all such illegitimate debt:

A committee convened by the Greek parliament has claimed much of the country’s debt of 320bn euros was illegally contracted and should not be paid.

Following an official parliamentary investigation, speaker Zoe Konstantopoulou described the debt as illegal, illegitimate and odious.

She told the BBC that Greek people “should fight for justice”. 4

Added to this, we also have the postwar precedent set by Greece and Spain amongst others when many nations agreed to the cancellation of German war debts thanks to the London Debt Agreement of 1953:

Needing a strong West Germany as a bulwark against communism, the country’s creditors came together in London and showed that they understood how you help a country that you want to recover from devastation. It showed they also understood that debt can never be seen as the responsibility of the debtor alone. Countries such as Greece willingly took part in a deal to help create a stable and prosperous western Europe, despite the war crimes that German occupiers had inflicted just a few years before.

The debt cancellation for Germany was swift, taking place in advance of an actual crisis. Germany was given large cancellation of 50% of its debt. The deal covered all debts, including those owed by the private sector and even individuals. It also covered all creditors. No one was allowed to “hold out” and extract greater profits than anyone else.

That comes from an excellent article written by Nick Dearden published in the Guardian. As Dearden points out, although this London deal helped pave the way for Germany’s “economic miracle”, the same remedy is entirely withheld from today’s debtor nations whether inside or outside the Eurozone:

The German debt deal was a key element of recovering from the devastation of the second world war. In Europe today, debt is tearing up the social fabric. Outside Europe, heavily indebted countries are still treated to a package of austerity and “restructuring” measures. Pakistan, the Philippines, El Salvador and Jamaica are all spending between 10 and 20% of export revenues on government foreign debt payments, and this doesn’t include debt payments by the private sector.

If we had no evidence of how to solve a debt crisis equitably, we could perhaps regard the policies of Europe’s leaders as misguided. But we have the positive example of Germany 60 years ago, and the devastating example of the Latin American debt crisis 30 years ago. The actions of Europe’s leaders are nothing short of criminal. 5

Unfortunately, today’s neo-liberal belief holds that debt is sacrosanct. So that whereas West Germany was only required to pay for debts out of its trade surplus, and thus its creditors had a vested interest in wishing to see economic growth, the creditors in the current crisis demand their pound of flesh irrespective not only of broader social consequences, but seemingly even of their debtors ability to keep up with repayments.

*

2. To Grexit or not to Grexit?

The debate over whether Greece would be better inside or outside of the Eurozone has been ongoing for just as long as the crisis itself. And once again, we can break the argument down into component parts, of which one claim is that the Eurozone per se was an inherently flawed concept that remains utterly unworkable in its current form. This is very possibly the case, although not a subject I feel comfortable discussing – it is beyond my technical understanding. However, whether the Eurozone is ultimately workable or not, and regardless of whatever costs to democracy and national sovereignty might be needed to completely fix it, we can certainly see that this current crisis did not arise from the formation of the monetary union.

Rather, this so-called “debt crisis” began as a banking crisis, and one that can be easily traced back to the American subprime mortgage crisis, the origins of which again, in reality trace back to the financial deregulation begun under Thatcher and Reagan, and then continued by Clinton, Blair and Brown. The subprime mortgage/banking crisis of 2008 never truly ended, and the western financial system only limps on thanks to sporadic bailouts, unlimited QE and zero interest rates. Better understood, and as already discussed above, the so-called bailouts of Greece have been little more than a continuation of the earlier banker bailouts.

Leaving aside the more technical or purely political considerations, the decision facing the Greek government to stay or exit the Eurozone is rather more straightforward. It is a question of economic expediency – and for millions of people, this is quite literally a matter of life and death. So here is what I wrote more than three years ago (it reveals just how little in the debate has actually shifted):

Should the Greeks submit to further the “austerity measures” that have already destroyed their economy and social infrastructure as Angela Merkel and others are demanding, or should they drop out of the Euro and begin tackle their debt crisis by returning to a hugely devalued Drachma? These are the only available choices, as we are all, Greeks included, constantly reminded. […]

So what of the second option – the one that already has the stupid text-style name of Grexit? Should Greece abandon the Euro altogether? Well, firstly, the Greeks cannot be forced to drop out of the Eurozone – or at least there is no recognised mechanism for expelling any member nation. Secondly, it should be noted that the Greek people don’t want to leave the Eurozone. Like most of the peoples of Europe, these days they are broadly enthusiastic about the European project. Added to this, they also clearly recognise the serious risks of trying to suddenly go it alone in such perilous times. Once isolated, the Drachma would be mercilessly attacked by the same predatory banks and hedge funds that are currently threatening to bring down the Euro. The Drachma wouldn’t stand the ghost of a chance.

Which brings us to an impasse. Accept “austerity” or get out! Jump off a cliff or suffer slow death by a thousand cuts. Is there really no genuine alternative for the Greeks?

Yes, Greece could exit, following which it makes perfect sense, of course, to default, and in which case to default absolutely. With financial support offered from elsewhere (the new BRICS bank being the most likely source) they might revert back to the drachma, a move that would instantly improve competitiveness. Grexit would be a shock, but with genuine investment in productive activity and with exports suddenly buoyed by a devalued currency, Greece would survive and steadily grow. Or at least this is how the arguments in favour of Grexit go. And they sound like a pleasant dream. The passing storm, though intense, is quickly over. So if Grexit is so survivable, then what’s been the hold up…? Here is recently ousted Greek Finance Minister, Yanis Varoufakis, laying out the difficulties that would lie ahead:

The threat of Grexit has had a brief rollercoaster of a history. In 2010 it put the fear of God in financiers’ hearts and minds as their banks were replete with Greek debt. Even in 2012, when Germany’s finance minister, Wolfgang Schäuble, decided that Grexit’s costs were a worthwhile “investment” as a way of disciplining France et al, the prospect continued to scare the living daylights out of almost everyone else.

By the time Syriza won power last January, and as if to confirm our claim that the “bailouts” had nothing to do with rescuing Greece (and everything to do with ringfencing northern Europe), a large majority within the Eurogroup – under the tutelage of Schäuble – had adopted Grexit either as their preferred outcome or weapon of choice against our government.

Greeks, rightly, shiver at the thought of amputation from monetary union. Exiting a common currency is nothing like severing a peg, as Britain did in 1992, when Norman Lamont famously sang in the shower the morning sterling quit the European exchange rate mechanism (ERM). Alas, Greece does not have a currency whose peg with the euro can be cut. It has the euro – a foreign currency fully administered by a creditor inimical to restructuring our nation’s unsustainable debt.

To exit, we would have to create a new currency from scratch. In occupied Iraq, the introduction of new paper money took almost a year, 20 or so Boeing 747s, the mobilisation of the US military’s might, three printing firms and hundreds of trucks. In the absence of such support, Grexit would be the equivalent of announcing a large devaluation more than 18 months in advance: a recipe for liquidating all Greek capital stock and transferring it abroad by any means available. 6

All of which supplies reasons enough to be cautious. However, the problem does not end with the reprinting of the drachma. Because by allowing Greece a comfortable ride, whether via any means of exit from the Eurozone or else through debt restructuring, a precedent will be set that those in the other debtor nations would be keen to emulate. Which means that Germany (as well as the EU Commission) have, as Varoufakis very candidly puts it, “an interest in breaking us”:

This weekend brings the climax of the talks as Euclid Tsakalotos, my successor, strives, again, to put the horse before the cart – to convince a hostile Eurogroup that debt restructuring is a prerequisite of success for reforming Greece, not an ex-post reward for it. Why is this so hard to get across? I see three reasons.

One is that institutional inertia is hard to beat. A second, that unsustainable debt gives creditors immense power over debtors – and power, as we know, corrupts even the finest. But it is the third which seems to me more pertinent and, indeed, more interesting.

The euro is a hybrid of a fixed exchange-rate regime, like the 1980s ERM, or the 1930s gold standard, and a state currency. The former relies on the fear of expulsion to hold together, while state money involves mechanisms for recycling surpluses between member states (for instance, a federal budget, common bonds). The eurozone falls between these stools – it is more than an exchange-rate regime and less than a state.

And there’s the rub. After the crisis of 2008/9, Europe didn’t know how to respond. Should it prepare the ground for at least one expulsion (that is, Grexit) to strengthen discipline? Or move to a federation? So far it has done neither, its existentialist angst forever rising. Schäuble is convinced that as things stand, he needs a Grexit to clear the air, one way or another. Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.

What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.

Click here to read Yanis Varoufakis full article.

*

3. How well are Varoufakis, Tsipras and Syriza playing their hand?

Because Finance Minister Varoufakis knows the economic field of game theory, lazy pundits have for months opined that he is playing “chicken” or “poker” or some other game. In Heraklion two weeks ago, Varoufakis denied this as he has done many times: “We’re not bluffing. We’re not even meta-bluffing.” Indeed there are no hidden cards. The Greek red lines – the points of principle on which this government refuses to budge – on labor rights, against cuts in poverty-level pensions and fire-sale privatizations – have been in plain view from day one. 7

From a fascinating breakdown of the “Nine Myths About the Greek Crisis” written by fellow economist James K. Galbraith.

As we await the decision of the Eurogroup, much of the mainstream media has been quick to draw attention to what it describes as the Greek government ‘climbdown’. So we hear how they have backed down on taxation, on pensions, on public spending and on privatisation. Following on from the dramatic “OXI” vote of last Sunday, it is quite easy to feel deflated by this. Indeed, the harshest critics of Tsipras (Varoufakis is out of range) – critics both from left and right – say that Syriza have managed to let a ‘no’ slip into a ‘yes’.

But then the voices that dominate the mainstream media have an axe to grind; the usual neo-liberal axe. So when they play up Syriza’s ‘climbdown’ we should look rather carefully into the details (I will offer further thoughts on this at the end). Meanwhile, the alternative voices who say that Greece ought to have followed Iceland’s example are missing a great many points of significant difference between the two nations: the size of populations, the make-up of their respective economies, and the rather important fact that Iceland were never part of the Eurozone or stuck in any kind of currency union.

Professor Steve Keen, who is Head of the School of Economics, History and Politics at Kingston University in London and author of Debunking Economics, put the whole matter into a useful context in an interview he gave on George Galloway’s RT show Sputnik [also July 10th]. Greece’s position is exceptionally weak and isolated, Keen says, so when it comes to Grexit:

“[Syriza] are afraid of the transition. And they are afraid of just how viable they are going to be once they are back on a floating exchange rate again. But I don’t think they’re going to have a choice.”

And as for how well Syriza have played their hand, Keen replies:

“Well, Yanis won’t mind me saying this now. He wrote to me saying they’re basically… we’re being subjected to a putsch. And he said, basically the attitude of the European Union was that they didn’t want Syriza to win, so let’s get rid of them. There was a political campaign right from the outset to break their backs and to either force them to become like the party they replaced [i.e., Pasok] or to drive them out of office. And in that sense the referendum was quite a surprise move – [the opponents of Syriza] weren’t expecting it – and now, of course, they’re treating it as though it didn’t happen… You did well. It’s a pity you voted the wrong way. But apart from that congratulations on winning. Now let’s go back and do exactly what we were doing last week.

But if, as Steve Keen, Yanis Varoufakis and many others fear, the talks do indeed fail, and if only because Germany (principally) refuses to budge, then those who have called for Syriza to look for alternatives sooner will feel vindicated. However, in response to this, it needs to be pointed out that although Syriza may fail to stall a Grexit, during the six months they have unquestionably strengthened their position politically. In Greece, rather than shrinking away, their popularity has grown, which is vitally important if you are keen to maintain your democratic mandate. Outside of Greece, Syriza has also been winning hearts and minds. By contrast, and in spite of whatever else happens next, the reputation of the EU has certainly been damaged. As Steve Keen says:

“They [Syriza] can survive being pushed out of the euro… one thing you can pick up from the Greek reaction to that election was that there’s a sense of pride come back. Because being put through an experience like that – people talk about they’re responsible for the situation [and so] they should pay the price (I’ve heard that amongst some of my Conservative friends recently). They don’t realise just how long the punishment has been. Just how severe and just how demoralising it is to have no sense of a future, which is why the suicide rate has increased by a factor of five or six in Greece since this whole thing began.”

Try again:

*

There is, however, an alternative argument against Alexis Tsipras and Syriza that is more incriminatory, and it is one that has followed both since long before the party had even been elected to power. In short, it is the opinion that Syriza itself is phoney, or if not Syriza as a whole, since this is a leftist coalition of different factions, then its leader Tsipras along with former Finance Minister Varoufakis – indeed, some go so far as to insinuate that both Tsipras and Varoufakis have been nothing less than saboteurs…

The World Socialist Web Site calls on Greek workers not to give any political support to Syriza. There is no party in this election that represents the interests of the working class.

That was the position of the International Committee of the Fourth International (ICFI) as outlined on their website wsws.org on the eve of the Greek elections.

Click here to read the full statement.

Having been ignored by the Greek people, the World Socialist Web Site, courtesy of International Committee of the Fourth International, then followed up with this:

It took just hours for the leftist pretensions of Syriza, (the Coalition of the Radical Left) to be exposed following its victory in Sunday’s Greek general election.

On Monday morning, Syriza leader Alexis Tsipras held talks lasting barely an hour with Panos Kammenos, leader of the right-wing, anti-immigrant Independent Greeks (ANEL). Following the talks, Kammenos announced that the Greek government would be a Syriza-Independent Greeks coalition.

Syriza had been caught red-handed, but it gets worse:

Syriza’s coalition with ANEL was prepared well in advance. In March 2013, Syriza entered into a “front” with ANEL based on efforts to save the Cypriot banks with aid from the European Union (EU).

Following Monday’s talks, the Protothema newspaper reported that “Syriza and ANEL have already reached an agreement on the issue of the Greek president and ANEL’s red lines on national issues will be respected by its leftist coalition partner.”

Was this true? Well, yes. In fact, my good friend from Germany who was then living in Naxos told me that people in Greece had been perfectly well aware of this alliance and that no-one was especially bothered. It is a marriage of convenience. But why believe me? This is what Stathis Kouvelakis, a prominent member of Syriza, said of the coalition with ANEL:

This alliance has been, I’m afraid, a forced and quite pragmatic type of choice, devoided of any grand strategic design. And since Syriza’s offer of an alliance with the other force of the radical left has been categorically rejected by the latter, this possibility has been explored since a while and was therefore easy to materialize once the election result was known.

Click here to read more at Richard Seymour’s popular blog Lenin’s Tomb.

Now everyone is perfectly entitled to their opinion about Syriza and Alexis Tsipras. If they believe that they are fakers then they should say so. But there is something deeply self-destructive about certain elements within the left. The reason is simple. For half a century and more as the left has been remorselessly beaten into submission by very powerful corporate and oligarchical interests, this sustained period of bruising defeats has created a feeling of resignation and a loser mentality, creating schisms that were so memorably lampooned by Monty Python’s Life of Brian.

But there’s also another point that desperately needs hammering out, which is the radical left’s obsession with intellectual legitimacy. Marxists, Trotskyists, and even Maoists (the madness of some on the far left simply knows no bounds!) who scrutinise and disparage one another over matters of conjectural doctrine, dismissing rival camps on grounds that alternative interpretations to their own are pseudo- and bourgeois. Meantime, the world moves on, and beyond the narrow confines of these inner party squabbles, there is no effect whatsoever on any practical advancement. The bigger joke being there are few preoccupations even half as petty-bourgeois as splitting hairs over Marx and Engels; one the son of a Jewish lawyer, the other the eldest son of a wealthy German cotton manufacturer.

For few in the proletariat care one jot for the ideological legitimacy of the left (or the right for that matter) – and why would they? They have more pressing concerns like putting food on the table and a roof over their head: a reliable income and fortnight’s holiday abroad are the main concerns of the ordinary Joe. Surely then, those on the left, especially the radical left, ought to strive to put programme above dogma. Since the masses, however miserable, will never be roused and politically animated by dry theory. And isn’t this where the revolution is expected to spring forth from?

For so long as the left keep bickering on about who is more properly socialist, then the right will easily steal in. Because the right, especially at its vilest extremes, is devoid of the same intellectual hang-ups, which is why, even when their closet intention is to coerce and oppress the poor and the workers by means of sectarian division, the right manages to gain so much traction amongst the ranks of the lower classes. The left needs to learn this lesson quickly; those self-aggrandising gangs of thugs like Golden Dawn are sharpening their knives and once Syriza are seen to have failed, the next act may be a diabolically familiar one.

*

Additional: Playing the long game

Greece will hold a referendum on a new European Union aid package intended to resolve the country’s debt crisis, Prime Minister George Papandreou says.

That was November 2011 and the BBC news report continues:

Analysts say a referendum could derail the wider deal on the euro debt crisis.

Adding:

Opinion polls in Greece show that most people do not support the austerity deal. 8

Of course, this was a referendum that never actually happened. Instead, and after pressure was applied during the G20 meeting at Cannes, Papandreou quickly backed down:

Speaking after the G-20 meeting in Cannes, US President Barack Obama questioned Prime Minister George Papandreou’s proposal to hold a referendum on the country’s eurozone debt deal and applauded New Democracy leader Antonis Samaras for backing last week’s Brussels agreement.

“We came to Cannes to discuss with our European friends how they will move forward and build upon the plan they agreed to last week to resolve this crisis,” he said.

Obama said the “actions of Papandreou and the referendum issue got a lot of people nervous.” He added that the plan European leaders presented last week is “still the best recipe.” He commended Samaras for saying he would support the bailout after the referendum proposal was dropped.

Dutch Prime Minister Mark Rutte welcomed Papandreou’s decision to withdraw the referendum but warned that the eurozone might lose patience with Athens. “It was a bizarre proposal,” Rutte said. “We think it’s of great importance to the eurozone that we prevent Greece from going bankrupt. But in the end, the euro is more important than Greece’s membership of the eurozone.” 9

It was an episode that led to Papandreou’s resignation and the appointment of former Governor of the Bank of Greece and Vice President of the ECB, Lucas Papademos, as interim Prime Minister. Following which, the “austerity” went on, the “debt crisis” deepened, and still the Greeks were yet to have a real say in what was happening to their country.

Almost four years and multiple general strikes later and the new Syriza-led government finally gave the people of Greece the referendum previously denied them. Although the detailed choice was a complex one, it boiled down to more or less straightforward ‘yes’ or ‘no’ – and not ‘yes’ or ‘no’ to staying within the Eurozone as so many have disingenuously claimed, but a ‘yes’ or ‘no’ to the latest bailout deal and further “austerity”:

In fact, only the “No” can save Greece – and by saving Greece, save Europe. A “No” means that the Greek people will not bend, that their government will not fall, and that the creditors need, finally, to come to terms with the failures of European policy so far. Negotiations can then resume – or more correctly, proper negotiations can then start. This is vital, if Europe is to be saved. If there ever was a moment when the United States should speak for decency and democratic values – as well as our national interest – it is right now. 10

So wrote economist James K. Galbraith prior to last weekend’s momentous referendum. And what he says is correct. The Greeks have indeed voted to stay in Europe and the Eurozone, having never offered Syriza any mandate to leave. As it transpires, they may now be forced out, or at the very least, forced into another general election. Syriza may then be obliged to stand on a ‘we will leave the euro ticket’, which, and as popular as Syriza are, would mean an election that they would currently be unlikely to win.

But then, as my friend in Germany points out, leaving aside the Greek concessions for a moment, this weekend’s deal pivots upon massive debt restructuring/cancellation, which is why Syriza have felt compelled to offer Germany the chance to wrestle some kind of victory, whilst returning to Greece as winners too. If a deal can be struck, then certainly hardliners on both sides will come away disappointed, and this is one reason any deal may very likely fall through.

Discretion is sometimes the better part of valour, and there are many occasions when it is necessary to take a step or two backwards in order to regain your balance again. Perhaps the very best Syriza can achieve right now, given the intransigence and bullying of the anti-deal voices within the Eurogroup, is to play for time. Right now, the banks in Greece desperately need to reopen in order to restore normality. For ordinary life must go on. Meanwhile, agreeing terms on privatisation and so forth is one thing, whereas implementing such deals is another thing altogether, because as my friend in Germany reminded me “… it’s Greece after all.”

*

1 From an article entitled “VOX POPS: Greeks ‘living beyond means’ published in The Local on July 10, 2015. http://www.thelocal.de/20150710/germany-has-shown-a-lot-of-patience

2 From an article entitled “Greek debt crisis: Goldman Sachs could be sued for helping hide debts when it joined euro” written by Jim Armitage and Ben Chu, published in The Independent on July 11, 2015. http://www.independent.co.uk/news/world/europe/greek-debt-crisis-goldman-sachs-could-be-sued-for-helping-country-hide-debts-when-it-joined-euro-10381926.html

3 From an article entitled “Where is the Greek bailout money go?” written by Phillip Inman, published in the Guardian on June 29, 2015. http://www.theguardian.com/world/2015/jun/29/where-did-the-greek-bailout-money-go

4 From a BBC news article entitled “Greek debt ‘illegal, illegitimate and odious’” published on June 18, 2015. www.bbc.co.uk/news/world-europe-33179593

5 From an article entitled “Greece and Spain  helped postwar Germany recover. Spot the difference” written by Nick Dearden, published in the Guardian on February 27, 2013. www.theguardian.com/commentisfree/2013/feb/27/greece-spain-helped-germany-recover

6 From an article entitled “Germany won’t spare Greek pain – it has an interest in breaking us” written by Yanis Varoufakis, published in the Guardian on July 10, 2015. http://www.theguardian.com/commentisfree/2015/jul/10/germany-greek-pain-debt-relief-grexit

7 From an article entitled “Nine Myths About the Greek Crisis” written by James K. Galbraith, published by Global Research on July 3, 2015. http://www.globalresearch.ca/nine-myths-about-the-greek-crisis/5460153

8 From an article entitled “Greek crisis: Papandreou promises referendum on EU deal” published by BBC news on November 1, 2011. http://www.bbc.co.uk/news/world-europe-15526719

9 From an article entitled “Leaders relieved referendum dropped, awaiting next steps” published by ekathimerini on November 5, 2011. http://www.ekathimerini.com/137088/article/ekathimerini/news/leaders-relieved-referendum-dropped-awaiting

10 From an article entitled “Nine Myths About the Greek Crisis” written by James K. Galbraith, published by Global Research on July 3, 2015. http://www.globalresearch.ca/nine-myths-about-the-greek-crisis/5460153

Leave a comment

Filed under analysis & opinion, austerity measures, debt cancellation, did you see?, Greece