Friday, 21 July 2017 / TRUTH-OUT.ORG

THE MEDIA SHOULDN'T SELL OUT

Truthout is accountable only to our readers: Not corporations, not politicians, not any political party.

Help us keep ethical, independent media thriving.

Click here
to donate.

Thirteen Theses on the Still Unfolding Greek Debt Drama

Wednesday, February 18, 2015 By C.J. Polychroniou, Truthout | News Analysis
  • font size decrease font size decrease font size increase font size increase font size
  • Print

LONDON 15 Feb 2015-  People gathered in Trafalgar Square to show support for the new Greek Government run by the anti-austerity party Syriza. (Photo: Sheila)LONDON 15 Feb 2015- People gathered in Trafalgar Square to show support for the new Greek Government run by the anti-austerity party Syriza. (Photo: Sheila)This story could not have been published without the support of readers like you. Click here to make a tax-deductible donation to Truthout and fund more stories like it!

As the Greek debt drama continues to unfold and Berlin's pressure on the new government in Athens increases dramatically in the aftermath of the collapse of the latest talks in Brussels - pressures that include demands for the replacement of the outspoken and rather brilliant Greek finance minister Yanis Varoufakis, thus adding more weight to the powerfully emotional argument that Germany treats its small euro partner as a colony - there are several things worth highlighting about Greece's problems and challenges, and the political economy of the eurozone.

First, many of Greece's current problems are of its own creation, but they were certainly intensified as a result of its entry in a monetary union that is intentionally structured in such a way that it seeks the dissolution of the traditional European social safety net, aggravates economic divergence and aims to establish a level playing field that allows big businesses to run roughshod over national interests and working-class people in virtually all areas of economic life.

Second, Greece's political economy rested on institutionalized corruption and a kleptocratic state in which the economic and political elite had made eternal vows of devotion to each other so they could enjoy a life of mutual pleasure through the rewards offered by looting the public coffers, an activity, or orgy of personal enrichment, in which lesser actors, such as the main syndicalist movements and various public agencies, were also allowed to participate.

Third, in joining the euro, Greece's political elite took advantage of the cheap borrowing costs and, with the help of highly irresponsible European leaders and financial institutions, engaged in reckless spending, pushing debt and deficits to unsustainable levels, with absolutely nothing to show for that borrowing in terms of sustainable growth, infrastructure improvement, improved social services, updated forms of governance and so on.

Fourth, the Greek debt crisis was the only real fiscal crisis in all of the eurozone as the calamities that befell the other peripheral member states (Ireland, Portugal, Spain and Cyprus) were caused by their private banking sector. Thus, only in Greece was there a public debt crisis, which, again, can be attributed almost entirely to the nature of the Greek political system. The crisis in the rest of the eurozone was a typical banking and financial crisis precipitated by the practices of predatory capitalism that the European Union had fully adopted in the course of the last two decades.

Fifth, the terms of the bailout plan that were imposed on Greece in May 2010 were intended not only to rescue Europe's banks as they had lent hundreds of billions of euros to the Greek state and to the nation's private sector, but also to punish the nation for its political culture and for having brought the eurozone to the brink of collapse.

Sixth, austerity policies and fiscal consolidation become the automatic stabilizers simply because the architecture of the eurozone - the absence of a federal form of government, a lender of last resort, and the lack of any form of democratic participation and accountability in European Union (EU) governance - prevents alternative solutions to capitalist crises. In this sense, the EU stands out as the ultimate undemocratic or anti-democratic entity in the advanced capitalist political universe.

Seventh, the policies imposed on Greece secured repayment of the loans and thus kept the country from defaulting, but destroyed national output, led 26 percent of the active population into unemployment, and, in the course of only a few years, converted an essentially advanced economy into a poor or undeveloped economy that would have sunk to the bottom of the Aegean were it not for its climate and astonishing natural beauty, which attract millions of tourists from abroad every year, although the tourist sector alone is not capable of jump-starting an economy that has been in free fall for so many years.

Eighth, all Greek governments up to early 2015 played the role of a servant to the country's international lenders (the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund) by enforcing the anti-social and anti-growth policies of Brussels, Berlin and Washington. They were ever obedient and servile to Greece's financial masters, working in full realization that their disgraceful end in Greek politics would not necessarily mean their end as political figures. European and US elite public and private institutions always seem to find room for those public officials who have served the system and the interests of the international capitalist class in particular so well.

Ninth, as the economic situation deteriorated further in Greece, the Coalition of the Radical Left (Syriza), which all along was against austerity and challenged the presence of the troika in Greece, started to gain ground and in the national elections held on January 25, 2015, Syriza secured a landslide victory, winning 149 out of the 300 seats in the Greek parliament. Immediately after its victory, it proceeded to form a coalition government with the Independent Greeks, a right-wing political organization, a move that did not sit well with many true leftists, but, as they say, politics is the art of the possible. In reality, there was no other bride or groom available for this political marriage, even though scores of opportunists both from home and abroad (ex-socialists and various pseudo-progressives and staunch supporters of capitalism and of the EU) had rushed to join Syriza's ranks when it had became obvious that the left represented the country's political future.

Tenth, as an opposition party, Syriza ran on an anti-austerity, pro-Europe platform, in an apparent effort to kill at least two birds with one stone. Its message was that by challenging austerity and Germany's hegemony, it would open up the possibilities for a new Europe. It placed all its bets on a negotiation strategy with its European partners and denounced the need for having a Plan B in the event that it might end up with its back against the wall, which was the only obvious outcome given the nature of European politics today and the structure of EU governance. In the meantime, its economic program was modest by anyone's account, thereby hardly living up to the ideological expectations of a party with an entire political history that has been based on the defense of socialism.

Eleventh, Syriza's initial public posture as a party in government was to demand an official debt write-off, an end to austerity policies and to the presence of the troika in Greece (thus a complete rejection of the bailout plan), the reversion of privatization and measures to address the worst aspects of the crisis. But before you could spell Mississippi, the demand for a debt write-off had been replaced by "smart debt engineering" and mixed signals were coming from senior government officials regarding the reversion of privatization. The new Greek government seemed to have realized rather quickly that the negotiation strategy that it had invested so much in demanded obvious compromises and a return to reality, especially since it had no alternative plan for an exit from the Greek crisis other than the good will of its European partners.

Twelfth, in two back-to-back Eurogroup meetings held in Brussels, one on February 11 and another on February 16, the Greek government made a case for an end to the bailout term (although one would have thought that its disastrous effects speak for themselves) and asked instead for a short-term financing agreement while it prepares the submission of an alternative "rescue plan" (although one would have expected Syriza to have developed one long before it won the elections!). As it turned out, Greece's euro partners played hardball in both meetings and left the Greek government with apparently two options: stay on the austerity course or leave the euro. To its credit, though, the Greek government did not back down and refused to be bullied.

Thirteenth, the two sides seem apparently to be as far apart over the causes of the crisis and the impact of the policies of the last five years as Earth from Mars. It is also obvious that Greece's euro partners are concerned with making concessions to the anti-austerity (but no longer radical) government in Athens out of fear that other peripheral countries might get a similar idea in their heads, that is challenging austerity and demanding debt write-offs. This is the only way to explain the fact that the Eurogroup draft presented to Greek officials on February 16 was "tougher" than the one produced four days earlier. Indeed, a strong case can be made that opposition to the Greek government's demands are dictated more by political considerations rather than an economic assessment of the pluses and minuses of the Greek proposal.

The euro masters have given Greece until February 20 to request an extension of the bailout term, implying that there can be no alternative to the existing program. In other words, the Greek government must either capitulate or be forced out of the euro area. That could happen either because the European Central Bank stops all liquidity to Greek banks or even because of a bank run, forcing the government to print its own currency.

It is not safe to make any predictions as to what might happen on February 20, but one should think that an "honorable compromise" of sorts is still possible even weeks later. If not, history will come down very hard on Syriza's leaders for having no Plan B and having developed such strong social democratic expectations of a neoliberal EU.

Copyright, Truthout. May not be reprinted without permission.

C.J. Polychroniou

C.J. Polychroniou is a political economist/political scientist who has taught and worked in universities and research centers in Europe and the United States. His main research interests are in European economic integration, globalization, the political economy of the United States and the deconstruction of neoliberalism's politico-economic project. He is a regular contributor to Truthout as well as a member of Truthout's Public Intellectual Project. He has published several books and his articles have appeared in a variety of journals, magazines, newspapers and popular news websites. Many of his publications have been translated into several foreign languages, including Croatian, French, Greek, Italian, Portuguese, Spanish and Turkish.


Hide Comments

blog comments powered by Disqus
GET DAILY TRUTHOUT UPDATES
Optional Member Code

FOLLOW togtorsstottofb


Thirteen Theses on the Still Unfolding Greek Debt Drama

Wednesday, February 18, 2015 By C.J. Polychroniou, Truthout | News Analysis
  • font size decrease font size decrease font size increase font size increase font size
  • Print

LONDON 15 Feb 2015-  People gathered in Trafalgar Square to show support for the new Greek Government run by the anti-austerity party Syriza. (Photo: Sheila)LONDON 15 Feb 2015- People gathered in Trafalgar Square to show support for the new Greek Government run by the anti-austerity party Syriza. (Photo: Sheila)This story could not have been published without the support of readers like you. Click here to make a tax-deductible donation to Truthout and fund more stories like it!

As the Greek debt drama continues to unfold and Berlin's pressure on the new government in Athens increases dramatically in the aftermath of the collapse of the latest talks in Brussels - pressures that include demands for the replacement of the outspoken and rather brilliant Greek finance minister Yanis Varoufakis, thus adding more weight to the powerfully emotional argument that Germany treats its small euro partner as a colony - there are several things worth highlighting about Greece's problems and challenges, and the political economy of the eurozone.

First, many of Greece's current problems are of its own creation, but they were certainly intensified as a result of its entry in a monetary union that is intentionally structured in such a way that it seeks the dissolution of the traditional European social safety net, aggravates economic divergence and aims to establish a level playing field that allows big businesses to run roughshod over national interests and working-class people in virtually all areas of economic life.

Second, Greece's political economy rested on institutionalized corruption and a kleptocratic state in which the economic and political elite had made eternal vows of devotion to each other so they could enjoy a life of mutual pleasure through the rewards offered by looting the public coffers, an activity, or orgy of personal enrichment, in which lesser actors, such as the main syndicalist movements and various public agencies, were also allowed to participate.

Third, in joining the euro, Greece's political elite took advantage of the cheap borrowing costs and, with the help of highly irresponsible European leaders and financial institutions, engaged in reckless spending, pushing debt and deficits to unsustainable levels, with absolutely nothing to show for that borrowing in terms of sustainable growth, infrastructure improvement, improved social services, updated forms of governance and so on.

Fourth, the Greek debt crisis was the only real fiscal crisis in all of the eurozone as the calamities that befell the other peripheral member states (Ireland, Portugal, Spain and Cyprus) were caused by their private banking sector. Thus, only in Greece was there a public debt crisis, which, again, can be attributed almost entirely to the nature of the Greek political system. The crisis in the rest of the eurozone was a typical banking and financial crisis precipitated by the practices of predatory capitalism that the European Union had fully adopted in the course of the last two decades.

Fifth, the terms of the bailout plan that were imposed on Greece in May 2010 were intended not only to rescue Europe's banks as they had lent hundreds of billions of euros to the Greek state and to the nation's private sector, but also to punish the nation for its political culture and for having brought the eurozone to the brink of collapse.

Sixth, austerity policies and fiscal consolidation become the automatic stabilizers simply because the architecture of the eurozone - the absence of a federal form of government, a lender of last resort, and the lack of any form of democratic participation and accountability in European Union (EU) governance - prevents alternative solutions to capitalist crises. In this sense, the EU stands out as the ultimate undemocratic or anti-democratic entity in the advanced capitalist political universe.

Seventh, the policies imposed on Greece secured repayment of the loans and thus kept the country from defaulting, but destroyed national output, led 26 percent of the active population into unemployment, and, in the course of only a few years, converted an essentially advanced economy into a poor or undeveloped economy that would have sunk to the bottom of the Aegean were it not for its climate and astonishing natural beauty, which attract millions of tourists from abroad every year, although the tourist sector alone is not capable of jump-starting an economy that has been in free fall for so many years.

Eighth, all Greek governments up to early 2015 played the role of a servant to the country's international lenders (the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund) by enforcing the anti-social and anti-growth policies of Brussels, Berlin and Washington. They were ever obedient and servile to Greece's financial masters, working in full realization that their disgraceful end in Greek politics would not necessarily mean their end as political figures. European and US elite public and private institutions always seem to find room for those public officials who have served the system and the interests of the international capitalist class in particular so well.

Ninth, as the economic situation deteriorated further in Greece, the Coalition of the Radical Left (Syriza), which all along was against austerity and challenged the presence of the troika in Greece, started to gain ground and in the national elections held on January 25, 2015, Syriza secured a landslide victory, winning 149 out of the 300 seats in the Greek parliament. Immediately after its victory, it proceeded to form a coalition government with the Independent Greeks, a right-wing political organization, a move that did not sit well with many true leftists, but, as they say, politics is the art of the possible. In reality, there was no other bride or groom available for this political marriage, even though scores of opportunists both from home and abroad (ex-socialists and various pseudo-progressives and staunch supporters of capitalism and of the EU) had rushed to join Syriza's ranks when it had became obvious that the left represented the country's political future.

Tenth, as an opposition party, Syriza ran on an anti-austerity, pro-Europe platform, in an apparent effort to kill at least two birds with one stone. Its message was that by challenging austerity and Germany's hegemony, it would open up the possibilities for a new Europe. It placed all its bets on a negotiation strategy with its European partners and denounced the need for having a Plan B in the event that it might end up with its back against the wall, which was the only obvious outcome given the nature of European politics today and the structure of EU governance. In the meantime, its economic program was modest by anyone's account, thereby hardly living up to the ideological expectations of a party with an entire political history that has been based on the defense of socialism.

Eleventh, Syriza's initial public posture as a party in government was to demand an official debt write-off, an end to austerity policies and to the presence of the troika in Greece (thus a complete rejection of the bailout plan), the reversion of privatization and measures to address the worst aspects of the crisis. But before you could spell Mississippi, the demand for a debt write-off had been replaced by "smart debt engineering" and mixed signals were coming from senior government officials regarding the reversion of privatization. The new Greek government seemed to have realized rather quickly that the negotiation strategy that it had invested so much in demanded obvious compromises and a return to reality, especially since it had no alternative plan for an exit from the Greek crisis other than the good will of its European partners.

Twelfth, in two back-to-back Eurogroup meetings held in Brussels, one on February 11 and another on February 16, the Greek government made a case for an end to the bailout term (although one would have thought that its disastrous effects speak for themselves) and asked instead for a short-term financing agreement while it prepares the submission of an alternative "rescue plan" (although one would have expected Syriza to have developed one long before it won the elections!). As it turned out, Greece's euro partners played hardball in both meetings and left the Greek government with apparently two options: stay on the austerity course or leave the euro. To its credit, though, the Greek government did not back down and refused to be bullied.

Thirteenth, the two sides seem apparently to be as far apart over the causes of the crisis and the impact of the policies of the last five years as Earth from Mars. It is also obvious that Greece's euro partners are concerned with making concessions to the anti-austerity (but no longer radical) government in Athens out of fear that other peripheral countries might get a similar idea in their heads, that is challenging austerity and demanding debt write-offs. This is the only way to explain the fact that the Eurogroup draft presented to Greek officials on February 16 was "tougher" than the one produced four days earlier. Indeed, a strong case can be made that opposition to the Greek government's demands are dictated more by political considerations rather than an economic assessment of the pluses and minuses of the Greek proposal.

The euro masters have given Greece until February 20 to request an extension of the bailout term, implying that there can be no alternative to the existing program. In other words, the Greek government must either capitulate or be forced out of the euro area. That could happen either because the European Central Bank stops all liquidity to Greek banks or even because of a bank run, forcing the government to print its own currency.

It is not safe to make any predictions as to what might happen on February 20, but one should think that an "honorable compromise" of sorts is still possible even weeks later. If not, history will come down very hard on Syriza's leaders for having no Plan B and having developed such strong social democratic expectations of a neoliberal EU.

Copyright, Truthout. May not be reprinted without permission.

C.J. Polychroniou

C.J. Polychroniou is a political economist/political scientist who has taught and worked in universities and research centers in Europe and the United States. His main research interests are in European economic integration, globalization, the political economy of the United States and the deconstruction of neoliberalism's politico-economic project. He is a regular contributor to Truthout as well as a member of Truthout's Public Intellectual Project. He has published several books and his articles have appeared in a variety of journals, magazines, newspapers and popular news websites. Many of his publications have been translated into several foreign languages, including Croatian, French, Greek, Italian, Portuguese, Spanish and Turkish.


Hide Comments

blog comments powered by Disqus