Michael Hudson, in the Real News Network segment, stresses that the bailouts (with tons of hairshirt measures) being imposed on Greece do not have the consent of the population. Hudson exaggerates a bit on how the debt was entered into. However, a critical aspect is that, as Floyd Norris pointed out, the overwhelming majority of the borrowings are subject to Greek law. That means Greece could repudiate that with no legal consequence. And collecting on the portion under English law would not be a party.
But a far more serious issue is the Greek banking system would collapse unless there was an immediate (or done over the course of a one week banking holiday) switch back to the drachma. Even then, the planning would need to be done in absolute secrecy, since if the public were to get a clue that this sort of move were in store, you’d see immediate capital flight. This is, to put it mildly, daunting.
Martin Wolf has argued in conversation that the ferocity of Greek protests (as opposed to, say, in Ireland) is due to the fact that it is the continuation of an unresolved civil war. Even so, civil disobedience has a way of being contagious, and if the Greeks are perceived to accomplish something, it may change attitudes in formerly complacent but unhappy groups in other countries.
From Real News Network:
Is there no mechanism in Greece for recalling these politicians? I don’t see how the Greek government can pretend to be legitimate when there are 100,000’s in the streets protesting its actions and 10% approval.
No, unfortunately not. The whole system is built around the undisputed authority and power of the Prime Minister. Although there is a theoretical distinction between the branches (executive, legislative, judicial), it’s the government that makes the laws, the MPs have to always adhere to party discipline (the PM, as also head of the ruling party, gets to pick who runs for an MP), and it is the government that gets to choose and appoint members of the three supreme courts (each one overseeing the judicial system, executive decisions and fiscal audit respectively) . The Council of the Realm (the supreme court overseeing executive decisions) used to be more independent, but consequent constitutional changes were designed to effectively gut it, since it had a pretty strong stance against environmental violations, and hence major construction interests.
So, there you have it…
Hmmm, well there is a party in opposition to all of this, right? When is the next election? It feels like the Greeks have been demonstrating (rightly so) for almost 2 years now and nothing has changed in their government.
The main “opposition” party used to be New Democracy, the conservatives that are blamed for all the economical disaster (the PASOK is “only” managing the crisis they have not, mostly not, generated – even if they are doing it against the people’s will and with little or no statesmanship). New Democracy has no legitimacy and I doubt it would win or even make any gains in any upcoming election soon.
So what’s left? The KKE (the classical pro-Soviet communists), Syriza (coalition of the radical left) and its main component, Synaspismós (heir of the Eurocommunists). Even if their positions are somewhat similar the two leftist blocs don’t get along at all.
Because of the deep crisis, Syriza expects to approach 20% of the vote according to current polls, even if they only gathered 5% in 2009. The KKE has received some 8% of the vote in last elections but they can probably expect to improve their outcome in the near future, although they can’t raise as much support as the more open-minded Syriza bloc.
There’s also an extreme right “orthodox” (nationalist-fundamentalist) party which, I guess, may also cater in the discontent. But I understand that the real doubt is about how much Syriza and the KKE grow (that they will), how much the bipartite (PASOK and New Democracy) collapse (that they will no doubt) and how many people abstain.
But the greatest doubt of all is when will the PASOK, knowing that has no legitimacy whatsoever, call elections that they and their traditional rivals will lose.
Excellent analysis of the political landscape. Only a minor correction, the forecasted percentages of the two left-wing parties are inverted. About 8% for Synaspismos and 13-14% for KKE.
As for a breach in PASOK, I wouldn’t rule it out. PASOK has proved again and again that is superior at adapting and surviving, by shifting its position in the political spectrum. A group of PASOK “dissidents” could declare that they abandon the neoliberal agenda, return to the root values of the party, and continue business as usual, either by forming a “True PASOK” or by forcing a change in leadership after the certain defeat in elections. It has the potential that they could pull it off, since it would promise both change and that the old ways could carry on. People would prefer that, even for a little bit, instead of facing TEOTWAYKI (the end of the world as you know it).
The peronistas in Argentina did exactly that (Menem to Kirchner).
No legal non-revolutionary way until their term is over in 2013 or there are internal breaches within PASOK, most unlikely. By then the country will be totally ravaged, sold out, demoralized and new debt would have accumulated to brutal levels (a timely bankruptcy prevents further debt).
If only it were so… Even a default only means further accumulation of debt. Craziness!
The problem is, the bailout now constitutes almost one third of the Greek debt. If Greece defaults, unless it goes for the nuclear option (refuses to pay even the debts to IMF and EFSF/ECB), that would only entail Greek bonds. In essence, and that’s what the current Francogermanic plan is all about, it will be just another bail out of major european banks. After that, Greece will be solely depended on EU “aid”, ie more debt.
In Greece, the trash isn’t being collected. Violent crime is up and people are starting to form vigilante squads.
The government will be gone within a year if this trend continues. Well, it may still claim to be the government, but there will be a new effective government — that is how these things work. Once government stops providing basic services, he who provides basic services BECOMES the government.
Amazingly, it seems like the Eurocrats haven’t even noticed that Greece is about to acquire a new government by spontaneous revolution.
Well, to put it in English terms, the ruling party is New Labour, and the opposing is Cameron’s Tories. And even better, the leaders used to be roommates in Harvard. Talking about change…
Or, in American terms, it’s like the Democrat Obama pushing for Social Security cuts and the alternative is Republicans who want to privatize and/or dismantle it.
If anyone wants an idea of why Greece is the way it is fiscally, Kyle Bass has a humorous recap of his visit there:
Having lived in Greece for a couple years, I can say nothing got done without a bribe. The entire system was corrupt there, whether it be getting supplies at the docks in Piraeus, to the local auto mechanic.
Thanks for this piece.
In a related note, this past week in /Cargo Business News/ a Greek shipping magnate was complaining about piracy on the high seas. Greece, as I’m sure you know, is #4 in the world for merchant shipping capacity–behind Japan, Germany, and China–where it used to be #1. Greece’s fall from shipping dominance has many causes, including in part the corruption of which you speak, and a failure to keep pace…but let’s not digress there. There is another cause as well: too much dependence on/expectation of bailouts to businesses.
This magnate was saying at a big maritime transport conference that he’s totally opposed to the currently favored piracy solution of training up ships’ crews to protect themselves with boomsticks and other effective fight-back technology. (Which BTW is the solution I support.)
That’s totally wrong, quoth he, because it puts pressure on ship owners to pay for the security of their own vessels!
Who should be paying to protect the private owners’ private ships and private cargoes in his view?
Why, “The Military” of course.
Government, said he. For in his view of the world, private individuals make private fortunes using a commons resource–international waters–for private trading, often with government contracts backstopping that trade. But it should be up to OTHER nations to police those waters. Not the ship owners to secure their vessels. (Till now ship owners have chosen just to give pirates whatever they want, then write it off to their insurers, a practice that Lloyd’s, and maritime workers, find increasingly unsatisfactory.)
Meaning that you and I are supposed to pay (via military budget) for Greek shipping magnates’ profits.
Sorry, Greece, but yall can, er, bite me.
I always thought the EU scheme was nuts because you really can’t combine a fiscal culture like Germany’s with a fiscal culture like Greece’s and expect it to go well. For several decades it was assumed that the Euro’s magical properties would mediate and level all these differences through the miracle of “free” “trade”…but instead it just magnified them. Big surprise there, eh?
What I’m waiting for is Kyle Bass’s (and others’) any-day-now window for Japan’s sharp downturn. Why? Because the bulk of Japan’s merchant fleet is registered in America (Panama); Japan leads the world in merchant ship registration. There is likely to be some hefty investment options in a few years as Japanese shipowners/lines start liquidating their holdings. It is very very sad that Japan destroyed its real economy with bubblenomics. Maybe more prudent nations/systems can do better with its assets. I can’t personally afford a breakbulk vessel, but I might have a few bucks to throw at Maersk.
The Greeks may not “consent” to austerity programs; I can understand why and feel compassion for their pain. But for a long time now they’ve been letting their fiscal house get out of order. So that now the possibility of good progressive reform is pretty much dead, and nothing is left but the globalista bankster jackals. Way to go, Greece! Molon fucking labe indeed!
Where is Themistocles when you need him?
PS–I don’t mean to oversimplify Greece’s situation, nor sound harsh, and of course I’m open to hearing otherwise from folks in that zone. But for 40 years now I’ve been watching Greece from a maritime industry point of view. It’s been like watching a train wreck at one one-millionth speed. A lot of those “businesses” that tout themselves as saviors of the planet left Greece, or threaten to leave, because the bulging teat of public assistance–which they pumped up with their need for that sort of bling to be profitable–is about to pop.
It’s easy to blame the Greek “government” for that; I sometimes do. But this shipping magnate’s comment is all too symptomatic of the deeper sickness. “Government” is becoming a straw man that everyone likes to burn, while demanding it spins itself into gold, Rumplestiltskin style, and magically make all business-caused problems go away. Add a culture of corruption and basic laziness to that, and a populace that was happy for a long time to go along to get along…well, I just can’t imagine why everyone is so surprised by how things are going, that’s all.
Greek “shipping capacity” has been replaced by Liberia. It used to be a convenience flag mostly and not so much a national industry (though there are some exceptions, it’s not such a extreme case as Liberia).
Historically, the only way to convert bribe-based economies to non-bribe-based economies is to (a) make the bribes legal, and (b) publish a formal schedule of bribes and punish those who demand *excessive* bribes. Pretty soon you have a formal system which works.
However, most “transparency” advocates have refused to approach it this way, so instead you just get fake reform and the bribes continue.
‘The Greek banking system would collapse unless there was an immediate (or done over the course of a one week banking holiday) switch back to the drachma. Even then, the planning would need to be done in absolute secrecy, since if the public were to get a clue that this sort of move were in store, you’d see immediate capital flight.’
Quite so. In pre-crisis Argentina (2001), dollars and pesos circulated in parallel. Banks offered accounts in both currencies (and still do). Since the local currency infrastructure was entirely in place, only the pegged exchange rate had to be changed to devalue.
Greece needs to consult game theorists about what to do. For example … what if an initial exchange rate of 2.5 drachmas per euro was announced, together with an offer that all euro deposit accounts converted into drachmas prior to the switchover date would receive a bonus rate of 3.0 drachmas per euro, for an immediate profit? Would depositors take the bait?
Incentives work better than penalties. But megalomaniacal governments intuitively prefer the stick over the carrot.
That would probably work, but that is not the crux of the problem.
Should default and exit happen, the Greek economy should switch gear to focusing on surpluses and exports. Capital that would have fled prior to that, will flush back in, grabbing up everything that isn’t nailed down. Furthermore, the exporting sectors of the economy (tourism, agriculture and food, ores, metal industry, chemicals and pharmaceuticals) would yield tremendous power over the other sectors and social groups, since they would be contributing valuable foreign currency into the economy. And since the focus would be on export, that would also mean that internal prices would also rise (for instance, why keep selling olive oil for 3 euros per litre in Greece, when you can make 10 in Berlin?). So do you also raise wages (inflation), or keep them stagnant (further austerity)? So, the oligarchs, who had hidden their money abroad, grab everything, certain other groups gain tremendous gains, and the rest are either stuck with inflationary money or with shrinking buying potential. Hilarity (or drama) ensues.
Of course, a new social contract could potentially deal with that transitional period, but that is the point: it’s a political and ideological crisis, but noone deals with it as such.
Just tax the windfall export profits. That’s what the Argentinians did.
I think you’re onto something here. You mention a scenario of flight capital coming back and “taking everything that isn’t nailed down.”
OK, so nail it the fuck down, and then require real competition to buy it back in a seller’s market.
That would require a period of austerity. But it’s a question of who had to practice it, under what political and ideological conditions, just as you say.
Real economic change can hurt. It doesn’t have to; it can happen systematically and humanely. But the choice to move in that direction was abandoned a good 40 years ago when funny money was judged to be more valuable than real things. Good heavens, the currency value of real things might GO DOWN, and everyone knows that the numbers have to keep going up up up up!
When I teach women self-defense skills, the basic one is adopting the stance of NO when someone decides to grab their–whatever. Purse, backpack, body, rights. This is the most essential missing element in many of these economic and political discussions. When “the people” say no in a democratic way, it generally takes the form of spectacle and street theater, as in the case of OWS.
Real NO has to have something backing it up. Nobody could buy out “the people’s” productive capacity if they themselves didn’t implicitly let that happen. This is why democracies often fail, over time. Nobody wants to be the generation that suffers through and into a new way of doing things. Look at 2/3 of the OWS agitprop: people whining because their material, consumerist, and class expectations/entitlements are not playing out as they assumed.
If these people were spending even a fraction of their energy organizing to, say, sunset Bank of America’s corporate charter, the world would be far better served.
I get the feeling this is all going to be solved by the U.S. with an orchestrated military takeover. That will ensure that the right people get control of the country.
Who needs democratic consent? Oli Garch has it right…
Greek fascists were supported by the US and British governments against socialist forces ostensibly connected to the Soviet Union. Recurrent coups de etat were conducted to keep rightists in charge in Greece and Italy as well as other periphery states.
After we beat Hitler, we sided with the Nazis because our corporate vision is their corporate vision.
And why not? Some shipping magnates like that dood I mentioned above are all hotted up to have the world’s militaries invade international waters to protect his interests (so he doesn’t have to incur the costs) from raggedy-ass pirates with RPGs.
OK, dood, we will; but we’ll charge you for it.
Oh wait, he didn’t WANT to be charged for it, he wanted TAXPAYERS to be charged for it.
Sociologically a coup is untenable: if Mubarak fell, any dictator in Greece would only be a pretext for total revolution.
It is of course a temptation but we are not anymore in the mass worker context but in the social worker one and in this context any military intervention (except maybe something of surgical precision that I can’t conceive) can only be a suicide for the regime.
I think it is more likely that Turkey is used against Greece, maybe via Cyprus, in order to neutralize the revolutionary forces. The risk is to reinforce the (weaker but real) revolutionary forces in Turkey as well or even to start a war that goes out of control (Iran, NATO, Israel, Russia… who knows?)
But I fear that a war is a more likely “exit” than a coup, which is destinied to fail by means of desertion and “treason” (loyalty to the Greek people, “treason” against the state). Let’s not forget that the Greek Army is a conscription army and that may turn against the elites (soldiers won’t shoot against citizens, they are more likely to shoot down the officers and march against parliament).
How about a left-nationalist coup against the Euro-bankers’ straightjacket and the economic royalists? Prime Minister Jr. is just committing political and national suicide. It’s not as if it’s never happened before.
This quote in a recent article on the Slovakia EFSF vote says it all:
“European officials are quite good at suggesting revotes or different tactics if votes don’t come out in line with what is required,” Steven Saywell, head of foreign-exchange strategy for Europe at BNP Paribas SA in London, said by phone.
Democracy? What democracy?
…capital flight to where, Mars?
I lived in Athens from 69 to 74 and I also maintain ties with Greece where I spend part of the year. It is a wonderful country with a wonderful people but, also, it has always been a dysfunctional and highly fractured society and now is a country with a practically nonexistent state apparatus. (I guess you could say the same things about Afghanistan, except Afghanistan is not in Europe and is not the birthplace of Europe!)
A fractured society and a debilitated government create a landscape that most of the readers of this blog cannot even begin to imagine. I hear opinions about Greece that show how little smart people here in America comprehend Greece. Some are overly critical and unflattering of the Greeks and some others express admiration for the fighting spirit of the Greeks. I think both extreme positions are just absurd. (On the other hand, Wolf seems to understand Greece much better than 99% of the journalists who write about Greece in respected news outlets like the NYT or the Guardian.)
The ferocity with which the Greeks refuse to deal with the crisis is rooted in the bloody history of modern Greece and the myths with which everyone is raised. The Greeks are trapped in a mentality that strangely combines a sense of being the victim, an inability to assume responsibility, cynicism, and panic. The Greeks feel that once again they are singled out to pay a heavy price for the mistakes of “others”. Since their governments, the mayors, and a myriad other officials are elected in free democratic elections, the people must now distance themselves from them — hence the concept that the government lacks legitimacy. Well, the government for all their incompetence is the government that the people selected. They will have a chance to vote again and it is guaranteed that they will select pretty much the same kind of people who say exactly the same kind of lies and behave the exact same way as the previous people they voted for. The Greeks also automatically consider anyone in power as a crook and a villain and thus end up selecting people with these qualities for the job of governing. This seems doubly convenient (but, of course, it is a big part of the problem)! Last but not least, most Greeks feel trapped in a system that they see as dysfunctional but also impossible to escape! Hence the sense of despair and even panic.
“… you could say the same things about Afghanistan, except Afghanistan is not in Europe”…
And that Afghanistan has not the most veteran and strong radical left wing movements in all Europe and almost all Eurasia for what I know (only South Asian Maoists and maybe stateless nations’ socialist independentist movements like Basques or Kurds can compare).
“… the government for all their incompetence is the government that the people selected”.
Under totally different premises, with a totally different program. The government should accept its responsibility towards the People and put their plans to referendum… and call elections if they lose.
They won’t. They will hide in that merely formal legality (that not legitimacy) and will keep betraying the nation for the remaining four years because Brussels and the banksters command it. The PASOK (nor New Democracy, perceived as the cause of the crisis) will be ever again elected for government… but that’s a problem they will try to avoid for two years more, even if everybody in Greece knows that the parliament has zero legitimacy: zero popular support.
Well, we have a paradox (yet another wonderful Greek word), or is it dilemma (also Greek)? If a politician speaks the truth, he or she does not get elected. Guaranteed! Even today, after the crisis has shown its ugly face, politicians who are frank about the state of the economy and the country are anything but popular. So those who get elected are the liars. But then, since they have lied they lack legitimacy, so back to the ballots we go?
By the way, I suspect that this is a problem not just limited to Greece.
According to the polling I’ve seen, the bailouts from Germany don’t have the democratic consent of the Germans either. The bailouts we have done here starting with TARP clearly haven’t had the democratic consent of Americans. Democratic consent hasn’t seemed to be relevant very often at all during this long crisis.
Excellent point. The combination of no-democratic-consent with it-isn’t-working is why most governments in the “developed world” are at serious risk of revolution.
People will tolerate really bad policies if they voted for those policies, and people will tolerate dictatorship if it makes things work for them. Currently the majority of “developed countries” governments are forcing through unpopular policies which the people did not give consent to… and those policies are *failing* to deal with the Second Great Depression.
This is pretty much a recipe for revolution. The fact that people are as peaceful as they are is something which elites should be grateful for. The elites are being given a second or third chance to start implementing policies which work and which people consent to.
I expect them to squander this chance, despite the warnings of people like Warren Buffett.