Economics and politics - comment and analysis
20. July 2015 I Heiner Flassbeck I Economic Policy, Europe, General Politics

SYRIZA’s migration into the transfigured night

Ein Gastbeitrag von Will Denayer

Read opinion pieces in newspapers from all around the world and you will notice that everyone who has a modicum of decency, morality and common sense is appalled, if not absolutely disgusted, by the German position. Some rudimentary knowledge of basic economics also helps. The evolution of events is well-known and there is no reason to go into it. It suffices to know that Tsipras submitted an alternative plan to the institutions on Thursday three weeks ago. This plan was in line with the creditors’ initial proposal, the Juncker plan that was refused by Tsipras three weeks ago and led to the decision to organise the Greek referendum. To the frustration of many, the Greek government and the Greek parliament accepted it. With this, it seemed that the Greek drama had finally come to an end. The creditors would accept the plan, Greece would sink further into a dystopian pit of bottomless austerity and lack of growth and neoliberal Europe would be as dysfunctional as ever. However, the outstanding characteristic of drama is that there is no closure: at the end nothing whatsoever is solved, innocents have been slaughtered, men with good intentions committed evil while malicious men got away with sadistic intrigue. There is no repair possible, no hope left. After Oedipus comes Oedipus at Colonus. The feast goes on (except in English plays in which everyone dies. It does the trick and it was literary innovation –  almost the Troika avant la lettre (see here)).

This then is exactly what happened: the world did not reckon with Dr. Schäuble. The proposal, which was already nothing less than a complete capitulation, was unacceptable to the German Minister of Finance. In his opinion, a much  firmer line was warranted: €50 billion of Greek state assets need to be transferred to a fund that will be managed by an external agency, it is to say the Luxembourg Institution for Growth, which is, as it turns out, a wholly owned subsidiary of the German KfW banking group. The chairman is no one else than Mister Schäuble! True, this part of the ‘Agreement’ (a euphemism that no magical realist, however visionary, would have ever been able to dream up ) is off the table in the meantime. The Troika made a ‘concession’ (see previous remark): the Greek state will be governed from Athens. But it won’t be the Greek government that does the governing.

The proposal that Tsipras accepted last week in Brussels will take out more than € 13 billion out of the public finances: a full € 4 billion more than the figure that was rejected by the Greeks in the referendum on July 5 (see here and here). It is – do not forget – €11 billion more than the austerity package that the previous government tried to implement last December. It did not find a parliamentary majority, so the government fell. That is how SYRIZA came to power. There will be a 50 % increase in the cost of health care for pensioners, although almost 40 % live in poverty. There will be deep cuts in public sector wages. Civil servants will undoubtedly be sacked. There will be the near complete privatisation of public infrastructure – airports, ports, the electricity grid. A.P. Moeller-Maersk A/S are already bidding on the ports of Thessaloniki and Piraeus (now for 74 % in hands of the Greek state) (see here). Collective bargaining and collective dismissals must be reviewed and Greece cannot “return to past policy settings which are not compatible with the goals of promoting growth” (the text of the Agreement can be found here). This means in practical terms waving goodbye to unions and social rights. The Agreement accepts Schäuble’s proposal for a €50bn privatisation fund. This is pure madness. All the proceeds of all privatisations so far and those currently undertaken add up to € 7 bn. There is no way that Greece can raise € 50 bn – 7 times as much – in the next three years, not even if it could sell the moon.

The institutions are making their way back into Athens. This time they have the power of veto on all relevant future legislation:“The government needs to consult and agree with the Institutions on all draft legislation in relevant areas (…) before submitting it for public consultation or to Parliament.” Wave goodbye to sovereignty

The ‘institutions’ also want the power to change legislation that has already passed: “With the exception of the humanitarian crisis bill, the Greek government will re-examine with a view to amending legislations that were introduced counter to the February 20 agreement by backtracking on previous programme.” Wave goodbye to laws you voted before you lost sovereignty.

What did Tsipras get out of it? The amount of the newest bailout is calculated at €82 to €86 bn, including €25 bn for bank recapitalisation. In relation to the crucial question of debt relief, the document says nothing concrete: “The Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods)” on Greece’s debt. However, here’s the caveat: “these measures will be conditional upon full implementation of the measures agreed in a possible new programme and will be considered after the first positive completion of a review”. In other words, you are a colony.

All that remained was that Tsipras had to sell the Agreement at home. There was some trouble within the cabinet. Some people gave a speech. On the streets, people who had supported the No side in the referendum – this was before Tsipras hoped to lose the referendum (see here), before Varoufakis promised that he would resign if the Yes side would win and before he got sacked after the No side had won (see here) – rose up in protest against the government. But it doesn’t matter. The parliament accepted the agreement by a large majority. It’s over, for the moment. If you have trouble understanding this, you are not alone. As Steve Keen said, ‘it is all Greek to me.’ Let’s try to make some sense of it.

SYRIZA won the elections of 25 January 2015 on the basis of the so-called Thessaloniki program. The text of the program can be found here. To highlight the essence: a European Debt Conference should be organised; the greater part of Greek public debt should be erased and debt servicing for the remainder should be made dependent on new growth in Greece and not on primary surpluses. Repayment of the remainder should only start after a grace period of two to three years, in order to give the Greek economy the chance to turn around. Public investments should be excluded from the restrictions of the Stability and Growth Pact and a European New Deal should be financed by the European Investment Bank. Implementing this plan would lead to recovery and productive reconstruction: public investment would be increased by at least €4 billion, the injustices of the Memoranda (the ‘reforms’) would be reserved, salaries and pensions would be restored so as to increase consumption and demand, small and middle sized enterprises would be provided with incentives for employment, the welfare state would be rebuilt and a meritocratic society would be created. SYRIZA would start by confronting the humanitarian crisis. There would, for example, be free electricity for those under the poverty line up to a certain cap and meal subsidies for families without income, there would be free medical care for uninsured unemployed and unemployment insurance would be expanded to more beneficiaries. 300.000 jobs would be created through the establishment of a public development bank, the institutional framework to protect employment rights that had been demolished by the Memoranda governments would be resurrected and rules allowing for massive lay-offs would be abolished. The program was ‘non-negotiable’ for Tsipras.

The art of winning elections includes use of the hyperbole, grand exaggerations, promises that never will be kept and the propagation of untruths, but was SYRIZA not supposed to be different?

This is was the official party program that brought SYRIZA victory in the elections of 25 January. Since the ‘reforms’ that the Troika implemented, unemployment increased by an incredulous 191 %. In 2014, youth unemployment reached 60 %. Only one out of twelve unemployed Greeks had a right to an unemployment benefit. There has been a 38 % salary reduction as well as a 45 % pension reduction. Poverty in Greece increased by 98.2 percent; 40 % percent of Greek children live in poverty. GDP contracted by more than 25 %. Public debt exploded to 175 % of GDP. According to UNICEF, 686,000 children (35.4 %) lived below the poverty line in 2014. The number of children growing up in families of which no parent has paid work is 292.000. In 2014, 352.000 Greek households had no access to electricity. Tens of thousands of students come to school hungry. Almost four million of the eleven million Greeks live below the poverty level. Homelessness has become a humanitarian crisis of the first order. In Europe, the number of new HIV cases per 100.000 people was 5.8 in 2012, in Greece it was 10.7. Until 2010, new HIV cases  were lower in Greece than the European average. The number of suicides quadrupled during the last four years. But no more! Last January, finally, an anti-austerity party came to power. But now what?

The Greeks had to negotiate with the Troika, but they had no leverage. To negotiate means to give and take, but how were the Greeks going to get anything? They could try to convince the other euro members, first and foremost, Germany. The Greeks assumed that the eurozone members would be open to reason, that they would be interested in honest and constructive talks, but it became clear quickly that this assumption was unrealistic. Varoufakis ‘negotiated’ with people who do not care about arguments and not even about common sense. It did not matter that a country without growth cannot pay its debts and that forcing austerity upon it makes servicing debt more impossible. The Greeks assumed that it would be likely, or at least possible, to find allies within the euro group, although there were no indications for this either. For a full five months, they found no ally – not one of the other crisis countries, not France, not Italy. In fact, the Greek illusions were scattered by Dijsselbloem during Varoufakis’s very first meeting of the finance ministers in February. Dijsselbloem told Varoufakis that the institutions want full implementation of austerity. A haircut, debt restructuring or debt forgiveness were out of the question. According to an aid who prefers to remain anonymous, Dijsselbloem went on to formulate a clear threat: in case the Greeks would not give in, the institutions would leave no money left in Greece (see here). These negotiations went on for a full five months. Why? Did the Greek negotiators think that something was going to change?

The reason, I assume in turn, has to do with several factors. It seemed that the Greek leaders had difficulty understanding the nastiness of those that they were up against. Or at least, they had problems coming to terms with it. It was also naivete. They were the democratically elected representatives of an independent country. Let’s talk, we are confident that an agreement can be reached. But the Troika was not interested in an agreement. Why settling for a compromise if you can have it all? Wear the opponent out. Let him make proposals, then send him home in order to write up another proposal that will be just as unacceptable. When the Greeks gave in on one point, there was another point to give in on. This is also very clear from the testimony of the anonymous aid. Varoufakis called it ‘mental waterboarding.’ The Greek government had to be humiliated, shown its place, it had to fail, it had to be defeated. No deals were going to be made with the Greek leftists. Wasn’t all of this completely predictable? Some observers formulated the idea that Varoufakis, who is after all a specialist in game theory, was playing a superb game of chicken with the creditors, a game so complex that mere mortals fail to see through it. But game theory has nothing to do with it. The Troika was never interested in a deal, a mutually beneficial outcome. It was after capitulation from the very start, nothing else. For this, the Greeks should have prepared from the very start. It’s not that it was particularly hard to anticipate.

How can the Greek behaviour be understood? Last week, Costas Lapavitsas (SOAS London, MP for SYRIZA and co-author, with Heiner Flassbeck, of Against the Troika) gave an interview to Peter Jay from the Real News Network in Baltimore (see here). They were discussing the possibility of a Grexit. Lapavitsas has been in favour of it since 2010. Jay told Lapavitsas that he had the impression that the Greeks had never prepared for the eventuality that the negotiations could fail, that, at one point, there would be no other possibility left than to leave the euro zone. ‘Why is there no plan B?’ asked Jay. Lapavitsas gave a telling answer. ‘This is Greece,’ he said. ‘We do not plan. It doesn’t matter whether there is a right wing or a left wing government in power here, planning is just not something we do. That’s just how it is.’ I do not doubt that this is true, but, all the same, is it not beyond bizarre to become the first outspoken leftist government in the last forty years in Europe and having to negotiate with institutions that are infamous for their neo-liberalism, their conservatism and their neoclassical orthodoxy, the very same institutions that destroyed the country, but still no serious planning is going to be involved in how such absolutely crucial negotiations are going to be handled? Was it not completely evident that a strategy had to be formulated that consisted of something different than a honest willingness and a constructive attitude to engage in negotiations?

The Greeks needed leverage. There is no doubt that the proposals that Varoufakis brought to the table were imminently reasonable and intelligent, but how reasonable is it to try to negotiate with people who do not want to negotiate with you? This week, many commentators opined that Tsipras had no choice left. The banks had been closed for two weeks, the country is running out of medicine and other vital supplies, the breaking point of social implosion cannot be far off. We can only speculate about what could have happened. Imagine that, six months ago, the Greeks would have come to the table, showing a willingness to service some of the debt. The condition would have been that the Troika would let the country recover. This is nothing more than Varoufakis’s original position. Imagine that the Greeks would have demanded debt relief, the organisation of a European debt conference (also a proposal of Varoufakis) and that they would have made the point that further austerity would be unacceptable. If the institutions did not give in, Greece would drop out of the euro zone. To make clear that they meant it, preparations for the introduction of a parallel currency could have started. The Greeks could have played ball much harder than this: they could have threatened leaving the NATO. Imagine the phone calls that Merkel would have received from the other side of the Atlantic. Tsipras could have gone to Washington and explain his strategy. A broken European economy is not in the interest of the United States either. Instead of looking for allies in the crisis countries – Portugal, Spain, Ireland – who all turned their back to the Greeks, they could have tried to work together with the Americans. Greece may mean less than a country to the Troika and Greek lives may mean nothing to the technocrats in Brussels, but geostrategically, for military analysts, Greece is pivotal, a neutral Greece is a nightmare and a Greece that would lean towards Russia is nothing but a doomsday scenario. That is leverage. The message would have been loud and clear: we mean it. We are not your servants. This is not how the European Union is supposed to work. If they would have said that, they would have been right.

There is another, much more serious reason, one which is also very difficult to understand: the Greek government never intended to leave the euro zone. If that is their choice, how did they ever anticipate implementing anything of the Thessaloniki agreement at all? A week ago, in Brussels, Tsipras was clinging to the euro as if his life depended on it. It is very difficult to understand why the Greek government is so stubbornly pro-euro. According to  Keen, Varoufakis testified that over the course of the last five months several proposals were made (but not discussed) with regards to a preparation of some sort of Grexit: a new Drachma, the nationalisation of the Greeks banks, the introduction of scrip, a parallel currency (see here). Tsipras wanted none of it. Varoufakis explained on his blog why Greece cannot do ‘an Argentina’ (default on its debts and start over). It is a difficult discussion. It suffices to say that many do not agree with him, although everyone agrees that it will be difficult. Difficult, not impossible and perhaps necessary because it is the only remaining viable option. If Greece defaults on its debt, it will have freed itself from a debt burden of 175% of GDP. It would end the strangulation of the ‘reforms’ once and for all. No more economic demolishing, social cannibalism and political servitude. Greece can introduce the new Drachma and sell bonds to raise foreign currency for imports.

‘A Grexit is an antiquated idea,’ said Tsipras on Sunday evening in Brussels: ‘It would cause a crisis and the consequences would be unpredictable’ (see here). Is there, then, no major crisis going on right at the moment? Aside from bottomless austerity and social cannibalism that will grind the country into the ground for decades, is there any predictability left? ‘SYRIZA want to do two things,’ said Greg Palast last January: ‘SYRIZA Syriza wants to do the impossible, which is to get rid of the austerity that comes with the euro and yet keep the euro. They want to cure themselves of leprosy, but they don’t want to leave the leper colony, and that’s impossible’ (see here). Is he wrong?

Besides, what is the alternative? As Flassbeck has explained many times, the euro is unstable (see here and many articles on this site). The euro zone cannot work as long as the issues of the trade imbalances and the German trade surpluses remain unaddressed, but to address all of this requires a degree of intelligence and knowledge from the part of both policy-makers and the electorate that is sorely lacking. Many other economists, Stiglitz and Krugman among them, also doubt that the euro can ever work or that its architecture can be changed. Perhaps most tellingly, last month, the German finance minister, under whom the euro was launched, Oskar Lafontaine, called for its break-up (see here). According to Lafontaine, the current policy is leading to disaster within the periphery. It is not only the periphery. As the Irish economist Ray Kinsella says ‘The austerity doctrine imposed the burden of adjustment to the post-2008 economic collapse on the labour market. It is an indefensible misuse of economics that the eurozone “authorities” should seek stability on the back of tens of millions of unemployed’ (see here). Austerity has done so much damage that it will take decades to reverse. The euro reinforced Germany’s hegemony within Europe. There is no solidarity. There is only bullying. The miserable Juncker proposal, yet another round of austerity for Greece, urged five prominent economists (Heiner Flassbeck, Thomas Piketty, Jeffrey D. Sachs, Dani Rodrik and Simon Wren-Lewis) to write an open letter to Merkel past week (see, for example, here and on this site). ‘Right now,’ the economists wrote, ‘the Greek government is being asked to put a gun to its head and pull the trigger.’ The new proposal looks more like the Greek government is being asked to carpet bomb their country and pay for the bombs as well as for the casualties. Can you blame people, tens of thousands by now, who post and subscribe to the hashtags #ThisIsACoup and #TsiprasLeaveEUSummit? Krugman comments: ‘The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project is supposed to stands for’ (see here). ‘Greece can bend up to a point,’ said Aristides Hatzis, a prominent political commentator. ‘But after that there is no bending, only breaking. The breaking point may well come when Tsipras realises he has lost most of his parliamentary group’ (see here). Tsipras faces substantial resistance from the parliament’s speaker Zoe Konstantopoulou in getting the policies fast-tracked through parliament. As Kostantopoulou said “the government is being blackmailed. The lenders are insisting on turning the “no” (of last week’s referendum) into “yes.” I could never vote for the contents of the agreement” (see here). Tsipras agreed upon the harshest austerity program for Greece so far, eight days after the Greek people rejected the creditors’ original demands. According to Marc Ostwald, the measures in this bailout package are ‘infinitesimally worse’ than the ones turned down in last Sunday’s referendum. To Ostwald, the deal highlights a) that there is no long-term future for the Eurozone and b) the desire on the part of the Eurozone creditor nations to completely destroy the Greek economy – as he writes ‘it can certainly be asserted that this is indeed a worse deal than the 1919 Treaty of Versailles’ (see here). This, then, has been SYRIZA’s migration: from Thessaloniki to the apocalypse. The events dumbfounded many. They left us behind in a state of shock, not because of the evil that has been caused by those who have no conscience, no morals and no vision – that much can be expected. The shock is about the good men who walked into the trap with their eyes open, seemingly unable to change the events that would destroy them, as if they were doomed from the very first day.

Dr. Will Denayer teaches Political Economy at the University of Cork. He is interested in economic theory, social policy and climate change.