by Michael Roberts
Afscme Local 444, Retired
A recent poll conducted by the University of Macedonia found
that 56% of those Greeks asked believed the Greek bailout extension had
been a success compared with 24% who said it represented a failure. A
Metron Analysis poll showed that more than two in three Greeks were
satisfied with the way the government was negotiating with EU partners,
while 76% were positive about the government’s overall performance so
far. It also put support for Syriza on 47.6% compared to New Democracy
That’s an indication that, with the four-month extension of the
bailout programme with the Eurogroup, the Syriza government has won time
with the Greek people hoping for an end to austerity, as well as with
the Eurogroup leaders wanting more austerity in return for the remaining
But this ‘window of opportunity’ is small and probably smaller than
four months. The immediate issue is finding funds to cover the upcoming
€1.5bn repayment due to the IMF this month and the rollover of
short-term government debt. The ECB has ruled out an expansion of T-bill
issuance to cover this debt redemption and probably will not raise the
Emergency Lending Assistance limit to Greek banks so they cannot use ECB
credit to cover Greek government debt bills. And yet tax arrears and
non-payment have built up so that the government has lost between €1-2bn
in revenues since the beginning of the year.
The Eurogroup has said that no outstanding bailout funds will be
disbursed to Greece unless they show ‘visible evidence’ that they are
trying to keep to the fiscal and other conditions of the existing
bailout agreement. This will all come to a head on 9 March when the ECB
meets on Greece again and the Eurogroup considers what the Greek
government has done. Greek finance minister Varoufakis says he will
present six ‘reforms’, costed, for approval by the Eurogroup.
In the meantime, it looks as though the Syriza government will
proceed with various measures to ameliorate the ‘humanitarian crisis’.
Tsipras said that the government would introduce measures including the
provision of free electricity to 300,000 households living under the
poverty threshold and the introduction of a new payment plan for overdue
taxes and social security contributions. The scheme is set to allow
applicants to pay in up to 100 instalments and will mean that anyone
owing up to 50,000 euros cannot be arrested over their debts. And the
government will protect primary residences with a taxable value of up to
300,000 euros from foreclosures and reopen the public broadcaster ERT,
shut down in June 2013. None of this will affect the budget targets,
Tsipras claimed, although how that is the case remains to be seen.
Maybe it won’t if the government can find extra revenues from
undeclared funds that should be taxed. The finance ministry is now
planning an amnesty on undeclared capital abroad, aiming to tax it – but
not necessarily to repatriate it – according to Alternate Finance
Minister Dimitris Mardas. The government reckons that up to €120bn is
being held abroad by rich Greeks and oligarchs, often hidden in real
estate in the UK or Swiss bank accounts. The government says it can
obtain up to 10-15% of this. In addition, special tax minister
Nikoloudis reckoned he had 3,500 audits amounting to €7 billion in back
taxes, €2.5 billion of which he hopes will be collected by summer. If
this money can be collected, then the government can square the circle
of paying its debts and keeping within the Troika fiscal targets and
help out the poor – at least for a while.
But only for a while because Greek public debt is ‘unsustainable’ and
will never be reduced to a manageable level by Troika-style spending
cuts and tax measures. However, as the interest rate on the debt is
relatively low (4% of GDP annually) and the repayment schedule on the
loans owed to the Eurogroup has been put back to the early 2020s, if the
government can get through this year’s redemptions, then it may find
another small fiscal ‘breathing space’. And if the Greek economy can
grow over the next year, tax revenues will improve.
It’s just possible that an economic recovery in the rest of the
Eurozone might also provide a boost to the Greek economy too. But it is
only possibility. The Greek economy is still suffocating from the
stagnation in Europe and the Troika’s inexorable austerity measures.
Indeed, Greek real GDP rose only 0.7% in 2014 while prices fell 2.8%, so
nominal GDP contracted.
Greece’s manufacturing PMI, the main measure of current business
activity, was down at 48.4 in February, implying that the economy is
still contracting. Greek investment and profitability remains at
Actually what is more important for the Eurogroup and big capital in
Europe is that the neo-liberal ‘structural reforms’ of deregulating the
labour market and other capital markets and the privatisation and
‘foreignisation’ of the best bits of Greek industry must go through. For
them, that is the policy for restoring the profitability of the Greek
capital (at labour’s expense).
These ‘structural reforms’ have been pursued with gusto by the
conservative governments of Ireland, Spain and Portugal that have been
under Troika programmes. Now the last thing they want is for Syriza to
succeed in turning things round without imposing austerity and without
restoring the profitability of the capitalist sector. So these
governments have been the strongest supporters of a ‘tough line’ with
Greeks. The French and Italian social democrat governments also continue
to introduce measures to weaken the rights of employment and worsen the
conditions at work.
But what happens at the end of June? Already there is talk of
shackling the Greeks into a new bailout programme. In return for new
loans (and a mixture of old ones) of up to €50bn over three years, the
Greeks would be committed to yet more Troika monitoring and neoliberal
measures to save Greek capital. This is the aim of the Eurogroup and its
Tsipras has made it clear that the Greeks will not enter a new
package after June. If the government also says that it will honour all
its debts to the IMF and the EU (even though it wants a new debt
schedule), then either financial markets must be willing to buy Greek
government debt and bank debt at reasonable rates of interest; and/or
the government must find extra tax revenues to meet its debt
Perhaps the Greek government can avoid default and stay in the euro
as the debt servicing schedule in 2016 is much lower. After all, the
Greeks could meet the ‘ordinary’ budget targets under the EU Fiscal
Compact. But can it get that far, and even if it does, how can it, at
the same time, meet the needs of its people in raising wages, pensions,
reversing privatisations, and restoring a decent health and education
and other public services, and get the economy growing? To do that,
Syriza needs a Plan B, as I proposed in a recent post (https://thenextrecession.wordpress.com/2015/02/20/troika-grexit-or-plan-b/).
Others see the issue as depending solely on whether Greece leaves the
euro or not. Professor of Economics at the London School of Oriental
and African Studies (SOAS), Costas Lapavitsas (see my post,https://thenextrecession.wordpress.com/2013/11/12/the-informal-empire-finance-and-the-mono-cause-of-the-anglo-saxons/) is now a Syriza MP and a leader of the Left Platform within Syriza. In a recent article in the British Guardian newspaper (http://www.theguardian.com/commentisfree/2015/mar/02/austerity-greece-euro-currency-syriza), Lapavitsas reiterated his view that “to beat austerity, Greece must break free from the euro”. Lapavitsas reckons that “we are deluded to think that we can achieve real change within the common currency. Syriza should be radical”.
Lapavitsas correctly gauges the deal reached by Tsipras and Varafoukis for the four month extension as a heavy price to pay “to remain alive”.
But is it correct to argue that breaking with the Troika and reversing
austerity must start with advocating leaving the euro, as Lapavitsas
says? Tactically, it does not seem right to me. The alternative to the
Troika should not be posed as ‘leaving the euro’, but rather ‘breaking
Plan B must be to reject a new programme with the Troika after June.
Instead, Syriza must introduce measures that can get the Greek economy
growing sufficiently to enable wages and pensions to be restored, labour
agreements honoured, increase employment and revive investment. That
will mean taking over the Greek banks, introducing capital controls, and
bringing into public ownership and control strategic industries and
companies with a plan for investment. Such an investment plan should be
pan-European, with an appeal to the labour movement through Europe to
campaign for this.
But won’t Greece be thrown out of the euro anyway if it adopts these
policies? Well, maybe, even probably. But there is nothing in the EU
treaties that stops a member state from adopting these measures. Public
ownership of the banks and ‘commanding heights’ might break EU
competition rules, but that would not be enough grounds for Greece’s
expulsion. After all, Germany runs state-owned banks in every region.
And if Greece is managing to run ‘balanced budgets’, it won’t be
breaking the EU fiscal compact either. There is just the question of its
huge public sector debt that is supposed to be paid back (but not for
The issue for the labour movement is not the “illusions” that the left has in the “absurdity of the common currency”
(as Lapavitsas calls it), but the illusion that capitalism can be made
to deliver people’s needs (something that Varoufakis has encouraged –
see my post, https://thenextrecession.wordpress.com/2015/02/10/yanis-varoufakis-more-erratic-than-marxist/).
It is breaking with capitalism that matters, not breaking with the
euro. The latter may flow from the former BUT the former does not flow
from the latter.
Breaking with the euro will not provide “a chance of properly lifting austerity across the continent”.
Default and devaluation and the establishment of a new drachma will not
mean prosperity for Greece if Greece’s weak and corrupt capitalist
sector continues to dominate the economy.
Take Iceland. This is a very tiny economy with only 325,000 people,
the size of smallish city in Europe or the US. It is often presented by
Keynesian economists and others as showing a way out of the crisis
compared to staying in a common currency. The argument is that Iceland
defaulted on its debts and devalued its currency and so recovered its
economy (on a capitalist basis), while Greece remains trapped.
I have written on the experience of Iceland in several posts and this
story of default and devaluation is just not true (see my post, https://thenextrecession.wordpress.com/2013/03/27/profitability-the-euro-crisis-and-icelandic-myths/)
). Iceland did not renege on the huge debts that its corrupt banks ran
up with foreign institutions (mainly the UK and the Netherlands). It
eventually renegotiated them and is now paying them back like Greece.
And devaluation did not mean that Icelanders escaped from a huge loss
in living standards. They have done little better than the Greeks on
that score – although of course, Icelanders started from a much higher
standard of living than the Greeks. In euro terms, Icelandic employee
real incomes fell 50% and are still 25% below pre-crisis levels.
The same myth is peddled by Keynesians and others that having its own
currency saved Argentina in its crisis of the early 2000s. See my post,
https://thenextrecession.wordpress.com/2014/02/03/argentina-paul-krugman-and-the-great-recession/, and my joint paper with G Carchedi (The long roots of the present crisis) for a refutation of that. Argentine capitalism is back in crisis now.
Greek capitalism’s demise is not because it joined the euro. It had
already failed when profitability collapsed, as a heap of excellent
papers by Greek Marxist economists show (for a summary of these, see the
paper by Stavros Mavroudeas out only this February and essential
And as Steve Keen has pointed out, “While Greece certainly had
its own specific problems—especially with its current account—in
general, its apparent boom before the crisis and the crisis itself had
much the same cause as in the rest of the OECD: a private debt bubble
that burst in 2008. Private debt grew rapidly before the crisis—on
average by more than 10% of GDP per year.” (https://elgarblog.wordpress.com/2015/03/03/elgar-debates-lessons-from-greece-being-anti-austerity-is-not-enough/#more-4521). Here is Keen’s graph showing that public sector debt only mushroomed after the crisis began.
The ultimate cause of the Greek crisis was falling and low
profitability and the proximate cause was the huge increase in
fictitious capital to compensate that eventually imploded in the Great
Greek capitalism is in no position to turn things round with its own
currency. Greek capital will be saddled with huge euro debts following
devaluation and it won’t be able to export enough to stop the economy
dropping even further into an abyss and taking its people with it.
Grexit also means not just leaving the euro but also the EU and without
any reciprocal trade arrangements that Switzerland has, for example.
Currently, Greece contributes €1.7bn a year to the EU budget and gets
back €7.2bn a year in various funds, a net 3% of GDP a year.
The issue for Syriza and the Greek labour movement in June is not
whether to break with the euro as such, but whether to break with
capitalist policies and implement socialist measures to reverse
austerity and launch a pan-European campaign for change. Greece cannot
succeed on its own in overcoming the rule of the law of value.
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