[Marxism] Foreign Policy: Why Greece Needs Syriza to Win
t at crashfast.com
Thu Jan 8 09:59:12 MST 2015
European politics normally pauses for the Christmas break. But this time
it erupted with a vengeance. On Dec. 29, Greek parliamentarians rejected
the government’s candidate for president, triggering early elections
scheduled for Jan. 25. Syriza, a radical-left coalition that wants to
renegotiate the terms of Greece’s 205 billion euros’ worth of loans from
eurozone governments, is leading in the polls.
Many fear that a showdown between eurozone authorities and a Syriza-led
government bent on debt relief and ending austerity could revive the
panic that almost destroyed the euro in 2012 and could even force Greece
out of the 19-country currency union. The Athens stock exchange has
plunged. Yields on Greek government bonds have soared. The cost of
insuring against a Greek default has skyrocketed. But a Syriza victory
on Jan. 25 may not be a calamity for Europe in the end. It may be a
necessary step toward resolving a crisis that has been festering since
It’s not surprising that voters are angry with Prime Minister Antonis
Samaras’s coalition government, which has implemented the brutal
austerity demanded by the European Union and the IMF since Athens
received its first bailout in 2010. Greeks have suffered six years of
severe slump. The economy has shrunk by more than a quarter. Incomes
have collapsed by nearly a third; many workers go unpaid. One in four
Greeks — and one in two young people — is unemployed. The social safety
net has been shredded. Many families scrape by on seniors’ slashed
pensions. Crowds jostle for handouts at food banks. Some children are
reduced to scavenging through rubbish bins for scraps. Hospitals run
short of medicines. Malaria has even made a return.
Eurozone policymakers insist that Greeks have only themselves to
blame for their plight and that the harsh treatment thepolicymakers
imposed is working. But that isn’t true.
Eurozone policymakers insist that Greeks have only themselves to blame
for their plight and that the harsh treatment the policymakers imposed
is working. But that isn’t true. Yes, successive Greek governments
splurged before the crisis, doling out jobs and favors to their
political patronage networks. With tax evasion rife, they borrowed
abundantly: a whopping 15 percent of GDP in 2009 alone.
But Greece’s reckless borrowing was financed by equally reckless
lenders. First in line were French and German banks that lent too much,
too cheaply — foolishly treating the Greek government as if it were as
creditworthy as Berlin and encouraged by Basel capital-adequacy rules
and European Central Bank collateral-lending rules that treated
sovereign bonds as risk-free.
By the time Greece was cut off from the markets in 2010, its soaring
public debt of 130 percent of GDP was obviously unpayable in full. It
should have been written down, as the IMF later acknowledged publicly.
Austerity would then have been less extreme and the recession shorter
and shallower. But to avoid losses for German and French banks, eurozone
policymakers, led by German Chancellor Angela Merkel, pretended that
Greece was merely going through temporary funding difficulties.
Breaching the EU treaties’ “no-bailout” rule, which bans eurozone
governments from bailing out their peers, they lent European taxpayers’
money to the insolvent Greek government, ostensibly out of solidarity,
but actually to bail out creditors. Poor Greeks were, in effect,
consigned to a debtor’s prison.
While foreign banks that held on to their Greek bonds eventually took
some losses in 2012, Greece’s EU creditors have bled the country dry.
Thus eurozone banks share responsibility for Greece’s plight, while
eurozone policymakers — as well as the Greek elites who did their
bidding — are to blame for the extent of the misery that Greeks have
endured. So whatever you think of Syriza’s left-wing politics, it is
justified in demanding debt relief from the EU. It’s a pity more
mainstream Greek voices aren’t doing so too.
Debt relief isn’t just a matter of justice. It’s an economic
Debt relief isn’t just a matter of justice. It’s an economic necessity.
Contrary to the propaganda from the EU and Samaras’s government, Greece
is not putting the crisis behind it. Yes, the economy is finally growing
a little: by 1.9 percent in the year to the third quarter of 2014.
Employment has edged up. The government has achieved a primary surplus —
its revenues now cover its outgoings, excluding interest payments. And
it managed to sell investors some longer-term bonds last year. Briefly,
Samaras even thought that Greece could escape the EU’s clutches and fund
itself freely from the markets when its EU loan ends in February.
Yet even at the height of the markets’ euphoria about the eurozone last
summer, before Germany’s economy stalled, investors who were desperate
for yield and increasingly blind to risk in markets awash with
central-bank liquidity were unwilling to lend to the Greek government on
terms on which it could finance itself sustainably. And the mood soured
long before a Syriza government seemed imminent.
Greece’s public debt is still a crushing 175 percent of GDP. With the
economy gripped by deflation — prices fell by 1.2 percent in the 12
months to November 2014 — the real debt burden is rising. Even under
optimistic scenarios for growth and interest rates, bringing it down
would require implausibly large payments to hated foreign creditors for
the foreseeable future.
Without debt relief, the economy looks set to remain depressed. While it
has scope for a bounce from its depths, a sustained recovery strong
enough to make up lost ground, put Greeks back to work, and bring down
debt is not in the cards. Even at its current annual growth rate, the
economy would recover to its 2008 level only in 2030. Domestic demand is
depressed by the debt overhang, while exports remain weak. Even with
imports suppressed by crunched incomes, the country is running a
whopping (and widening) trade deficit. The banking system is bust. No
wonder businesses aren’t investing.
Nor has Greece fixed its fundamental flaws. Despite all the talk of
reform, the EU’s priority has been austerity and wage cuts. The corrupt,
clientelist political system remains intact. Politically connected
businesses continue to have a stranglehold over cartelized markets. The
rich still don’t pay their taxes. Re-electing Samaras and his New
Democracy party won’t change any of that.
Nobody knows how an untested Syriza would behave in government. While
its roots are on the hard left, Alexis Tsipras, its telegenic
40-year-old leader, has been softening his rhetoric and policy stance.
Yes, Syriza’s spending commitments, such as hiking pensions, seem
unrealistic. Regrettably, the left-wing coalition wants to tax and
regulate cosseted capitalists instead of exposing them to competition to
up their game. But since Tsipras’s movement does not have a stake in the
clientelist system, it might actually follow through with its reform
pledges. And on the key issue of debt relief, Syriza is Greece’s best
If Merkel were wise, she would make a virtue of a necessity and offer
Greece debt relief as a gesture of solidarity. She must know that if the
euro ultimately collapses, Germany will be blamed — again — for wrecking
Europe. The chancellor could call on historical precedent: West
Germany’s debts were slashed in 1953 through the London Agreement. She
could even throw in a Marshall (or Merkel) Plan of investment for Greece
and other crisis-hit countries that would also boost German exports.
Unfortunately, that is highly unlikely. Because of Merkel’s mistaken
bailout of Greece’s private creditors in 2010, German taxpayers would
lose out if Greece’s debt were cut. Since Germans self-servingly believe
that as creditors they are virtuous, they feel no obligation to be
generous to Greeks whom they view as sinful profligates. And Berlin is
loath to set a precedent that could encourage others, notably the Irish,
to seek relief for the bank debt unjustly imposed on them by the EU.
So Greece needs to stand up for itself and demand a negotiated
write-down, backed by the threat of unilateral default. It can credibly
do so: Since Athens has a substantial primary surplus, it would not need
to borrow if it stopped servicing its debts. Syriza says it won’t write
down bonds held by private investors, so Argentina-style legal
entanglements aren’t a concern. With the bonds held by Greek banks
untouched, the European Central Bank could scarcely refuse to accept
them as collateral for liquidity. Meanwhile, German threats to force
Greece out of the euro are probably bluster: Merkel has no legal right
to deprive Greeks of the use their own currency, and it is implausible
that unelected central bankers would dare splinter the eurozone. So
Tsipras just needs to control his spending urges and stand his ground.
Will this cause upheaval? No doubt. Could it go horribly wrong? Of
course. Is it necessary? Absolutely. Choosing the “safe” Samaras option
would condemn Greece to continuing misery.
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