Thursday 2 July 2015

Notes on the Greek Crisis

Crisis? Since 2009, when has Greece not been in crisis? What the people of Greece have suffered is nothing less than a permanent depression that has since its economy collapse by almost a quarter and hundreds of thousands of its young people have fled abroad in search of work. Meanwhile, public spending has been cut to the bone in an austerity programme the likes of George Osborne can but aspire to, and has seen it return surpluses of around six per cent of GDP to the treasury. However, instead of investing and allowing that money to recirculate, to grind the cogs of the Greek economy onwards, it's being systematically parcelled up and sent off to the creditors. As the depression grinds on, the state is effectively prioritising the synthetic demands of the so-called troika, of which more shortly, above the human needs of its flesh-and-blood citizens. This is fiscal barbarism, the collective punishment beating of an entire people not responsible for the debts in whose name austerity is being carried out. And it's an austerity that just isn't working. To have complied with the creditors' requests ha seen debt rise from 120% of GDP to an utterly unsustainable 170% - instead of Eurozone bigwigs carping about the credibility of Syriza and Tsipras, the people of the Eurozone would do well to reflect on the idiocies of their finance mandarins.

This wasn't a situation of Syriza's own making, but they've certainly made the best of it. Internationally and domestically, Tsipras and Varoufakis have played a nuanced, sophisticated political game aimed at raising the level of consciousness in Greece and abroad, but as we have seen this week with Tsipras's surprise announcement of a bail out referendum, that hegemony has only brought them very limited wiggle room. For all the talk of capitulation and sell out from ultra-left micro groups and the increasingly unhinged KKE, the referendum caught the troika on the hop, and has allowed Syriza to oppose both democracy and national pride to the EU's carpet bombing of Greece. But even then, Syriza cannot defy political realities. Despite everything that has happened, as Monday's huge Yes demonstration, um, demonstrated; there are millions of Greeks - not all of whom are untouched by austerity by any means - who will cling to the bail out in the hope that by staying in the Eurozone, anything and everything the troika throws at them is going to be a lesser evil than the alternative. That's why, though from the safety and comfort of sunny Stoke-on-Trent, I didn't think ringing up Berlin and asking for an 11th hour renegotiation was a good move, but having out-maneouevred our ECB friends with a referendum, and then looking like it might be lost, Tsipras at least had to do something to try and avoid a major loss of face and, perhaps, the government's resignation. The troika know this too, which is why after their initial shock, and the absurd rant at the Greeks by Commission president Jean Claude Juncker, they've knocked it back. When the Greek electorate can't take more artificially-induced depression, but want to stay in the Eurozone at all costs, Syriza are in a difficult position that no amount of radical posturing can extricate the party from.

Meanwhile, I've seen the argument floating about in some centre left circles that parallels the common sense of the ECB's bovver boys: that Greece ran up the debts, so it has to pay them. It's not as if faceless banks and the debt holders either, as this BBC graph helpfully demonstrates:

This has led some to suggest that Syriza's line is morally reprehensible because what is being lent is taxpayers' money. Spain and Italy, with not a few difficulties of their own, would quite like to see those debts repaid so their own economic houses can be put into order. Understandable, except for a few things. Firstly, Syriza has not repeated the Bolsheviks' actions a century ago and repudiated all foreign debts. What they are asking for is a combination of debt relief, because £170bn is simply not sustainable for an economy of Greece's size, and a restructure. Showing far greater awareness of how capitalism works than the high priests of European capitalism, they know every cut acts as a negative multiplier. Scrapping the "solidarity grant" each pensioner receives upon retirement, for instance, weakens spending power and the jobs reliant on that money, depressing economic activity and therefore the capacity of Greece to service its debts. Secondly, in cheerleading more austerity for Greece because they've been through it themselves, the Spanish and Italian governments are acting in such a reckless way that they're unlikely ever to see the sums returned. Likewise with Angela Merkel. As a canny and astute politician, she knows her tough talking curries favour with the German press and electorate, and she also knows that her policy agenda is imperilling the likelihood of repayments as well as the future stability of the Eurozone itself. Like the centre right here, Merkel is sacrificing the medium and long-term health of German capitalism and those it has subordinated to it in the EU framework for short-term posturing. So what if it keeps a lid on the populist movements in Spain and Italy and those stirring elsewhere if the whole project is in danger of fraying?

In short, on the side of the debtors the people least qualified to negotiate with Greece are recklessly imposing conditions that undermine their own position. As the crisis builds and creates uncertainty and jitters, you can be sure they're the ones insulated from having to pay for it.


Chris said...

Syriza are OK, but the KKE is the most patriotic party. If Tsipras can't deliver an end to austerity Dimitris Koutsoumpas should become Prime Minister and Greece should start printing Drachmas immediately.

Speedy said...

I read Boffy's post about the Greeks not being responsible for their debts, and it's bollocks.

This is public debt, not private debt we are talking about - the crisis in Spain, for example, was caused by a housing bubble fueled by silly lending by German banks, but Greece's debt is public and largely down to a crazy post-Euro spending spurt that from 2004 saw 150,000 extra civil service jobs, for example, due to political clientism of the highest order, plus retirement at 59 for many, etc etc. As Renzi (who is sympathetic, given Italy's own problems in this regard) said, how can I ask Italians to pay for Greeks to retire at 59 when they don't retire until 67?

The Germans, being Germans, went through their own period of austerity before the crisis, suppressing wages and public spending to ensure their own economy was competitive - this is why they have the needle now.

Don't get me wrong - I support Syriza and would vote No - but blame lays on both sides: the Greeks are being punished for political reasons (as the IMF admitted today, debt repayments should be suspended for 20 years - something the EU opposes) due a mix of toxic objectives - to punish the Left not only in Greece but Spain and the (right) Front National in France, and because the EU and Germany in particular is in thrall to swivel-eyed neo-liberalism, etc, etc, but equally as Merkel said, this is a problem of the Greeks making. They fiddled the figures to join the Euro then went on a spending binge.

Like a lot of new nations with old histories, I think there is national Narcissism in play here, which has them either as heroes or victims. But equally I note a certain psychological flaw on the part of the Germans, that fails to conceive why other nations cannot be like them and prescribes only punishment as the solution. What the late, great Iain M Banks would have described as an "hegemonising swarm"... It occurred to me the other day, that the only way the EU can truly work as a social democratic block would be to jettison both the UK and Germany.

Speedy said...

I would add that of course the Greeks borrowed from the same German banks glutted by German savings and who recklessly lent - which is why it is true that the EU plan was originally designed principally to stop the German and French banks from crashing, and why all the lectures about probity are a bit rich, but the fact remains that the Greek state borrowed recklessly.

The truth is, as usual, taxpayers paid for banker's avarice - because it is now their money that has been spent on Greece - however we are where we are.

Greeks will vote in their self-interest. On balance however, only a No vote can help the country in the middle-to-long term, although be bad news for the rest of the EU. I suspect the EU ministers would go back to the table in the event of a No vote, but perhaps not - this is all about politics, nothing to do with economics.

They may be digging their own political graves if Greece leaves and the contagion cannot be "contained" - either the EU will survive more strongly, or we could even, ultimately, see something close to civil war. Far-fetched? Imagine a French Front National government, or Podemas in Spain. Military coups may not be a thing of the past.

Robert said...

The secret of the financial crisis, the thing that nobody anywhere wants to talk about is this: if a country gets into a credit crisis, defaulting on its debts is the one option that consistently leads to recovery.

That statement ought to be old hat by now. Russia defaulted on its debts in 1998, and that default marked the end of its post-Soviet economic crisis and the beginning of its current period of relative prosperity. Argentina defaulted on its debts in 2002, and the default put an end to its deep recession and set it on the road to recovery. Even more to the point, Iceland was the one European country that refused the EU demand that the debts of failed banks must be passed on to governments; instead, in 2008, the Icelandic government allowed the country’s three biggest banks to fold, paid off Icelandic depositors by way of the existing deposit insurance scheme, and left foreign investors twisting in the wind. Since that time, Iceland has been the only European country to see a sustained recovery.

When Greece defaults on its debts and leaves the Euro, in turn, there will be a bit of scrambling, and then the Greek recovery will begin. That’s the reason the EU has been trying so frantically to keep Greece from defaulting, no matter how many Euros have to be shoveled down how many ratholes to prevent it. Once the Greek default happens, and it will—the number of ratholes is multiplying much faster than Euros can be shoveled into them—the other southern European nations that are crushed by excessive debt will line up to do the same. There will be a massive stock market crash, a great many banks will go broke, a lot of rich people and an even larger number of middle class people will lose a great deal of money, politicians will make an assortment of stern and defiant speeches, and then the great European financial crisis will be over and people can get on with their lives.

Speedy said...

I was in Russia between coups - mid-90s, before the Parliament building was destroyed - and I will never forget the scenes, literally thousands upon thousands of pensioners lining the streets selling off their last possessions before crawling off somewhere to die, changing 10 USD in the post office and piles of bank notes being pushed across the counter, so many so I had to carry them around in a shoulder bag and would hand out wrapped wads in payment, and so on.

I agree that default is probably the only way, but it's not something I would wish on anyone, least of all the most vulnerable. For some people life is never "normal" again.

asquith said...

What ibterestts me is that it's not just Syriza in the government, but a "right-wing" nationalist party thhat was a wing of the conservative party until it broke off due to its anti-austerity views. And Syriza went out of their way to choose them to form a coalition with, not the centrists.

You hear relatively little from ANEL because they agree with Syriza on austerity and fully back its efforts in Europe, and are probably more loyal to the government line than much of Syriza, which resembles some nightmare in which Keele faculty were entrusted with power.

The junior party reminds me of the Lunchtime O'Flynn wing of UKIP, and its leader is in fact a pal of Farrago's. (He is the defence minister "distinguished" by his racist, anti-Semitic and anti-Turkish ssentiments and the fact that he essentially takes his orders from Moscow).

Too little attention is given to the fact that these nationalist and anti-EU movements, like Syriza, ANEL, KKE and assorted ragbags in Europe, are supported and often outright controlleed by Russia. One thinks of the Kremlin "loan" to Marine Le Pen.

And it is in this vein that we are tasked with keeping a desperate Greece out of Russia's de facto empire.

What I have decided to advocate is visiting Greece and buying Greek products as a show of solidarity and practica help whilst thoroughly enjoying oneself. A proper redistribution of wealth that, like the remitances sent home by migrant workers, is far more useful than the clogged-up official channels.

Naturally I can't affpord it myself. But he who can is thoroughly encouraged. I'd go to Patmos, it is where Saint John wrote Revelation and really I'd love to see the landscape that could inspire such, erm, "interesting" stuff.

Boffy said...

"it is where Saint John wrote Revelation".

Its actually been established pretty conclusively more than 150 years ago, that Revelations was not written by Saint John. The John who wrote Revelations was a completely different person.

Pretty much like the way the Church for centuries perpetuated the myth that Mary Magdalen was the same Mary the prostitute referred to in the Bible, until the Catholic Church had to admit they were two different people, and that Mary Magdalen actually came from a fairly wealth family.

One of the perennial problems of all religions that are reliant upon such myths, lies and ignorance.

Boffy said...

Engels writes of the Revelation.

"Who the author was we do not know. He calls himself John. He does not even pretend to be the “apostle” John, for in the foundations of the “new Jerusalem” are “the names of the twelve apostles of the lamb” (XXI, 14). They therefore must have been dead when he wrote. That he was a Jew is clear from the Hebraisms abounding in his Greek, which exceeds in bad grammar, by far, even the other books of the New Testament. That the so-called Gospel of John, the epistles of John, and this book have at least three different authors, their language clearly proves, if the doctrines they contain, completely clashing one with another, did not prove it."

asquith said...

Boffy, given that I'm an agnostic and support a secular state it's difficult to see why you felt the need to say this. I am pointing to one particular place, and I think even if something is a myth, it becomes "true" if enough people believe it, as in it has an impact on the world, which Revelation certainly has.

And this is part of a broader statement, which is the point I was trying to make, to what should be done by those not in positions of power or influence whose primary concern is the well-being of folk in Greece.

"I stand at the door and knock" and it seems that you return no answer :)

Phil said...

The reason Syriza went out the way to deal with the Greek kippers was party pragmatism. They agreed on what needed to be done to haul Greece's irons out of the fire, albeit for different reasons, and would happily play around with the non-essential ministry handed to them in return for votes. Hey presto, the only government management issues Tsipras has had to worry about so far are lefter members of his parliamentary group.

asquith said...

Yes, and I dare say there'll be rejoicing in Moscow if Greeks reject the EU deal. Not exactly laugh-a-minute stuff, is it?

BCFG said...

The German national average wage is more than twice that of Greece!

“plus retirement at 59 for many”.

We definitely need a revolution if retirement at 60 is causing is a major cause of crisis in a capitalist nation! If the only way for capitalism to survive is for us to work until we drop then I say capitalism must die!

With the spectacular development in technology over the last 30 years it is clear that this technology has been put to bad use! We should be working 20 core hours a week and retiring at 50.

But of course workers compensation is not so straightforward as speedy suggests. For example, the better off workers tend to retire much much earlier than the lowest paid 20%. On sickness pay, again the better off are 5 times more likely to be paid sick leave than the lowest paid quartile. German, French workers enjoy more years of retirement than Greek workers.

Speedy needs to stop plucking official figures from the headlines and drawing conclusions.

He should change the habit of a lifetime and start thinking critically.

“Don't get me wrong - I support Syriza and would vote No“

With friends like speedy...