Greece entered a new phase of uncertainty as the country went through an amazing roller-coaster ride in July. Barely a week after the Syriza-led coalition won a massive No in the referendum on the eurozone’s conditionalities for a fresh bailout package, the government agreed to a fresh package, which to most observers was indistinguishable from the earlier ones placed on the table. How a popular No was converted into a Yes by a government whose raison d’etre was opposition to the savage austerity that has been heaped on Greece in the last five years is perhaps a coup of its own kind.
The referendum of July 5 was conducted in the most trying of circumstances. While the Greek media, which are curiously funded by public banks even if privately owned, hammered away at the notion that all would be lost if the people voted No, the European Central Bank (ECB) starved the Greek banks of liquidity, which created a severe scarcity of euros at ATMs across the country as people went to the polls. Yet, 61 per cent of the people voted No to the bailout proposals, which were widely seen as being a collective punishment for having voted a left-wing government into office.
Yet, it was obvious that a No alone would not be enough. The first casualty occurred on the very night of the referendum when Yanis Varoufakis, the Finance Minister and the man who won the highest number of votes in the last parliamentary elections, resigned. The exit of Varoufakis, who had been a professor of economics in Australia before he took over the political reins in Athens and who was a persistent thorn in the side of the bosses in Brussels, proved ominous. In his unconventional style, Varoufakis explained (significantly, through his blog and not before TV cameras) that he was exiting in order to allow Prime Minister Alexis Tsipras a free hand in the negotiations that were due on July 13 at the Eurozone Summit, which brings together representatives of the 18 countries that are linked to the euro.
Varoufakis’ exit was more than merely symbolic. For months, the media had focussed on his love for motorbikes and his preference for leather jackets while the glitterati of the world of finance strutted about in three-piece suits. The media also ignored his status as an economist of some standing, especially in the realm of macroeconomics of which he could teach those in Brussels a thing or two. Absent in the popular media’s portrayal of Varoufakis were his magisterial tomes on the origins and causes of the crisis in the eurozone (especially his latest book, The Global Minotaur: America, Europe and the Future of the Global Economy , Zed Books, 2013). Instead, it portrayed him as a maverick and a reckless gambler. In his blog post announcing his resignation, Varoufakis said: “I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.” And as a parting shot at the mandarins in Brussels, he said: “And I shall wear the creditors’ loathing with pride.”
In his first reaction to the Brussels agreement, Varoufakis likened it to a “New Versailles Treaty that is haunting Europe”, much like the one imposed on Germany after the First World War, and termed the agreement “Greece’s Terms of Surrender”. In his first interview after his resignation, with the Australian Broadcasting Corporation (ABC), which was broadcast after the Brussels agreement, Varoufakis said he remained committed to remaining in politics. “I am not a fair-weather sailor,” he told the interviewer, Phillip Adams. He said he preferred to remain “a backbencher” because it gave him “more room for manoeuvre and for speaking the truth, instead of having to worry about phrasing it in diplomatic terms”.
Capitulation in Brussels
On July 13, at the meeting with the Eurogroup, Tsipras agreed to the conditionalities in exchange for a 86-billion-euro (about $95 billion) bailout package. The key elements of the package had all the usual suspects that are key to such bailouts. Tsipras, accompanied by the new Finance Minister, Euclid Tsakalotos, widely portrayed as the very antithesis of Varoufakis, virtually signed on the dotted line at Brussels. Regarding the pension reforms demanded by the Eurogroup, he committed to increasing the pension age and eliminating exceptions that allowed some categories of workers to retire earlier. He also promised to undertake reforms to make pension funds self-sustaining, shorthand for making them more dependent on the vagaries of the market.
Regarding tax reforms, Tsipras agreed to broaden the tax net to include more products, apart, of course, from increasing rates. Significantly, critics have pointed out that faltering growth will actually result in lower tax mobilisation, which would defeat the very purpose of the increased rates of tax. Tsipras also agreed to undertake far-reaching reforms in the judicial system and the administration by amending Greece’s Code of Civil Procedure to “speed up” decision-making. Critics see this as a means of facilitating the deepening of global capital in Greece, especially by allowing for the privatisation of Greek national assets. Tsipras also agreed to undertake reforms relating to banks, the national budget and national accounting—far-reaching changes aimed at allowing European technocrats greater say in how budgets are to be disbursed. Among them are moves to “automate” spending cuts, placing them outside the purview of political authority, a clear abridgment of national sovereignty. He also agreed to amend banking laws to make them European Union-compatible, in effect paving the way for the winding up of “failed” banks in Greece.
In the name of removing traditional “oligarchies”, Tsipras agreed to open up Greek small enterprises such as maritime trading companies, pharmacies, bakeries and milk producers to competition from producers elsewhere in Europe. Tsipras also agreed to undertake labour reforms in order to implement European “best practices” in relation to labour’s collective bargaining, strikes and layoffs of workers. Also on the anvil is a commitment to scale down Greece’s “bloated” public services. Pathetically, the argument is that by implementing such demands Syriza will enhance its support base among youth, who would get the jobs stolen from older folk.
But the sting in the tail came with Tsipras’ undertaking that the government would unleash an aggressive round of privatisation. Everything is now on the table, including even ancient Greek ruins and Greece’s islands in the Mediterranean! The assets are to be shifted into a special purpose vehicle that would then sell them off. As Varoufakis has said, no Greek is ever likely to see the funds that would accrue from the sale of these assets because most of the money will directly move into the accounts of the banks that own Greek debt. In particular, “valuable Greek assets” are to be moved into the special purpose vehicle with the objective of realising sales to the tune of €50 billion (about $55 billion). Although Germany had initially demanded that the fund be based in Luxembourg, it later offered a symbolic concession by letting it remain in Athens. Varoufakis estimates that the value of assets has been exaggerated, indicating that premier Greek assets, such as its electricity network, are likely to be sold off at bargain prices.
To comprehend the extent of the capitulation that Tsipras made in Brussels, it is instructive to quote from the first paragraph of the declaration made on July 13. It said: “The Euro Summit stresses the crucial need to rebuild trust with the Greek authorities as a prerequisite for a possible future agreement on a new ESM (European Stability Mechanism) programme. In this context, the ownership by the Greek authorities is key, and successful implementation should follow policy commitments.” As ironies go, this surely takes the cake, observes Yves Smith in her popular blog “Naked Capitalism”: “One doesn’t know whether to laugh or cry at the idea that Greece owns this programme. Yet the statement is right to say that ownership is crucial. Greek national pride will be bound up with recoiling at these constraints and releasing them. If the Greek parliament, lacking better alternatives, passes the laws demanded of it this week, there’s little reason to suppose that future governments—which will doubtless appear sooner rather than later—will feel bound by them.” On July 15, Varoufakis helpfully posted an annotated version on his blog, clearly aimed at an audience that is keen to strip the text of agreement of its officialese.
Delivering a televised speech on July 15, Tsipras admitted that the deal was a “bad” one but that Greece had no other option if it wished to remain within the eurozone. He said he did not “believe in the deal” and termed the negotiations “a bad night for Europe”. The capitulation at Brussels has prompted speculation about a snap election, which even some leaders within Syriza, such as Varoufakis, expect sooner rather than later.
Strife within Syriza
To make matters worse for Tsipras, he has to cross a number of hurdles while maintaining a tight schedule in order to get his hands on the bailout package. The first of these is to get the Hellenic Parliament to pass the relevant legislation. Ironically, while the left-wing faction within Syriza has maintained a sustained opposition to such a proposal, Tsipras may draw support from pro-euro opposition parties, the very same that brought Greece to this pass. Syriza’s junior partner, the Independent Greeks, has affirmed its opposition to the deal, especially the provisions that may result in thousands of Greeks losing their homes if they default on their mortgages. The popular anger and revulsion that Tsipras’ alliance with new-found friends may spark would obviously imply a crisis of legitimacy for Syriza, at least if he heads it.
Within hours of the announcement of the deal, Greek unions of civil servants and local government employees declared their plans for a series of demonstrations, the first since Syriza formed the government in January. Ironically, it was Syriza that was at the forefront of demonstrations in 2010 and 2012 when the then Greek government signed the two previous bailouts totalling about €230 billion (about $242 billion).
Scholars, scientists, economists, sociologists and political analysts from across the world (including Achin Vanaik from India) gathered at Delphi on June 20-21 to adopt the Delphi Initiative, which called on all people of Europe, including Germany, for “a radical restructuring of Greek debt” and for moves that would “control the activities of the financial sector”. It noted that European governments, European institutions and the International Monetary Fund (IMF) were acting in “close alliance with, if not under the direct control of, big international banks and other financial institutions”.
Speaking at Delphi, Michael Hudson, a professor of economics at the University of Missouri, pointed out that finance had become “the new mode of warfare”. “Financial interests want exactly what military invasions in the past wanted. They want the land, the raw materials including oil and natural gas and all the other public utilities,” he observed. “They want to lend to a point where the governments cannot pay, and then they want to buy what is in public domain,” Hudson pointed out, referring to the Greek case.
Since May 2010, when the troika—the European Commission, the ECB and the IMF—initiated the first bailout, it has unleashed “reforms” in Greece that have been socially and economically catastrophic, regarded as the worst in Europe since the Second World War. Greece’s nominal national income has fallen 27 per cent since then—more than 40 per cent in real terms—more than the material losses suffered by either France or Germany during the First World War. Unemployment rates have increased to almost 30 per cent, with rates among youth being more than 50 per cent. Living standards have plummeted and the welfare system is in tatters, and the consequences are poignantly reflected by a dramatic increase in the suicide rate in just five years. Greece has reduced its fiscal deficit from 15.6 per cent of the gross domestic product in 2009 to 2.5 per cent in 2014, a scale of deficit reduction not undertaken anywhere else in the world. Under the austere gaze of the troika, Greece has already undertaken substantial pension reforms: from a country that had among the lowest average retirement ages, it now has the highest. “This,” as the Marxist economist Michael Roberts wryly notes, has been “austerity at its finest”. Syriza had even before July agreed to raise social security contributions and tax rates and to cut pensions over time and promised to sell off a range of national assets. Yet, the two key objectives of the aggressive slash-and-burn policy—the reduction in Greece’s debt and the recovery of its economy—remain distant dreams.
No to the troika Stathis Kouvelakis, who teaches political theory at King’s College London and is a member of Syriza’s central committee, has argued vehemently against the party’s capitulation in Brussels after the referendum. In a recent interview with Jacobin magazine, Kouvelakis, who claims he was “privy” to detailed Cabinet discussions that preceded the announcement of the referendum, observed that the No vote was aimed at strengthening the hands of the Tsipras government in its negotiations with the bosses in Brussels. He said the referendum was perhaps the most “class-divided” in Greek electoral history. While the No vote was in a majority in every single county in Greece, in working-class areas the No vote consistently gathered more than 70 per cent of the votes polled. But the converse was also true: in upper-class localities, the Yes vote gathered more than 70 per cent of the votes, indicating the extent of class polarisation on the issue of Greece’s relationship with the euro. The closure of banks and the limits on daily cash withdrawals angered the masses even more, especially when they could clearly associate their misery with not only the bosses of the eurozone but also the elite within Greek society.
Even more significantly, but not surprisingly, more than four-fifths of youths in the 18-24 age group voted No. “This generation, which has been completely sacrificed by the memorandum, is very aware of the future ahead of it and has a clear attitude with regards to Europe,” said Kouvelakis. “Young Greeks have seen what the European project has been all about: Europe is about austerity, Europe is about blackmailing democratic governments, Europe is about destroying our future,” said the Syriza leader. Even in parts of Greece that were not by any means Syriza’s strongholds, people voted No because they saw the protracted negotiations in Brussels as nothing but an affront to a duly elected popular government.
Kouvelakis, who campaigned for the No vote, said the scale of the victory surprised him, as it did most others. Recounting his campaign, he said people everywhere wanted to know what Syriza planned to do if they rejected the proposals of the eurozone bosses, especially the troika. In hindsight, the lack of clarity on this within the Syriza leadership provides a clue as to why it made the turnabout that is now being portrayed as a betrayal or even a coup. Commenting on Tsipras’ about-turn after the referendum, Kouvelakis said: “It is clear to both international public opinion and Greek society that Tsipras is betraying a popular mandate.”
The Grexit option
However, there is some evidence that Varoufakis and some others were working on an alternative plan in the week leading up to the referendum, essentially preparing a Plan B in the face of an intransigent resistance to Greece’s proposal for a restructuring of its debt. Varoufakis, who has admitted that he was preparing for Greece’s exit from the eurozone “from Day One”, said elements of such a plan included state control of some banks (at least those that were committed to lending to finance an economic recovery in Greece), disconnecting the ties between the Greek banking sector and the ECB, and other measures that prepared Greece for a gradual exit from the clutches of the eurozone.
Costas Lapavitsas, professor in economics at the School of Oriental and African Studies, London, said while he understood the reasons for Varoufakis’ stepping down, following months of ridicule from not only the Western media but also from the European mandarins of finance, he was “worried” about how radical his successor would be. Lapavitsas, also a Syriza MP, has been among the critics who have been calling on Syriza to develop an independent track of options irrespective of what happens in the negotiations with the troika. For instance, he has said that Syriza needs to take radical measures quickly with respect to banks. “It (Syriza) needs to put the knife in…. It needs to sort the problem of the banks out. Banks need to be nationalised and run centrally very quickly,” he said in a recent interview. Lapavitsas also called for measures that would control and discipline big business in Greece, which has been significantly responsible for the crisis in which the Greek people now find themselves.
Varoufakis explained, in the ABC interview cited earlier, that Syriza never seriously explored the option of opting out of the eurozone. Although Syriza has, in its public pronouncements, always maintained that it could never do this because it never had the mandate to take Greece out of the eurozone, this does not quite explain everything. After all, without the threat of Grexit, it never seriously had sufficient leverage in its negotiations with the troika. What then explains Syriza’s unpreparedness?
Varoufakis’ radio interview, his first articulation of the reasons for his departure from the government, provides some clues. He pointed out that reverting to the drachma was never a serious option because it would have taken at least several months of preparation to do so. He pointed out that the United States in occupied Iraq took almost a year to introduce new paper money. “It is a nightmare, the introduction of a new national currency,” Varoufakis said. However, he revealed that he had a “secret team” that had made a contingency plan in case Greece was forced out of the eurozone. However, he pointed out that the government faced a conundrum if it scaled up preparations for such an eventuality. “The moment the number of people involved in such an exercise increases from five to 500, which is the minimum that is needed for its actual implementation, then it becomes public knowledge,” he explained. “The moment it becomes public knowledge, the power of prophecy creates a dynamic of its own, and you are out of the euro before you realise it,” he said. “We never made the transition from five to 500, we never felt we had the mandate to do this, and we never planned to do this.”
Impossible triangle
Even before the Syriza-led government assumed office in January, Michael Roberts in his blog made the extremely perceptive observation that the party faced an “impossible triangle” of political choices. He pointed out that the party had to choose among three possible courses: reverse austerity, stay in the eurozone or retain political power. He predicted then that all three choices were not open to Syriza simultaneously. In a recent post in his blog, he suggested that while Syriza had not understood this the troika had figured it out pretty quickly and proceeded to break this triangle. Roberts also pointed out that more than 90 per cent of all the loans the troika provided Greece in the past five years have simply flowed back to creditors “without touching the sides of the Greek economy”.
Roberts also predicted last January that Syriza would come under severe pressure—from the troika from above and the groundswell of popular opinion from below demanding a better deal in terms of jobs, social security and the basic aspects of life. “If Syriza cannot or won’t respond to that pressure, then it will split or its supporters will become disillusioned and Syriza will fall back,” Roberts had predicted then. In yet another telling observation, which is suddenly so relevant to the Greece of today, Roberts commented: “Syriza is divided between those like Tsakalotos who look for a ‘social market’ solution within the eurozone and those like Costas Lapavitsas who reckon [that] the only answer is for Greece to leave the eurozone.”
That prophecy is what is being played out in Greece today. As the Greeks run out of options, the choice of running to the exits of the eurozone appears far more respectable after the humiliation it has suffered at the hands of the mandarins of global finance. In a sense, that would mark the end of the loftier dream of the larger European Project, one that was supposed to provide deliverance from centuries of war, strife and suffering in the continent. But why should it fall on this ancient civilisation to carry that great load of history if it is only to be sacrificed at the altar of global finance without any solidarity from all those who belong to Europe?
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