On 25 January, a parliamentary election was held in Greece, which, as had been widely anticipated, has brought to government the anti-austerity Syriza party. This result has given rise to hope everywhere that an end will now be brought to the misery of austerity – first in Greece and then in all the other countries whose people are reeling under similar measures aimed at bailing out the finance capitalists of the imperialist countries from a crisis of their own making.
At the end of December, the Greek government fell because it proved impossible for Greece’s parliament to agree, in accordance with the provisions of the Greek constitution, who should be Greece’s new president. This gave rise to the snap general election that was held on 25 January.
The calling of the election put the financial world in a turmoil. Greece’s economic woes had rather been brushed under the carpet since the New Democracy-led (centre-right) Samaras government was installed. Since the latter was happy to go along with the demands of the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF) troika, which represents Greece’s creditors (especially Germany), to impose harsh austerity on the people, there was not much more to be said.
The ‘thinking’, if one can call it that, behind this austerity policy is that Greece’s problems were caused by profligacy and could therefore be put right by a few years of reversing such profligacy and tightening the belt. This ‘common-sense’ solution of course could only be reached by those wilfully blind to the fact that Greece has fallen victim to a world economic crisis of overproduction that has little if anything to do with any alleged profligacy.
Those who are prepared to focus on how the economic crisis affects the economies of various countries (including quite a few bourgeois economists, never mind Marxists) were easily able to predict that the austerity medicine prescribed for Greece would make matters worse and not better.
For example, five years ago Martin Wolf of the Financial Times was predicting that, were it to impose austerity, “the Greek government would find that, for every step it takes forward, it would slip a bit backwards”, since the inevitable consequence of austerity would be a reduction in Gross Domestic Product (GDP). This in turn would necessarily mean a reduction in tax revenues, which would lead to an increase in the fiscal deficit (the excess of government spending over revenues), thus causing the government to increase austerity still further, adding yet another twist to the drive to annihilation.
Despite the warnings: “In 2010, with Greece crippled by debt and threatening the survival of the euro, the European Union, the International Monetary Fund and the European Central Bank began imposing German¬inspired austerity on the country. The aim was to slash the budget deficit and address fundamental problems like corruption and a failure to collect taxes. Such policies, they promised, would get Greece back on its feet, able to borrow again on financial markets.
“Greeks grudgingly went along, assured that painful reform would return the country to growth by 2012.”
The result, however, was just the opposite:
“Instead, Greece lost 400,000 jobs that year and continued on a decline that would see a drop in the gross domestic product since 2008 not much different from the one experienced during the first five years of the United States’ Great Depression. Greece’s unemployment rate was supposed to top out at 15 percent in 2012, according to International Monetary Fund calculations. But it roared to 25 percent that year, reached 27 percent in 2013 and has ticked downward only slightly since.” (‘Greeks’ patience with austerity nears its limit’ by Suzanne Daley, New York Times, 30 December 2014)
The result has been terrible: “The human toll of the economic crisis in Greece has been significant: Rates of hunger, suicide and unemployment have increased sharply, thanks to years of misguided austerity policies” noted the New York Times editorial board on 4 January. (‘A weary Greece considers its options’)
Professor Costas Douzinas of Birkbeck College, London University, appositely commented: “The theory of austerity was a kind of black magic. It was the idea that if you bleed a person, like they did with leeches in the Middle Ages, then they will get better. But the patient is bleeding to death.”(Quoted in ‘Greek election Syriza sweeping to victory: as it happened 25 January’ by Josie Ensor, Daily Telegraph)
Greek people desperate for relief
Reeling from an austerity drive that has worsened rather than repaired Greece’s economic problems, the Greek people for months had been indicating in the opinion polls that the party likely to get the largest number of votes in any parliamentary election was the apparently anti-austerity ‘far-left’ Syriza.
This was already the case at the time of the last elections in 2012, but in the end sufficient voters were frightened off by fears that they might be even worse off if a Syriza government were returned, enabling New Democracy to win by a slender margin.
This time, although Syriza’s opponents resorted to the same scare tactics, things had got so much worse for the Greek voters that it appeared likely that they would not be scared off again and that Syriza was very likely to win the largest number of votes. When the election materialised in December, this, initially at least, horrified the international bourgeoisie.
“Investors took fright at the prospect of a victory by Syriza, which has pledged to write off much of Greece’s debt and renegotiate the terms of its bailout. The Athens bourse fell almost 11 percent to a two-year low before regaining some ground. Greek 10-year bond yields jumped to a year high of 9.8 percent while the government’s short-term borrowing costs hit a record high of 12 percent,” reported Kerin Hope and Elaine Moore in the Financial Times. (‘Fear for fresh Greek crisis after poll called’, 30 December 2014)
At the time they were writing, “market reaction across the wider Eurozone was muted, with the euro broadly flat”. Since then, however, the euro has been taking a hammering as the realisation has dawned that the European economy, already floundering, may well find itself taking quite a hit from a Greek haircut, or even default, which may in turn topple other dominoes in Spain, Italy and France – and that is just for starters.
Bourgeois opinion, however, has become divided, with some sections strongly resistant to making any concessions to Greece, regardless of who forms the government, and others believing that there is now more benefit to be gained – and more chance of creditors being paid – if Greece is given leeway to recover.
Currently, Syriza leader Alexis Tsipras cannot be faulted on his observation that “on a realistic basis, Greece requires a remission of debt, because the debt objectively cannot be paid”. (Translated from ‘Tsipras’ Syriza insists on “a remission of most of the debt”’, Libre Mercado)
Wolfgang Münchau in the Financial Times has agreed: “The official EU policy towards Greece is best described as debt forbearance – of recognising a debt problem, and delaying the inevitable. It is also the policy of Antonis Samaras, the Greek prime minister, and his coalition government. It is a version of extend-and-pretend: extend the loans, and pretend that you are solvent. The history of international debt crises tells us that these strategies are always tried, and always fail.” (‘Political extremists may be the Eurozone’s saviours’, 5 January 2015)
He went on to say: “Unfortunately, the only party that makes a convincing case for a debt restructuring is Syriza, a party of the radical left.”
Münchau, however, is far from convinced that Syriza will be able to stick to its guns if the Troika puts its foot down, mainly because the party appears (no doubt in the interests of muting bourgeois opposition and making itself ‘electable’ in a bourgeois election) to have ruled out leaving the Eurozone, thus leaving itself without a bargaining chip.
Can Syriza save Greece?
Let it first be noted that Syriza has greatly modified its rhetoric in order to make itself electable in the eyes of the bourgeoisie. “Alexis Tsipras, Syriza leader, has abandoned his pledge to ‘tear up’ the bailout agreement with international creditors and is instead emphasising more moderate steps to address the debt load as well as his deep commitment to the euro.” (‘Greece’s Syriza no longer terrifies some investors’ by Elaine Moore, Stephen Foley and Kerin Hope, Financial Times, 31 December 2014)
Since Greece’s problems stem from the worldwide capitalist crisis of overproduction, and Syriza, for all its ‘far-left’ designation, is not committed to the overthrow of capitalism and the establishment of socialism, it is self-evident that a Syriza government cannot save Greece, any more than any other bourgeois government can.
The choice facing a Greece that continues to be capitalist is between (a) continuing to service an unpayable debt while the economy sinks into oblivion; (b) securing easier terms of repaying all or part of the debt; and (c) defaulting. All these options, under the present economic system, will have repercussions for the wellbeing of the working class of the whole of Europe, including Greece.
The worst option for Greece is obviously continuing on the path of hopelessness on which the Troika launched Greece in return for its ‘support’ back in 2010. Back then, it seemed that a sovereign default could not be avoided because of the astronomic rise in the interest rates international lenders were insisting on if they were to continue to lend to a country whose economy was clearly uncompetitive.
In actual fact, however, it was the European banks that were rescued by the Troika, not Greece – as we pointed out at the time. For Greece to prosper in the capitalist world, it needs to become competitive (by upgrading its machinery and forcing down the pay and conditions of its workers), but there’s little chance of achieving that when massive debt repayments are hanging round its neck.
As to the other options (debt rescheduling and default), only Syriza presented itself in the 25 January election as committed to debt rescheduling and only the Communist Party (KKE) is committed to default – although the KKE, of course, is not envisaging keeping Greece within the bounds of capitalism.
So Syriza appeared to be offering the ‘happy medium’. In reality, it is not a ‘happy medium’ at all, since continuing to repay vast amounts of debt will always be an obstacle to economic recovery. However, from the point of view of creditors, the plan to reschedule Greece’s debt will mean that they are repaid rather more than they would receive if there were outright default, which in turn could possibly lead to more opportunities for Greek workers to be enlisted in work to generate the wherewithal to pay the creditors.
However, for this to ‘work’, workers would need to be paid as little as possible and benefits would need to be cut still further, allowing the maximum of Greece’s wealth to be transferred to its creditors. The Troika are continuing to demand ‘reform’, by which they mean the complete dismantlement of Greece’s welfare state, further wage reductions, and legislation that will outlaw virtually all trade-union activity.
It cannot be too strongly emphasised that, under these conditions, Greece will lack the wherewithal to modernise and is thus very unlikely to generate production that is competitive in the modern world in order to recover economically, so that it is only a matter of time before the whole arrangement collapses. It would most probably turn out merely to be a postponement of the inevitable default.
Will Greek debt be rescheduled or not?
The problem with Syriza obtaining the rescheduling of the debt to which it is committed is that the Troika may not be prepared to negotiate any significant debt-rescheduling package.
The question, however, is what will happen to Tsipras’ policy if Greece’s creditors, led by Germany (which has certainly been strongly exclaiming it will not be turned), refuse to negotiate a restructuring? Tsipras would appear to have no Plan B. But logic dictates that Plan B would have to be defaulting, which would necessitate leaving the Eurozone. Would Syriza be prepared to do this, and would Germany and the Troika maintain an uncompromising stance were such a Grexit unequivocally to be on the cards?
Tsipras could well be in a strong position to secure a measure of debt relief if he stands firm. German Commerzbank economists Jörg Krämer and Christoph Weil certainly think so: “Preventing a Greek exit is also still desirable for Germany and other countries, since billions of euros in European taxpayer money could be wiped out if Greece were to leave the euro, raising the risk of a political backlash against leaders in those countries,” they told the New York Times recently. (See ‘Euro countries take tough line toward Greece’ by Liz Alderman, 6 January 2015)
“It would be much easier politically to renegotiate a compromise with Greece, albeit a lame one, and thus maintain the fiction that Greece will pay back its loans at some point in time,” they said.
True, there are still those such as Stefan Wagstyl in the Financial Times, reflecting official optimism, who consider that the Eurozone could weather the storm of a Grexit, as “there is widespread agreement in government circles on the point that a potential ‘Grexit’ is today less of a threat than three years ago. Not only are debt-laden countries, including Greece, making progress with reforms, but the EU has backed the Eurozone with new institutions, while many commercial banks have raised fresh capital.” (‘Berlin insists it expects Greece to remain in the Eurozone’, 5 January 2014)
This optimism is certainly misplaced, for the obvious reason that Greece’s creditors include effectively the governments (and ultimately the taxpayers) of the rest of the Eurozone, many of which are themselves in a precarious financial situation. If Greece defaulted on the whole of its €245bn debt, then under the guarantee commitments imposed on other Eurozone countries designed to encourage lenders to continue to lend to Greece despite its parlous economic situation, Spain would have to find €30bn, Italy €45bn and France €51bn. This they would be quite hard put to do.
To bring all or any of these large economies to the point that they are unable to pay their debts would clearly be an exponentially greater disaster than the bankruptcy of Greece alone.
However, the fact is that the crisis of overproduction has wiped out wealth that is dependent on the health of the underlying economy – in particular on commodities being saleable and their value being realisable. If the necessary sales cannot occur (because workers have no money to buy goods), indebtedness piles up and it is then just a question of who is left holding the baby – the debtors or their creditors.
At the end of the day, creditors cannot extract from debtors wealth that they just do not have. It is a fact that the illusion of solvency in the present conditions of economic crisis of overproduction can only be to “extend-and-pretend: extend the loans, and pretend that you are solvent”, to use Münchau’s memorable phrase. When you stop pretending, which one day becomes inevitable, the whole house of cards comes crashing down.
Such, then, is the motivation for the Troika to give in to at least some of Syriza’s demands. As against that, Syriza will find itself as much over a barrel as did its predecessors when it comes to contemplating a Grexit: all the predecessors in their time promised to try to negotiate a rescheduling of debt, all of them failed and ended up toeing the line dictated by the Troika. Given that they have no plans to look outside the bounds of the capitalist system for a solution, it will be very difficult for Syriza to behave any differently.
Syriza may be determined in the words of Tsipras, to have the “international markets … dance to our tune”, as he has promised voters, but capitalism has imposed certain unavoidable obstacles in his way. According to outgoing finance minister Gikas Hardouvelis, the government only has enough funding to meet its current commitments until the end of February. It follows that, after February, any capitalist Greek government will need to borrow more in order to keep going. And who is going to lend to a defaulter?
True, one result of austerity is that Greece is currently running a small current-account surplus (if one leaves debt servicing out of the accounting), which might give it some borrowing power, but it would be likely to have to pay astronomic rates of interest. In any event, Syriza’s promises to voters to soften austerity (by increasing the minimum wage and providing free electricity to the poorest households, for example – very modest concessions indeed relative to the desperate needs of the Greek masses), would, if they were kept, wipe out this small surplus entirely.
Another headache awaiting Syriza is the likely bankruptcy of Greek banks. As in Cyprus not so long ago, no sooner had the rumours of trouble started to circulate than the rich started to withdraw their money from Greek bank accounts. Three billion euros were withdrawn in December alone!
If one considers that no fewer than 34 percent of Greek bank loans are non-performing (ie, not being repaid), and that this situation is going to get far worse as a result of investors shunning Greece in its current travails, and that the Athens stock market has dropped billions of euros in value over the past few weeks (reducing the value of shares that have been used as security for loans), it is clear that if Greece were to exit the Eurozone, and as a consequence the ECB were to cut its support (currently running at some €45bn) to Greek banks, these banks could run out of money – creating absolute chaos for workers and pensioners, who would lose access to the cash they need for day-to-day living expenses.
A default would, it would seem, quickly wreck the Greek economy. But on the other hand, so does interest on €245bn in ‘bailouts’ for years if not decades to come. What will Syriza’s response be to that?
We can assume that Europe will not dance to Syriza’s tune. However, if wiser counsel prevails, creditors can be expected to make at least some modest concessions to Greece in terms of prolonging the repayment period of its debts and possibly even allowing a small reduction in the amount to be repaid (a cautious ‘haircut’). But for the Greek working class, there is little to be gained, as the KKE has rightly pointed out:
“The day after the elections, whoever is in government … old and new measures, which are demanded by capital in order to make it more competitive in the global capitalist market, will still be here and will continue to bleed the people.
“The anti-people laws in their entirety will still be in place. Laws that were voted for by all the governments and which they are not going to abolish.
“The unbearable debt will still be here, which is recognised by New Democracy-Pasol, Syriza and the other parties that support the EU. They call on the people to pay for it. The people who did not create it and do not owe anything.
“The contradictions and squabbles inside the Eurozone will be here. The squabbles that take place are over the management of the deficits and debts, which are created by the capitalists and are repaid with the aim of increasing the capitalist profits – the power of the strongest, always at the expense of the people’s interests.
“Above all, capital and the monopolies, both domestic and foreign, will be here. It is they that hold the keys of the economy, the real power, and will demand even more privileges in any recovery phase – always at the expense of the people. They will demand an even cheaper and more subjugated work force in order to invest. Unemployment will be here, even if there are some investments.
“The power of capital will be here – the state that consistently serves the interests of the monopolies at the expense of the people and demarcates the role of each government.” (From the Appeal of the Central Committee of the KKE concerning the parliamentary elections on 25 January 2015)
Quite rightly, the KKE has pointed out to the Greek proletariat that it is only by supporting the communists and proving their willingness to fight austerity by whatever means necessary that the Greek proletariat can hope to improve its situation.
There may, nevertheless, be gains to be made from Syriza taking power.
a. If the Troika is obdurate about not renegotiating the debt, there is a chance that Syriza may be forced into a corner and have to default, pulling Greece out of the Eurozone – possibly leading to the implosion of the entire European Union. “The result could be chaos in the markets not seen since the collapse of Lehman Brothers, as the possibility of default spreads across the continent like a financial contagion.”(Telegraph View, ‘Greek election leaves the euro on perilous ground’, Daily Telegraph, 26 January 2015)
b. Syriza, unlike the Labour party in Britain, has not yet been exposed in practice in the eyes of the proletariat, who for the moment are showing excessive undeserved enthusiasm for it. There is nothing like a period in government for Syriza to demonstrate its true colours, thus facilitating the transfer of support to the communists of the KKE.
The Greek people have voted for the Syriza anti-austerity ‘happy medium’ – the promise that austerity could be ended while remaining in the Eurozone and in the EU. Since joining the Eurozone and the EU initially led to a sudden substantial boost in living standards, Greeks learnt to believe that these institutions were good for them, and they have not yet concluded that they have been drinking from a poisoned chalice. The experience of a Syriza government will undoubtedly prove exceptionally educational in this regard.
The communists, however, need to put clearly before the Greek people not only a policy of opposition but also a very concrete programme of how affairs will be arranged under a socialist economy, so that it can clearly be understood what the difference is between a social-democratic programme such as Syriza’s and a socialist economic programme.
The KKE has an important opportunity to blaze a trail in restoring the faith of the people in communism and blazing a trail to be followed throughout Europe. We wish them well in this endeavour.