Yves here. Yanis Varoufakis discusses the prospects for negotiations between a new, likely Szyria-led Greek government and the Troika over the next Greek restructuring. Varoufakis in effect argues that the Greeks should go hardball because the Trokia’s demands are unreasonable. We’ll find out soon enough whether the incoming government has the public support and the guts to do so.
As much as a Grexit would be a lose-lose of major proportions, Varoufakis argues that the logic of current Eurzone arrangements is driving members to a break-up. Indeed, some observers believe that Germany would like to kick Greece out of the Eurozone. As Marshall Auerback put it by e-mail:
As far as Germany goes, let me quote Macbeth:
I am in blood
Stepped in so far that, should I wade no more,
Returning were as tedious as go o’er.
By Yanis Varoufakis, professor of economics at the University of Athens. From an interview by Alessandro Bianchi in L’Antidiplomatico on Greece and Europe in the run up to the Greek general election of 25th January 2015
European media often speak of the “Greek recovery” and the growth of competitiveness of the country to try to persuade the public opinion about the effectiveness of austerity and structural reforms imposed by the Troika. Considering the macroeconomic data, however, we find a youth unemployment above 50%, a negative inflation rate and a debt-deflation spiral out of control. How is it possible to speak of “recovery” when three Greek citizen out of five have exceeded the poverty line?
Over the past two years, no fact could get in the way of the EU propaganda machine which, approximately eighteen months ago, went into overdrive in an attempt to shore up the Samaras government, terrified at the prospect of a new government in Athens that insists of speaking truth to power. Have you noticed how the ‘Greek Success Story’ narrative disappeared once elections became inevitable? What kind or ‘recovery’ was it that went up in a puff of smoke the moment an election appeared over the horizon?
The answer is: a ‘recovery’ that existed only in the realm of propaganda. A ‘recovery’ that was engineered by means of two new bubbles, one in the bond market the other in the market for Greek banking shares – bubbles that burst the moment the Greek people seemed as if they were to have a chance to express what they felt about the said ‘recovery’ in the polling stations. A ‘recovery’ evidenced in one quarter’s positive GDP growth (equal to 0.7%), after seven years of continuous decline, which was due to the sad fact that nominal GDP fell – but for the first time it fell less than average prices did.
So, let’s be frank: There was no recovery. What we did have was a monstrous denial that was functional to the story Mrs Merkel wanted to convey to European citizens: If austerity worked even in Greece, it must be the right cure for every European realm, and it must thus be accepted unthinkingly by every European – especially the… Italians.
In Greece there will be a general election next January 25, 2015. According to the latest polls, SYRIZA, the main opposition party critic of the austerity measures imposed by the Troika, could be the winner. But, victory at the polls could be precluded by the speculative attack of the markets on spread, aimed at creating a climate of terror among the public. What remains of democracy in this oligarchic regime of the European Union? And the same scenario could be repeated in other countries with those parties critical of the institutional architecture of the EU?
The threat to a SYRIZA government will not come from the markets. Remember: Greece is bankrupt and is not borrowing from private investors. When you do not borrow, you do not care about the interest rate! No, the threat to a SYRIZA government comes from the ECB, from the EU and from Berlin. Days after its election, there is a strong chance that our European partners’ officials, in violation of democracy’s – and logic’s – most basic principles, will threaten the new Athens government with a shutdown of Greece’s banking system until and unless it bows to their will. This is far, far worse, and morally more reprehensible, than being terrorised by the markets. Investors have every right to demand high interest rates in order to lend you money. Fellow democratic governments and unelected central bankers have no right to threaten a newly elected government with Armageddon if it dares ask for a renegotiation of an unsustainable loan agreement with the EU, the ECB and the IMF.
In its program, SYRIZA provides for the annulment of the Memorandum, the complete restructuring of the public debt, the refusal to pay interest on it until it will be a real economic recovery (suspension of payment of the debt) and, finally, the ECB becomes lender of last resort in order to guarantee a portion of the debt Greek. Given the hostile attitudes of Berlin, Brussels and Frankfurt, how would SYRIZA react facing a new absolute denial of the European authorities compared to its demands? Would it be the pretext to consider the unilateral exit from the euro zone?
Exit from the euro is not an idea that a SYRIZA government will ever entertain or use as a negotiating strategy. While it is clear that Greece should never have entered the Eurozone (and, indeed, that the Eurozone should never have been designed the way it was), exiting would inflict massive damage upon everyone. At the same time, the ‘logic’ of the current agreement is busily working toward dismantling the Eurozone. Italy’s social economy for instance is unsustainable under policies inspired by those first tried in Greece in 2010. To save the Eurozone, and indeed to save Europe’s integrity and soul, we need a New Deal for Europe. SYRIZA is determined to kickstart the conversation on what this New Deal should be. Naturally, the outcome of such a debate will be a compromise. Alexis Tsipras, SYRIZA’s leader, knows this: When you are entering a negotiation, you are aiming at a compromise with which all sides can live. To bring it about, you must stake your initial position – which is what the party’s platform does – and set thin red lines which, if the other side crosses, you walk out. One such line, in Greece’s case, must concern the demand that Greece borrows from, amongst others, the ECB to repay the… ECB for bonds that the ECB bought in 2010/1. If Berlin continues to insist on such illogical transactions, a SYRIZA government must simply say ‘No’ and refuse to do it. Whatever the threats.
In these three and a half years of the troika regime, Greece has lost important parts of public land and areas of national strategic interest in a program of wild privatization. Is SYRIZA thinking of a new state intervention to nationalize at least the essential public services to be delivered to the citizens? And in that case it would not be a violation of the principle of non-interventionism enshrined by the Maastricht Treaty?
The privatisation program has failed spectacularly. There are, indeed, some assets that have been turned over to shady privateers (e.g. the national lottery and the Hellenikon site) which a new government must look at afresh – at least in terms of their legality as re-nationalisation will be impossible given the state’s illiquidity. Having said all this, the most extensive privatisations took place not during 2010-14 but during 2000-2009 involving banks, the state telecommunications monopoly etc. As for public services, the problem there is not that they were privatised. The problem was that they were dismantled or strangled by austerity and hideous cutbacks.
However, the response of European crisis continues to be clear and summarized in the reduction of public spending, increasing taxation and so-called structural reforms to bring down the cost of labour, the only way to compensate for the competitiveness gap between countries. Compared to this, Syriza puts forward very interesting proposals, but those are measures that had been rejected in the past by Brussels, because they violate the rules of the existing treaties, such as Eurobonds and the political control of the European states on the European Central Bank. Do you believe that it is time to overcome Maastricht and to start thinking about a new Treaty?
Our proposals have been calibrated in a way that they do not violate any of the Treaties. For instance, our proposal for an ECB-mediated conversion loan for the Maastricht compliant part of each member-state’s debt, without monetisation by the ECB or debt guarantees by the surplus countries. Or, to give another example, the proposal for a form of Quantitative Easing where the ECB buys large quantities of European Investment Bank bonds for the purposes of funding a European invstement-led Recovery Program. These are some of a number of ideas that can be implemented tomorrow morning, political will permitting. Once we stabilise Europe by means of such policies, we can then talk until the cows come home about a future federation, future Treaties etc. But any attempt to tamper with the Treaties now, while the crisis percolates, will only backfire.
In the event that the countries of the North, as already claimed in the past, will oppose these scenarios of change needed to overcome the crisis, should the countries of the South, in particular the parties critical of the current institutional architecture, start thinking about a new form of integration funded on economic and social solidarity, which aim to the respect of the national sovereignty? Due to the severe conditions of their economies, is there still time to deal with a drawing up of a new Treaty based on those principles?
No, I do not think so. As I argued above, this is not the time for Treaty changes. First we must halt the fragmentation and only then discuss consolidation. Having said that, the current Treaties allow for so-called ‘enhanced cooperation’ – which allows for nine member-states or more to go it alone in the implementation of European Union policies that are not binding on the rest. Perhaps Europe’s ‘South’ could use this institutional facility.
On the opposite side, Europe seems to head very quickly toward a road opposite to that outlined by Syriza. This is clear especially after the sanctions to Russia and the political interferences of NATO in Ukraine, the inevitable passage of TTIP, the area of free trade with the United States, which the European elites want to approve in 2015. Could a new majority of Syriza in the national Parliament stop the ratification of TTIP?
The idea of free trade with the United States is splendid. The problem with TTIP is that it is not at all about free trade but, rather, about handing inordinate property rights over environmental standards and intellectual property to multinational corporations. Similarly with the security issue. Ukraine should be stabilised and Russia democratised. Alas, the current standoff with Moscow is not about this but, rather, it is part of a grubby geopolitical tussle out of which Europe’s citizens, from the Atlantic to the Urals, will lose out.