Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Tag: Greece

Syriza Wins in Greece: What It Must Do

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On July 13, 2015

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(Given the way Greek financial negotiations have played out, I think my first take is timely/relevant, and have restored it to the top. Originally published in January. -Ian)

It would have been better if they won last time, Greece is pretty fully looted now. But Greeks thought they were Europeans, and didn’t realize the contempt that French and Germans had for them, nor how willing they were to kill and impoverish large numbers of them.

There is a great deal of hand-wringing in conventional circles over the Syriza win. They are worried about the Greeks exiting the Euro (Grexit) and defaulting on their debt.

Greece should do both of these things, or something close to it. (Rolling the debt over into 100 year bonds at 1 percent, for example.) Greek debt is at a level which is effectively impossible to pay off and has been made much, much worse by all the “aid packages” and “bailouts” given by their “fellow” Europeans. (a.k.a., they should have defaulted years ago.)

As for the Euro, Greece can’t print it, and Greece will need to print money.

I worry that Syriza is serious about negotiating on the debt. There is essentially no chance the Troika (well, really, Germany) will give them acceptable terms on a write-down. Negotiations should be intended only to go on long enough to demonstrate that a good deal is not possible. While they are ongoing, the Greeks should be preparing for Grexit and repatriating all the resources they can. Since Greek debt is under foreign law, debt vultures will go to the courts to seize all foreign Greek assets once Greece does default or restructure its debt.

Greece needs to recognize that it will effectively be a financial pariah, unable to access Western money markets. It will have almost no hard currency, and no ability to buy goods which require hard currency.

This is a huge problem for Greece because it has neither oil nor the ability to feed itself. Syriza MUST have a plan to deal with both these problems. Neither is insurmountable.

For oil, Greece will simply have to make a deal with Russia, Venezuela and/or Iran. Greece will be a pariah state just like them, and they have oil. What does Greece have to offer? Well, sub voce, access to Greece. Greece will be out of the Euro, but it will still have borders with Europe. Once whatever you want into Europe is in Greece, it’s easy enough to get it into Europe. And anything those countries want from Europe, the Greeks can obtain and ship to them. Grey market, baby, and grey market finance, as well.

In terms of food, a deal must be made with a food surplus nation. I would suggest Argentina, which has plenty of food. (This is incorrect, Greece can feed itself, Greeks will just have to eat less imported foods.-Ian)

Remember that Greece has one of the largest merchant marines in the world. It has that to trade, and it has access to Europe to trade.

In addition, currency controls must be put on immediately and the borders must be secured against those trying to move goods out of the country (a.k.a., Greece’s useless rich).

Given that all this will cause Greece to be completely loathed in Washington, London, Berlin, and Paris, they may also wish to consider seizing much of whatever means of production remain in the country. If they want a reason, simply use the Lagarde list of Greek oligarchs who haven’t paid their taxes, and seize their back taxes—with plenty of interest.

The media is playing this as an anti-austerity vote, and it is. But voting anti-austerity for a country like Greece, which can’t feed itself, has no oil, and doesn’t have a lot of industry, is one thing, not being austere is another. If the Greeks want a decent life again, they will have to take on some of the most powerful nations in the world and at least fight to a draw.

Many nations are in the same boat as Greece: Russia, Iran, Venezuela, Argentina. Greece needs to make the necessary alliances with such countries and it needs to align with the rising Chinese block.

Doing this requires a psychological step that many Greeks may be unwilling to take: A recognition that their interests do not lie with Europe and an understanding that Europeans are willing to see them impoverished, homeless and dead. Greeks who are living in the past and think the EU is about prosperity for everyone in the EU need to learn otherwise.

If the Greeks are unwilling to be coldly pragmatic and give up their illusions about who they are, what their fellow Europeans are willing to do to them, and what their actual assets are, then Syriza will fail, and Greece will continue on their path of impoverishment.

I wish the Greeks all the best.

(26/01/15 – There is some dispute over whether the Greeks can leave the Euro and not the EU.  See this paper for a discussion — pp 26-29.)

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Push Is Coming to Shove with Greece

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On June 15, 2015

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Greece is now close to default (and possible Grexit, though it can default without leaving the Euro):

The radical wing of Greece’s Syriza party is to table plans over coming days for an Icelandic-style default and a nationalisation of the Greek banking system, deeming it pointless to continue talks with Europe’s creditor powers.

Syriza sources say measures being drafted include capital controls and the establishment of a sovereign central bank able to stand behind a new financial system. While some form of dual currency might be possible in theory, such a structure would be incompatible with euro membership and would imply a rapid return to the drachma.

The confidential plans were circulating over the weekend and have the backing of 30 MPs from the Aristeri Platforma or ‘Left Platform’, as well as other hard-line groupings in Syriza’s spectrum. It is understood that the nationalist ANEL party in the ruling coalition is also willing to force a rupture with creditors, if need be.

“This goes well beyond the Left Platform. We are talking serious numbers,” said one Syriza MP involved in the draft.

The “creditors” believed and believe “there are no other options” but capitulation:

The creditors argue that ‘Grexit’ would be suicidal for Greece. They have been negotiating on the assumption that Syriza must be bluffing, and will ultimately capitulate. Little thought has gone into possibility that key figures in Athens may be thinking along entirely different lines.

I had been dismayed by Syriza’s apparent unwillingness to consider default and Grexit, while acknowledging that given their election campaign (premised on staying in the Euro) and Greek’s own preference for staying in the Euro, they might well be negotiating deliberately to make the case that Europe will offer an unacceptable deal. And if Europe did offer a good deal, well, excellent!

This is all coming to a head. The demands made by creditors are virtually all punitive, things like reducing pensions and decreasing pharmacy times and wages and so on. Austerity. The vast majority of Greece’s problems, other than its massive debt overhang, are not caused by ordinary citizens, they’re caused by Greece’s rich not paying their share.

But all our lords and masters can conceive of when money must be scrimped his hitting regular people harder, soaking them. They make mention of taxing Greece’s rich and ending corruption there, Syriza agrees, but they are never willing to acknowledge that that an unsustainable debt load is the real problem, let alone get serious about tracking down Greek money which has left the country.

That, of course, is the real problem. There is talk of capital controls, but most of the moveable money and assets left in 2010. It’s all gone. I’d still impose capital controls, but it has the taste of barn door slamming after the horses are gone.

Nonetheless, Greece still has its immovable capital, its land, and its people. While Greeks would have to eat quite a bit less meat and non-seasonal vegetables, if they’re willing to do that, they can certainly feed themselves. Deals can be made with Russia (whom Syriza is on good terms with) and, if necessary, Iran and Venezuela to get the oil they need.

Greece has options. They don’t need to be in the Euro for prosperity, in fact they need to be out of the Euro for it; and they definitely need to default. Now that the “institutions” have made the case for Syriza that no compromise, no deal, is possible, I hope they will do so now, then prosper (though it will take a few years.)

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Do Tsipras and Syriza want to resist Austerity?

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On February 25, 2015

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By Mark From Ireland (Elevated from the comments)

(In response to my article on whether Syriza got owned, Mark writes):

Did Syriza get owned?

Yes and No. Syriza is a coalition between a variety of factions ranging from PASOK lookalikes to people with genuinely socialist principles. I’ll be interested to see how Alekos Flambouraris for example will react, will he help “sell” this within the Syriza coalition?

If the currently dominant faction (who have always wanted to work within the Euro framework and are very pro-EU) are to succeed in getting Syriza to accept this capitulation they’re going to have to override internal resistance. From whom? My guess would be that the resistance will centre around Panagiotis Lafazanis and the “Left Current/Left platform” grouping. The “Left Current/Left platform” are, I believe, fairly well organised and they do have a consistent critique not only the current state of affairs but also of capitalism per se. Lafazanis and his comrades can truthfully say that in attacking the capitulation to the troika that they are merely defending the platform upon which Syriza stood and that anybody who wants to vary or overturn that platform has to provide cogent and compelling reasons as to why. But the problem that Lafazanis and his comrades face is both one of policy and of internal organisational strenght. Principles are all very well but if you don’t control the party structure you’re going to lose every time. I said above that they’re “fairly well organised” but are they as well organised as Tsipras and his supporters?

Tsipras’ opponents to the left face a very real problem and one which reminds me in a way of the problem faced by the British Labour left when confronted with Tony Blair. Like Blair Tsipras has a substantial personal mandate and like Blair he’s got a record of going over the heads of his critics to party congress (he’s already successfully done this over candidate lists) and also like Blair he’s got a record of successfully campaigning alone – of very pointedly not campaigning alongside the left-wingers. Just like Blair he can say that Syriza’s victory is a personal victory brought about by him. (He’s also tried Blair’s strategy of giving difficult posts to left-wingers* how that will work out is something that will tell us a lot. Blair successfully marginalised his internal opposition using it whether Tsipras can do the same I just don’t know as the Blair/Tsipras analogy can only go so far).

So the question in a way isn’t so much one of whether or not Syriza got owned as one of whether Syriza is a coherent and viable movement without Tsipras and his followers. I have my doubts.

I hope that Greece manages to resist but I doubt they’ll resist if Tsipras remains at the helm as he never wanted to resist in the first place.

*What for purposes of shorthand I’ll call the Bennite and Militant tendencies

Did Syriza get owned?

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On February 24, 2015

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The details of the Syriza request to the Troika are here, for those who want to read the actual list. The public statement is here.

The best analysis I’ve read of the deal, as compared to Syriza promises, is by Stathis Kouvelakis, in the Jacobin Magazine.

Kouvelakis makes the case, convincingly to me, that Syriza caved, and got virtually nothing of what it wanted.  Here is a summary of what Syriza wanted:

Not consenting to any supervisory or assessment procedures, it requested a four-month transitional “bridge program,” without austerity measures, to secure liquidity and implement at least part of its program within balanced budgets. It also asked that lenders recognize the non-viability of the debt and the need for an immediate new round of across-the-board negotiations.

But the final agreement amounts to a point-by-point rejection of all these demands.

…..

In the Eurogroup’s Friday statement, the existing program is referred to as an “arrangement,” but this changes absolutely nothing essential. The “extension” that the Greek side is now requesting (under the “Master Financial Assistance Facility Agreement”) is to be enacted “in the framework of the existing arrangement” and aims at “successful completion of the review on the basis of the conditions in the current arrangement.”

Kouvelakis goes through the agreement point by point, and backs up his argument.  You should read the entire piece.  More important than proving the obvious (that Syriza got virtually nothing) is why.

The question that emerges, of course, is how we landed in this quandary. How is it possible that, only a few weeks after the historic result of January 25, we have this countermanding of the popular mandate for the overthrow of the memorandum?

The answer is simple: what collapsed in the last two weeks is a specific strategic option that has underlaid the entire approach of SYRIZA, particularly after 2012: the strategy that excluded “unilateral moves” such as suspension of payments…

Kouvelakis calls part of this the “good euro” strategy—the supposition that anyone in power in the Euro area wanted Syriza and Greece to get real debt relief and exist austerity.  This, as I have argued in the past, is delusion:

The key here is psychological. Greeks need to admit that their fellow Europeans do not care how badly they suffer; need to acknowledge that they are not seen as Europeans by their fellow Europeans, and need to look East and South for their survival and future prosperity.

Until Greeks get through their heads, and hearts, that the other European countries are not their friends, they will continue to suffer.

Unilateral is the key word.  Greece cannot depend on any other nation in Europe to look after its interests, let alone Germany (the very idea that the German government cares one whit how much Greeks suffer is so laughable as to move beyond fantasy into insanity).

Greece must do what it can it unilaterally.  This doesn’t mean no negotiation, but that negotiation will not be with Europe or Germany or the ECB, it will be with other countries who need what Greece has to offer enough to make a deal.

Read the Jacobin article.  And understand what just happened, because as Kouvelakis notes the only thing worse than defeat is pretending it was victory.

None of this means that victory is not still possible.  But it is only possible if Syriza spends the next few months planning moves which do not require Europe’s approval.

I genuinely hope they do.  The sooner they do, the sooner Greeks will be better off (though yes, the transition will be painful), and the sooner the current European and World system, which is causing so much unnecessary suffering, will end.

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Syriza and Greece Seem to Have Been Owned

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On February 21, 2015

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So, the Greeks have an understanding for an extension of the loan agreement.  On Monday they have to present the “reforms” they will be undertaking in exchange for it.

I don’t know what those reforms will be, but I know that the agreement still gives the Troika (now called “institutions”) veto power over Greek policy.  The key text in the mealy-mouthed statement is this one:

The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

The Greeks also promised to pay back everything.

Yeah, Tsipras may be attempting to portray this as a victory, but it’s not.

The bottom line here is that Syriza weren’t really willing to default or Grexit.  One can note that they campaigned on ending austerity, but staying in the Euro.

That was always problematic: yes, that’s what many Greeks want, so it was a political winner, but if they were serious (and it appears they were) it left them without the ability to actually negotiate a better deal.

Much has been made of the fact that Greek Finance Minister Varoufkis is an academic specialist in game theory.  In the the early days he seemed serious about being willing to default.  It appears he wasn’t, it was a bluff.

I’m not an expert on game theory, but I do know something about it, and about negotiation and I’ll tell you this, for threats to work they must be credible, and to be credible you must be willing to actually go through with them.  Faking is never as good as sincerity.  Having campaigned on “have your cake and eat it too”, Syriza was in a bad position to negotiate with Europe.

I had hoped they were negotiating to show the Greeks that no good deal was possible, then would be willing to say to Greeks “only default and Grexit is viable.”  So far, it appears not.

It’s worth noting that reports are that Southern politicians in places like Portugal, Spain and Italy were pushing for no debt forgiveness.  For their own political futures, they need to be able to say “there was no alternative”.  But, of course, debt forgiveness would be good for all of those countries, meaning politicians pushing against it for Greece (setting a precedent allowing it for them) are acting  against the best interests of their own countries.  There is a word for such people, and it starts with “T”.

The Greek Communist party refused to join with Syriza in a coalition government because they expected this to happen, they have been proved correct.  If Syriza does not get a very good deal, or spend the next few months making the case to Greeks for default; in other words, if they don’t turn this around, then they will have their one term and the Greeks will turn to someone else.  Golden Dawn, the fascist party, came in third, but Syriza voters, being left-wing, might prefer the Communist party.  We will see.  Syriza, after all, is not very left wing at all.

It should be noted that we don’t know what threats were made behind closed doors. My guess is that they were very harsh: Greece cannot feed itself, it cannot fuel itself, it has very little to offer in exchange for the foreign currency it requires to buy what it needs.  A default and a Grexit where the Troika and other European countries were not trying to punish it could be managed.  But one where they did seek to punish it would be difficult.  Syriza may not have properly gamed out how to survive in that scenario, and may have been surprised by how punitive the Troika intended to be in the case of default and Grexit.

If so, that is political incompetence (and game theory incompetence).  One should always know what one’s best alternative to a negotiated settlement is.

I’ve written in the past how Greece could handle such a scenario.  (Here and here.)  It’s not an insoluble problem, but it does require being willing to backhand Europe as hard as they have backhanded Greece and then to get even nastier.  Greece has a lot to offer Russia, for example, and Russia can take care of Greece’s fuel needs easily in exchange for Greek bases and so on, which essentially cost Greece nothing.

The key here is psychological. Greeks need to admit that their fellow Europeans do not care how badly they suffer; need to acknowledge that they are not seen as Europeans by their fellow Europeans, and need to look East and South for their survival and future prosperity.

Until Greeks get through their heads, and hearts, that the other European countries are not their friends, they will continue to suffer.  Until they are willing to take the losses that Grexit and default will impose, things will continue to get worse.  (Being genuinely willing to take those losses is also the only way they might be avoided.)

I note also that sheer idiotic incompetence of Syriza in not putting in place currency controls to prevent capital flight during the negotiation period.  This is virtually an own-goal it is so stupid, and should bring into question just how smart Varoufkis is (or Tsipras, if he over-ruled Varoufkis.)

I wish the Greeks the best. But as with all those who have been horribly damaged by neo-liberalism and austerity, they need to get through their heads that those in charge of the policy have no fellow feeling for them; that people like Merkel, Shauble and the Germans who support them are enemies, not friends, let alone family members in some big European family which cares about all Europeans.

This is economic war, with the casualties that implies.  The Germans and the ECB are treating it as such; the collaborators in Italy, Portugal and Spain are treating it as such. Until ordinary people, and the representatives they put their faith in start treating it as such, they will continue to lose.

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The Greek Pivot East and the Future of Greece In Europe

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On February 3, 2015

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In my most recent article on Greece and Syriza’s options I pointed out that cutting deals with other pariah nations might be wise.

Practically the first thing Greece did was say that they will not be onside for any more Russian sanctions.

Russia said they would consider, if asked, bailing out Greece.  (This is a way of saying, “go ahead, ask”.) Given Russia’s own reserve problems, one wonders where it would find the money, BUT my guess this is a “if you default” scenario.  Russia won’t pay off European banks for Greece, but if Greece defaults, it will help Greece running. (Not least, most likely, by selling them heavily discounted hydrocarbons, and probably even loaning them the rubles to buy them with.)

That takes care of one of Greek’s main problems: food, oil/gas, and medicine—what they MUST have which they MUST buy from other countries.

A few words on Greece’s negotiations with Europe are also in order.  First, note that the “bailouts” given to Greece mostly weren’t — 89% just went back to lenders.  Worse, the imposed austerity conditions caused an actual collapse in GDP and employment, which means that the cost of the bailouts was far more to the Greek government and economy than the actual amount of money received.

In other words, this was all just a bullshit way of bailing out banks, and as the FT notes, only because bailing them out direct was “embarrassing”.  To avoid embarrassment, millions were impoverished, people set themselves on fire, and Greece was devastated.

This, people, is why I say, and mean, that Merkel is monster.  A disgusting, rotting excuse for a human being, let alone a statesman.  Millions suffered, not just in Greece but in the other peripheral countries, for no good reason.  Austerity is just the voodoo economics of the modern day, but even more devastating.

The deal Greece wants is more than fair to “lenders”.  And I mean “more than fair” literally.  They deserve to be defaulted on, because they didn’t do their due diligence, and all loans since the financial crisis at the very least, should NEVER have been made.

An independent Bloc is desperately needed in the world.  BRICS plus allies, with their own payment system, reserve currency and international trade and settlement system.  Until it exists, countries like Greece will feel (and often be right) that they have no choice but to buckle under to whatever terms the West sets.

Enough.  This suffering is not required in any world which runs on rational economics AND has as its goals the welfare of everyone.  It never was required.  All of the deaths, job losses, homelessness, hunger and so on was optional.  It was chosen because it suited oligarchs and politicians like Merkel.

This is the world you live in. It must be changed.  Since core westerners are unwilling to change it from withing in time to save millions and millions from suffering; it will have to be changed by those it is most severely impoverishing.

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