The ruling party of Greece, Siriza, under the leadership of Alexis Tsipras, is keen to prevent another bailout in August, but the reforms imposed upon Greece in the last 8 years have all but destroyed any remnant of hope in the birth place of democracy.
Greece is due to receive another €6bn from its existing €86bn bailout deal in late January, for which the Troika (that is the International Monetary Fund (IMF), the European finance commission, and the European Central Bank (ECB)) has mandated “reforms” as a condition to releasing the funds.
These include further restrictions on trade unions striking, further cuts to pensions (which have already been reduced by over 50%) and the privatisation of a substantial part of Greece’s energy production.
The total debt burden in Greece now amounts to €320bn, or 180% of GDP. The €6bn, will only allow Greece to pay for its existing debt liabilities and does not constitute renewed investment in Greece’s economy. Greece is being forced to run fiscal surpluses. Only Greeces creditors, the Troika and the bankers, stand to benefit from the exchange of money for legislation.
Why debt matters to Greece
Unlike the UK government, which creates currency as it spends, the Greek government, like all other Eurozone members, cannot issue its own currency. Greece’s finances are thus similar to those of a local council or a household: It needs to raise income before it can spend. Thus, we say that Greece is not ‘monetarily sovereign’.
For monetarily sovereign nations like the UK, the national debt is little more than a number indicating the net supply of currency into the economy (government spending minus taxation). It never has to worry about not being able to pay for its liabilities. By virtue of their unlimited capacity for money creation, monetarily sovereign governments can always pay. And this is reflected in other economies such as Japan, that despite relatively large debt to GDP ratios, continues to fulfill all their liabilities in their national currencies.
Relinquishing monetary sovereignty is in itself a terrible idea. Think of what might have happened in the UK in the aftermath of the financial crisis had the government not been able to bailout the banks, or, if it had found itself unable to fund the unemployment benefits of the thousands that lost their jobs. We now know that the austerity that followed was purely a political choice.
Why then, did Greece want to join the Euro in the first place? This is not a difficult question to answer for anyone who understands the dominance of the elite class in our political sphere:
The rich hated the Drachma, because everytime the Drachma devalued, their assets were worth less, they wanted their assets to be valued in Deutschmark. And let’s face it, the Euro is a Deutschmark.” — Yanis Varoufakis, The Rubin Report
It was then a simple matter of exploiting the economic illiteracy of most of the population to lure them in with promises of prosperity which were not grounded in reality.
A dysfunctional Eurozone
Membership to the Eurozone (and the EU), brings with it strict restrictions on government spending (as specified in the Treaty of the functioning of the EU). This disadvantages nations that have trade deficits. And it creates imbalances, with some nations always benefiting while others are in constant decline. Greece is one of the latter.
During the period before the financial crisis, when economies in the western world were running on private debt, the illusion of prosperity was created, and the eurozone’s inherent problems were ignored. This private debt-fueled pseudo-growth was brought to a brutal end in Greece in 2008.
Some attribute much of the events that followed on Greece’s economic mismanagement and political corruption. The truth is, that in a dysfunctional Eurozone, much like a building on the verge of collapsing, the weakest column crumbles first, and Greece’s shoulders were too weak to bear the brunt of Europe’s financial collapse.
Yanis Varoufakis, former Greek finance minister, confirms in his book Adults in the room what had long been suspected. The first bailout in 2010 was, in fact, a bailout of French and German banks, who could not afford Greece defaulting on its debts to them. The European Commission thus lied to the 19 Eurozone parliaments to present the bailing-out of bankers as a bailout of Greece.
A debt prison
Since then, Greece has been stuck between the sword and the abyss. The Troika has been extending credit to a country that cannot afford to repay. Subsequent Greek governments, including Siriza, under pressure from the Greek elite, and fearful of what leaving the Eurozone might bring about, were coerced into accepting whatever terms the Troika dictated.
They had reason to fear. The Troika had indicated that any attempt to leave the Euro or run a parallel currency would result in the permanent shut down of Greece’s Banks (which rely on the ECB for liquidity), immediate cutting of EU subsidies, etcetera. All of which is nothing short of declaring economic war on an already weakened nation. More so, they have repeatedly shown willingness to use such tactics (as they did in Cyprus in 2013 and Greece in 2015) in the event of any democratically elected government displaying signs of not playing ball.
Thus, since 2010, the charade of more bailout money to repay old bailout money has been sustained. In the meantime, Greece’s GDP has shrunk by 35%. The unemployment rate is and will continue to be, in the double digits, as the IMF casually indicated in a 2016 report:
Looking forward, growth prospects remain weak and subject to high downside risks, and unemployment is expected to stay in the double digits until the middle of the century.” (Source: imf.org)
The median disposable income has dropped by 50%. But citing the median does not do justice to the extreme level to which the vulnerable have suffered. The tale of Mr Dimitris Christoulas, a pensioner who in 2012 shot himself in protest in front of the Greek parliament in Syntagma Square in Athens does so more aptly. In a letter he left behind he wrote:
I see no other solution than this dignified end to my life, so I don’t find myself fishing through garbage cans for my sustenance.” (Source:Reuters)
Greece and the Eurozone
In the context of more austerity measures, more relaxation of labour laws, and the forced sale of national assets, the money that Greece is asking for will not improve the situation for the Greek people. Renewed access to the bond markets will not bring about prosperity.
It is simply not possible for a nation with a persistent trade deficit, where non-performing loans now account for 45% of all private debt, to recover while pursuing the fiscal surpluses demanded by its creditors. What the Greek economy needs is investment (i.e. deficits) of substancial size. This will never be allowed by the Troika, and in the current arrangements, would require an even larger unsustainable debt burden.
But to indicate that the Eurozone had failed would be to ignore its intended purpose. Greg Palast, a close friend of the now widely regarded ‘father of the Euro’ Robert Mundell, explained his friend’s vision, in a 2012 piece for The Guardian:
The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.[…] He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace.” (Source: The Guardian)
Viewed in this light, the Eurozone has been a success: Greece has become little more than the EU’s punching bag. Both an experiment, and a warning signal to any other nation that dares to defy the authority of the Troika, who are in turn hell-bent on running the show for the benefit of bankers and the elites… And who bow to the political agendas of its dominant economies, Germany and France. The punishing of Greece serves to warn the Italian people, perhaps, of what might just happen if they fail to vote ‘correctly’ in their upcoming elections.
Mainstream media in denial
Mainstream economic commentators, who see Greece’s recent return to the bond markets as a sign of recovery, are non the wiser. They mistake the unemployed young leaving the country with a fall in unemployment rates. They don’t see through the baseless and constantly missed targets for growth. They measure success only in terms of its government’s fiscal budget, with no consideration for what the mandated fiscal surpluses mean to the lives of ordinary people. Alexis Tsipras, under orders of the Troika, is extracting every last Euro from Greek citizens to give to its creditors.
It is fair to say that the media fools Europe but does not fool the Greek. They can see the poverty, the exodus of young talent, the falling wages, the drying up of opportunity, the suicides. And the hopelessness which now shrouds the Greece populace is displayed in the dramatic drop in voting turnout (which now languishes at about 55%), and the increased support for NAZI party, Golden Dawn.
The sentiment amongst Greece’s young was summed up aptly by a friend of mine:
It doesn’t matter who we vote for. No matter how much they advocate leaving the Euro, fighting the Troika, they have no way out. And once they get to power, they’ll do as the creditors ask.” (E.V.)
Greece and the Left
The continued public support for membership to the Eurozone in Greece is evidence that its leaders have failed to fully communicate to the Greek people what this membership means. Or perhaps they have convinced themselves that remaining in servitude is preferable to leaving in defiance. Grexit would not be easy. But it is still the best chance Greece has of escaping permanent decline, and the only way it can regain lost sovereignty for its people.
The Left’s often unconditional support for ‘internationalism’ means it falls short of holding to account those that have caused much of the suffering observed through out Europe. Solidarity for Greece must include condemnation of those who, under the banner of internationalism, have contributed to Greece’s destruction.
International cooperation cannot become an excuse for the surrendering of Sovereignty to central unaccountable entities like the Troika, who will inevitably abuse their powers to benefit private financial and political interests, while occasionally adopting progressive policies as a means of throwing its members off the scent of corruption.
If the Left in Greece and elsewhere does not actively challenge the democratic deficits within both the Eurozone and its parent entity, the EU, parties like Golden Dawn will take advantage of the political void left behind. What then, will be the ultimate cost of unquestioning reverence to the European project?