February 11, 2015

Aris Hatzistefanou is a Greek journalist, creator of the radio and TV show Infowar and a writer for the newspaper Before, published by the New Left Current that participates in the ANTARSYA coalition. He was the co-creator of two widely viewed documentaries, Debtocracy and Catastroika , about the Greek economic and social crisis. In this article published at Info-war.gr and reprinted at the Rproject.gr website , he examines the Varoufakis' proposals. The article was published after a February 5 demonstration of some 10,000 people in Syntagma Square in Athens, to show support for the government in its confrontation with the EU and to urge retreat from its promises.

Greece's Finance Minister Yanis Varoufakis has changed direction from the commitments made by SYRIZA in its declarations, even publicly accepting the idea that Greece will pay most or all of the debt to international lenders run up under past governments as they obeyed the dictates of Europe's bankers and bosses. His program has provoked critiques within SYRIZA and on the Greek left generally.

Previous Greek governments accepted a bailout of the country's financial system in return for imposing harsh austerity measures that have only made Greece's debt problems that much worse. Now, leaders of European governments and financial institutions are insisting that the new left-wing government--elected by landslide proportions because of its promise to reverse austerity--continue the program of cutbacks, mass layoffs and privatization, or the European Union will pull the plug on the Greek financial system.

When the finance ministers from Eurozone countries meet on February 11, Greece will be the top item on their agenda--but to judge from the statements of Europe's political and financial elite in the days before the meeting, they will have a one-word answer to the SYRIZA government's proposals for dealing with Greece's huge foreign debt: No.

WILL WE go down to Syntagma Square to support the government, many friends and readers asked me on the morning of January 5? Our answer can't be based on an emotional appeal. You don't go into the streets just because you are angry, but to achieve specific objectives. Let's start from the beginning.

There are significant problems with the government's strategy for negotiations on the debt, which derive from its leaders' desire to stay in the Eurozone and the decision not to move toward a more definite confrontation with the lenders.

As described by James Meadway of the New Economics Foundation, the two main proposals of Yanis Varoufakis--which don't include any debt forgiveness--suffer in important respects.

The first proposal from the Finance Minister is that the Greek debt held by the European Central Bank will be exchanged for "perpetual bonds," under which Greece will pay only a low interest rate and not repay the borrowed funds. Second, Varoufakis seems to be proposing a "growth clause" attached to debt repayments--meaning that Greece would pay back the lenders only when GDP growth exceeds a certain percentage--probably 3 percent.

Greek Finance Minister Yanis Varoufakis

As Meadway and other economists predicted, indirectly but clearly, the hope to get the ECB to agree to the first proposal has been shown to be a fantasy after its unequivocal statements last week rejecting any deviation from the current terms. With these statements, the ECB has shown itself to be a blind instrument of the German government, with a mission to crush any country that dares to differ with its economic line.

The second proposal is equally problematic because it still requires the government to maintain a primary budget surplus--the difference between revenues coming into the state (mainly through taxes) and expenditures going out (not including interest on the debt repayments)--of 1.5 percent.

In theory, Meadway believes SYRIZA could achieve this target with the reform of the tax system (essentially by getting the wealthy to pay). But something which no other government has wanted to do since the creation of the Greek state is supposed to be accomplished in a few months, all while the country has Berlin's revolver pointed at its head and while those who owe the taxes control all of the mainstream media.

SYRIZA is the only party in the government that can make the rich pay, and it is necessary to try. But this doesn't mean that it will succeed--and certainly not in the timeframe suggested.

Yet if the reforms to the tax system fail or are delayed, the only alternative that would maintain a budget surplus is a new cycle of austerity, which would undermine the government's political support in a very short time. Let us not forget that people usually don't revolt at the height of a crisis, but when their hopes sink. And right now, they hope.

IN ESSENCE, however, the problem is not economic but political. As the New York Times columnist Paul Krugman explained, within the Eurozone, the hands of the Greek government are tied. That's why he always likened the euro to a "straitjacket."

As long as the Greek banking system is a hostage of the ECB to maintain liquidity, no government can be in a strong negotiating position. The head of the ECB will be able to cause a banking crisis that would threaten to topple the government in a matter of a few days.

Let us not forget that executives of the German Bundesbank have said that either the status quo or the Greek government will change. We can assume that they are determined the outcome is the latter.

Obviously, it is possible to carry out reforms that improve the conditions for Greek society while the country remains in the Eurozone. The financial elite of Europe could reach consensus on a temporary relaxation of the hold they have on Greece--before moving on to a new attack on workers in a few years' time. But they have no reason to do this today if Greece does not threaten them with unilateral cancellation of the debt, leaving the euro, and nationalizing the banks.

Does all this mean we should abandon Greece's first left-wing government to its fate if we disagree with its more moderate stance? Just the opposite--we must all be in the streets today and every day, proving that the extortion of the EU will not be allowed.

In the past, even conservative governments were forced, under popular pressure, to challenge the lenders. There is an even greater likelihood of this from SYRIZA, which has strong radical elements inside it.

The demonstrations in the streets do not mean we accept the moderation of the government's leaders or the dictatorship of the EU. They mean we support the government by removing the option of surrender.