Why solidarity with Syriza against the EU leaders is crucial
If anybody can remember a new Finance Minister (anywhere in the world) beginning his first press conference by announcing he is going to reinstate the cleaners made redundant by the previous Finance Minister let me know. When has anybody given a damn about cleaners? This was not just symbolism. It came from the lips of a man who has said that Syriza is going to destroy the oligarchic system in Greece. Whether they succeed is another matter. However, the first actions of the new government were directed at addressing the social catastrophe which the population has suffered as a result of the Greek version of austerity. They have also announced that they are halting plans to sell stakes in Greece’s biggest port and its main electricity provider. The importance of this is that both sales were demanded by the Troika.
The election of Syriza presents a big problem for the European rulers. They are nervous that a break with austerity and the logic of the dominant economic strategy will encourage a similar rejection in other countries, especially in Spain where Podemos is seen to be a similar threat. That’s why the outcome of the current situation in Greece is so critical. Will Syriza stand its ground or will it cave in to the intransigence of Merkel and the others, with the threat of the tap being turned off? Download a PDF here greece or read on below
For all the tough talk demanding Greece stick to the previous agreements, it may well be that the European leaders have a bigger problem than the new Greek government. The economic collapse of Greece and its exit from the Euro could drag down the Euro and them with it. Merkel and co are well aware of this danger. Paul Getty’s saying springs to mind: “If you owe the bank $100 dollars it’s your problem, if you owe the banks $100 million dollars it’s the bank’s problem.”
“A quasi-slave economy”
The fact is that the level of debt with which Greece is saddled precludes any real economic recovery. A recent Financial Times Editorial suggested that the current level of debt would reduce Greece to “a quasi-slave economy”.
“To service its debt burden would require Greece to operate as a quasi-slave economy, running a primary surplus of 5% of GDP for years purely for the benefit of its foreign creditors. Even the IMF has dropped hints in favour of debt forgiveness.”
The FT asks, what is the point of “demanding money back merely to hasten the bankruptcy of the Greek state?” Presumably, it suggests, its creditors would prefer to be paid in Euros rather than drachma. So, it says:
“A programme should be agreed that restores the Greek economy to a level where debt repayments become affordable. This could still be done so that creditors still do not take a write-down of the amount owed. The neatest way would be to link repayments with the level of Greek GDP.”
Even an authoritative mouthpiece of British capitalism like the Economist admits that Alexis Tsipras has “got two big things right”. Firstly that austerity has been “excessive”. Merkel’s policies “have been throttling the continent’s economy and have ushered in deflation.” The economist says that the belated introduction of quantitative easing by the European bank admits as much. Secondly, they agree that Greece’s debt is “unpayable”. Benevolently they suggest that the country should be granted “a forgiveness programme just like a bankrupt African country”. It’s just Tsipras’s “crazy socialism” that they have a problem with: his plans to rehire 12,000 redundant public sector workers, abandon privatisation and increase the minimum wage. Their advice to Tsipras is to stick to “structural reforms” in return for “debt forgiveness”. In other words, more of the same. The population must be impoverished in the quest for increased Greek “competitiveness”.
Yet even the Economist recognises that Merkel’s “obstinacy” is likely to backfire on her.
“So in the end, Greece will probably force Europe to make some hard choices…Greece’s voters may be living in a fools paradise if they think that Mr Tsipras can deliver what he says, but the Germans have to look at the consequences of their obstinacy. Five years after the onset of the Euro crisis, southern European countries remain stuck with near zero growth and blisteringly high unemployment. Deflation is setting in, so debt burdens rise despite fiscal austerity.”
If Merkel “continues to oppose all efforts to kick-start growth and banish deflation, she will condemn Europe to a lost decade even more debilitating than Japan’s in the 1990’s.”
The Economist fears that that would trigger “a bigger populist backlash than Greece’s, right across Europe.” That would produce the demise of the Euro from which Germany would be “the biggest loser”.
The London Conference
Notwithstanding the FT’s advice, Syriza’s position, as I understand it, is for at least 50% of the debt to be written off, a “significant moratorium” on debt payments, the purchase of Greek sovereign bonds under the ECB’s quantitative easing programme and for repayment to be linked to growth in GDP. It proposes a European debt conference modelled on the London conference of 1952 (an agreement was signed in 1953) when half of Germany’s debt was written off, and very favourable repayment terms were granted, helping to create the conditions for its post-war economic growth.
The political context was different, of course; the cold war. The US and Britain were concerned that unless war-torn Europe recovered economically then communism might spread westwards. At the same time the US economy which had profited enormously through the Second World War (its economy doubled) was faced with the danger of contraction if Europe was not able to buy its goods. The Marshall Plan devoted over 13 billion dollars (eleven of which were freely given) to restore 17 European countries. Germany was given $1.173 billion. In return the US demanded moves towards European unity, and insisted that the money received was used to buy US goods.
In the case of Germany they were conscious that the Weimar reparations created the conditions for the rise of the Nazi party to power. Germany’s pre-Second World War debt amounted to 22.6 billion marks. It’s post-war debt was estimated at 16.2 billion. In the London conference it was agreed that these sums would be reduced to 7.5 billion and 7 billion respectively, a 62% reduction. The debt service was linked to the countries reconstruction and exports. Its debt payments were limited to 5% of exports values. Payments were stretched out over 30 years.
In addition Germany was allowed to manufacture goods it previously imported. It could use its national currency to pay off debt. The London agreement held out the possibility of suspending payments and renegotiate conditions in the event of economic conditions limiting available resources.
The EU was formed on a ‘free market’ basis and when the Maastricht Treaty was introduced its criteria for the national economies included
A budget deficit of no more than 3% of GDP and
Overall government debt not to exceed 60% of GDP.
Yet when the global crash occurred these criteria were largely ignored when the major economies were in trouble. It is, of course, the powerful who insist on tough medicine for others whilst operating different criteria for themselves.
At any rate there is growing support for the idea of a debt conference. The emergence of deflation in the Euro zone has created a loss of nerve amongst the ranks of supporters of austerity.
The ‘four pillars’
The debt, of course, isn’t a technical issue. Syriza’s programme has offered relief from the consequences of austerity to its victims. It has said it will create 300,000 jobs and increase the minimum monthly wage from 580 Euros to 751. Syriza says it will rebuild Greece on ‘four pillars’:
Confronting the humanitarian crisis
Restarting the economy and promoting tax justice
Regaining employment, and
Transforming the political system to deepen democracy.
They have also promised 300,000 households under the poverty line up to 300kWh of free electricity per month and food subsidies for the same number of families who have no income. Whilst it might compromise on its positions, if it cannot offer material improvements to the victims of austerity then it will not last very long.
Any radical government faces the dual threat of ‘domestication’ to tame it or economic warfare as a means of crushing it. At this stage the EU leaders will pressure Syriza to compromise in such a way that Greece does not make a fundamental break with the politics of austerity. The initial signs are that they won’t. New Finance Minister Yanis Varoufakis has just given a representative of the ‘Troika’ (the EU, the ECB and the IMF) his marching orders, refusing to deal with them as a group. Suffering something of a culture shock, the head of the Eurogroup’s Finance Ministers, reportedly told him “you have just killed the Troika”. Varoufakis said “we have no intention of cooperating with a three member committee whose goal is to implement a programme which we consider to be anti-European”.1 Of course, pressure will be stepped up as the end of February approaches (see below). However, if Syriza forces them to retreat because of the consequence for the EU and the Euro of a Greek collapse then this will promote the struggle against austerity both in Greece and across Europe; the fear expressed by the Economist. Syriza has sought to develop links and build solidarity across Europe because it is well aware that the struggle cannot be won in Greece alone.
Notwithstanding one’s assessment of Syriza and any mistakes which it has and will make, all those who want to push back the neo-liberal tide, have a stake in the outcome of events in Greece. The question of debt write-off or ‘debt forgiveness’ is fundamental. It is absurd to blame ‘the Greek people’ as a whole for the dire state of the economy. The oligarchy which has dominated the country and refused to pay its taxes is responsible for the situation together with the politicians who accepted the neo-liberal orthodoxy. Why should the Greek working class be forced to pay the price in poverty and hunger? They are no more “all in it together” in Greece than they are in Britain.
As with any government which is the product of aspirations for fundamental change2 the movement which elected it will have the task of supporting it against those forces wishing to break it, whilst being vigilant against signs of retreat from its programme, and seeking to pressure it when necessary. Can the Party control the government? It is comprised of different currents and the actions of the government will inevitably create internal tensions. Yet it is the direction of travel that’s important. It’s mistakes can be overcome provided that it does not buckle in supporting a break from austerity. The key factor, though, is the level of mobilisation of the working class and the poor.
The first crunch date coming up is February 28th when Syriza will be expected to sign an extension to the bail-out deal or face the possibility of the withdrawal of 40 billion Euros supplied by the ECB to shore up the banks, being withdrawn. Pressure will be brought to bear to impose ‘moderation’ on the new government. Breaking with its commitments would mean that it could not address the humanitarian and social crisis which forms one of its ‘four pillars’. Standing its ground will put the ball firmly back into the court of the EU leaders. Do they want to risk the Euro going down the drain?
Already ‘the markets’ have moved to punish the new government for policies in the interests of the majority of the population. Greek Bank stocks have tumbled, the stock market plunged by 9%. And just to help out, the private company Standard & Poors revised its ‘Greek sovereign outlook rating’, the first step to a formal downgrade.
What Greece requires above all is pan-European solidarity from the labour and trade union movements and the victims of austerity. We all have a stake in the struggle which is taking place there. Whilst the impact of austerity in Britain has been nothing like as drastic as in Greece, as we approach the General Election in May, we should be conscious of the fact that the cuts which a re-elected Tory government is promising are worse than those suffered by us so far. It threatens to take us down the road towards Greek style conditions. However, if the EU leaders are forced to retreat in the face of a European movement in support of Syriza then it will undermine the rationale for austerity here and open up the possibility of a significant shift in the political situation throughout Europe, a change in the balance of power. If the political block in Europe which is demanding that Greece stick with it its austerity programme can be split and forced to retreat then the hope that has been ignited by the electoral victory of Syriza will spread farther afield. The struggle will be difficult. The ruling elites and ‘the markets’ will try to extinguish what they fear most, an example which could spread elsewhere and threaten their domination.
February 1st 2015
For up to date information in English here are a few websites.
UK based Greece Solidarity Campaign
Syriza English page
Analyse Greece. A Greek English language website supportive of Syriza.
1Syriza’s view of the European Union and its “European partners” merits separate treatment.
2Only some of its supporters want fundamental change, others just wanted to try something different because the others were so bad.