The Troika of the ECB/EU/IMF have imposed a harsh defeat on Syriza and all the anti-austerity forces in Europe. At every stage the concessions agreed by the Syriza leadership were not enough. The Troika, led by Germany, sought a political solution to the economic crisis; the complete rout of the anti-austerity forces and the humiliation of their first government.
They have been able to impose this outcome through the establishment of a new regime not just in Greece, where the Troika is back in charge, but also in the EU as a whole. The string of summits, the sovereignty of governments, the role of parliaments and the negotiations among the 19 countries within the Euro Area have all been revealed as a charade. In the course of the crisis it has been shown that policy submissions from Athens (or any other capital) are not seen by the Eurogroup of finance ministers or prime ministers but assessed by technocrats. This is done explicitly to prevent democratic scrutiny by elected national parliaments. However, there is one exception to this secrecy, which is the German parliament. The Eurogroup itself has no legal standing.
The entire project has become one in which Germany rules by diktat in its own narrow financial interests. This is a financial dictatorship and all forces in Europe will have to adjust to this new reality.
Refusal to pay
The fundamental forces pushing in this direction are that no monetary union can operate without substantial transfers payments (as happens largely automatically in federal states such as the US) to partly compensate for differences in productive level and living standards. Those transfers barely exist at all within the Euro Area and have been cut further as part of the austerity drive. Germany, as the largest economy and the most productive in the Euro Area benefits most from the single currency. But it refuses to make the transfer payments that are needed to allow it to function.
In the current crisis the German ruling class and its political representatives have shown that they are unwilling to pay to maintain the Euro. On the contrary, they have repeatedly imposed exactions on the Greek population and others and have now administered a coup de grace. Like its predecessors, the latest Greek bailout of €86 billion is not a bailout of Greece at all. It is the imposition of further debt in order to pay off existing creditors. It is the way a loan shark or Mafiosi operates in order to exact the maximum revenue and seize assets. This will duly be done with a €50 billion privatisation fund, to the benefit of Germany and the US, via the IMF. There is no prospect of a recovery for the Greek economy under these conditions. The crisis will only deepen.
Provoking a crisis
The overwhelming responsibility for this debacle lies with the Troika led by Germany. The previous bailouts in 2010 and 2011 were designed precisely to be able to undermine any reluctant government in Athens and bring it to heel. The private creditors were paid off and the debts loaded onto the Greek banking sector. Therefore, any general default on government debt would bring down the entire banking system and the economy. At the same time the ECB starved them of short-term cash to meet withdrawals (‘liquidity’) as well as the banks’ deteriorating position caused by the continued economic crisis. Under these circumstances it was easy enough to provoke a run on the banks simply with rumours that the ECB liquidity was being cut. The European media duly played its part, with fake empty supermarket shelves and bus queues portrayed as lines of desperate savers until it became a reality.
The crime of the Greek population was to elect an anti-austerity government. Onerous but far easier terms had been offered to Syriza’s right-wing predecessor. In the eyes of the Troika, Tsipras compounded this affront by calling and winning the Oxi referendum in a landslide. Expressions of popular will are inimical to financial dictatorship.
Under these circumstances, combined with the deep attachment of a majority of the Greek population to Euro and EU membership, combatting the Troika was always going to be extremely difficult. There would have been no guarantee of success. But neither is it possible to say that there was no other possible outcome to the current humiliation.
Far from being a revolutionary or similar crisis, the mass of the Greek population precisely wants to ‘go on in the old way’. They wanted both an end to austerity and continued membership of the Euro. That is, they wanted a return to pre-crisis situation, say, of 2000 to 2006. But the actions of the Troika in this instance have not made it possible to end austerity, despite this being a precondition to improve living standards and revive the economy.
Ending austerity, not continued Euro membership was the principal question. Unfortunately the idea that Greece had to remain in the Euro ‘at all costs’ predominated. This was largely true of both the population and the political leadership. ‘All costs’ ended with the conditions now being imposed and there was no alternative strategy.
However it seems that the overwhelming majority of Syriza’s critics make the same error in mirror image. They raise ‘Grexit’ to a principle. It is a simple-minded pretence that leaving the Euro would by itself solve the Greek economic crisis. There are no proposed concrete steps to end the crisis, to combat the inevitable collapse of the banks or find the resources for the recovery. The notion that Greece could simply issue a parallel currency to resolve the crisis is nonsense. All currencies require assets to support their legitimacy. Otherwise they are worthless IOUs.
At the end of June the Greek National Bank held €5.1bn in foreign exchange reserves. Monthly imports are €3.6 billion, which would be required for vital goods, energy imports, pharmaceuticals and so on. Without new assets Greece would be unable to import after about 6 weeks. Nor is there any pot of gold in the Greek banks, where the May data shows loans outstanding exceeding deposits in Greek banks by €100 billion. The position will have deteriorated since. Taking tighter control of the banks was a necessary but wholly insufficient condition to reverse austerity.
Follow the money
There have been no resources to alleviate austerity and to fund investment made available to the Syriza government from international sources. But there are resources available in Greece.
Greece is in one sense simply the most extreme case of the investment strike in the major capitalist economies which has caused the crisis. In 2014 the profits of Greek firms were €95 billion and their investment level was just €8bn. At the same time, the deposits of Greek firms held at the Greek banks fell by €8 billion.
The oligarchs who dominate the Greek economy are looting the country. They make vast profits (the highest profit share in the OECD) and spirit them out of the country with negligible domestic investment. It is necessary to make inroads into their incomes in order to find the resources to begin to reverse austerity and to fund investment.
The political situation would not allow wholesale expropriation, but neither is this necessary to resolve this crisis. The unutilised Greek resources that end in Swiss and German bank accounts could simply be taxed at source at a greater rate. Taxes on the oligarchs which yielded 5% to 10% of GDP would be ample funds to reverse the crisis. Tellingly, the shipping industry and the oligarchs who own it are still largely untaxed. Overall, Greek business pays half the proportion of its profits paid by its US counterparts.
Using these resources could have funded significant measures to alleviate the crisis and to promote growth. If it then became apparent that the Troika would not allow these measures at least the choice between the benefits of ending austerity versus remaining in the Euro would have become clearer to all. That would have allowed a clear political choice. But that proposition was never tested. Declarations that Euro membership was paramount removed a decisive bargaining weapon, and any alternative.
The establishment of a German financial dictatorship in place of fake appeals at the top to European solidarity will lead to a general realignment of all political forces and not just in Greece. As a minimum forces both on the anti-austerity left will reconsider their entire strategy. After a defeat the growth of racist and xenophobic right will also inevitable grow. Within the other European countries there will be a growing division between Germany and its acolytes and the rest, who now realise what German hegemony entails.
The pro-austerity ruling parties in Spain, Ireland, Portugal and elsewhere will be jubilant. The first anti-austerity government in Europe has been brought to its knees. But this will also demand of the anti-austerity forces in those countries and elsewhere greater political clarity and determination. The illusions that there can be a return to the pre-crisis status quo have been shattered.
The treatment of Greece stands in sharp contrast to the Ukraine, where the IMF is insisting on debt relief and promising further funds without creditor agreement. Of course the Kiev government is a coalition of fascists, the far right and US State Department appointees, not an anti-austerity party of the left.
The exceptionally harsh treatment of Greece will be a standing rebuke to the Troika especially since the Greek economic crisis will only deepen. The resentment of the new European regime will only grow. As austerity has not ended neither with the fight against it.