[Marxism] Two articles of note on Greece

Dayne Goodwin daynegoodwin at gmail.com
Wed Jul 8 05:56:50 MDT 2015


[Thanks to Art for his message.  I am copying next below the full text
of Ambrose Evans-Pritchard's very interesting behind-the scenes view
of Syriza's leadership, followed by some comments on it by Yves Smith
at "Naked Capitalism", dayne]

Europe is blowing itself apart over Greece - and nobody seems able to stop it
Prime Minister Alexis Tsipras never expected to win Sunday's
referendum. He is now trapped and hurtling towards Grexit
by Ambrose Evans-Pritchard, Athens
<http://www.telegraph.co.uk/finance/economics/11724924/Europe-is-blowing-itself-apart-over-Greece-and-nobody-can-stop-it.html>

Like a tragedy from Euripides, the long struggle between Greece and
Europe's creditor powers is reaching a cataclysmic end that nobody
planned, nobody seems able to escape, and that threatens to shatter
the greater European order in the process.

Greek premier Alexis Tsipras never expected to win Sunday's referendum
on EMU bail-out terms, let alone to preside over a blazing national
revolt against foreign control.

He called the snap vote with the expectation - and intention - of
losing it. The plan was to put up a good fight, accept honourable
defeat, and hand over the keys of the Maximos Mansion, leaving it to
others to implement the June 25 "ultimatum" and suffer the opprobrium.

This ultimatum came as a shock to the Greek cabinet. They thought they
were on the cusp of a deal, bad though it was. Mr Tsipras had already
made the decision to acquiesce to austerity demands, recognizing that
Syriza had failed to bring about a debtors' cartel of southern EMU
states and had seriously misjudged the mood across the eurozone.

Instead they were confronted with a text from the creditors that upped
the ante, demanding a rise in VAT on tourist hotels from 7pc (de
facto) to 23pc at a single stroke.

Creditors insisted on further pension cuts of 1pc of GDP by next year
and a phase out of welfare assistance (EKAS) for poorer pensioners,
even though pensions have already been cut by 44pc.

They insisted on fiscal tightening equal to 2pc of GDP in an economy
reeling from six years of depression and devastating hysteresis. They
offered no debt relief. The Europeans intervened behind the scenes to
suppress a report by the International Monetary Fund validating
Greece's claim that its debt is "unsustainable". The IMF concluded
that the country not only needs a 30pc haircut to restore viability,
but also €52bn of fresh money to claw its way out of crisis.

They rejected Greek plans to work with the OECD on market reforms, and
with the International Labour Organisation on collective bargaining
laws. They stuck rigidly to their script, refusing to recognise in any
way that their own Dickensian prescriptions have been discredited by
economists from across the world.

"They just didn't want us to sign. They had already decided to push us
out," said the now-departed finance minister Yanis Varoufakis.

So Syriza called the referendum. To their consternation, they won,
igniting the great Greek revolt of 2015, the moment when the people
finally issued a primal scream, daubed their war paint, and formed the
hoplite phalanx.

Mr Tsipras is now trapped by his success. "The referendum has its own
dynamic. People will revolt if he comes back from Brussels with a
shoddy compromise," said Costas Lapavitsas, a Syriza MP.

"Tsipras doesn't want to take the path of Grexit, but I think he
realizes that this is now what lies straight ahead of him," he said.

What should have been a celebration on Sunday night turned into a
wake. Mr Tsipras was depressed, dissecting all the errors that Syriza
has made since taking power in January, talking into the early hours.

The prime minister was reportedly told that the time had come to
choose, either he should seize on the momentum of the 61pc landslide
vote, and take the fight to the Eurogroup, or yield to the creditor
demands - and give up the volatile Mr Varoufakis in the process as a
token of good faith.

Everybody knew what a fight would mean. The inner cabinet had
discussed the details a week earlier at a tense meeting after the
European Central Bank refused to increase liquidity (ELA) to the Greek
banking system, forcing Syriza to impose capital controls.

It was a triple plan. They would "requisition" the Bank of Greece and
sack the governor under emergency national laws. The estimated €17bn
of reserves still stashed away in various branches of the central bank
would be seized.

They would issue parallel liquidity and California-style IOUs
denominated in euros to keep the banking system afloat, backed by an
appeal to the European Court of Justice to throw the other side off
balance, all the while asserting Greece's full legal rights as a
member of the eurozone. If the creditors forced Grexit, they - not
Greece - would be acting illegally, with implications for tort
contracts in London, New York and even Frankfurt.

They would impose a haircut on €27bn of Greek bonds held by the ECB,
and deemed "odious debt" by some since the original purchases were
undertaken by the ECB to save French and German banks, forestalling a
market debt restructuring that would otherwise have happened.

"They were trying to strangle us into submission, and this is how we
would retaliate," said one cabinet minister. Mr Tsipras rejected the
plan. It was too dangerous. But a week later, that is exactly what he
may have to do, unless he prefers to accept a forced return to the
drachma.

Syriza has been in utter disarray for 36 hours. On Tuesday, the Greek
side turned up for a make-or-break summit in Brussels with no plans at
all, even though Germany and its allies warned them at the outset that
this is their last chance to avert ejection.

The new finance minister, Euclid Tsakalotos, vaguely offered to come
up with something by Wednesday, almost certainly a rejigged version of
plans that the creditors have already rejected.

Events are now spinning out of control. The banks remain shut. The ECB
has maintained its liquidity freeze, and through its inaction is
asphyxiating the banking system.

Factories are shutting down across the country as stocks of raw
materials run out and containers full of vitally-needed imports clog
up Greek ports. Companies cannot pay their suppliers because external
transfers are blocked. Private scrip currencies are starting to appear
as firms retreat to semi-barter outside the banking system.

Yet if Greece is in turmoil, so is Europe. The entire leadership of
the eurozone warned before the referendum that a "No" vote would lead
to ejection from the euro, never supposing that they might have to
face exactly this.

Jean-Claude Juncker, the European Commission's chief, had the wit to
make light of his retreat. “We have to put our little egos, in my case
a very large ego, away, and deal with situation we face,” he said.

France's prime minister, Manuel Valls said Grexit and the rupture of
monetary union must be prevented as the highest strategic imperative.
"We cannot let Greece leave the eurozone. Nobody can say today what
the political consequences would be, what would be the reaction of the
Greek people," he said.

French leaders are working in concert with the White House. Washington
is bringing its immense diplomatic power to bear, calling openly on
the EU to put "Greece on a path toward debt sustainability" and sort
out the festering problem once and for all.

The Franco-American push is backed by Italy's Matteo Renzi, who said
the eurozone has to go back to the drawing board and rethink its whole
austerity doctrine after the democratic revolt in Greece. He too now
backs debt relief.

Yet 15 of the 18 governments now sitting in judgment on Greece either
back Germany's uncompromising stand, or are leaning towards Grexit in
one form or another. The Germans are already thinking beyond Grexit,
discussing plans for humanitarian aide and balance of payments support
for the drachma.

Mark Rutte, the Dutch premier, spoke for many in insisting that the
eurozone must uphold discipline, whatever the financial consequences.
"I am at the table here today to ensure that the integrity, the
cohesion, the underlying principles of the single currency are
protected. It is up to the Greek government to come up with
far-reaching proposals. If they don't do that, then I think it will be
over quickly," he said.

The two sides are talking past each other, clinging to long-entrenched
narratives, no longer willing to question their own assumptions. The
result could be costly. RBS puts the direct financial losses for the
eurozone from a Greek default at €227bn, compared with €140bn if they
bite the bullet on an IMF-style debt restructuring.

But that is a detail compared with the damage to the European
political project and the Nato alliance if Greece is thrown to wolves
against the strenuous objections of France, Italy and the US.

It is hard to imagine what would remain of Franco-German condominium.
Washington might start to turn its back on Nato in disgust, leaving
Germany and the Baltic states to fend for themselves against Vladimir
Putin's Russia, a condign punishment for such loss of strategic vision
in Greece.

Mr Lapavitsas said Europe's own survival as civilisational force in
the world is what is really at stake. "Europe has not shown much
wisdom over the last century. It launched two world wars and had to be
saved by the Americans," he said

"Now with the creation of monetary union it has acted with such
foolishness, and created such a disaster, that it is putting the very
union in doubt, and this time there will be no saviour. It is the last
throw of the dice for Europe," he said.


Ambrose Evans-Pritchard: Tsipras Never Wanted to Win Referendum, is
“Trapped” and “Depressed,” Syriza in “Turmoil”
by Yves Smith
Naked Capitalism, July 7
<http://www.nakedcapitalism.com/2015/07/ambrose-evans-pritchard-tsipras-never-wanted-to-win-referendum-is-trapped-and-depressed-syriza-in-turmoil.html>

Ambrose Evans-Pritchard of the Telegraph has a bombshell new report on
Greece. It’s even more devastating when you keep in mind that
Evans-Pritchard has been a staunch Syriza supporter and has spoken
regularly to government officials, including Yanis Varoufakis, who is
a source for this story.

The subhead says it all:

Prime Minister Alexis Tsipras never expected to win Sunday’s
referendum. He is now trapped and hurtling towards Grexit

The story explains, as we reported at the time, that Syriza had
finally agreed to cross its red lines. It had offered a plan that
would meet it draconian austerity targets of 1% primary surplus this
year, rising to 3.5% in 2018. Greece offered what amounted to a
pension cut of 0.4% of GDP by tightening up on early retirement and by
increasing health care payments on retirees, which is a de facto
pension cut, and committed to a total pension cut of 1.0% of GDP the
following.

Rather than accept the Syriza offer and only ask for changes at the
margin, they [E'group] maintained that the numbers still did not work
and pressed for the 1% pension cut immediately as well as an increase
in VAT at hotels from its current effective level of 7% to 23%. They
also refused to budge on wanting to impose labor market “reforms”.

Key sections of the Telegraph story:  [see above]
 . . .

Evans-Pritchard stresses that the Eurozone is in similar disarray:
Leaders of the creditor nations had said before the vote that a “No”
meant Greece was signing up for a Eurozone exit. Even though European
Commission chief Jean-Claude Junkcer is urging European officials to
put their egos aside, they too appear to have whipped up their voters
and MPs to such a high level of hostility against Greece that it’s not
clear that they could back down even if they want to (and mind you, I
don’t think there are many that want to). Put it another way, when
Juncker is the sanest guy in the room, you know it’s bad.

Evans-Pritchard says the French and the US are trying to throttle back
the hardliners, and Italy is on board too. But any bailout would
require approval of all 19 Eurozone members. We’ve said before that
Merkel didn’t have the votes for an extension, although she might be
able to muster them if Greece capitulates. But that was before the
referendum. The new theme in the German press has been that the Greek
loans are a total loss and the Eurozone would be better off if Greece
were gone. And with an ECB default date of July 20, in theory there is
very little time to turn sentiment around. In practice. there is €10.9
billion held by the ECB that Greece has been seeking to have released;
if a deal really were nigh, the ECB might be persuaded to apply or
borrow against that amount to make the €3.5 billion payment due July
20. But that assumes a real desire to get a deal with Greece done, and
right now, that sentiment hasn’t jelled. Again from Ambrose
Evans-Pritchard:

"Yet 15 of the 18 governments now sitting in judgment on Greece either
back Germany’s uncompromising stand, or are leaning towards Grexit in
one form or another. The Germans are already thinking beyond Grexit,
discussing plans for humanitarian aide and balance of payments support
for the drachma.

"Mark Rutte, the Dutch premier, spoke for many in insisting that the
eurozone must uphold discipline, whatever the financial consequences.
“I am at the table here today to ensure that the integrity, the
cohesion, the underlying principles of the single currency are
protected. It is up to the Greek government to come up with
far-reaching proposals. If they don’t do that, then I think it will be
over quickly,” he said.

The article outlines a Grexit plan that was discussed at an emergency
session a week prior. It would consist of seizing the Bank of Greece
so that the government could get its hands on €17 billion of reserves,
imposition of a haircut on €27 billion of Greek government bonds held
by the ECB, issuing IOU to recapitalize the banks, and appealing to
the European Court of Justice that Greece’s rights as a Eurozone
member had been violated (particularly with respect to liquidity
provision).

This is far too late to be planning for a Grexit, and this level of
planning is well short of the sort of war-level mobilization of
resources that needs to happen. Worse, by letting these plans be
reported in the media, the Greek government loses any element of
surprise. For instance, the ECB has now had over a week notice that
the Bank of Greece might be “requisitioned”. Do you think they haven’t
taken preparatory countermoves?

If the two sides are unable to pull out of their current trajectories,
the end game looks to be a Grexit and a Greece not free but dependent
on its creditors for key imports like food (Greece is not self
sufficient in food), petroleum and pharmaceuticals. And this will do
huge damage to the fabric of Europe, both in the cost of a downdraft
of a Grexit and the creation of processes to allow for nations to
depart, which ones big enough to do so and come out ahead or not
suffer very much, like France and Italy, may eventually use
themselves.

Update 8:20 PM: The Greek banks will not last beyond the weekend which
basically means the Greek government has until Sunday to capitulate,
um, come to a deal. From the Financial Times:

Mario Draghi, the European Central Bank president, briefed the summit
on the situation for Greek banks, indicating that they could survive
to the end of the week but not much longer. He also signalled that
emergency central bank loans keeping the banks alive, which the ECB
must approve, could not be extended beyond the weekend.



On Tue, Jul 7, 2015 at 8:37 PM, Art Young via Marxism
<marxism at lists.csbs.utah.edu> wrote:
>
> 1) Stratfor: The Greek Vote and the EU Miscalculation
>
> http://tinyurl.com/nujndsp

> 2) Europe is blowing itself apart over Greece - and nobody seems able to
> stop it
>
> Prime Minister Alexis Tsipras never expected to win Sunday's referendum. He
> is now trapped and hurtling towards Grexit
>
> By Ambrose Evans-Pritchard, Athens
>
> http://www.telegraph.co.uk/finance/economics/11724924/Europe-is-blowing-itse
> lf-apart-over-Greece-and-nobody-can-stop-it.html
> . . .




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