Tag Archives: #grexit

A European Strategy for Syriza

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Guest post by John Palmer

[After the discussions in the comments on my blog last week, I invited John to write an article fleshing out what Syriza could gain from a policy of staying for as long as possible within the Eurozone]

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In the politically highly charged post-mortem into negotiations between the Syriza government and the Euro-area powers, one fact should not be overlooked. In spite of the widespread view that Athens suffered a humiliating set back at the hands of the German government and its allies, the latest opinion polls show that more Greeks than ever support Syriza – enough to give them an overall majority in a new election.

This should not be entirely surprising. The mass of Greek voters do not blame Alexis Tsipras, or his finance minister, Yannis Varoufakis, for the dogmatic refusal of Berlin and Brussels to recognise that their austerity strategy has failed. They also believe the Euro-area leaders – as well as Syriza – also had to make concessions. As the US economist, James Galbraith has put it: “What happened was that at the end of the day, the creditor countries and the creditor institutions took a step back. There had been through the entire process a very firm position taken by the German government that you had to sign up to the existing loan program, all of its conditions, lock stock and barrel, no changes that the elections have really meant nothing.

This was an untenable position. It was a position that over the time of these discussions lost the sympathy of the European Commission, and I think also of the International Monetary Fund, and also of several other major governments. And it was a position from which the German government at the end of the day took a step back, agreeing to the essence of the Greek position all along, which was to have a financing arrangement that would be in place over a four-month period, and then discussions about the specific terms, based upon a list that was submitted yesterday to the institutions.

So that strikes me–I wouldn’t call that a capitulation; I would say that what happened was that the German government, having taken a very tough line through the process, took a step back from that tough line in order to secure a basic framework agreement for going forward. And that’s where we are now.”

No one in their right mind would suggest that Syriza is winning the struggle to defeat mindless austerity or that the pressures on Athens to retreat will not be re-doubled in intensity in the weeks ahead. I agree with those who urge Tsipras and his comrades not to gloss over the compromises they have been forced to make or the profound challenges ahead. In that sense, they should emulate the Russian Bolsheviks who never denied the terrible price they had to pay to Imperial Germany for the Brest-Litovsk treaty ending Soviet involvement in the First World War.

Some of the criticism of the Syriza strategy made by the Greek and international far left is, however, based on misunderstandings. For example those calling on Athens to defy Berlin and impose capital controls to prevent money being drained from the banks do not realise that this can be done under Euro-area rules. This what the Cypriot authorities were forced to do last year. It may be something Syriza adopts but the recent statistics show that capital is starting to return to Greece.

Leaving aside the Greek neo-Nazi and populist far right, and a small minority on the left, the mass of Greek workers rightly suspect – indeed fear – talk of abandoning the Euro. They remember the disasters which Drachma devaluations brought in the past and suspect it would mean an even more terrifying collapse in living standards.

But are the Greeks right in believing that Syriza should struggle to change the Euro-area, indeed the European Union itself, from within? Is there the remotest chance that Syriza could trigger a shift in the balance of class forces needed to secure a radical change of economic policy? Where in the EU are the allies to be found else to bring this about?

It is essential here to avoid exaggeration. But there are some signs that popular opinion in most EU countries is swinging against any prolongation (let alone intensification) of austerity. It takes different forms in different countries. In Portugal even the leader of the Social Democrats (the Mayor of Lisbon), who is favourite to win the next election, has declared he will negotiate an alternative agreement with the Euro-area authorities.

Of course we should not hold our breath. But the financial markets will be quick to see another crisis point in Portugal if talk of an economic policy change grows. Should a forced Grexit be seen as pre-figuring a possible Portuguese or even Spanish default, Berlin will be at risk of losing astronomic amounts of money.

Indeed why stop there? Market suspicion could easily fall on France and/or Italy – which may be why Berlin has just agreed to give both government more time to come into line on deficits and debt. Of course the right wing governments in Lisbon, Madrid who have insisted on the unpopular austerity policies are desperate they are not exposed by any concessions given to Athens.

The European Commission has already signalled it favours some relaxation of the current terms of the Greek austerity “agreement.” The balance of opinion in the elected European Parliament is in favour of even more substantial concessions because austerity has only succeeded in increasing rather than decreasing indebtedness.

Another important factor working Greece’s favour is the growing alarm among mainstream academic economists that the austerity card is being overused. In any future policy review it would not be surprising if even bodies like the IMF and the European Central Bank signalled to Berlin and its allies that some fiscal relaxation was in order.

None of this is to attribute any inherent or dependable progressive orientation to the EU institutions. They reflect the ideological tenor of the great majority of pro neo-liberal EU national governments. Nor can any confidence be placed in the mainstream social democratic parties whether in opposition or in coalition with the right – as in the case of the German SPD.

But political parties have to keep a keen weather ear on the fluxes in public opinion. Tolerance of austerity is wearing thin which is one reason why some even the populist far right – such as the French FN – is giving expression to public anger about public spending cuts and falling living standards.

Important in this context are the signs of a new restiveness stirring among workers in both northern and southern European countries. In Germany the Metal Workers have just forced through a major, inflation busting wage increase and public sector look set to follow. There have been strikes by airport workers against job losses in Denmark, Finland and by Portuguese transport workers against privatisation plans.

None of this is to suggest an imminent change in the economic or the political balance of forces which Syriza will have to confront in its struggle to survive and to win tangible relief for the Greek people. Pressure is growing from hard line right wing German tendencies (Alternative fur Deutschland, PEGIDA but also within the CDU/CSU) against any concessions to Greece.

A swing to the right in the recent Hamburg election brought Merkel’s CDU percentage vote down to the mid-teens.  Little wonder Schauble and co are worried.

I agree with those in Syriza (and commentators like David Renton) that Syriza must strengthen the societal groups at its base and ensure the government is more actively accountable to them. This will, however, involve these organisations also taking some very hard decisions on priorities and compromises. The Greek foreign ministry should be encouraging the maximum contact between Greek social interest groups – obviously including the trade unions – and comparable organisations throughout the European Union.

The next weeks will be crucial. It will be essential to use the maximum political leverage to ensure a substantial revision of the terms of the policy review. But Syriza cannot avoid having to play a longer term strategy. It should be judged by how it balances these priorities with maintaining the commitment of its support base to fundamental change both in Greece and throughout Europe. That is why it is bound to be a lengthy war of positioning.

For those socialists who regard their political pedigree in some sense as derivative of the so-called “IS tradition” I would like to quote from a leading article on the issue of European integration written in 1961 during the first debate on British membership of what is today the European Union, by the first editor of ISJ, Michael Kidron: For us the move to Europe extends the scope of class struggle in which we are directly involved; it worsens its conditions for the present. But it makes ultimate victory more secure.”

Demanding the right to breathe

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If there had been any doubts about the meaning of the agreement reached by Syriza and the Eurozone, they were resolved by the publication on Tuesday morning of Greece’s proposals to reduce its deficit.

Panagiotis Sotiris has subjected them already to a detailed analysis and I will do no more than endorse the points he makes that Syriza has agreed to an absolute cap on the public sector wage bill (and therefore a wage freeze), the agreement weakens Syriza’s previous commitments not to allow the auctioning off of homes which are in debt, and it concedes in principle to the continuation of the privatisation programme including of workplaces which are central to the Greek union movement such as the docks at Piraeus

If anything, there are still more criticisms could be made. For example an English-language audience will be attentive to the implications of promises to “develop the existing scheme that provides temporary employment for the unemployed”, or to “strengthen the independence of the General Secretariat of Public Revenues” (ie. the Greek equivalent of George Osborne’s Office of Budget Responsibility) “from all sorts of interference (political or otherwise)”, in other words from attempts by an elected Syriza government to control its own economic policy. And in addition Syriza has given the troika, now relabelled “the institutions”, an unwelcome, express veto over any future increases to the minimum wage.

One writer who wishes Syriza well has cautiously welcomed the agreement saying that it “cancels the previous Greek government’s planned cuts to pensions”, which may be true, but the proposals tabled by Syriza still involve cutting pensions by reducing early retirement, and index-linking of payments in future. In any event, the right comparison is not with the plans of the previous government, but with Syriza’s own Thessaloniki programme on which it was elected. This had promised to restore the Christmas bonus for pensioners, and increase pensions thereafter (along with public sector wages) as a means to increase demand in the economy. Both of these promises appear to have been quietly shelved.

The most important part of the Thessaloniki programme were the starting principles of Syriza’s policy in regard to the Eurozone, ie that it would “write-off the greater part of public debt”, obtain “a growth clause in the repayment of the remaining part so that it is growth-financed and not budget-financed”, and “include a significant grace period in debt servicing”.

Now, of course, you can only reach a fair agreement in negotiations with someone who is willing (or compelled) to bargain fairly with you. And, Syriza’s negotating position was reduced even beneath any foreseeable position of weakness by Greek savers’ removing £12 billion from their bank accounts.

To grasp the enormous pressure Syriza was under, imagine a trade union which is trying to negotiate a pay increase from a hostile employer, while at the same time, its savings are separately being withdrawn from the union’s main bank account at the rate of about 10% of all its money every single day. Whatever other difficulties Syriza may have had, it simply did not have the ordinary negotiator’s option of stringing discussions along in the hope that something better would emerge.

Without falling into the ritualistic language of “sell-out”, it is not hyperbole to accept that the Greek government is being “strangled” or to compare it to “a debt colony with a bit of ‘home rule’”. Those, including 20 Syriza’s MPs, the speaker of the Greek parliament Zoi Konstantopoulou and Syriza’s chief economist John Milios, who have criticised Tspiras for trying to portray a defeat as a victory when it is in Milios’ words “suffocating” are right; no healthy politics, reformist or revolutionary, can start except from stating the facts truthfully.

How then might the harm of the last week be undone?

A return to the movements (with two notes of caution)

There is an almost universal desire on the Greek left, from the leadership of Syriza as far as Greece’s anarchists, to see a shift from the government to the social movements, so that it is the latter which initiate policy and the latter which control the former. How this change is conceived depends on the politics of the different groups.

Syriza itself to some extent supports the idea, and included within its Thessaloniki programme promised to “empower the institutions of representative democracy and introduce new institutions of direct democracy.” The detail of the programme included legislation to allow referenda, removal of MP’s immunities from prosecution, and a democratisation of radio and television broadcasting.

But there is potentially a much more inspiring version of the same vision in which the balance of forces within Greece is changed by the emergence within Greece of powerful social movements demanding a return to the sorts of politics which won Syriza the election.

This would the best next step. But I do have two notes of caution. First, merely seeing the best hope does not conjure it into being. Among socialists in the English-language world, there is still often a conception that Greece has enjoyed a continuous five-year period of open struggle, with widespread workers’ strikes, occupations, etc, and that therefore it is inevitable that any moment now, a social movement will emerge which will have interests clearly opposed to both those of their own government and those of the Eurozone. And yet the pages of indymedia Athens, or of the major Marxist organisations in Greece, whether pro-Syriza or anti, do not give an outsider the impression of a society on the verge of open ferment.

Second, it is important that the re-emergence of social movements is not abstracted from their politics. The last occasion when a social movement “broke through” to challenge austerity was during the revolution which took place in Egypt from 2011. This was a movement which for two years, like the great revolutions of France or Russia, seemed to constantly renew itself. It had a similar effect to Syriza’s election in terms of raising hopes internationally. At its peak, workers were involved in around 1000 strikes or protests every month. Yet, at the end of the revolution, the fatal moment was the emergence of a counter-revolutionary force “Tamarod” which portrayed itself, plausibly, as just another reform campaign. The form which the counter-revolution took was a series of public protests which were widely (and inaccurately) described as the largest demonstrations in history.

Socialism means democracy; it means the abolition of the present state and its replacement by one governed by the mass of producers. Any process which tends in that direction is always better than one that does not.

Yet in a context where very many Greek unions are linked to the political parties which been voting together in parliament against Syriza (ie New Democracy, Pasok and the KKE) more politics is needed than the simple analysis which says that we have had too much of government and now we need a syndicalistic return to the movements.

What Greece needs is something more specific a local counterpart to the huge numbers that rallied in support of Chavez against the 2002 coup and then radicalised and transformed his government, in other words a mass movement with a democratising dynamic.

Breaking with the Eurozone (but)

Syriza’s survival as a government will depend on it taking measures which could be seen as the beginning of Grexit, i.e. the introduction of capital controls, and limits to withdrawals from personal and corporate bank accounts. If it does not introduce them, then in four months’ time, Syriza will be faced with the same difficulties it faced in the last week, ie it will be nearing the end of negotiations with hostile powers, while money drains out of its banks leaving its negotiators without any leverage at all over Greece’s creditors.

Accordingly, increasing numbers of activist in Greece would not just agree with this analysis but go further, arguing that Syriza must take Greece out of the Eurozone altogether. If nothing else, the politics of Syriza’s isolation in Europe seem to compel this approach. At present, it is in a minority of one, and even in if Podemos wins the Spanish elections in November of this year, the radical left will continue to be a tiny minority among the governments, and will lose repeatedly.

But the vision of a Grexit without a change in the underlying social relationships was criticised by Antonis Davanellos of Syriza’s Left Platform, in an article from 2011:

“a return to the drachma, if it happens under the direction of capitalists and their state, would have devastating results for the Greek population. The drachma would be undervalued from the start and would instantly lose even more value when it is introduced. This would wreak havoc on the value of everything that is important to wage-earners (their wages, pensions, housing, etc.) and also farmers (the value of cultivable land). On the other hand, the capitalists–who would retain over 600 billion euros deposited abroad, more than twice the sum of the Greek debt–would be able to grab for just pennies public enterprises, hospitals, land and more”.

Those who know their history will recall how the solution to the German debt crisis in 1923 had exactly the dynamic that Davanellos cautions against, ie that inflation enabled a massive concentration of wealth within Germany, with the largest businesses buying up their dozens of their smaller counterparts on the cheap.

It also involved the impoverishment of Greece’s savers who then turned to the far right, which is not something that the leadership of Syriza, motivated as they are by the fear of Golden Dawn, will countenance lightly.

And the assumption that Davanellos makes that Grexit would lead to devaluation (and therefore inflation) is, notably, accepted by Grexit’s supporters, for whom devaluation is of course the mechanism to encourage increased foreign trade. A devalued currency is intended to sell its goods abroad for less, kick-starting the economy – but even to formulate the policy in these terms is already to see Grexit as a strategy for defending Greek business, rather than Greek workers.

Moreover a Greece equipped within an independent currency would not lose the economic problems which are weighing presently on its workers. Greece would still have a debt larger than its GDP; merely announcing “we will not pay any more” would not make the debt disappear unilaterally. It might be for example that an independent Greece would seek to trade occasionally with the European states which surround it. They, of course, would attempt to make trade conditional on the payment in full of the debts they are now enforcing.

The problem is not Grexit but the failure to attach it to transformation from one kind of society to another – from one ruled by its bosses to one ruled by its workers. Socialists often make this invocation, sometimes ritually, but this really is a situation where seemingly the same possibility (the departure from the euro) can have a wide range of different outcomes, from the most hopeful to the most desperate.

The vision has to be not the restructuring of capitalism, but its defeat.

So, there are two solutions, albeit neither is straightforward. Yes, Greece needs a return to the movements, but one which arms Syriza (and its left critics) rather than its opponents in the parliament or the Eurozone and one which changes the relationship between the government and the streets.

Yes, Greece needs to take steps towards Grexit, and possibly Grexit itself, but one based on a changing dynamic between classes within Greek society, rather than the mere exchange of capitalism in one continent for capitalism in one nation.

The debate in Syriza concerning Grexit

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Consider three people. First, Costas Lapavitsas is the recently-elected Syriza MP for Imathia and a lecturer in economics at SOAS. Four years ago, he was at the heart of an intense debate within Syriza as to whether the party should have a policy of leaving the Eurozone (“Grexit”). In an ebook ‘Against the Troika’ which Lapavitsas wrote with Heiner Flassbeck, and was published at the end of January 2015 by Verso, Lapavitsas and Flassbeck predict that a Syriza or Podemos government would be met by relentless hostility from within the Eurozone, and that its options would rapidly narrow:

“Without effective debt restructuring a left government would find it impossible to implement an alternative programme, even in the short run” … “There can be no conflict within the EU on [the debt restructuring] that would not also raise the spectre of EMU exit”.

They turn to the practicalities of Grexit. They suggest that a left government should start by insisting on the independence of its bank from the Eurozone, including alternative currency (i.e. short-terms paper loans, or “scrip”) denominated in Euro. This paper currency could become the first step towards re-establishing a national currency. A left government should also have capital controls to prevent money leaving the country on exit.

Lapavitsas and Flassbeck call for social mobilisation and negotiations towards a voluntary exit from the EMU. If consensual exit was not possible, Grexit could take place by first declaring a default on the country’s debts and ceasing to pay them, then redenominating the balance sheets of the central bank, commercial banks, private enterprises and households. The government would have to increase its circulation of money and should expect a sharp devaluation of its currency. Medicine, food and fuel would need to be administered (i.e. rationed) to get basic goods to those in need.

While they paint in some ways a brutal picture of a government necessarily operating in temporary conditions of extreme scarcity, they do also emphasise that the countries of the European periphery have vast unused capacity, to produce goods, medicines, even such basic needs as electricity, so that an economy which was allowed to grow back even if only to its 2010 state would be growing rapidly.

Second, Yanis Varoufakis the Syriza finance minister, writes regularly in English, chiefly on his own blog. In 2012, he was interviewed by a website on Grexit. In Varoufakis’ now-familiar, paradoxical style, he argued that Grexit was impossible not because it would have negative connotations for Greece but because it would be self-defeating for the other European economies.

The whole point of creating the common currency was to impress the markets that it is a permanent union that will guarantee huge losses to anyone bold enough to bet against its solidity. A single exit suffices to punch a hole through this perceived solidity. Like a tiny fault line on a mighty dam, a Greek exit will inevitably lead to the edifice’s collapse under the unstoppable forces of disintegration that will gain a toehold within that fault line. The moment Greece is pushed out two things will happen: a massive capital flight from Dublin, Lisbon, Madrid etc., followed by a reluctance of the ECB and Berlin to authorise unlimited liquidity to banks and states.

As for the risks to Greece:

Exiting the euro is not the same as cutting a peg (as Argentina did a decade ago) or exiting the Gold Standard (as Britain did in 1931, followed by the US a year later). The profound difference is that Argentina and Britain had their own currency and they simply severed its link to some exogenous hard currency – allowing it wisely to drift ‘south’ in order to restore competitiveness etc. Greece, Spain et al do not have a currency to devalue. We must do something that has never happened in history: Create a currency in order to devalue it! And since it takes months to create a currency, we are talking about driving countries that are already savaged by recession into an un-monetised state for months on end … One only needs to state this to realise the immensity of the hardship it will create.

A further interview in 2013 again emphasised the practical difficulties:

As for an ‘orderly’ exit, there can be no such thing. One only needs to think a little bit about what that ‘orderly exit’ might entail to realise that it is an impossibility. For the moment it is announced, all hell will break loose. Greek ATMs will run out, immigration officers in airports and ports (not to mention land crossings into Bulgaria and Turkey) will have to search people for cash, the banks will be closed indefinitely.

Although these articles do not make the link explicit, it would not be fanciful to see behind the fear of devaluation (and inflation) the fear that a lasting run on the Greek banks would permanently set the Greek middle classes against Syriza, in the same way that 1923 turned a generation of Germans permanently against Weimar.

Finally, Giorgos Gogos is a dockworker and trade unionist in the port of Piraeus; and a supporter of the Anasa (“breathe”) faction within Syriza, i.e. at a point somewhere between the leadership (Tsipras) bloc and its critics in the Left Platform.  Both PASOK and New Democracy have loyal party-run trade unions, he complains, which they ran like their pet businesses (or, in his word, “clients”); in a recent interview with Katy Fox-Hodess he insists that the Communist Party’s operation was fundamentally the same, “the Communist Party is part of this clientelism and has especially non-democratic ways of holding power within the unions.”

Syriza received one of its highest votes in the Piraeus B district, he notes, where the electorate includes many dockers and their families. He is proud of the part that he and other activists have played in winning the workers to Syriza – a process which took place largely outside the workplace, including through initiatives such as Solidarity for All in Piraeus, which provides food kitchens for workers without ever (unlike the food kitchens run by Golden Dawn) asking about their immigration status.

In 2011 and 2012 Gogos was following the debate within Syriza concerning Grexit. “I was following [Lapavitsas] during 2011 and 2012, for two years, I was following his speeches.” But ultimately Gogos decided that he agreed more with the Syriza leadership than with Lapavitsas or the Left Platform:

I was quite open to hearing such opinions but I was not persuaded that they have a clear answer especially for the first period of a transfer from the euro to a local currency. They didn’t convince me that they have something concrete to propose to the people for those first critical six months of transition. And you know, our society is not trained or educated to suffer under such terms. For example, if you leave the euro, the iPhone will be three or four times more expensive. I don’t care. I don’t give a damn. But many people give a damn about some items that they don’t even have the power to buy in euros. So I’m ready to wait for gasoline and to do my part and not to demand more but I know many guys around me that would be happy to simply take their share and their family’s share for the month. So I think we’re not trained well enough to confront such a danger.

There is not yet a “Greek revolution”, what we have rather is a left government trying to do what it can where the level of strikes has been falling for two years, where the strikes have been largely limited to the public sector, and where millions of ordinary Greeks – not merely the rich – have been removing their savings from the banks.

Whether Grexit will become a reality or not is likely to depend not only on the terms demanded by Berlin, nor only on the attempts by Syriza leadership to find a breathing space, but whether the likes of Giorgos Gogos reconsider and conclude that Lapavitsas or Varoufakis is in the right.

 

[em Português]