This week has been a taste of what the economy would look like with a real rupture with the Eurozone: uncertainty, elite blackmail, banks teetering on the brink and the start of rationing. That the mobilization of Syriza and the left outside it has overcome this and made Oxi a possibility is impressive. Greece and its economy can expect no miracles either way Sunday’s vote goes and for quite some time afterwards, but they deserve full international solidarity.
And so on the eve of the Greek referendum, with the streets of Athens still buzzing from Friday night’s enormous Oxi!/No! rally in Syntagma Square, I’ve collected and parsed some of my notes on Greece from afar. A text on where things stand is first, then some notes on how things came to be for those not keeping close track the past few months.
Where things stand
Five months of torturous, fruitless negotiations came to a head last week when the more-or-less polite dance around the table in Brussels abruptly broke down. Whether this was a costly demobilization or a calculated strategy to demonstrate the intransigence of the Institutions doesn’t quite matter at this point. When Alexis Tspiras called a referendum on a take-it-or-leave-it offer last Friday, he precipitated a political rupture, which soon started to foreshadow the economic rupture that Greece leaving or being pushed out of the Euro would bring.
My latest piece on Greece was published yesterday at Ricochet. In short, Europe and the IMF’s message that ‘there still is no alternative’ proves that objective of punitive austerity is political, not economic. Here it is in full:
The project’s aim is to make an example of Greece and solidify austerity as the only option within a Europe united by elite interests. Emergency summits, duelling proposals, trickles of banking system support and stern warnings create an economic veneer to paper over ultimately political aims.
Take the latest “compromise” proposal made yesterday by Greece’s ruling party Syriza. It offers a whopping additional €8 billion in austerity measures over the next year and a half. These measures amount to 1.5 per cent of GDP in 2015 and nearly 3 per cent of GDP in 2016. Rather than a compact for growth, or even stability, Europe has squeezed out yet more painful austerity that will make it much harder for Greece to escape its 21st-century Great Depression.
It is “not the right moment” to discuss debt relief, Jean-Claude Juncker, the head of the EU Commission, was quoted saying, despite the increasing concessions. This is the political, not economic, function of the Greek debt. It’s not the right moment economically to discuss the debt because Greece has long been insolvent, its debt repayments kept on track by drip-fed funding via subsequent agreements of austerity. Politically, it’s never the right moment, because each new agreement maintains austerity as the only possible option.
Belatedly, here is an article I wrote on Greece’s agreement with the Eurozone for Ricochet. It focuses on the next four months with their opportunities and pitfalls. Given that the list of reforms authored by Yanis Varoufakis looks to get the approval of the Eurogroup member states, the article remains relevant, the breathing room actually in place.
Assuming its plan of reforms is accepted by the Eurogroup on Monday, Greece’s Syriza government has gained four months of breathing room — albeit in the same stuffy space, already full of the nauseating fumes of austerity, the window barely cracked.
No one was humiliated in Friday’s compromise between Greece and the Eurogroup. Nevertheless, Syriza had to concede much, most painfully the continued involvement of external observers from the Troika. In return, Germany’s no-compromise hard line was finally broken. Friday concluded but the first skirmish in a long battle.
If anything, the resulting agreement demonstrates the weakness of Syriza’s position. Syriza has inherited an economy and financial system in tatters — years of economic depression compounded by sadistic austerity. Yet its leaders, for now, calculate that change outside the bounds of European institutions, including the euro, would open the gates to something far worse. Whatever the precise distribution of gains and losses, which will only come to light as the agreement is implemented, the fact remains that Syriza has four months to act.
Four months to stop the bleeding
First, of course, there is the pressing need to start enacting change in state policy. Existing austerity measures will be hard to dislodge for the time being. But breathing room means that Syriza will be able to spend more, even run a smaller primary surplus this year than stipulated in the old program, perhaps by up to 3 per cent of GDP. It can also start breaking the old oligarchy’s grip on the Greek economy and go after the unpaid taxes of the rich.
Beyond this, there is space for creativity. One Greek journalist tweeted that he’d already overheard Greece’s delegation at the Eurogroup talking about creative ways to raise the minimum wage. Though a far cry from simply raising the minimum wage, such creativity would be a testament to Europe’s intransigence.
Altogether this amounts to a program that can stop the bleeding and subtly fortify the patient before the next round of negotiations.
How to characterize the mainstream media reaction to the unfolding debt negotiations between Greece and Europe (not the financial press mind you, which knows what it’s about though sides largely with the creditors)? For those looking for the simplest angle, it is merely a stand-off without context: a horse race or Wild West shoot-out. Here, the problem is not so much a particular internalized economic doctrine, though that’s there too, but an additional utter lack of context.
A significant chunk of reporting, however, tries to give at least some context. Often, it starts with the “fundamental fact” of the debt: hark! there’s a huge pile of debt. Even this choice of starting point is already open to significant unacknowledged assumptions. One such natural assumption is “oh it’s probably the result of profligacy” or some variation on this theme. Debt is moralized from the outset rather than a search begun for potential structural causes. (Krugman is actually quite good on critiquing this.)
A second theme often almost immediately follows, “well, clearly belt-tightening is in order” — austerity is the natural remedy to the crisis. This is the household budget view of government finances that has little basis in economic theory, but is a central plank of excuses given for the politics of austerity: you’re in debt so save your way out, pinch pennies even if starts to cause immense suffering. The suffering is acknowledged but in similar terms as collateral damage is in so much mainstream war reporting.
Yet while the focus is often the sum of debt and how it can be repaid, both are in many ways meaningless if the debt is truly unsustainable. Greece, with the Troika and the other European states, is involved in an argument partly over symbols, albeit symbols with very real effects. If Greece is insolvent, then further repayment on harsh terms brought about via financial lifelines to enable this repayment is also disciplining device, one that conveniently also sends a message to other EU states. The tool is the austerity program, which produces real suffering, dislocation, enormous unemployment and massive shrinkage of the social sphere.
All this is too often left out. The amount of debt figures large in reports, the billions and debt/GDP ratios frightening and pushing the austerity narrative. Sometimes, the fact that 25 percent of Greeks are unemployed sneaks in, or 50 percent of youth. But how often is it mentioned that the Greek government needs to be able to redirect spending towards its social programme, which at a basic calculation provided by Syriza before the election actually amounts to a modest 11 billion Euros? Similarly, the question of how the state can even collect revenues to pay for anything — measures to end the tax strike by the oligarchs and clientelist state-business relations — is a side issue at best.
This interplay between media assumptions and reality was in rather full effect in the recent interview with Yanis Varoufakis on BBC Newsnight. Take the phrase “structural reforms” — clearly the presenter and the interviewee meant very different things but assumptions obscured this away. The other elements were there: the Wild West metaphor, surface level yes/no questions, the eschwing of ambiguity in favour of a horserace. Entertaining if demoralizing to watch:
[This is an extended version of a short commentary I was asked to provide for Al-Jazeera’s Listening Post on the mainstream media’s handling of the Greek debt talks.]
Over at Ricochet, I’ve transcribed my podcast interview with Yanis Varoufakis, economist and Syriza candidate in tomorrow’s Greek elections. With Syriza looking to get the most votes and possibly an outright parliamentary majority, I asked Yanis about the Greek economy, Syriza’s economic plans, his views on what these mean for Europe and how we can expect Greece to take its place in Europe come Monday. Here is the interview in full.
Michal Rozworski: I know this is an enormous topic but what is the current economic situation on the eve of the elections in Greece? Can you give a kind of snapshot?
Yanis Varoufakis: In brief, everyone owes to everyone, and no one can pay. The banks are bankrupt; they owe money to the state, to each other, to foreign banks. Citizens owe money to the banks and owe money to the state. The state owes money to everyone. So we have a triple insolvency: bankrupt banks, a bankrupt state and a bankrupt private sector. There are of course pockets, like everywhere, within society of people who are really well off. They have money in banks in Switzerland, in the city of London, on Wall Street, in Frankfurt, and even some money in the Greek banks.
But the overall situation is that — even though in the last year or so there’s been a small rebound, not in terms of income but in terms of expenditure — the economy is quite clearly still in a downward spiral that is filling everyone’s soul with negative expectations.
It’s interesting you mention that slight rebound. What I found interesting is that there seems to be a bit of a reversal of 2012. So, on the one hand, now some of the economic indicators have improved in minimum ways, if we can even use that word, but on the other hand, the population seems to be more immune to the fear-mongering on behalf of Greek and European elites against the left. What’s changed? What’s led to Syriza actually having a chance of gaining a majority in parliament?
Well, two things mainly. Firstly, Syriza has matured over the last two years; there is no doubt about that. So it has inspired more confidence in the electorate. Secondly, and perhaps even more significantly, now it is abundantly clear that the whole narrative of a “Greek-covery” — if you remember a year ago or so — was just utterly bogus. It was a piece of propaganda, a bubble that burst and Greeks are sick and tired.…
Look, I was in a taxi this morning. The taxi driver said to me — he recognized me as a candidate — “Look, Greeks fall into two categories. There are those who are really scared of losing what little they have left. The rest don’t give a damn; they just want to vote in a way that states it in a way for everyone outside of Greece to see that we’re not interested in this vicious cycle anymore.”
I’ve been visiting family in Poland for the past few weeks so, fittingly, this week’s podcast deals with the situation of the left at two opposite ends of the European periphery: Greece and Poland. My first guest is Yanis Varoufakis, professor of economics at the University of Athens and candidate for SYRIZA in this Sunday’s parliamentary elections. Syriza is the main Greek left party and is poised to take the most votes, potentially even form a parliamentary majority, on Sunday. Yanis spoke with me about Greece’s economy on the eve of the elections and Syriza’s economic program.
My second guest is Jakub Dymek, Polish academic, journalist and editor. Jakub is, among other things, the Polish correspondent for Dissent Magazine and a member of the editorial collective of Krytyka Polityczna (Political Critique), the major journal of Poland’s “New Left”. Unlike its Greek counterpart, Poland’s electoral left is currently at its lowest point since the post-Communist transition. I spoke with Jakub to get a sense of this electoral decline, the situation of left social movements and the future prospects of Poland’s left.
Very briefly, I say that Greece and Poland are at the opposite ends of the European periphery for two reasons. First, Greece has undergone years of recession and brutal austerity in response to the global crisis of 2007/8; Poland, on the other hand, has managed to grow through the crisis, at least according to the major economic measures. Greece and Poland are also opposed when it comes to the fortunes of the electoral left. It is in Greece that the left has may well take government this Sunday or at least become the largest force in parliament, whereas in Poland the electoral left is currently virtually non-existent. Looking at these two lefts and the political economic conditions that led to their different fortunes makes for a fruitful juxtaposition.
