October 3, 2015

By Shiv Sethi

Syriza won its second parliamentary election in less than 8 months on September 20, 2015. But nothing could be starker than the meaning of these two victories. While the first election promised radical political change the second is an admission that even the hope of a change is impossible within the framework of eurozone.

Multiple interpretations have been offered to assess Syriza’s performance since January 2015. It cannot be gainsaid that Syriza has been an important actor for the past six months and everything they tried failed.

To make sense of Syriza’s conduct it is worthwhile to look at what they are up against. Syriza made a lot of playing by rules within the eurozone. But was the other side acting within a well-defined legal framework?

Troika rules

Troika, the triumvirate of IMF, EU, and ECB, was illegal to begin with within the broad European framework. These institutions were meant to be independent as their mandates are not only different they are geared to check excesses of the other. For instance the role of EC is to safeguard EU treaties. And one such provision is to honour the laws of EU countries until a common framework could be developed. But Troika has walked rough-shod over the laws of eurozone and EU countries. For instance, top courts in both Portugal and Greece ruled that some of the pension cuts imposed by Troika violate local laws and even European convention on human rights. The troika reacted by asking the governments to overrule the courts. In fact, none of the three institutions has any mandate to ask countries for ‘structural reforms’. (A decent documentary on some of these legal aspects is The trail of Troika) . Enough has been written about IMF in this regard. IMF has violated its mandate–short term liquidity support–every time a country has approached it (starting probably from Cuba in 1960).[2] But what brought Syriza to its knees was the conduct of ECB.

ECB is a central bank mandated by EU but privately run by an unelected plutocracy. By EU treaties ECB cannot lend to governments even though it did buy government bonds (but only from secondary markets) in the past 5 years. ECB lends to commercial banks against collateral and the most reliable collateral is often government bonds. In other words, government borrows from private banks and private banks can borrow from ECB against these bonds. (An aside: Central banks are thought to be creators of money and they do create money out of nowhere. But in a well functioning economy far more money (as debt) is created by circulation which is ensured by commercial banks through fractional-reserve banking. For instance, the monetary base of the US (measure M0 of money and a fair fraction of central bank generated money) in 2008 was 800 billion dollars but the GDP was close to 13 trillion dollar (which is close to the broader forms of money M2 or M3). M0 shot up by a factor of more than three after 2008. In other words, central banks are not so important in a normally functioning capitalist economy but come into their own during a crisis and that is one the reasons they were created.)

ECB has committed trillions of Euros to stabilize banks since 2008 European banks and currently is in the middle of a quantitative easing program (over 60 billion euros a month).[3] In addition the lending interest rates of ECB have hovered around zero for years. Yet Greece is not a beneficiary of any of this. ECB lends to Greek banks through ELA program at 1.5%.[4] Why? Because Greek bonds are not considered good enough collateral. This would be a bad argument before the financial crisis because this runs against the very mandate of ECB. But it is positively grotesque after the lavish bank bailouts around the world when all these banks had for collateral were worthless toxic assets. Much worse, over 90% of Greece bailout money flowed to private banks in Germany and France that had nothing better to offer than sinking Greek government bonds.[5] Does ECB has something specific against Greek banks? It cannot be denied that Greek banks were forced to suffer loses when the troika forced a haircut on the creditors of Greek government in 2012. However, a fraction of the bailout money was used to re-capitalize these banks. (One Greek bank Piraeus got a windfall of over 3 billion euros when it was allowed to buy assets for cheap when Cyprus’s banking system collapsed) . The aim all along has been political re-structuring of Greece.[6]

This much is known to one and all in Greece. Syriza members have often presented excellent analyses of the machinations and overtly criminal designs of troika and Greek elite against the working classes of Greece, e.g. see the short speech of the president of the recently-dissolved Greek parliament delivered in the UN headquarters.[7]

But how did Syriza react to the extreme pressures they have undoubtably faced since Jan 2015?

Syriza’s capitulation

Syriza’s ‘revolutionary’ spirit lasted a few days after it ascended to political power in Greece. Syriza government expelled troika representatives from Athens and pledged to only deal with EC, the guardian of European unity. The troika was in a bit of a fix because it did not appear to have many cards to play. Then ECB acted to sink the banking system of Greece and their task was made easier by Syriza’s indecision in imposing capital controls. In less than a month after Syriza’s election victory over 50 billion dollar flowed out of Greece. Somewhere in the middle of this month, ECB struck by refusing to accept Greek bonds as collateral. While this hastened capital haemorrhage from Greece on the one hand, it sent a clear warning to Syriza.

Even though ECB revoked its strong stand it put the Greek banking system on a drip-feed which finally brought both the Greek banking system and Syriza to its knees. What did Syriza do to counter this situation? They continued to negotiate with troika as if the latter was acting within a fixed, previously-agreed framework in line with EU treaties. This is strongly indicative of how the weak plead with the strong. It is incumbent on the weak to constantly adjust to the changing demands of the powerful.

No one doubts Syriza inherited a Greek state that had been running under the direction of the troika for many years. The entire Greek political class and state functionaries were either collaborators or deeply disenchanted. But the most relevant question remains: was Syriza’s failure an ideological failure or should it be seen as strategic/tactical withdrawal from its avowed politics?

Syriza’s main leaders ran their election campaign and later negotiations with the troika on three main principles: (a) Greece should not leave the eurozone, (b) there are serious issues with Greek economic order (e.g. one could hear Greek PM complain about how making a road costs more in Greece as compared to Germany) and Syriza is the best party to reform it, and (c) If Syriza should fall Greece will plunge into chaos created by the extreme right wing.

One remarkable aspect of this outlook is that it is more or less shared by the right-wing liberal parties across Europe. On the one hand is civilized Europe gone somewhat awry with its austerity policies and on the other is the specter of Nazi-like parties. One thing singularly missing is even a shred of class analysis. How come a party that is called a ‘Coalition of radical left’ find itself so close to a liberal position? Do the objective conditions in Europe warrant such commonality of thinking?

To address this question one should first assess Syriza objectively. It should be recognized that Syriza has an electoral base but no mass base. Political parties make promises to their electoral base and if they fail to fulfill their pledges the electoral base shifts its allegiance. On the other hand, the mass base is built on long-term affiliations with better-defined political aims. More notably, a political party can ask its mass base to make sacrifices but not its electoral base. Or political parties with mandates provided by an electorate with ephemeral loyalties typical of bourgeois democracies have no reason to shake the system too much.

Throughout their short reign Syriza desisted from directly addressing the working classes of Greece. They never called mass rallies in support of their position. They played very strictly according the legal and constitutional framework. Even as they blamed the troika for the state of Greek economy they failed consistently to underline that the troika could never have succeeded without open collaboration of the Greek elite. In their narrative they pitted ‘Greek people’ against the EU elite as if all the classes in Greece have been affected the same way by the policies of the troika.

Let us look at their main political planks. Unlike the communist party of Greece KKE, the main leaders of Syriza see no reason to leave the eurozone. They cite polls that suggest a majority in Greece wants to stay inside the eurozone. There are good reasons why a majority in Greece doesn’t want to abandon a common currency zone. Greece saw sharp economic downturn in mid-1990s. Its entry into eurozone entitled the government and businesses to borrow money in a stable currency at reasonable rates which saw economic growth fed by this debt from 2000 to 2007.

In addition the mainstream, including Syriza, has painted horrific pictures of what might happen if Greece were to exit the eurozone: sharp currency devaluation probably followed by a long period of economic downturn. However, a vast majority is also against the austerity measures imposed by the troika as the poll conducted by Syriza confirmed. So a more relevant question is: would you want to stay in eurozone with near certainty that austerity will continue for an indefinite period or would you wish to exit the eurozone and face the chaos and uncertain future that might follow?

The first part of this question is not rhetorical. Under the third bailout agreement recently signed by Syriza amounting to nearly 85 billion (roughly the same amount that flowed out of Greece since Syriza rose to power) Greece has agreed to unprecedented austerity measures: labour laws will be loosened in the favour of employers, pensions will be cut, government agrees to run primary budget surpluses for eternity with this surplus expected to reach nearly 3% in 2018 (even the right wing government preceding Syriza opposed it), and finally Greece is expected to raise 50 billion euros by the sale of public assets in three years![8]

We do not know which way the vote will go because this question has not been asked.

The idea of eurozone is inextricably linked to the concept of unity of Europe. It is also a clever ruse because these are two entirely different things from the perspective of working classes of Europe. The eurozone, or the monetary union of europe under a single currency, is the tyranny of the unelected few as has become abundantly clear after 2008. For a left party, the unity is first and foremost a unity of working classes of Europe and then a weaker unity of other classes based on close cultural ties. Yet Syriza has never emphasized this unity. They have juxtaposed Greece’s exit from the eurozone with the break up of EU. On the contrary, if the demise of eurozone is caused by left parties then it could foster solidarity between austerity-stricken working and middle classes across the EU.

Does Greek economy need serious reform? If yes, why? First one must get out of the way the notion that it is somehow owing to ‘lazy Greeks’ who do not pay taxes. It is known that Greeks work the hardest in the eurozone and tax collection in Greece has been comparable to other eurozone countries.[9] Even if Greeks worked the least in eurozone and avoided taxes, the working classes could not be held responsible, at least not by the ruling elite, because they are constantly adjusting to rules of engagements set not by themselves by the ruling elite. It is in fact well known that the long-term policies of the ruling elite are responsible for the current crisis. Consider Greece’s military expenditure. For the past thirty year it is at least twice the average of EU. According to various estimates, this excess itself is over 150 billion euros for the entire period.[10]

The threat Greece faces is presumably from Turkey. Turkey attacked and captured parts of Cyprus in the early 70s. However, both Greece and Turkey are Nato members and according to Nato charter if a Nato country is attacked all Nato countries are bound to come to its defense. In other words, if Turkey attacks Greece it is also bound to come to its defense! In fact the main weapon exporters to Greece are good old US, France, and Germany, all major Nato countries. (Those who believe that the US funding of both sides in the Syria and Iraq crises is some kind of a conspiracy theory are well advised to read about how US has played Greece and Turkey against each other for the past 40 years.) Surely no one can blame working or middle classes of Greece for this. Nor for that matter can they be blamed for the profusion of unsustainable debt, humiliating bailout terms plunging Greece into deeper crisis, or numerous financial or other scandals (e.g. a Greek oligarch buying land at the half the market price in a fire sale a few years ago).

If Greek economy needs a reform it can only be achieved by changing the conduct of its ruling elite; it has nothing to do with the ‘people of Greece’. This is a clear case of a deep-seated class conflict and needs to be stated as such. Using obfuscating language to describe it is done by the right wing. Yet again Syriza is not in the right company when it agrees to ‘manage’ restructuring of Greek economy on behalf of the EU elite and then tries to justify it.

Perhaps the most outrageous contention of the bigwigs of Syriza’s government has been the claim that they act as a bulwark against the rise of the extreme right wing in Greece. Like all good liberals, Syriza leaders have tried to define this section in purely normative terms–as something so objectionable one should not even try to describe it. Indeed, without the invocation of this section, liberals would find it difficult to call themselves progressives let alone Leftists. The extreme right wing is on the rise across Europe but so far has been in a position to cause substantial damage only in a handful of cases. And who supports them? In Ukraine they find the support of the US and EU and in Croatia in 1990s they were supported by the very same set of global elite. Golden Dawn in Greece remains a small though growing presence and finds the backing of entrenched ruling elite to contain restive working classes. And they are likely to grow stronger after the failure of Syriza. If the extreme right wing has polarized Greek society in the recent past, the only long-term means to counter this menace it is to polarize the society further around the political aspiration of working classes. It is natural for left parties but Syriza did nothing more than banking on constitutional means to curtail the rise of this section.

Syriza’s failure will have wider implications. It is a major setback for the working classes of West Europe who wished for the success of Syiza as a guiding principle to wage similar struggles in their countries. The dark shadow of Syriza’s failure will hang over what Podemos could achieve in Spain or, with its recent leftward swing, the labour party of England could even aspire for. Equally significantly, it is an astounding victory for the EU and global financial elite. They have managed a country to reduce its deficit by over 15% in less than 5 years and plunge its economy into deep depression without a shot being fired.[11] They have successfully maneuvered parties of all political hues to tow their line. IMF could never manage anything close to this. No doubt they will hunt their next prey with greater confidence.

The torturous six months of Syriza’s rule culminated in the split of the coalition. The ‘left’ wing of the coalition, led by the ex-energy minister, has accused Syriza’s top leadership of reneging on its election pledges. It was election time again. Syriza again emerged as the largest party and formed the government with its erstwhile right-wing partner. Only this time there was no euphoria of anticipated radical political change. The six months of intense hope and deep despair are finally over.

Notes:

[1] https://www.youtube.com/watch?v=BLB3uu1IXM0

[2] A lot has been written about the dubious conduct of IMF. A good starting point to understand it could be a US congressional committee report, the Meltzer report http://www.gpo.gov/fdsys/pkg/CHRG-106shrg66721/html/CHRG-106shrg66721.htm This report shows how the IMF systematically acts in the favour of private creditors (mainly US banks) at the cost of countries it is supposed to be ‘bailing out’. It details how the IMF acted as a branch of the US treasury during Asian and Latin American financial crisis in 1990s. Instead of claims to the contrary, the IMF has not changed, e.g. it continues to force countries to cut social expenditure https://docs.escr-net.org/usr_doc/Prioritizing_Expenditures.pdf . Its policies have caused famines in parts of Africa in early 2000s http://cadtm.org/Famine-in-Malawi-Exposes-IMF, http://www.worldhunger.org/articles/08/editorials/bello_afag.htm

[3] European Bank Bailout Total: $4 Trillion http://money.cnn.com/2015/03/09/news/economy/europe-stimulus-qe-three-things/index.html

[4] http://www.economist.com/news/finance-andeconomics/21642210-how-european-central-bank-can-dictate-terms-greek-government

[5] http://www.macropolis.gr/?i=portal.en.the-agora.2080 http://jubileedebt.org.uk/reports-briefings/briefing/six-key-points-greek-debt-weeks-election German government, the most strident backer of crippling austerity in Greece and one of the most powerful party in determining troika policy, itself is a direct beneficiary of the Greek crisis. http://www.iwhhalle.de/d/publik/iwhonline/io_2015-07.pdf

[6] It is hard to escape this conclusion. The outcome of the policies troika imposed on Greece was known to troika, e.g. a leaked IMF document in 2010 (reference i). If the austerity policies were geared to reduce Greek debt, the debt has increased sharply from 120 % of the GDP to 180% of the GDP, partly because the GDP itself has fallen by 25% in the past 6 years or so. It is a matter of record that every single country in the clutches of the troika has seen its debt sharply rise: Ireland, Portugal, Spain, Italy. In fact government debt of every country in eurozone has increased to bail out its banking sector since 2008. http://www.bbc.com/news/business-13361930 During the same period unemployment rate in Greece has risen to over 25% with an average Greek seeing up to 40% lose in income https://www.wsws.org/en/articles/2015/06/08/gree-j08.html

[7] https://zcomm.org/znetarticle/sovereign-debt-as-weapon-subverting-democracy-in-greece/

[8]http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_loan_facility/pdf/01_mou_annex1_20150730_en.pdf This document gives a sense of the scale of privatization plan: important ports, airports, many profitable public utilities and whole islands are slated to be sold at a fire sale price to private investors.

[9] e.g. http://sanhati.com/excerpted/3465/#7

[10] http://www.workers.org/articles/2015/02/10/greek-debt-austerity-and-past-military-contracts/

[11] See e.g. http://crisisobs.gr/en/2015/03/the-costs-of-greeces-fiscal-consolidation/

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