On the Austerity and Rule by Big Finance in Greece

This Real News Network interview nominally is about whether Greece should leave the Euro. But it is really about the struggle between the bondholders, who are crushing Greek democracy and society, versus the population. The interviewee Costas Lapavitsas makes an forceful case why defying the banks is the best route for Greek society, even thought the transition will also be difficult.


More at The Real News

Print Friendly
Tweet about this on Twitter20Digg thisShare on Reddit0Share on StumbleUpon0Share on Facebook0Share on LinkedIn0Share on Google+0Buffer this pageEmail this to someone

24 comments

  1. Blissex

    «But it is really about the struggle between the bondholders, who are crushing Greek democracy and society, versus the population.»

    I haven’t seen on TV column of ECB tanks rolling through the streets of Athens while IMF killer drones fly over, so it is hard to imagine how Greek democracy is being crushed.

    The Greek have made a democratic choice between bankruptcy or having a creditor friendly administration. They have democratically chosen the latter.

    At any point in time they can democratically choose bankruptcy instead, and indeed that «Costas Lapavitsas makes an forceful case why defying the banks is the best route for Greek society» means that it is a real option, and that the Greek democracy is functioning and that Greek society can choose their own path.

    Unless one makes the argument that the debts that are driving them to bankruptcy are “odious debt” in the USA sense, and therefore illegitimate, but that must mean that democracy has not existed in Greece for a decade at least, and thus Greece should be expelled from the EU for violating a fundamental treaty condition.

    1. Soullite

      Sure, if you ignore the meanings of words like ‘Democracy’, and ‘Democratically’, and ‘Chose’, then you’re absolutely right.

      In the real world though? You aren’t even close.

    2. Foppe

      Sorry, but what is a “fundamental treaty condition”? Is that one of those things that no member state except Spain ever met, and that Italy hadn’t even met on paper before being allowed to enter by the other EZ members?

      The Greek have made a democratic choice between bankruptcy or having a creditor friendly administration. They have democratically chosen the latter.

      Cool requirement. What government could they have voted for that would’ve opted for bankruptcy? I don’t really remember which party offered the choice you here list. And remember Iceland — even though the public voted to default, the government has screwed its citizens in any way it can.

      Anyway, I don’t really think your definition of legitimacy is very fair. It is easy to argue that it the actions the Greek govts have taken are institutionally legitimate, but beyond that?

      1. Blissex

        The “fundamental treaty condition” to be part of the EU is to be a functioning democracy.

        If Greece is no longer or has not been a functioning democracy since they asked for those debts, the debts are arguably (for debt to be “odious” it is not sufficient for government to be undemocratic) “odious” and illegitimate, but then Greece cannot be a member of the EU.

        1. Maju

          When I was like 21 y.o. I went to Strasbourg with an ecologist group and we were given the (I presume) usual “welcome to the EP” mini-conference by a MEP, a quite standard one, member of one of the institutional consensus parties (can’t recall which one exactly).

          He said that in regards to Hungary, Czechoslovakia, etc. (it was probably 1989 or so) that as soon as they became democracies they would be invited to join the EU. In the questions round I asked what would happen if any of these countries wanted to become democratic in the political aspects but remain socialist in the economic plane. Our host said that then no way, that “market economy” (capitalism by another name) was a fundamental condition to belong to EU.

          It’s not just democracy: if a country democratically decides to go communist or even mildly socialist, they’ll kick them. The EU is not a state but in what affects the economy and its regulations it is in all aspects.

    3. Eric377

      The borrowed funds were not stolen – they were spent as approved by legitimate Greek governments, popularly elected. The Greek debt equation of public spending supported by really ineffective tax collection was entirely popular with the majority of the population for many long years. Creditors do not want to strangle Greek society or democracy: they just want to get paid back as per Greece’s bond. If Greece can pay them back and also send every citizen a Mercedes I sure the bankers would be perfectly happy with that arrangement. Look to, say, Ireland, if you want something closer to a true Greek tragedy.

      1. KnotRP

        So we have no problem with the fact that “legitimate Greek governments, popularly elected” engaged in various “financial innovations”, with the assistance of international bankers, to bury the fact that Greece’s debt didn’t meet the Euro entry requirements? What’s a little governmental fiduciary malfeasance and treaty fraud amongst legitimate governments, eh? They were “popularly elected” after all, so somehow in your imagination that makes malfeasance and fraud “ok”?

        You keep using that word “legitimate”; I do not think it means what you think it means….

        1. lambert strether

          Fine word, “legitimate.” IIRC, Golden Sacks helped the Greek government finagle its accounts so it could meet the EU entry requirements. Is it too much to imagine that GS saw this day, and made money on the entry play, and also on the exit play, say by picking up privatized infrastructure on the cheap?

          If so, who said central planning was impossible?

        2. Blissex

          «So we have no problem with the fact that “legitimate Greek governments, popularly elected” engaged in various “financial innovations”, with the assistance of international bankers, to bury the fact that Greece’s debt didn’t meet the Euro entry requirements?»

          Greece is a sovereign democracy, and that is an internal problem for Greece and for Greek voters to solve.

          In the past several years they have “solved” it by re-electing the same parties and people, and thus fully endorsing whatever they have done.

          Democracy is principally a way to make voters accountable for the politicians they choose, not to ensure good government or a prosperous economy (or even to make politicians accountable to voters).

          If the Greek voters have voted for frauds and scoundrels, that was their choice and mistake, and they suffer the consequences. Next time they should vote more carefully, if they wish tom do so; but that accountability is inescapable.

          Same for Italy, for example: there is little doubt that Italian voters have kept re-electing Berlusconi being fully aware that he and his allies were “lovable” frauds and scoundrels, and they endorsed their actions repeatedly.

          Same for the USA too: there is little doubt that USA voters have kept re-electing with full awareness Presidents and representatives who have enacted PATRIOT, Guantanamo, TARP and commmitted proudly many violations of international laws of war. All these are on the head of USA voters.

          Every time the USA tortures someone or get someone tortured by their partners, the torturers know that USA voters are cheering them on, and the victims know that too. Every time a USA banker withdraws a large chunk from a bonus pool refilled by the government with free money, he knows that he is fully entitled to that because such is the popular will.

          Democracy is not a game where those who vote can cast a ballot and then blame someone else. It is all about accountability of voters for whom they elect and their actions. Elect the wrong people, pay for it.

          1. Maju

            Accountability of voters? Or accountability of elected managers? Of course voters should think who they vote and, in representative democracy, we hope that the majority (or more commonly the plurality, because systems are rigged so a party can rule with just 30% support and such) choose correctly.

            But in democracy it is elect (or secondarily appointed) managers who are accountable: private individuals are accountable for their private actions not for what the state does. Otherwise abstentionists or those who voted for minority parties could claim exemption from responsibility, after all they never voted those mafiosi.

            In Greece not a single corrupt politician, not a single corrupt businessman, not a single corrupt bankster has been imprisoned. And you want the people to pay for their crimes?!

            You do not understand what democracy and equality before the law means: it means that those who comitted the crimes must pay, so the debt must be privatized on the shoulders of those who created it for their own benefit: it is the Greek banksters and businessmen, but also the European and American financiers who must accept that burden as punishment for their reckless actions.

            And Goldman Sachs has much of the responsibility in the Greek case, yet, instead of being punished as they deserve, they get the “technocrat” government (without elections, mind you!) and get the Nazis in it.

            Beware!

      2. curlydan

        Creditors also should have known what type of tax collection Greece was running and charged higher rates. That would have reduced Greece’s borrowing with higher rates and helped reduce their (hopefully) future losses by less money lent and higher interest. Both the borrower and lender are at fault–both should suffer the penalties.

      3. bobh

        Let me get this straight, Eric. Greeks should work their butts off for the rest of their lives to make interest payments on foolishly acquired debt that can never be paid off because it would be morally wrong for them to default on paying back loans that raised their standard of living in the past. But if they do decide to default, the bankers who own all of this bad debt will need to be made whole by taxpayers around the world or, failing that, will have to default on their own bonds over a long weekend, close their offices, spend a few months living on their yachts in Corfu and then start up a hedge fund that invests in lucrative credit default swaps on sovereign drachma bonds. What am I missing?

        1. Maju

          “Morally wrong”?!

          Morally wrong is to allow that your children are enslaved by Goldman and the other banksters. That is morally wrong!

          And it is very morally wrong to demand anyone to sell their children or otherwise suffer beyond reasonable to pay for any debt. That’s why the US constitution enshrines the right to bankruptcy: to prevent debt slavery and usury. True that the US constitution does not apply to Greece but the universal moral principles are the same everywhere and do apply.

          “spend a few months living on their yachts in Corfu”

          What yatchs? You live in a very fictitious reality and you are a shameless hypocrite.

          The Greek average salary is €700 but costs are even more expensive than in Germany (because they have almost no welfare, unlike Germans, which decreases the cost of life, and because they are bound to import from Germany and other core European countries.

    4. casin

      It is always helpful to refer back to the facts:
      As Costas expresses, the Greeks are in debt because somebody actually gave them the cash…no? Don’t “the lenders” have any responsibility?
      Then you have Papandreos calling for a referendum to ascertain whether “the people” democratically decide whether to repay that debt or not. That’s a “democratic” way. no?
      What happened next is that an un-elected government was appointed.. is that democracy at work?
      I suggest that calling what’s going on in Greece now could be called many things… Democracy is not one of them.

      1. Blissex

        «As Costas expresses, the Greeks are in debt because somebody actually gave them the cash…no? Don’t “the lenders” have any responsibility?»

        The responsibility is with the European regulators who put the debt of all European sovereign states in the topmost category.

        Banks legitimately took that to mean that they were effectively (but nor formally) backstopped jointly and severally and thus nearly risk-free, and thus they all got the same low interest rate.

        The whole mess started when Merkel told the world that sovereign debt held by private investors was not backstopped using the term «private sector involvement»:

        http://seekingalpha.com/article/297412-germany-s-catastrophic-euro-mistake

        At that point investors realized that Euro sovereign debt was not essentially risk free, and priced it according to individual country risk, not whole-Europe risk. BANG!

        «What happened next is that an un-elected government was appointed.. is that democracy at work?»

        The government has been democratically elected by parliament and got parliament’s confidence vote.

        Just like in Italy. And the reason why non-politicians were democratically elected by parliament to government is that politicians want eventually to be re-elected to parliament, and are trying to dissociate themselves from the government (even if they voted democratically for it).

        A simple public relations trick: they are electing a temporary government, and then they will blame it for whatever it does.

        1. Maju

          “The responsibility is with the European regulators who put the debt of all European sovereign states in the topmost category”.

          That is false: the EU does not rate debt. If anything it’d be the fault of US-based rating agencies, I presume (there are no major EU-based rating agencies either and there has been talk of outlawing them altogether, as their practices are considered too close to “market manipulation”).

          “The government has been democratically elected by parliament and got parliament’s confidence vote”.

          There should be elections: it is crystal clear. If there are elections however the left (Syriza and KKE) will grab 30% of the votes or more (who knows: the Greek people is really angry).

          However, provisionally, I partly agree with the national unity government for one single reason: it puts all the thieves together in sharing the responsibility and ND or the fascists can’t so easily get away with blaming PASOK alone. But I hope this government falls soon anyhow and elections are called, so democracy is put to work again and those who oppose Brussels and the IMF may win instead.

          “Just like in Italy”.

          Which parties exactly support the Goldman Sachs government in Italy? I was not able yet to figure out, however he must be approved by parliament and so must its budgets and law projects, so he must have the support of a majority of deputies and senators. It’s not like politicians can really get detached.

  2. Susan the other

    Greece is for Greece to decide not in editorials but in action. It is already out of our hands and out of anyone’s control. Whatever happens, no matter how long it takes, will be fair. Fairness will prevail. Because? It is impossible for fairness to fail.

  3. steve from virginia

    The underlying argument behind this article and so many others (most of them) is that there is some sort of alternative to austerity that can be chosen.

    The future of modernity is austerity, there is no option. Ours is a waste-based economy that cannot pay its own way. Endless credit is necessary which is impossible which is the downfall of the euro and Greece.

    The real problem is the Europeans live far beyond their energy means, like every state besides Norway and Denmark must borrow in order to have fuel to waste. It is not debt that crushes Greece but its automobile fleet which does not earn anything by its use.

    Greece wriggling out of its debt will solve nothing. Only stringent energy conservation will do, which means austerity. The alternative to voluntary austerity is that imposed by the force of events.

    Technically, when Greece defaults, it becomes a client state to Iran’s mullahs for the benefit of diminishing numbers of Greek drivers. Society must endure hyperinflation, it becomes dependent on black marketers and smuggling, mafias and terrorists. This is also the fate of the other European countries … eventually the fate of all the countries.

    Recession is conservation by other means. The problem is at the end of everyone’s driveways, not the euro.

    The euro was just an energy hedge, like the USA- and Japan asset bubbles and Japan’s reactor build. FAIL!

    1. Maju

      Austerity for whom? Austerity for those who have nothing, consume little and have a tiny ecological footprint? Or a fair austerity for those who have a lot, consume a lot and have a huge ecological footprint?

      Of course we must change the focus of the economy towards less consumerism, what means getting rid of markets altogether (or nearly so) but you can’t put the burden of this necessary change on the shoulders of those who are not having excesses of any kind.

      I doubt that Greece, specially the Greek workers live “beyond their energy means”. Maybe the upper classes, those who don’t pay almost any taxes and enjoy all the benefits, do. Well, for sure they do because those classes and their associated state expenditure in, for example, police or military, which defend their privileges, are the ones who cause most of the environmental footprint of any country.

      It’s not the people, mostly not: it’s the rich, their wasteful industries and their wasteful bourgeois state.

  4. Brian

    Greece has no choice but to go through austerity, that’s the price to be paid in being a part of massive credit bubbles. The real question is do they go through austerity to prop up insolvent and corrupt banks or go through austerity to put their country back together financially.

    Greece needs to leave the Euro and they need to do it now, but this will force them to live on what they take in taxes, and although they may be able to issue their own currency, it will at first only be accepted under tight monetary controls from other nations.

    Austerity is coming Greece as it’s coming for us all regardless, the question is: who are we going to do it for: ourselves or the bankers?

    1. Maju

      I keep thinking that Greece must not leave the euro (unless it goes the Cuban way – austerity but equality – which may be sustainable as Cuba has shown for half a century). If Greece leaves the euro in “market” conditions it’ll be a total disaster for the country (and the Eurozone altogether).

      Besides it’s not just Greece: it is, as we know, a generalized problem of all the Eurozone and one that must be solved together by a careful combo of:

      1. Monetarization of at least part of the debt, reducing the value of the euro to near dollar parity (what is generally good for the European economy and is another way of enforcing austerity: import austerity).

      2. Controlled bankruptcy.

      3. Nationalization of companies, notably banks, in order for the state to better manage the effects of (2).

      Germany can get out if they want: Germany’s destructive monetary policy is what is causing most of these problems and, anyhow, if anyone can get out of the euro without paying impossible prices for it in the middle of this crisis, that one is Germany.

Comments are closed.