Greece needs our solidarity, in or out of the euro
Soup kitchen, Athens.
For more analysis and discussion on SYRIZA's struggle against austerity, click HERE
By Dick Nichols, Barcelona
July 10, 2015 -- Green Left Weekly, posted at Links International Journal of Socialist Renewal -- Regardless of the result of the latest round of negotiations between the SYRIZA-led government of Greece and the heads of the 28 members of the European Union, one thing is certain: in coming years, the Greek people are going to need all possible solidarity because their struggles and sufferings are bound to continue.
The best imaginable deal with the EU will mean six years of Troika-imposed austerity grinding along to one degree or another. Forced Greek exit from the eurozone will drive the country deeper into recession, further contracting an economy that has shrunk by 25% since 2008.
This awful choice will hang over Greece so long as the country has a government committed to ending the austerity that has created a humanitarian crisis.
Which of these two paths to misery appears least evil will be for Greece to decide. At the time of writing – July 9 – a forced Greek exit from the euro remains possible.
This is despite a last-minute scramble by French economic officials to help the Greek negotiation team craft a proposal that would have some chance of winning EU support. The proposal, which was agreed by the Greek government on July 9 and was to be submitted to the SYRIZA parliamentary caucus on July 10, involves a “reform-for-debt relief” swap.
The SYRIZA-led government will apparently offer budget cuts and tax increases of €13 billion over two years — more, ironically, than the €9 billion rejected by the July 5 referendum on the June 25 ultimatum of Greece’s creditors.
In exchange, however, Greece would win a new “bailout” package worth at least €50 billion -- and maybe up to €60 billion if International Monetary Fund recommendations are followed.
According to the British Guardian’s running coverage of the Greek crisis “international observers have been telling us that the package is likely to be so punitive that humanitarian aid cannot be ruled out. EU president Jean Claude Juncker had mentioned humanitarian aid as part of the ‘detailed Grexit scenario’ plans creditors had drawn up.
“EU diplomats based in Athens said some form of assistance is likely to be given even if an agreement between Greece and its creditors is reached.”
The new negotiation is being overseen by Donald Tusk, president of the European Council made up of EU prime ministers. This marks a new axis between Greece and its creditors, partially displacing the intransigent Eurogroup made up of 18 Eurozone finance ministers.
The Eurogroup strategy was aimed at taming or destroying the SYRIZA-led government. As former finance minister Yanis Varoufakis told the July 4 Spanish daily El Mundo: “During my first week as minister I met with Eurogroup chairman, [Dutch finance minister] Jeroen Dijsselbloem, and he already made it very clear then that we only had two options: we either signed the agreement that the previous Greek government had accepted or they would end the aid program.
“I asked him if he was threatening me with ‘Grexit’ at our very first meeting, and he replied by saying that if we didn’t sign he would end the aid program. But we all know that ending the aid program means forcing us to close the banks …
“They had all this prepared from the beginning: a plan to get rid of a government that would not let itself be blackmailed by the European establishment already existed five months ago.”
By contrast, Tusk’s approach expresses the position of the French and Italian governments, the IMF and the United States. They are fearful of the impact of a forced Greek exit on the stability of the euro and world economy, as well as on the NATO-Russia power balance in south-eastern Europe.
This conflicts with the approach of the “hawks”, led by German finance minister Wolfgang Schäuble. They think Greece can be “let go”, because they feel the economic impact on the eurozone is now controllable.
They fear the longer the delay in dropping Greece, the greater the chance of other “SYRIZAs” -- starting with Podemos in Spain and Sinn Fein in Ireland -- coming to power and ending SYRIZA’s isolation.
That position is shared by the German Social Democratic Party (SPD), governing in tandem with chancellor Angela Merkel’s Christian Democratic Union (CDU). After the Greek July 5 referendum, SPD leader and government minister Sigmar Gabriel said: “If you reject the rules of the Eurozone, it’s pretty inconceivable to be negotiating a program of several billion euros.”
July 5 referendum
The stunning referendum result on July 5, with 61.4% rejecting the terms of the creditor powers’ offer despite its backing by the EU power-that-be as well as Greek commercial media, deepened the differences between the European establishment’s hard and soft cops.
For those wanting to drop Greece as soon as possible, SYRIZA daring to ask the Greek people’s opinion was a betrayal of trust.
Former Belgian prime minister and leader of the Alliance of Liberals and Democrats for Europe in the European parliament, Guy Verhofstadt, said: “Tsipras pulled off the referendum at home, but he has lost credibility with the rest of Europe.”
Manfred Weber, head of the conservative European People’s Party parliamentary fraction, said: ”Tsipras has to a large degree broken the links of mutual confidence that connected him to his European partners.”
By contrast, the social-democratic governments in France and Italy felt pressured to show sympathy towards a Greek government that enjoys broad sympathy with their own voters.
For example, on the evening of the referendum result, chairperson of the social-democratic caucus in the European Parliament Gianni Pittella said: “From tomorrow, let’s reopen the negotiations on the basis of a new attitude, of solidarity and cooperation, taking into account the difficult social dimension that exists in Greece … It will be the opportunity for certain members states and ministers to put an end to unacceptable rigidity, national egoism and national political game-playing.”
To pressure the Schäuble-Eurogroup position, Tusk said on July 9: “If Greece provides a realistic proposal, it will need to be matched by an equally realistic proposal on debt sustainability by the creditors.
“Only then will we have a win-win situation. Otherwise we will continue the lethargic dance that we have been dancing for the last five months.”
The ECB's role
Whichever side of the appalling choice SYRIZA’s parliamentarians come down on — or even divide over — it is vital to remember how their eventual decision was forced on them. In this drama of many villains, the villain-in-chief has been the European Central Bank.
The day after the victory of the “No” case, the ECB board decided that it would tighten conditions for supplying liquidity to the Greek private banks. This brought even closer the risk of collapse of a banking system already restricted to providing withdrawals of no more than €60 a day.
The screws were further tightened by discounting the value of Greek government debt being offered as loan collateral by the banks. This cut the available liquidity under the ECB’s Emergency Liquidity Assistance program.
This happened as euro notes of various denominations are disappearing from circulation in Greece and the Bulgarian lev is appearing as a substitute currency.
The ECB justified its financial sadism with a note on its website reading: “The functioning of the Eurosystem can be disturbed by Emergency Liquidity Assistance granted under overgenerous conditions, which could in turn increase moral hazard on the part of financial institutions or responsible authorities.”
New Greek finance minister Euclid Tsakalatos commented: “If they do that the situation will become really serious. It looks like an attempt at overthrowing the government.”
Greek economist Dimitris Athanasopoulos said: “Our economy is dying, it is in intensive care. Everything, everywhere, is coming to a halt.”
In tightening its strangulation of Greece, the “independent” ECB is violating its own statutes, which require it to safeguard the stability of the banking system.
In the words of Belgian economist Paul de Grauwe: “When a banking system of a Eurozone country undergoes a meltdown, it is its responsibility to provide liquidity. Which the ECB refuses to do.
“So we are dealing with political goals — in any case that’s my interpretation.”
Obstacles to a deal
At the time of writing it is impossible to guess what the outcome of the latest Greek proposal will be. The economic pressures on the SYRIZA-led government are brutal and growing -- apparently leading it to accept measures on pensions and sales tax that are close to those rejected on July 5.
This poses questions that will be answered in coming days:
* Will SYRIZA’s Left Platform accept the new proposal? This seems unlikely, given the opposition of energy minister and Left Platform leader Panagiotis Lafazanis. He has already expressed opposition to the proposed plan because he believes it fails to give any hope of a breakthrough to the ongoing Greek economic crisis.
* How many of the millions of Greeks who voted “No” will be prepared to accept the government’s new proposal, even if backed by Tsipras, who won enormous political authority by calling and winning that referendum?
* Even if Tsipras wins majority support for the “reforms-for-debt-relief” swap, will the hawks in the EU accept it as sufficient, or will they insist on their line of “offers” that they know SYRIZA must refuse?
On June 9, Schäuble said in response to the Tusk initiative that the IMF was correct in Greece needing a “haircut” to make its debt sustainable; but “alas this isn’t possible under European rules. A monetary union constructed like ours is nothing but an invitation for somebody that doesn’t stick to the rules.”
* If negotiations fail, will the SYRIZA leadership dust off the plan it has already rejected — of producing a parallel currency while refusing to leave the Eurozone and taking the ECB to court? Or will it accept the judgement of economist Paul de Grauwe? He called the plan “science fiction. When Greece leaves the Eurozone, it will be a definitive departure … the process of pushing Greece out of the Eurozone in very violent fashion is under way.”
Whatever the answers to these vital questions, the need for solidarity with the Greek people will only grow.
[Dick Nichols is Green Left Weekly’s European correspondent, based in Barcelona.]Like the article? Subscribe to Green Left now! You can also like us on Facebook and follow us on Twitter.
It is not a case of "total capitulation" by SYRIZA, but having come up against enormous odds leaving it with few choices. Those who focus on and on about any deal SYRIZA may be forced to make are misidentifying the enemy. It's very easy to demand from a continent or ocean away that SYRIZA do what we will not be asked to do -- do the best with the hand we're dealt with little or no back up -- but the last thing we should do is simply walk away from the struggle at this point.
Our struggle is not helping to split and divide SYRIZA as so many "far-left" commentatots believe. SYRIZA needs solidarity more than ever. SYRIZA simply surviving in the face of everything the combined ruling classes have attempted in order to defeat it is a gain. If we offer solidarity, resist the attacks of the elites in our own countries around the world, and make it easier for SYRIZA in the future to resume the fight -- and hopefully with Podemos, Sinn Fein and other radical governments in Europe, as well as the "Pink Tide" governments in Latin America, led by Venezuela, Ecuador and Bolivia -- then that's important.
By Paul Mason
July 10, 2015 -- The new Greek government proposals, published late last night are clearly based on those submitted by Jean Claude Juncker last Thursday, before the referendum.
It’s left many Greeks frustrated, asking: what was the point of the referendum? It’s left many foreign observers saying the same.
Here are the most obvious answers:
First, the Greek government’s hope that a referendum mandate would allow swift negotiations with their creditors, and relaxation of terms, did not materialise. Instead a renewed ultimatum materialised. If they can’t meet it, the ECB and EU will collapse the Greek banking system and throw them out of the Eurozone. Indeed, one of the main “achievements” of the referendum was to flush out that clear threat, from politicians who had never admitted it before.
The Greek government has no mandate to leave the Euro, as the 61% vote No last Sunday was clearly won as a “stay in and fight” mandate.
Secondly, the deal makes no economic sense without debt relief. The referendum, combined with US pressure, seems to have prompted key European voices, including Angela Merkel and Donald Tusk, accede in principle to the need for debt reprofiling – which is a sneaky way of writing off debts.
Thirdly, it is still redistributive on balance. Syriza can still sell this as a very different programme from those previously designed by the conservative led coalition. 29% corporation tax is one example. However it does make concessions on pensions and on VAT on the islands, which currently enjoy a discount.
Fourth, it is the work of Euclid Tsakalatos. Tsakalatos, as I’ve been explaining since mid-January, is existentially committed to two things: Euro membership and the use of government to foster widespread modernisation and social change. He wants to stay in power – not lose it to a government of “technocrats”.
Fifth, the deal comes with a request for a loan to make Greece’s debt repayments over the next three years. If someone else pays your debts for three years, that is a very fiscally beneficial thing, and leaves Greece with money to spend it did not have.
Most importantly, this is not a done deal. If it gets through the Greek parliament and is then thrown back into the Greeks’ faces it will solidify and prepare Greek society for Grexit.
It will most likely prompt a few resignations from Syriza, but I am told the Left Platform in Syriza will mainly accept it. But getting it through parliament is not the problem. Getting it through the EU is the problem – and it’s left many Greeks still predicting this is the last gamble before Grexit.
Friday 10 July 2015
Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.
In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the eurozone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.
Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.
To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well.
Once the sordid operation was complete, Europe had automatically acquired another reason for refusing to discuss debt restructuring: it would now hit the pockets of European citizens! And so increasing doses of austerity were administered while the debt grew larger, forcing creditors to extend more loans in exchange for even more austerity.
Our government was elected on a mandate to end this doom loop; to demand debt restructuring and an end to crippling austerity. Negotiations have reached their much publicised impasse for a simple reason: our creditors continue to rule out any tangible debt restructuring while insisting that our unpayable debt be repaid “parametrically” by the weakest of Greeks, their children and their grandchildren.
In my first week as minister for finance I was visited by Jeroen Dijsselbloem, president of the Eurogroup (the eurozone finance ministers), who put a stark choice to me: accept the bailout’s “logic” and drop any demands for debt restructuring or your loan agreement will “crash” – the unsaid repercussion being that Greece’s banks would be boarded up.
Five months of negotiations ensued under conditions of monetary asphyxiation and an induced bank-run supervised and administered by the European Central Bank. The writing was on the wall: unless we capitulated, we would soon be facing capital controls, quasi-functioning cash machines, a prolonged bank holiday and, ultimately, Grexit.
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.
Syriza supporters in front of the Greek parliament Facebook Twitter Pinterest
‘By the time Syriza won power last January, a majority within the Eurogroup had adopted Grexit either as their preferred outcome or weapon of choice against our government’.
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.
With Grexit reinforcing the ECB-induced bank run, our attempts to put debt restructuring back on the negotiating table fell on deaf ears. Time and again we were told that this was a matter for an unspecified future that would follow the “programme’s successful completion” – a stupendous Catch-22 since the “programme” could never succeed without a debt restructure.
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.
Europe did not know how to respond to the financial crisis. Should it prepare for an expulsion (Grexit) or a federation?
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.