As discussions continue to take place between the Greek government and the country’s lenders, Greece’s economic crisis is showing no signs of abating. Meanwhile, new cuts to pensions, wages and social services are currently on the table. Unemployment remains at record levels, while large-scale privatizations of profitable publicly owned assets are moving forward to appease the demands of Greece’s lenders.
While some economists, like Greece’s former finance minister, Yanis Varoufakis, have proposed the introduction of a “parallel” or dual currency as a solution for Greece, others disagree. Economist Dimitris Kazakis is the general secretary of Greece’s United Popular Front (EPAM), a party founded out of the mass protests that took place in Greece in 2011, but that remains on the sidelines of Greek politics, with no parliamentary representation.
Kazakis objects to the dual currency proposal and instead calls for Greece to depart from the eurozone and European Union (EU), and to unilaterally write off its debt. In this interview, he presents his proposals and explains why the introduction of a parallel currency is not a solution, while also discussing the recent leaks of International Monetary Fund (IMF) discussions regarding the Greek crisis and the firm positions of the IMF and the EU vis-à-vis Greece.
Michael Nevradakis: What is your reaction to the recent leaks of IMF discussions regarding Greece and the ongoing so-called negotiations that are taking place?
Dimitris Kazakis: The leaks did not reveal anything new. Everyone knows the IMF’s positions and the manner in which they operate. Despite this, I do believe that the leaks were authorized in advance, and they had to do with the fact that Germany fiercely opposes the IMF’s proposal for a large write-off of Greece’s debt and for a greater emphasis to be placed on a different set of so-called “reforms,” which would have more to do with privatizations and the selling of the country’s assets and less to do with the meeting of fiscal targets.
“The proposals put forth by the IMF do not constitute a solution for Greece.”
The proposals put forth by the IMF do not constitute a solution for Greece, by any means. But what they do reveal is a schism between Washington and Berlin, and the Syriza government has chosen to align itself with Berlin. In terms of what will follow, most likely we will see a fourth memorandum agreement based on the proposals of German Finance Minister Wolfgang Schäuble and the introduction of a parallel currency in Greece.
Let’s not forget that the IMF is not participating in the third memorandum agreement or in its funding mechanism. So, could somebody explain to me why legislation has been passed which requires that any political decision that is made in Greece must be first sent to the IMF, the European Commission and the European Central Bank (ECB), who must then agree on these proposals? This is part of the third memorandum agreement. Could somebody explain to me how the Greek government is supposed to clash with the IMF when this very same government has signed an agreement where the IMF still has the power to accept or reject political decisions made in Greece? The subservience of the Greek government has surpassed even that of the Quisling regime.
The only way in which this situation can change is if the Greek people find a way to overturn this government, as soon as possible. They have a responsibility to do this, before we see the situation get even worse.
What would a parallel currency mean for Greece?
No economist would support a parallel currency. Anyone who supports a parallel currency is either a con artist who supports interests that are in opposition to the interests of the people, or he is completely clueless about economics and is therefore dangerous as well. What Yanis Varoufakis wanted — and the orders he was given to implement when he was Greece’s finance minister — was to prepare Greece for the introduction of a so-called “alternative currency.” This “currency” would resemble the IOUs that were introduced in the state of California in 2009. Economist James Galbraith was chosen to lead a new team, largely comprised of officers from Goldman Sachs, and which was hired by the Greek government with taxpayer money, to prepare the way for its introduction.
The IOUs issued in California had catastrophic consequences. What prevented their introduction in Greece, however, was an unforeseen event: 62 percent voted “no” to further austerity in the referendum of July 5, 2015. The powers that be feared a social uprising if they introduced an “alternative currency” at that time, and they therefore decided to introduce the third memorandum instead, to stifle any dissent, and then to potentially bring in the “alternative currency” at a later date.
“What we need to understand is that an occupation regime has been forced upon Greece.”
What [Greece’s lenders] have since done is to parade out their various agents, such as the self-proclaimed “radical Marxist” Yanis Varoufakis, who does not want to hear about returning to a national currency, but who continues to parrot in favor of an “alternative currency” — a solution which has been rejected in Greece as far back as ancient times, as seen in The Frogs by Aristophanes. Varoufakis does not know about this, nor does he seem to be aware of Gresham’s law, which is an economic principle that explains why parallel currencies do not work, as has been seen with the catastrophic example of bimetallism [an economic system where both gold and silver are legal tender with a fixed rate of exchange between the two metals], for instance.
It must be made clear that a national currency, which is issued by the government as the only authorized legal tender, is different from a parallel currency, and that the goal of a national currency would be to finance the national income, and not to finance the well-being of the bankers. But a national currency has to be issued by the state, and it is upon this structure that a democracy can be formed. Otherwise, you will not be able to control the small cabal of people who will produce currency and who will have control over the manner in which the economy operates.
You continue to advocate in favor of Greece departing from both the eurozone and the EU, and you also support the unilateral write-off of Greece’s debt. How can Greece accomplish this?
What we need to understand is that an occupation regime has been forced upon Greece. It began with the infamous loan agreements that Greece signed, which stripped from Greece a basic sovereign right that exists under international law, for national immunity in the exercise of national sovereignty.
What should Greece do? Greece should implement the UN Charter and international treaties that consider national sovereignty the foundation upon which a nation-state is formed, and to renounce any agreement that strips the country of its sovereignty. We are talking about the loan agreements, which are connected with three-fourths of Greece’s national debt and which are connected to the so-called European bailout mechanism. Greece or any country cannot consider as legal any obligations that threaten it with the stripping of its national sovereignty. It is as if war has been declared against the country. Is it even fathomable that a sovereign country could accept such agreements? If it does, it means that it is a colony, which is exactly what has happened in Greece.
“Greece or any country cannot consider as legal any obligations that threaten it with the stripping of its national sovereignty.”
The remaining 25 percent of the debt belongs to banks, which have flat-out looted from the Greek people. This is a matter, which, quite simply, can be solved by the justice system. You put the justice system to work investigating all of the money that has gone to the banking system. For example, during the first six months of 2015, Greek banks received from the European emergency liquidity assistance fund (ELA) a total of 94 billion euros. Supposedly, this money went to cover bank deposits that were fleeing the country. But that only amounts to 43 billion euros. We were also told that some funds were used to secure everyday liquidity. That amounts to another 2 billion euros. Even if we round it up to 50 billion, where did the remaining 45 billion euros go? Why is nobody being held accountable for this? This money was loaned with an interest rate that was much higher than the normal interbank rate and it is owed by the Greek taxpayer, because this money was loaned with taxpayers as the guarantor.
Prosecutors need to get involved, to investigate what happened and to eliminate this debt from Greece’s ledger, and after, all who stole and looted this money are tried and convicted. In this way, the entirety of this debt would be written off. In this way, we will not even have to deal with the issues of odious debt and whatever else is foreseen by international law.
After that, one thing that Greece must not do is to borrow on the global markets ever again. Nation-states borrow in the global markets for the sole purpose of covering up the black holes created by politicians and the looting that has taken place from national coffers on behalf of those in power. When a national economy does need to borrow, it can do so internally. And the only reason to borrow is this: to make investments, bona fide investments based on careful planning, in order to ensure that the money that is borrowed will be repaid from the investment itself, and not by forcing the taxpayers to forever stick their hands into their pockets.
We have been borrowing all this time to pay the usurious interest rates to the lenders, and to pay for the criminal looting of the national coffers by politicians and their cronies. This must stop. We have to create a new economy that will operate in the interests of citizens, which will protect workers and which will present a stable environment for entrepreneurs and businesses to operate.
How could this transition back to a national currency take place without a catastrophic devaluation?
Everything you hear about what would happen if we returned to a national currency will actually happen if we remain in the eurozone. Yes, there will be a catastrophic devaluation if Greece departs from the euro, but it will be the euro that is devalued, and not the new national currency of Greece! For example, when, in June 2015, the referendum was announced in Greece and set for July 5, within the one-week period that followed, the euro was battered in the global markets. The ECB was forced to pore over 800 billion euros into the markets in order to stabilize the euro. [What] this shows us is that the euro is incredibly unstable.
Therefore, it follows that if Greece departed from the eurozone, an attack would follow against the euro in the global markets. It would be an attack on such a scale that I am not certain that any amount of liquidity that the ECB would pour into the markets would be enough to stabilize the euro. Therefore, the issue is not a potential devaluation of the new national currency of Greece. The problem would be that the new Greek currency should not in any way be pegged to the euro, because then it will follow the downward spiral of the euro, as a result of all of the short-selling of the euro, which will take place once Greece leaves the eurozone. This short-selling will not allow the euro to recover. Instead, it will be stabilized, if at all, by the ECB at a rate of 40-50 percent of the value of the dollar and it will be subject to repeated attacks in the markets as investors speculate which will be the next country to leave the eurozone.
Thereafter, the issue will be this: The path will have been paved for Greece’s new national currency to stabilize itself. The country and its economy will recover, and the quicker you recover on the basis of productivity, the faster your currency will stabilize. Secondly, there will be a lot of capital that is currently parked in the eurozone, which will seek a “safe haven” and to flee the increasingly unstable euro. Greece’s new currency, which will be outside of the forex [foreign exchange] system and not traded in the international marketplace, will be one such “safe haven.” As a result, it is quite possible — and indeed, the most likely scenario — to see upward pressures on the value of the new currency of Greece. This is problematic for an economy, especially one that is recovering, but it is more easily dealt with than if the opposite were true.
But even if the new national currency of Greece were to devalue due to pressures that it might face, so what? Norway devalued its currency, the krone, by 40 percent within the past year. Did their economy collapse? Is it facing the problems that Greece or indeed Germany and the rest of the eurozone are facing? No. In fact, the Norwegian economy is performing better than every other European economy. Why? Because it has a stable productive base and its currency provides real purchasing power domestically and real income for its people. As long as these two factors exist, an economy can withstand any devaluation.
There are many who argue that Greece could not return to a national currency because, they claim, it lacks a productive base, relies upon imports and because it would be shut out of the global markets. How do you respond to these arguments?
Greece lost its productive base when it was inducted into the European Economic Community (EEC), as it was known at the time, and later into the EU. This was the deathblow for the Greek economy. It is true that we did not have a strong productive base even before that, but whatever productive base did exist was lost once we entered the EU. We lost our dynamic agricultural base, which produced a surplus of goods up until the 1980s when we entered the EEC, and Greek farmers were battered, and we lost our industrial base.
In order to recover, we need to enforce protectionist measures. However, the protectionist measures need to be selective and to ensure competitiveness, to provide for a truly competitive framework instead of simply protecting the profits of domestic oligarchs. We need to allow our productive capacity to grow and develop, for investment to take place in entrepreneurship and development in the private sector under conditions that protect against unfair competition or the monopoly conditions created by foreign multinationals or Greek and foreign cartels. To say that we need to recover our production first and then leave the eurozone is foolish. Anyone who argues this either does not know what they are talking about, which means that they are dangerous, or they are simply fooling the people with the goal of maintaining the status quo and a situation in which we are going from bad to worse.
Currently, the Central Bank of Greece possesses approximately 42 billion euros in foreign currency reserves. Additionally, the investment portfolios of Greece’s banks presently contain convertible securities, primarily bonds issued by Britain and Luxembourg, totaling 56 billion euros. This totals 98 billion euros of foreign currency reserves. Greece, annually, needs approximately $20 billion for its inelastic imports, for goods such as industrial equipment, fuel and basic needs such as medicine. When you therefore have approximately $100 billion in foreign currency reserves, you could go four or even five years without even one tourist setting foot in Greece and leaving behind foreign currency; without even one export taking place; without even one contract for the shipping and transport of goods taking place. Such a far-fetched situation could only take place under conditions of total warfare.
In the meantime, Greece has the ability to stand on its own feet. Greece, even today, has 98 percent self-sufficiency in terms of food production, plus self-sufficiency in terms of energy production. Therefore, we would have no problem undertaking an orderly transition to a national currency, which would permit a quick recovery of the Greek economy, based exclusively on its own strengths, but which would be outward looking, as we will finally be able to develop trade relations with any country, instead of operating as a protectorate of Germany.
Join us in defending the truth before it’s too late
The future of independent journalism is uncertain, and the consequences of losing it are too grave to ignore. To ensure Truthout remains safe, strong, and free, we need to raise $46,000 in the next 7 days. Every dollar raised goes directly toward the costs of producing news you can trust.
Please give what you can — because by supporting us with a tax-deductible donation, you’re not just preserving a source of news, you’re helping to safeguard what’s left of our democracy.