Greece needs our solidarity, in or out of the euro

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.

Europe's stance

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.]