(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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