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. 

Greece and our battle against austerity

On the evening of the 28th of January hundreds rallied to the Greek Solidarity Campaign meeting to support Syriza's victory at the TUC in London.

Two speakers from Syriza, one from the national leadership, made many points of interest. These included spelling out the first acts of the new government. The Greek people now have something to defend! 

The speakers were also adamant about the future. Of course Syriza is facing a momentous battle. Of course much will turn on whether Podemus in Spain maintains its lead in the polls and is able to open up a second front (as a result of the Spanish elections on or before Sunday 20 December this year.) But we should realise that, like the struggle against Apartheid in South Africa, or the Vietnamese war of liberation against the US in the 1960s and 70s, the people, particularly the people of Europe, must rise to the defence of Greece in its challenge to western and specifically European austerity. 

Both Syriza speakers elaborated on the purpose of such an international solidarity movement. Its potential role as both a support for Syriza and the Greek people, but also its role in creating pressure on Syriza itself, alongside the mobilisations in Greece, to confirm and buttress the will of the new politics and the new politicians, to go forward -  and to go on to the end. This is the complete opposite to the traditional Labourite, social democratic perspective. When Obama won the presidency he demobilised the marches and the rallies (and had his own healthcare legislation cut to pieces by a hostile Congress as a result.) If the British Labour Party wins an election that is the end of the role of its supporters at the base. The dialectic of the struggle against austerity however reverses these shibboleths. Politics, action in the communities, isolation and even physical control of countervailing forces like the police and military and the oligarchs that use them, begins with the assertion, in action, by the people, of their indispensible place in the unfolding political drama.

The momentum of mass political action is the only route afforded by our withered western democracies to allow democratic change on the key questions of wealth and power. Our parliaments and mass parties have not, for a couple of generations, been able or willing to challenge society on these terrains. Our political leaders have become apologists for the 'here and now', for the increasingly narrowing boundaries available to democracy, for the 'realism' of decline and defeat. 

Syriza threatens to break the mould; to bring down the political class with its self serving and crushed imagination. It is inconceivable that it will succeed without the democratic movement in the communities and on the streets of Europe - and wider. 

Debt bomb

Dumping the Debt

In his infinite wisdom UK Chancellor George Osborne warned us that the huge Greek vote for Syriza was
‘Not a defeat of austerity. It is a defeat of economic plans that don’t work...’
On the other hand the Syriza leader Alexis Tsipras said,
‘The verdict of the Greek people ends, beyond any doubt, the vicious circle of austerity in our country...’
It is perhaps easy to decide who has really grasped the moment here.

Osborne is not an idiot however. He was not warning the Greeks. Gunboats are long gone and his dire warnings, he suspects rightly, would mean little in Greece. The Greek people are no doubt now consigned in Osborne’s head to that collection of peoples and nations that the great Tory patrician, Douglas Heard, once described as ‘Basket Cases.’ In the meantime we will get a picture in a few weeks of what UK voters think about austerity – albeit limited through the painfully distorting prism of a party system without proportional representation and without a formation like Syriza. No. Osborne was speaking to the UK population and to the EU – especially the Germans. He has a deep interest that the German leadership does not retreat in the face of the anti-austerity tide in Europe unleashed by the Greeks. He is aware of how politically fragile things are at home.

It would be an arrogant stupidity here to outline Syriza’s economic policy. Syriza spokespeople are today the most cogent politicians in Europe and present their own case more convincingly than anyone else ever could. It is useful however at this point to look at one issue more closely. That is the question of debt. And here we find a potential fault line in the camp of big capital and among those politicians and thinkers who defend its social system, which may prove useful in the wider battle against austerity.

A critical part of Syriza’s policy is the substantial reduction of ‘Greece’s debt’ to the IMF, the EU and the European Bank (the Troika.) Syriza points out that barely 10% of the Troika’s loans went anywhere near the Greek people. The loans were used to shore up individuals and institutions that faced a catastrophe because of the collapse of their previous highly profitable investments. This money has not been used subsequently in any productive way whatsoever. In fact the Greek economy is 25% smaller than its size in 2008. Today, Greece ‘owes’ 317 billion euros. Production is stagnant and in 2016, Greece must pay out 22.3 billion euros, mainly in interest payments, on those wretched loans. (That is more than total Greek expenditure on all of its state employees in 2014.) In fact the Greek debt, as leading economists across the globe agree, is not really sustainable.

What then was big capital’s plan for Greece and its people, before the Greek electorate intervened in its own history? It was spelled out, among others, by various US banks and London based investment funds. The Greek debt would be rescheduled forever, accepting more rescheduling around 2024, 2030, 2050 and beyond, and reinforcing permanent austerity applied by a succession of rightwing capitalist governments, under the whip of the endless debt. This was the prospects outlined in Greece (not to say Spain, Portugal, Ireland and now the UK) for long term US and other western investors.

Debt has a long history in the capitalist system. Syriza quotes the 1953 London Conference that annulled more than half of Germany’s  debts, including pre-war debts, as part of the planning to stimulate West German growth (under the shadow of East Germany and the USSR). The US and the UK were deeply aware that debt had stifled growth in the past and led to catastrophe after 1918. We can all smile when we are reminded that there are still outstanding debts held by the UK government for money that financed the war against Napoleon. Perhaps not so amusing for the US at least (and one key reason why there was such intense US opposition to supporting the UK at the beginning of WW2) was the 1934 ‘decision’ by British rulers to stop paying their WW1 debt to the US. This amounted to £40 billion today if adjusted by RPI (£225 billion if estimated as a proportion of GDP.) France, Greece and Italy stopped paying their war debts at about the same time. Those debts were 36%, 43% and 52% of their nations’ various GDPs respectively. Revolutionary regimes, as in the case of Soviet Russia, repudiated all previous debts.

But is it only in cases of post war settlements and revolutions that capitalist countries annul debts?  By December 1983, 27 countries, mainly in Latin America, publicly stated that they could no longer finance their debt charges from debts of over $239 billion. In 1989 the Brady Plan (under President Bush senior) annulled 32% of all outstanding loans in the 18 countries that applied. $61 billion was wiped out. This was money lost to Western major shareholders in US banks. Why? Capitalism was threatened across Latin America and they were not going to get the money anyway. The US billionaires and Corporations got tax relief.

Debt annulment is often agreed secretly for obvious reasons, but still emerges publicly from time to time, as in the case of Ecuador when in December 2008 the President of the Republic declared Ecuador's national debt ‘illegitimate odious debt,’ based on the argument that it was contracted by corrupt and despotic prior regimes. He has succeeded legally so far in reducing the price of the debt.

As a result of this reality in the history of the capitalist system there is a sustained argument among economists and leading politicians about debt relief and annulment in general. And Syriza’s policy will open out that argument again. In a recent example, on the 24th December 2014 Rogof, the ex lead economist for the IMF, produced an IMF paper that re-charged the debt bomb row. Carmen Reinhart and Kenneth Rogof pointed out that debt overload in developed Western countries had always required major (albeit sometimes masked) debt annulment in the past – just like developing economies. They also pointed out that western debt has now reached a 200-year high. From 1970 to 2011 western debt, both government and private, rose from 25% of GDP to 260% of GDP. So, they demonstrated, austerity and ‘labour flexibility’ (lower wages; longer shifts) won’t do it. And not just in Greece.
Syriza’s policy on the debt will change the economic landscape on the western crisis. It is no longer (and has never been as Rogof’s paper shows) simply an argument about the rich West and the poor South; it is also and indeed primarily an argument about the rich in general and the global poor who are now paying and who have always been asked or been forced to pay for the rich’s systemic crises. Syriza’s policy on the euro debt could have the effect of further dividing the current political and economic leadership in Europe and the West - as well as the hope it has also created for the 99%.

Note: Apologies to any readers for the delay in blogs, which was caused by family health matters.