Options for Greece

As the hours tick by, so the decline of share prices on the Greek stock exchange and the draining of deposits from Greek banks increases. There is absolutely no immediate reason for this other than the deliberate, and precipitate decision of the ECB to remove Greece from all the other Eurozone nations who are allowed to use debts as a collateral against ECB loans. The Governor of the Bank of Greece Yannis Stournaras (who is not replaced in the normal change of posts in the bank after a Greek election) had reassured that bank liquidity was fully ensured and that the bank deposits were fully secured (6 February.) Nevertheless the ECB has made a calculated political move, led by the German regime, to smash the democratic decision of the Greeks as quickly as possible. Chancellor Merkel wants to close down the anti-austerity movement in Europe now. At the moment they believe that any delay, any sign of any Syriza's success, will simply increase the number of voices across all of Europe now rising against their past they have been forced to endure. We are witnessing a test in history: whether the scope of German economic power includes the capacity to make a rapid regime change - in another modern, western European country.

But Syriza has opened out a deep split among the world's economic leaders. Virtually all economic experts outside Germany (minus the second rate, public school idiots in the British Treasury) agree that Greece's policy towards debt relief is eminently sensible. The US political leadership has echoed that view. Every move by Syriza so far has had the effect of politically isolating Germany and the discredited captains of the Troika (the European Central Bank, the IMF and the European Commission.) Of course they remain immensely powerful. But they are increasingly losing their status as the leadership of the continent both in the wider world and certainly among the toilers of Europe. 

And now Syriza has begun its internal Greek reform programme. They aim to dismantle the cartels and self serving oligarchies and most importantly, to implement a radical and progressive tax system - accompanied by a register of external assets of Greek citizens, with no exemptions or exclusions and with a policy of forfeiture of property where there is no payment. (An estimated 10 billion euros are currently owed in tax.) The demand of the Troika for internal reform in Greece is being addressed as never before (and as the Troika never believed would happen.) So the Greek government's democratic legitimacy, having already been established, is supplemented by a political credibility now on a rapid rise across all that part of Europe that does not belong to the banks and the European Commission's largely discredited politicians. 

Greenspan, the ex chair of the US 'Fed' and the genius who gave us 2008, predicts an early exit by Greece from the Euro. Despite Greenspan's dodgy credentials, his thought must also be in the minds of Merkel and her associates. Syriza leaders implacably repeat their intentions to remain in the Eurozone. Politics will obviously determine the outcome of this particular 'economic' argument. (There are a thousand and one ways to set up a solution that would look like the debts are continuing without them effecting anything in Greek life.) On the 11th and the 15th of February major mobilisations will take place defending the anti-austerity proposals of Syriza across Greece and the rest of Europe. But it is perhaps useful to spell out some of the direct economic options in this ongoing struggle.  

As we have seen there are a growing number of mainstream economists and politicians across the world that are in favour of annulling all or part of Greek's debt. This would be the most favourable option, but unlikely as a position of the Eurozone leadership at least in the short term. Sensibly the Syriza leadership has placed their main focus on the priority for the Greek people; the end of political corruption and the end of life-sapping austerity. In this context, the point of the discussion about the debt is to get to a place where the debt can no longer effect the day to day life of ordinary Greeks now or for the foreseeable future; where the debt cannot hold up either the drive against austerity or for growth. Accordingly, a fifty or even thirty year suspension of all debt payments or payments of interest on the debt, would have the desired result. Inflation would eat away at the debt itself. Fifty or even thirty years will change the character of prevailing politics and economics etc., etc. This would have virtually the same effect as cancelling the debt. It was first tried (successfully) by the British when they simply stopped paying their WW1 debts to the USA in 1934 without ever denying that the debt continued to exist and without ever paying a bean.

Syriza have already put forward an idea for debt repayment via bonds which would be tied to a period where Greece had sustained growth in its economy (when very low interest repayments would have little effect on real economic life) or where the bonds (for the debt) would be repayable at some future to be decided. Both of these suggestions have the same effect; of pushing the debt and any interest or debt repayment outside of the real day to day Greek economy - and allow for its capacity to grow. A new 'bridging' plan is to be presented to European ministers which rewrites the Troika's economic conditions, allows some of Syriza's promises to go ahead and creates the time and space to rally the peoples' Europe against any further austerity. 

Time is now the main goal in the struggle of Greece against the Troika. The politics and economics are going Syriza's way. But they need to survive the initial German led onslaught. They need time to allow Podemus and others in Southern Europe to grow into the leadership of their own countries and societies. They need a peoples' clamour for a debt conference. They need enough immediate financial stability to deliver real reforms to the Greek people.

And would a Greek exit from the Euro be a disaster? For the Euro zone quite possibly. In December 2001 Argentina exited its currency tie-in with the dollar. Argentina accounts for 0.9% of the world's GDP, Greece for 0.4%. Before the Argentinian currency left its link with the US dollar some 24% of its population were unemployed, 50% of its youth. The economy as a whole had shrunk by 20%. A huge social upheaval challenged the status quo. Argentina stepped away from the dollar, repudiated all of its debts and despite a government that desperately hung on the what it could of the old corruption, the existing status quo and the supreme rights of the rich, (which meant that it was the ordinary people who, on the whole, bore the effects of the the currency devaluation and loss of savings and purchasing power etc,) the country's growth skyrocketed to 8% a year over a decade. Argentina had no line to possible Chinese investment. It had no allies (because of its government) in the rest of Latin America.  In Greece we might do more than hazard a guess about the direction that a Syriza government might take to defend the living standards of its people in such circumstances.