When you ain’t got nothin’ you got nothin’ to lose – Bob Dylan
As one candid British commentator tried to come to grips with why his confident prediction of a “Yes” vote in Greece has failed so resoundingly, he said that he’d made that prediction from his own viewpoint – as someone with savings to protect. But most Greek people, he suddenly realised, didn’t have that concern anymore after five years of austerity. Duh. As a result, a whopping majority of Greeks rejected the Eurozone ultimatum to (a) privatise and sell off the prize chunks of their economy to foreigners, and (b) have their economy throttled for the next 20 years by the kind of austerity policies that have failed spectacularly to promote economic growth in every single country that has tried them. All in order to repay loans from which ordinary Greeks had received no benefit.
In reality, there was never any earthly reason for most Greeks to vote for the deal that the Eurozone was offering, and no possible way to base a genuine repayment schedule in the medium term on the conditions that the European troika (the EC, ECB and IMF) were seeking to impose. And once you’ve sold Greece’s prize assets to foreigners, how are you supposed to generate the wealth required to service the repayment schedule? As Britain’s Financial Times conceded yesterday:
There is no reputable economic theory according to which an economy that has experienced an eight-year-long depression requires a new round of austerity to bring about economic adjustment.
Right. So “Yes” was always a dead end. But what now… for Greece? Immediately, that will depend on the outcome of summit talks on another deal /interim emergency debt relief package that will help to stave off the liquidity problems of Greece’s banks. Like most of the Eurozone’s efforts, this is strictly short-term stuff. Even if an emergency lifeline is extended – which is uncertain – this won’t go any way to enabling Greece to clear the next hurdle, which is a 3.5 billion euro repayment looming on July 20. That’s the real problem with the measures currently on the table. They’re strictly short term debt relief to enable Greece to limp along to the next impossible hurdle. Again, as the Financial Times also pointed out yesterday, Europe’s leaders had tried to rig the referendum by quietly suppressing their own evidence – in the shape of an IMF report this week – that had in fact, supported Syriza’s negotiating stance:
The news last week that Eurozone officials tried to suppress the latest debt sustainability analysis of the International Monetary Fund did not help either. The IMF report essentially revealed that the Greek government had been right after all to demand debt relief. The rest of the EU gave the impression that it wanted to rig the referendum, and it did not even bother to conceal this.
On any rational, strategic and moral grounds then, the Eurozone should now give ground and make a genuine offer to restructure Greece’s debt away from these immediate short term debt obligations – which are less about resolving the debt situation than they are about enforcing political and economic compliance by Greece. Otherwise, Europe will face the internal consequences of a Greek exit that will wipe the slate of Greece’s creditors, most of whom are German. Externally, it will also create a failed state on Europe’s borders. Meaning: the Eurozone can hang tough (and face the geo-political and economic blowback from a Greek collapse) or it can begin to take some responsibility for its own intransigence.
Lest we forget, this is a crisis born out of the rigging of the Eurozone (pre-GFC) so that it serves mainly as a mechanism for creating captive markets for German exports. Last year alone, that chronic imbalance created a trade surplus for Germany of 217 billion euros; which, BTW, it needs, badly. By late last year Germany was hovering on the brink of recession.
If and when weak economies like Greece ever did leave the euro, the euro would then appreciate – and while this would raise the value of German savings, it would seriously damage Germany’s export drive. That’s the (only) leverage Athens currently has. It knows that Germany’s self-interest lies in keeping the Eurozone together, with its weaker members kept docilely compliant to German-led demands. Instead, Syriza has been steadily calling Germany’s bluff – sufficiently at least, to try and win some easing in the raft of austerity measures that are offering Greece no future opportunities for growth whatsoever. The economic case for the other option – of kicking Germany (not Greece) out of the Eurozone was made here, in February.
Lets assume – as we should – that anything that emerges later this week will be only Band-Aid stuff. Even if Greece can (somehow) limp through the next week without its banking system collapsing, the July 20 payment will deliver the coup de grace. (At that point, the Greek banks will almost certainly go bust and tourists to Greece – hitherto spared the 60 euro a day limits – will suddenly find themselves stranded. Cue tabloid hysteria about Brit holidaymakers being stranded in the Greek isles. Lucky them.) Probably though, a deal of sorts will be made later this week, for a temporary fix.
In case a temporary fix doesn’t eventuate – or just for the sake of argument – let’s assume the parties do remain at loggerheads, and Greece does gear up to leave the Eurozone. ASAP it would issue its own currency (ie it would revive the drachma) and take the immediate hits in terms of the simultaneous devaluation, and hyperinflation. At least in the meantime, this route would reportedly seem to be the only way that the Greek government could then re-capitalise the country’s banks, pay pensions and continue to function, albeit at a far lower level. Eventually, it would be a hard path to economic recovery and growth. (To repeat, that’s something entirely absent from the Eurozone measures.) Part of that solution could theoretically entail the ‘hair cut’ option taken during the banking crisis in Cyprus a few years ago, whereby the banks commandeered a fraction of everyone’s existing bank deposits and used that money to help themselves re-capitalise. As Reuters pointed out yesterday though, Syriza has promised not to do that.
Taking that kind of scenario seriously for a moment… it is a bit unclear whether the current Greek government has the constitutional authority – or the numbers in Parliament – to actually re-instigate the drachma. The Eurozone troika – the ECB, the EC and IMF – are probably gambling that if they hang tough, the Syriza-led government will fall within weeks, and a more compliant set of Greek politicians would then be elected who will swallow whatever the troika choose to impose, and will force that down the throats of the Greek people. Having seen its puppet Greek politicians lose to Syriza in January’s election and having now lost yesterday’s referendum, Europe’s leaders want Syriza either brought to its knees, or removed.
In fact, much of the Eurozone posturing about Greece’s debt is not about economics. It is about politics inside Greece, and beyond it. In Spain, the populist Podemos party has shaken the old rotten system to the core in much the same way that Syriza has done in Greece. Elections are looming in Spain later this year. Thus, as Reuters pointed out yesterday:
Several countries such as Spain will be nervous that, if they now cut Athens a soft deal, radical parties in their own countries will grow in strength.
What can we do? Rather than contribute to the crowd sourcing for Greece, its sympathisers should vow to go visit, after the Grexit crash has occurred and a new, freer Greece is trying to climb back up out of the crater. Its economy will need tourism. Think about it. A holiday in the Greek islands could soon become a revolutionary act of solidarity.
Meet Daughn Gibson
There’s no direct link between what’s going down in Greece and these tracks by Daughn Gibson except they seem tonally appropriate. A 6 foot five inch trucker who named himself as a mixed tribute to the songwriter Don Gibson and Stevie Ray Vaughn, Gibson has been specialising for the last couple of years in a twisted kind of country music. Have fun.