Greece, Austerity & Europe’s Future

Dan Georgakas

AUGUST 31st UPDATE: Some options discussed in my article below have been resolved.

Alexis Tsipras has resigned as head of the government, which will result in a new election on September 20.   Panagiotis Lafanazis  and 53 Syriza MPs have left Syriza to form the Popular Unity Party (Laiki Enotita). For the moment this makes it the third largest party in the Greek Parliament.

Opinion Polls for the coming election show Tsipras with between 25-30% of the vote, not enough to form a government without a coalition with one or more centrist parties. He has stated he will not serve as Prime Minister in a government of national unity.

Popular Unity has stated that if elected, it would default on Greek debts even if that meant leaving the Eurozone. Details on how that would be implemented have not been offered. A handicap for Popular Unity in this particular election is that voting will not be for individuals but for a party slate. Recent polls show  Popular Unity as winning  5-8% of the vote.  ANEL (current Syriza coalition party), PASOK, and Papandreou’s group are at under the 3% needed for at least one seat in parliament. Golden Dawn has a moderate increase to over 12%. The Communist Party (KKE) remains stable. — DG

THE GREEK CRISIS revolves around two concerns. How are the Greek people going to fare, and what is the nature of the Eurozone? In other words, is the broad purpose of the Eurozone to enhance the life of all participants or to enhance select nations and classes at the expense of others?

The strongest nations of the Eurozone, led by Germany, have insisted for years that a policy of economic austerity is required for a prosperous Europe. Greece heads the list of states that have been damaged by this perception. Syriza (Coalition of the Radical Left) was elected to power in January on the basis of its opposition to continuing austerity.

Prime Minister Alexis Tsipras and Finance Minister Yannis Varoufakis opened negotiations for additional Eurozone debt relief by showing how more austerity would worsen the Greek economy and arguing that austerity was not the best policy for the Eurozone in general.

They believed that reform of the Euro­zone from within was possible. They also thought the will of the Greek people would be respected.

Eurozone politicians and bankers were fearful that any concessions to Greece would set a precedent for other nations needing relief, and catalyze support for similarly oriented anti-austerity leftist parties such as Podemos in Spain. On the other hand, expulsions or withdrawals from the Eurozone had never been considered options. Either would permanently alter the Eurozone’s nature.

Greece leaving the Eurozone also would set a precedent for euro-skeptic parties, mostly of the far Right that want to withdraw their nations from the Eurozone. The creditors decided their best option was to flex their muscles by rejecting any compromises involving the Greek proposals.

The austerity package ultimately offered to Greece was so severe that Syriza felt compelled to put its acceptance to a national referendum. On July 5, every political region in Greece responded with a resounding OXI (no). The percentage of Greeks voting OXI was a little over 60% — and would have been even greater if the Greek Communist Party and the anarchist movement hadn’t told their followers not to vote as Greece needed to end all negotiations and leave the Eurozone.

The OXI result was remarkable. Within Greece there had been an unprecedented mass media campaign for a “Yes,” and the European Central Bank had forced the closing of Greek banks in the middle of the tourist season by withdrawing currency support.

Tsipras Capitulates

Reaction to the OXI vote by the Eurozone was a toughening rather than an easing of its demands. Creditors spoke openly with opposition parties about the need for “regime change,” a sentiment echoed by financial behemoths such as Goldman Sachs.

Faced by intransigent creditors and a closing of the banks that was psychologically and economically unbearable for the Greek public, Tsipras capitulated to the Eurozone demands.

After apologizing for his actions, Tsipras told Greeks that Syriza could handle the effects of austerity far more humanely than opposition parties. But when he brought the new austerity agreement to the Greek parliament for approval, 32 of the Syriza MPs voted against or abstained. The agreement only passed due to the support of New Democracy and Potami, two opposition parties.

Faced with a rebellion in his own ranks, Tsipras might have sought to reconcile with his erstwhile comrades at a party congress to be held in September, but he opted to continue moving rightward. A formal split in the party now seems to be only a matter of timing and circumstances.

Easily lost in these political gyrations is the immense suffering of the Greek people. Unemployment continues to be 25% for the general population and 60% for younger people. One result has been that 300,000 Greeks, or 3% of the total population, has emigrated in the past few years.

The overwhelming majority of the emigrants are young and college-educated, amounting to a national brain drain. The freedom to work anywhere in the European Union is the major reason Greeks wish to remain in the EU even if they favor leaving the Eurozone.

Among other grim statistics are that the number of children living in poverty is approaching 50%, and a quarter million Greeks have applied for humanitarian relief for purchasing food, paying rent and maintaining electricity services. Additional hardships are related to lack of medical supplies, delayed payment of wages even when people are employed, and a rising suicide rate.

The economy is slated to decline another 2-4% for another four years, with the national debt climbing to 200% of the annual gross domestic product.

The new austerity program includes further cuts in pensions, reducing public sector jobs, and prolonging the eligibility age for retirement benefits. There will also be an increase to a 23% VAT (Value Added Tax, a national sales tax — ed.) for most items, and its imposition on thinly populated islands previously exempt from that tax.

Surrender or Eurozone Exit

When Tsipras surrendered to the creditors, critics asked why there had been no Plan B for reviving the drachma. In fact, there had been a Plan B and as Tariq Ali discussed in the London Review of Books (July 30, 2015), there had been a Plan C as well.

Plan B had been developed by Varoufakis and a team that included U.S. liberal economist James Galbraith. The plan had been top secret but New Democracy got wind of it and proclaimed Varoufakis was a traitor who had illegally hacked into Eurozone tax programs. Varoufakis, who had already resigned his ministry, replied that it would have been irresponsible not to have a backup plan but nothing illegal had transpired.

Varoufakis’ resignation, which had seemed to be a concession to creditors who despised his frankness, now appears to have been more a leap than a push. Varoufakis did not want to administer a plan that he believed put Greece under German occupation with banks substituting for tanks. He retained his seat in parliament and voted no when the agreement was put to its first vote.

Plan C was an offer by German Finance Minister Wolfgang Schauble to gift Greece €50 billion and assist Greek banks if Greece left the Eurozone voluntarily. The Germans would have saved face by not seeming to have forced a nation out of the Eurozone, while Greece would have capital and time to revert to the drachma.

Tsipras, who retains the view that the Eurozone can be reformed from within, declined the offer. By having shown he did not want to leave the Eurozone, under any circumstances Tsipras had made the OXI vote irrelevant.

Greece now has two broad options. Either it accepts being an economic colony within the Eurozone by supporting the Tsipras regime, or it creates a political anti-austerity alternative that takes the risk of leaving the Eurozone in its own time frame and manner. In either case, the immediate living conditions in Greece will worsen.

Tsipras, who retains his popularity, thinks he can navigate the Eurozone maze. Given that some of the reforms demanded by the troika (European Central Bank, European Commission and International Monetary Fund — ed.) had been part of the Syriza agenda, he could focus on them, buying goodwill at home and abroad, while moving more slowly regarding changes he has often denounced.

A plus for Tsipras is that the Eurozone image in general and Germany’s image in particular have been severely damaged by their behavior toward Greece. Even the Wall Street Journal has written that the European project, which was created to prevent any fascist revival, was now letting its Eurozone component take actions that feeds the rise of the rabidly nationalist Right.

Given these international critiques of German behavior but with the spotlight off, Tsipras thinks he can eventually obtain informal concessions that involve extending the time for payments and other related matters.

Tsipras is also buoyed by knowing an American will soon head the IMF. The IMF has already spoken of forgiving some of the Greek debt and with formal American leadership that might happen. Moreover, the U.S. administration has always believed stimulation, not austerity, is the best means for improving the stagnant European economy, and wants to prevent greater Greek involvement with Russia.

Syriza’s Crisis

A formidable challenge Tsipras faces in Greece are the leftist militants in Syriza, particularly the faction led by Panagiotis Lafanzis, head of the Left Platform and former minister of environmental planning. Another major opponent is Zoe Konstantopoulou, the fiery President of the Parliament.

Underlining their opposition is that like many Syriza members, they fear Tsipras will be like Andreas Papandreou, the Socialist party leader who was elected on the slogan of “Change” but ultimately allowed PASOK, his party, to become like other conventional Greek parties. The actions of Tsipras suggest he is fast-tracking on a similar pathway.

A number of Tsipras’ current ministers want to expel all Syriza MPs who have voted against the agreement, expulsions that would be routine in traditional Greek parties. Tsipras originally responded that was not how Syriza works, but he has already removed his critics as ministers and from many other positions of influence. Debate within parliament and the party has become increasingly acrimonious and personal.

Tsipras will likely call a special national election in the fall. This option is quite risky. If Syriza does not remain united, it is unlikely it could poll strongly enough to form a government. That would require bringing opposition parties such as Potami and perhaps even New Democracy into a government of national unity, contrary to Syriza’s original electoral pledge to sever cooperation with all such parties.

On the other hand, a snap election favors Tsipras as it would take place before the longer-term consequences of the new agreement are fully felt in daily life.

Should the revolutionary Left leave or be expelled from Syriza, the task of forming a new party faces many hurdles.

A new formation would pledge to exit the Eurozone and/or default on all illegitimate debts. This would not require exiting the EU where a number of nations retain national currencies. But there would be insufficient time before a snap election to plan a program to handle the details of implementing such a policy.

Even voters inclined to these views might be wary that they would be voting for promises. Many also might see the new party as a spoiler. If such a party polled strongly, Syriza would have to ally with more centrist parties, which is exactly what the creditors desire.

Any Eurozone-exit strategy requires nationalizing the banks, whose leaders have been in league with the creditors. Even more critical is that the terms and players in the original loans need to be reexamined. A promise could be made to honor all valid loans but that loans based on bribery and other corrupt practices would be repudiated or given a close shave rather than a haircut.

For example, how is it that Hochtief, the German company that runs the new airport, has never paid any VAT taxes and has a total unpaid tax bill of approximately a billion euros?

More Dubious Debts

A major area of corruption and coercion involves Greece’s military budget of $8 to $10 billion annually, the largest in Europe.

That many of the loans were corrupt was established in 2009 when former defense minister Akis Tsochatzopolos was found guilty of accepting bribes. The evidence at his trial showed that even military “assistance loans” without outright corruption usually required Greece to use the borrowed funds to purchase unwanted European arms — old tanks from France, out-of-date jets from Britain, and submarines from Germany.

Such economic fleecing is typical of “loans” that involve Goldman Sachs, Ferro­staal, Siemens, Rheinmetall, Deutsche Bank, Daimler-Benz, and others. In a related manner, the German bonds Greece was forced to buy from the Nazis can reasonably be applied as a reparations credit against valid outstanding German loans.

Any new radical initiative must be serious about uprooting corruption. The bureaucracy in Greece has been crafted to spawn bribes and cronyism. Even getting a deed to one’s land is a major undertaking.

A new radical agenda will have to spell out actions to be taken rather than just making promises. The grassroots community groups that are the basis of left activism at the local level cannot be very effective absent a governmental assault on corruption, including severe penalties for the offending institutions and individuals.

An asset to breaking free of the Euro­zone and having a relatively cheap currency is that a weak drachma would boost the vital tourist industry even beyond last year’s all-time record. Greece would also be free to seek significant aid from non-Eurozone sources.

One can more easily imagine an economically sound Greece outside the Eurozone rather than inside. Nonetheless, any left proposal to abandon the Eurozone must be frank about the immediate consequences, which will be exceedingly harsh. The big difference from living under the present austerity blueprint would be that the hardship of a Eurozone exit promises to be temporary rather than permanent.

September-October 2015, ATC 178