It’s amazing, isn’t it? Immediately after his government won an internationally-important vote against the foreign bankers and financiers who have been terrorising Greece with undemocratic austerity measures in return for loans, finance minister Yanis Varoufakis has resigned.
In his blog, he wrote that he had been “made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement.
“For this reason I am leaving the Ministry of Finance today.”
He wrote: “Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached. It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms. [Bolding mine]
“We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government.
“And I shall wear the creditors’ loathing with pride.”
Greece has voted decisively to reject the terms of the latest loan offer from the so-called Troika – the IMF, ECB and EU.
Figures published by the interior ministry showed 61 per cent of those whose ballots had been counted voting “No”, against 39 per cent voting “Yes”. This means Greece will go back to the negotiating table with a firm mandate to reject demands for further austerity as part of the conditions of any further loans – and to demand that the country’s huge debt be restructured into a sum that it is possible to pay off.
The victory for Tsipras and his Syriza party is all the more remarkable because it faced enormous opposition from representatives of the Troika and elements of Greek society who scaremongered hard that a ‘No’ vote meant Greece would be ejected from the Eurozone, meaning the Euro would cease to be its currency and it would have to create one of its own.
This is a proud day for Greece. As a nation and democratically, these people have made it clear that austerity doesn’t work and they won’t have any more to do with it – especially when it is imposed undemocratically from beyond their borders.
But you probably won’t hear anything of the kind from the media in the UK. Here’s Guy Debord’s Catto explain why:
“The BBC and the rest of the British media will continue to peddle the lie that George Osborne’s LTEP is “working”. Can you see the green shoots of reification? If you can’t, then you’re probably an “extreme leftist”.
“As I type this, a BBC News reporter in Athens is interviewing a New Democracy politician who’s claimed that it’s a “dark day for Greece”. Then the reporter interrupts to tell her that Antonis Samaras, the leader of the New Democrats, had resigned. She stumbles and mumbles something along the lines of “I couldn’t possibly comment”.
“Cut to some vox pops of Greek people telling the camera how “scared they are for the future”. The propaganda: it’s blatant.”
The Cat also points out something well worth spelling out to the UK’s current Tory government:
“They don’t have a mandate. 24.3 per cent is nothing. 62 per cent is a mandate. Tories, take note.”
They won’t, though.
Not until the UK finally wakes up and follows the Greek example.
Greek Prime Minister Alexis Tsipras has been meeting German Chancellor Angela Merkel to discuss his country’s economic strategy and debt repayments.
The point of Austerity in Greece was never to help that country pay off its debts; it was to create a permanent debt that Greece would never be able to pay off.
Under a submissive government, this was feasible – as it has been in many countries in what is laughably called the Developing World – but now Syriza has taken control and Alexis Tsipras could have the Troika (European Central Bank, IMF and the European Union – the three organisations that have been lending money to the Greek government) over a barrel.
The plan was to add Greece to the list of nations running a ‘zombie economy’ in the service of neoliberal corporate interests, rather than the well-being of its own citizens.
The Troika’s settlement with Greece was similar to that carved out by the western banks with the Developing World – the creation of a Debt Trap.
Western banks indulged in a lending spree across the Developing World during the latter half of the 20th century but the oil shocks of the 1970s created a domino effect of economic disaster which ended up putting most of Africa and Latin America on the verge of bankruptcy.
They could not be allowed to default on their debts. This would have allowed those countries to recover but would have harmed the western world – both economically and politically, as its influence would have faded.
So the IMF stepped in with ‘bridging loans’, ensuring that the original debts could be serviced – but there was a cost. In return for these loans, the IMF created a mechanism called the Structural Adjustment Programme (SAP – an appropriate acronym as it has sapped away a huge amount of money from every nation where it has been used).
The SAP set conditions under which debtor nations were provided the bridging loans: The sale of nationalised industries and resources – mostly to foreign-owned corporations and governments; the removal of capital controls on money flowing into and out of these nations; allowing the IMF to dictate the level of public spending; prioritising debt repayment and corporate welfare over infrastructure investment and human welfare; and suppression of wages and restrictions on trade unions.*
This is more or less the deal that Greece was offered.
The result has been clear – as Professor Simon Wren-Lewis pointed out in his Mainly Macroblog yesterday: “Austerity… is of course why Greek GDP has fallen by 25 per cent.”
At the moment, the Troika is threatening Tsipras with the loss of further loans, as he has stated that he intends to reverse the privatisations that have been forced on Greece over the last few years, raise the minimum wage, and increase public spending. These are measures designed to reverse the Troika-engineered Greek economic collapse and make it possible to start paying off the huge debt the country has built up.
Tsipras wants that money because he wants his economic recovery to take place in an orderly way, so he has agreed not to roll back the privatisations that have already taken place but to review those that haven’t; to introduce collective wage-bargaining, stopping short of raising the minimum wage but encouraging non-statutory wage rises; and tackling the humanitarian crisis with free medical care for the uninsured unemployed, along with housing guarantees, at no extra cost to the public purse.
But here’s the thing: Greece can manage without that loan money, if it has to. Yes, there will be a great deal of pain, but Tsipras effectively has the Troika over a barrel. The promise of some money is better than no money. All he has to do is hold his nerve and point out that what the Troika is doing is exactly the opposite of what it is supposed to be doing.
By funding Greece during Austerity, the Troika was perpetuating its debt, rather than helping end that debt; now it is actively fighting a plan that will genuinely help end that debt. And the world can see this.
It is an important lesson for the UK, as well. This country didn’t need the Troika to enforce privatisation, wage suppression, public spending restrictions and so on because we have a neoliberal Conservative-led government that is already avid for those things.
Our economy has suffered badly – and our people have suffered brutally – because of these choices by rich Conservatives who have not had to bear any of the pain themselves.
For no reason.
It seems possible that both Greece and the UK could probably take a leaf out of 1920s German chancellor Gustav Streseman’s book – re-industrialisation and (in Greece’s case) renegotiation of loans and an exit from the Euro in order to create a new currency. Whether that is practical is best left to economists who have more expertise than a layman like this writer.
What is clear is that Austerity – and its champions – are bad for everybody’s national interest.
*Austerity – The Demolition of the Welfare State and the Rise of the Zombie Economy, Kerry-Anne Mendoza, published by New Internationalist. Pick up a copy now!
Alexis Tsipras is smiling because he can tell that David Cameron is a monstrously incompetent economic illiterate [Image: Reuters].
It is rare for Professor Simon Wren-Lewis to make an overtly critical statement of our politicians – usually he sticks to their policies.
We may therefore conclude that he has taken extreme exception to David Cameron’s comments about the Greeks, made in Brussels a few days ago.
Cameron said: “When I first came here as prime minister five years ago, Britain and Greece were virtually in the same boat, we had similar sized budget deficits. The reason we are in a different position is we took long-term difficult decisions and we had all of the hard work and effort of the British people. I am determined we do not go backwards.”
Here’s Prof Wren-Lewis’s response: “In other words if only those lazy Greeks had taken the difficult decisions that the UK took, they too could be like the UK today. This is such as travesty of the truth, as well as a huge insult to the Greek people, that it is difficult to know where to begin.
According to OECD data, the 2010 government deficit in Greece was 11%, and in the UK 9.5%. The Prime Minister is normally well briefed enough not to tell outright lies. But look at this chart you can see why the statement ‘virtually in the same boat’ is complete nonsense.
“The real travesty however is in the implication that somehow Greece failed to take the ‘difficult decisions’ that the UK took. ‘Difficult decisions’ is code for austerity. A good measure of austerity is the underlying primary balance. According to the OECD, the UK underlying primary balance was -7% in 2009, and it fell to -3.5% in 2014: a fiscal contraction worth 3.5% of GDP. In Greece it was -12.1% in 2009, and was turned into a surplus of 7.6% by 2014: a fiscal contraction worth 19.7% of GDP! So Greece had far more austerity, which is of course why Greek GDP has fallen by 25% over the same period [all boldings mine]. A far more accurate statement would be that the UK started taking the same ‘difficult decisions’ as Greece took, albeit in a much milder form, but realised the folly of this and stopped. Greece did not get that choice.
“And I have not even mentioned the small matter of being in or out of a currency union.”
Did you take note of the comment that austerity hinders productivity?
This is very important to a United Kingdom that is struggling to increase its productivity – and therefore its competitive edge in the world marketplace. We will never succeed under the stranglehold of Tory austerity.
Prof Wren-Lewis goes on to explain why Janan Ganesh’s recent claim that George Osborne is surrounded by “monstrously incompetent adversaries” is a reversal of the facts; we have a monstrously incompetent chancellor instead.
The newly-elected government in Athens has always been suspicious of the Transatlantic Trade and Investment Partnership (TTIP) and will use its Parliament majority to sink the EU-US trade pact, claims a former Syriza MEP now turned minister, according to Euractiv.
After making its voice heard in the debate over sanctions on Russia, the new government in Athens is now making its opposition known to the EU-US trade deal, TTIP.
Georgios Katrougkalos, a former influential Syriza MEP who quit his European Parliament seat to become deputy minister for administrative reform in the leftist Greek government, said the new leadership in Athens will use its veto to kill the proposed trade pact – at least in its current form.
Just before the January elections, he told EurActiv Greece that a Syriza-dominated Greek parliament would never ratify the EU-USA trade deal.
Asked by EurActiv Greece whether the promise still holds now Syriza is in power, Katrougkalos replied:
“I can ensure you that a Parliament where Syriza holds the majority will never ratify the deal. And this will be a big gift not only to the Greek people but to all the European people”.
Anyone voting Green (or failing to vote) in a seat that Labour can win but the Greens cannot will in part be responsible for the consequences of a future Conservative government, writes Professor Simon Wren-Lewis in his latest Mainly Macro post.
Syriza has won the Greek election, which is the result I hoped for. For some this heralds the death of neoliberalism. To celebrate, George Monbiot – whose journalism consistently tells me more than most other journalists – says that here in the UK we should no longer vote tactically, but instead vote for what we want. What dangerous nonsense!
Anyone who votes Green in any seat where Labour has a chance to win, aside from maybe a few seats where the Greens have a chance (more realisticallyone or two), is voting for a Conservative government… (Not voting in a seat Labour has a chance to win is almost as bad.) This is going to be a tight election, so it matters.
There is a huge difference between Labour and Conservative fiscal plans beyond 2015. It is quite possible that we will see very little additional fiscal tightening under Labour, and a lot more public investment.
Monbiot says “Fearful voting shifts the whole polity to the right.” Where is the evidence for that? Neoliberalism did not triumph because the left decided to compromise. Yes Greece voted for Syriza, but only when half of its young people were stuck in unemployment. Is that the future that he hopes for by abandoning tactical voting?
Monbiot described voting No in the Scottish referendum as “an astonishing act of self-harm”: no matter that the SNP tried to deceive the electorate that they would at all times be better off independent; a sorry claim given what has subsequently happened to the oil price. No doubt some said in 2010 that a future Labour government would be much the same as a Conservative government.
This is an article that re-states many of the themes Vox Political has been exploring over the last few weeks: The victory of Syriza and its implications for the future; the realities of voting Green in the UK; the facts about Labour policy; and the deceptions of the Scottish Nationalist Party.
Now, why would the Western (right-wing) media be doing their best to suppress this?
Most of you, dear … readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds biggotry, nationalism, even violence.
In 2010, the Greek state ceased to be able to service its debt.
Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.
In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the ‘extend and pretend’ tactic would lead my country to a tragic state. That instead of Greece’s stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself.
My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to [all boldings mine]. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.
Indeed, even before a full year had gone by, from 2011 onwards, our predictions were confirmed. The combination of gigantic new loans and stringent government spending cuts that depressed incomes not only failed to rein the debt in but, also, punished the weakest of citizens turning people who had hitherto been living a measured, modest life into paupers and beggars, denying them above all else their dignity. The collapse of incomes pushed thousands of firms into bankruptcy boosting the oligopolistic power of surviving large firms. Thus, prices have been falling but more slowly than wages and salaries, pushing down overall demand for goods and services and crushing nominal incomes while debts continue their inexorable rise. In this setting, the deficit of hope accelerated uncontrollably and, before we knew it, the ‘serpent’s egg’ hatched – the result being neo-Nazis patrolling our neighbourhoods, spreading their message of hatred.
Despite the evident failure of the ‘extend and pretend’ logic, it is still being implemented to this day. The second Greek ‘bailout’, enacted in the Spring of 2012, added another huge loan on the weakened shoulders of the Greek taxpayers, “haircut” our social security funds, and financed a ruthless new kleptocracy.
Respected commentators have been referring of recent to Greece’s stabilization, even of signs of growth. Alas, ‘Greek-covery’ is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!
Allow me to submit to you that this sorry attempt to recruit a new version of ‘Greek statistics’, in order to declare the ongoing Greek crisis over, is an insult to all Europeans who, at long last, deserve the truth about Greece and about Europe. So, let me be frank: Greece’s debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding. The insistence in these dead-end policies, and in the denial of simple arithmetic, costs the German taxpayer dearly while, at once, condemning a proud European nation to permanent indignity. What is even worse: In this manner, before long the Germans turn against the Greeks, the Greeks against the Germans and, unsurprisingly, the European Ideal suffers catastrophic losses.
Germany, and in particular the hard-working German workers, have nothing to fear from a SYRIZA victory. The opposite holds. Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits.
Our target is, rather, the country’s stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end ‘extend and pretend’ logic not against German citizens but with a view to the mutual advantages for all Europeans.
Dear readers, I understand that, behind your ‘demand’ that our government fulfils all of its ‘contractual obligations’ hides the fear that, if you let us Greeks [have] some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the kleptocracy which today pretends to strive for ‘reforms’, as long as these ‘reforms’ do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.
Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.
A great opportunity for Europe is about to be born in Greece. An opportunity Europe can ill afford to miss.
With Greece under Syriza about to enter negotiations with the Troika, there has been much discussion of what might happen, and what should happen. This post is in the ‘should’ category, writes Professor Simon Wren-Lewis in Mainly Macro.
In the past I have argued that the Troika should welcome the opportunity to put right earlier mistakes. There should be a large amount of guilt, or at least regret, on their side… to show that I’m not living in a dreamland, read this FT piece by Reza Moghadam, the former head of the European Division of the IMF.
In reality debt restructuring is a bargaining game, but I want to suggest a general principle that any agreement should hold to. That principle is that there should be no significant increase in unemployment above its natural rate (let’s call this excess unemployment) as a direct result of having to pay interest on any government debt.
This is why the Troika should feel guilty, because by not allowing Greece to default on all its debt back in 2010 it helped create a situation where over half young people in Greece are unemployed… As I have argued in the past in the context of Latvia, the efficient way to restore competitiveness is to have small but persistent excess unemployment: a ‘short sharp shock’ is much more costly. The Troika imposed much too much austerity on Greece in a futile effort to avoid full and early default.
The process transferred the ownership of the remaining Greek government debt from the private sector to the public sector – other Eurozone governments and the IMF. The transfer to other European governments was wrong in two respects. First, it was another example of governments bailing out their own banks and other financial institutions with no costs to those institutions. Second, it made any subsequent restructuring of Greek debt much more difficult politically. If there had been full and immediate default there would have still been need for additional lending to Greece to give them time to adjust their public finances and avoid a large increase in unemployment, but that is what the IMF is for. If the Troika had not been involved, the IMF may well have gone for early and complete default.
So much for the past and guilt. What about what should happen now? The priority is for Greece to reduce unemployment as quickly as possible.
Alexis Tsipras: He’s making all the right moves – so the European Right will do everything in its power to break him. Let us hope they don’t succeed.
It would be idle to pretend that Britain’s economic problems resemble those of Greece when the latter has suffered a 25% reduction in its national income and where three out of every five young adults are now out of work, writes Mr Meacher.
But there is one parallel between them which is shared by both countries, as well as several others in the EU, and that is increasing resistance to endless austerity.
Osbornomics has not produced a genuine or sustainable recovery, but rather an elongated austerity which offers not the faintest hope of escape within the foreseeable future… But one might well ask, why has he got away with it for so long? There are basically two reasons which interact between themselves. One is the sheer power of the Thatcherite ideology by which the (Tory) political and economic elite have for the last three decades enriched themselves massively at the expense of the rest of the nation and through networking with the controllers of the finance sector, the media and the multinational corporates have established a dominance which until recently seemed impregnable. Opposition to it was either ignored, vilified or laughed out of court.
But the dam burst with the momentous victory of Syriza, the ripples of which will play out across the whole of the EU, including the UK, over the next few years.
The second reason is the poverty of challenge from the Labour Party[bolding mine] which remains the one single force in the country which can stop the Tory marauding in its tracks. Ed Miliband has bravely championed the fight against predatory capitalism, and Ed Balls has carefully excluded capital expenditure from Labour’s spending cuts. But sadly, so far at least, this has been for the cognoscenti who read the small print; it’s not the message that’s getting across on the streets of Britain.
That’s why Labour is now at risk of haemorrhaging votes to the leftish-seeming SNP in Scotland, to the Greens increasingly voicing the Left’s message, to LibDem deserters from the coalition who may now be drifting further leftwards to the Greens, and even (impossible as it may sound) to UKIP for whom a sense of insecurity and abandonment is a major driving force.
There has never been a time when a radical Left message from Labour was more needed.
Yesterday, Greece’s new government announced that it was halting major privatisation projects that had been demanded by the country’s creditors as part of the bailout agreement for the country.
Quite right, too.
You see, the privatisation of national assets is an opportunity for foreign corporations to leap in and buy them, then raise the price for users of those assets. It’s how Third World countries have ended up handing over the keys to their hospitals, schools and water supplies to multinationals.
Come to that, it’s how many UK reservoirs came to be in the hands of foreign water companies, meaning we were unable to use them in recent droughts, how our railways ended up in private hands and ticket prices skyrocketed, even though British taxpayers continued subsidising them – to a level never-before-seen, and how our energy suppliers ended up in foreign hands as well.
The result is best described by this quote from You Are Here, by Rory Bremner, John Bird and John Fortune: “At a… conference in Cancun to discuss how global trade barriers could be removed and markets opened up still further, three ministers from Ghana, Barbados and Malawi were wheeled out to describe how such liberalisation had helped their respective countries escape the poverty trap. Sam Mpasu, the Malawian minister for commerce and trade, was first to speak, and surprised the G7 delegates with his candour:
“We have opened our economy. That is why we are flat on our back.”
So you see, privatisation of its assets including the port of Piraeus and the Public Power Corporation of Greece, would not have helped the country balance its books – quite the opposite.
Mr Tsipras is absolutely correct to halt the privatisation projects and ensure that income generated by those assets continues to boost his country’s Treasury.
The weird dances currently being undertaken on the Greek stock and currency markets are merely symptoms of the European Right’s apoplexy at having its fun disrupted.
If only a visionary political organisation here in the UK had a radical plan to similarly unencumber this country of its privateer parasites…
Syriza leader (and soon-to-be Greek Prime Minister) Alexis Tsipras waves to the crowd at a pre-election rally.
Here comes a major headache for the British right-wing parties.
It seems clear that Syriza, Greece’s main socialist party, will win that country’s general election.
Syriza has promised to renegotiate Greece’s debt with international creditors, writing much of it off altogether; and to reverse the many austerity measures brought in by the previous administration.
What if this is the turning-point for Greece?
What if Syriza’s policies turn out to be the right thing to do? What if the Greek economy starts expanding, contrary to all the claims of right-wing economic ‘experts’ since the financial crash of 2007-8?
In case you haven’t noticed, there’s a general election taking place in the UK at the beginning of May, and the right-wing parties here must be praying that any such upturn in Greek fortunes will be delayed until after our national poll happens, otherwise they’ll be annihilated.
Alternatively, what can the right-wingers of the western world do to hobble efforts to improve the Greek economy? Should we now expect them to put those strategies into practice, simply to ensure that the socialists don’t prove them wrong?
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