Suppose you realised that there was no way on earth you could stay in the Euro.
Supposed you realised that to do so was electoral suicide for you weeks after you had been put into office.
And suppose you also were absolutely sure that the austerity that staying in demanded would ruin your country.
What would you do in that case if you were told you had no choice but comply with the Eurozone demand for austerity?
I know what I would do. I would buy time.
And decide to exit at a moment of my choice.
PS (Added later) And why get a delay? So all the capital flight that's going to happen has already exited at cost to the ECB before the announcement is made.
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Or they realise they’re better in the club than out
They could be
Not on these terms
Is it possible they could use some of these community currencies i’ve read were quite widespread in Austria in the 30s or the Bristol pound here today. The problem comes in having foreign currency for imports.
I don’t know anything about this but there is an article on Piera which suggests not.
For what it is worth
http://www.pieria.co.uk/articles/monbiots_misguided_monetary_reforms
I agree the alternative is possible
I am suggesting a possibility
Perhaps they need a delay, and a demonstration of the impossibility of reasoning with the ideologues. As I understand it the people in Greece would prefer to stay in the EU at present: it would make sense to show very publicly just how irreconcilable is that wish with their desire to take a different course on austerity, no matter how much sense that makes.
Agreed
I’ve been wondering if actually the agreement behind closed doors between Greece and the EZ is that Grexit is really the only viable option, but both sides need some time to put plans in place. The alternative Grexit scenario could have been Greece using this bank holiday weekend to do a very sudden exit. Assuming no one would have wanted that (and Syrizia don’t have a mandate for it in any case), buying 4 months to prepare is the best option. That also gives the Greek government the chance to go back to the electorate if they need to, either for agreement via referendum, or a kind of “back us in this or we’ll accept defeat of our whole manifesto and hand back to the old parties” approach. Certainly it doesn’t look like the EZ approach can be reconciled with democracy in Greece at the moment.
I do wonder if it is not just Greece playing this game too
Try not to use the term ‘Electoral Suicide’, unless you really do mean the insult: that an elected party or leader are in it for whatever they can get out of it, and they know that there are some things they can’t have because the electorate won’t let them get away with it.
But it is perfectly legitimate, honest and principled, to say: “The voters didn’t sign up for that. They know it’s danaging, they don’t want it, and they expect us to prevent it”.
Its democracy; we cynics have forgotten that, and ‘Electoral Suicide’ implies contempt and bad faith where the straightforward reading – and the outcome – is a straightforward victory for the better interests of the electorate.
Admittedly, that insult strikes close to home, close to where we call home.
I have to say I do not get the point you are making
Are youy saying that although people voted for Syriza they should now be pleased it cannot deliver the mandate they gave it?
No, it’s a point about language: cynics and Westminster Villagers use the label ‘Electoral Suicide’ to describe any action that a government can’t get away with – as if ‘Getting away with it’ is all that electoral politics is about.
We’ve taken on a jaded cynicism that says “Nah, voters won’t stand for that” as if that was the whole of the moral understanding of a politician; and it comes with an unexamined assumption that any act – any damage to the voters interests, any deceit, any corrupt enrichment or outright betrayal – is acceptable if we can get the media and the voters to swallow it.
There is an unstated contempt for the voters in there; and a complete refusal to examine any sense of duty in the political class.
Or, for that matter, any sense of reality: the Greek government can’t do that to their citizens, and they know it – and the results on polling day are very low down the list of their concerns today.
It may well be that the Greeks have elected yet another venal shower of deceivers who deserve our cynicism, and well deserve the insult of saying that they’d only ever do the right thing for their country if they faced electoral oblivion for choosing otherwise.
Maybe: but probably not, and they’re a long way from the Westminster village.
So a better choice of words would be: “They know they must not do that to their citizens”.
I like the argument
Entirely, agree, Richard. And with Fiona’s comment. Indeed, I made the same points in a discussion I was party to yesterday evening as the scale of the humiliation of Syriza – and thus of Greece as a country – became evident. And now I’ve read the comments by Schauble (an utter disgrace, but a clear mark of the power of neoliberalism, and thus contempt for others that sits at the heart of the Eurozone) I cannot see any other option.
Of course, this (time to plan for an exit) may be wishful thinking on our parts. But I simply cannot see that a party that came to power on a ticket that they are now being forced to trash completely can make such as U turn. If they really have then it demonstrates beyond any doubt at all that any politics/political party that are not of a neoliberal bent anywhere in Europe may be tolerated while in opposition but is doomed to failure if ever in government. That truly and absolutely unambiguously signals that representative democracy in Europe is dead, and that those in power simply maintain the trappings as camouflage for a pan European (global?) dictatorship of the 1%.
If Syriza has indeed been forced to completely U turn then you are right, democracy will be dead
Maybe I am just hoping that is not the case
If it has then everything changes
At the moment I’m reading this situation as Syriza buying time to prepare for an orderly “Grexit” (well, Grexit with the minimum of disorder – there will still be one hell of a lot of disruption). The alternative is a complete U-turn by Syriza – that would lead to them becoming PASOK Mk 2, a collapse in the polls and then probably the ascent to power of the Golden Dawn fascists – who would leave the € immediately as they are far right loons who don’t give a damn.
We’re thinking alike Howard
I can’t see what else could be planned if Golden Dawn is to be avoided
Syriza are in a real tight spot. This is because the soft underbelly of this issue is the banking system which will collapse if it runs out of money due to the ECB stopping flows.
This would lead to chaos (think what might have happened if Gordon Brown had not pumped liquidity into the banking system in the UK in 2008) and then all sorts of nasty things could happen (such as Golden Dawn; civil war).
So I hope that they are playing for time for an orderly withdrawal from the Euro. It would be brave and momentous but that’s what I would be thinking of.
The Euro is now the ‘one ring that binds them all’; the Union too. Any new ideas can only overcome that euro-orthodoxy if they come from being outside the grip of the ECB. It’s unpalatable, but true.
But the point is QE in the EU could solve this overnight
And that’s why this is so obviously not an issue about banking per se but about austerity and beating Greece
So I agree with you
I have been wondering for a while if this wasn’t the strategy. Even if it isn’t this may well be how the politics (both in Greece and Germany/Netherlands/Finland) work out. I think that regardless of what policy you think a Greek government should follow, the Greek economy is not going to recover until Greece leaves the Euro. As things stand Greece is hopelessly uncompetitive and to correct this by a deflation is simply impossible (the alternative, of higher inflation in Germany isn’t going to happen). You could adjust by a sustained transfer but the mechanism for this and the political support simply don’t exist and are very unlikely to. So I hope you are right.
As far as I can tell, default-and-devaluation is the only game in town for Greece.
They’ll get there eventually: remember that a ‘victory’ for the Troika means continuing the lockdown of the Greek economy, until the Greeks decide that an steepening spiral of deepening poverty is intolerable and throw out the Troika, their Government, and the externally-imposed recession. Or until they cease to function as a nation state with a taxable economy and the rule of law; which would also mean default and an effective exit from the Euro.
The classic IMF approach – austerity – was discredited years ago; its sole utility today is punitive, an example of the consequences of defying the neoliberal order, and a deterrent to others in a similar position.
The future for Greece is probably a facade of ‘associate membership’ in the EU that looks like favoured access to our markets in the press releases, and sanctions or an economic war from underneath.
Greece in 2025 will look a lot like an emerging market, with a repeatedly-devalued currency, no tax base, an undeveloped banking sector, all domestic savings kept offshore and no domestic access to capital (and therefore no investment), and a cashflow based on tourism and the remittances from gastarbeiters.
The tax gap and the offshore savings will be a boon to London, and this will be tacitly permitted by the EU to ‘punish’ the Greeks.
I would serve us right if Greece pursued the other Third-World cash cow: no extradition treaty, tax haven status, secrecy in banking, and official policies explicitly facilitating money-laundering and fraud. Syriza won’t permit that – and well they shouldn’t, tax havens enrich an elite and ill-serve their citizens – but a future right-wing party or dictatorship would be happy to oblige.
I don’t agree that this is Greece finessing the timing of their departure. I am inclined to think it is Germany setting up Greece as a fall-guy to take the blame its own public will throw at it for abandoning the Euro instead of abandoning the unworkable structure and embracing essential practical reforms.
There isn’t anything for the rest of the Euro nations to gain by putting off the reforms Greece wants, since the Euro cannot function without the changes. It has run into a wall, where it simply generates piles and piles of unrepayable debt in Greece’s name, which Greece has no control over, no benefit from and no chance either to use or to refuse. After Greece, it will be Portugal, then Spain, then whichever other country is at the bottom of the pile, and so on in a cascade, until the Euro is just the name of the currency of Germany, the Mark in all but name and strength.
Greece seems to be handling the talks with commitment and flexible, cooperative efforts to keep the currency alive and manage the ridiculous mountains of debt that are piling up, while working to get a method that will allow the project to move forwards, recycling surpluses and making payments and repayments realistic. It is the die-hard neocon banksters who are determined that their financial model will prevail, no matter what the cost and the unworkableness of the reality it creates. When we are all at war, let’s remember that.
interesting perspective
Noted
I’m inclined to disagree, mainly because I’m not reading this as a complete climb-down by Syriza. Clearly different people want to present it in different ways; for instance, German politicians’ comments are presumably meant to appeal to German voters, not to Greeks. The text contains somewhat contradictory elements, as is the EU way. But the substance is:
1) Syriza wanted to target a 1.5% primary surplus every year, instead of 3%, then 4.5%, then more.
They got: “The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.”
Now it would be better if a lower target had been explicitly agreed now, or even it had said that a new target would be negotiated between the Greek government and the institutions. But it sounds like they are getting some movement on this. At least one of the “institutions”, the IMF, has recently admitted that the austerity it had previously advocated for the eurozone was a mistake.
2) Syriza wanted to implement its own definition of “reforms” (a word which can mean anything), i.e. to tackle tax evasion and corruption, instead of cutting wages, pensions, and low-paid jobs.
They’ve got a renegotiation of the list of reforms, with the new list to be agreed between the Greek government and the “institutions” (EC, ECB, IMF). And the Greeks are to provide the initial list on monday, though doubtless there will then be horse-trading.
That is an improvement on the previous position, in which “reforms” were dictated by “troika” (though of course, the “institutions” are just the same thing under a different name) to the Greek government.
So I think some room has been left for renegotiation. Is it enough room? I’m not sure.
I also don’t think Syriza are cynical enough to have a secret plan to leave the euro.
Good points
But all politicians have to be cynical
I wonder if Greece could use an alternative currency internally to boost the economy.
1930’s Germany was an economic basket case but printing money and using it for employment worked very well. Difference of Germany economically from 1933 – 1938 was profound. The policies of Hjalmar Schacht are well worth looking at.
Mefobills were a very innovative way of getting around treaties, when the bills from a shell, government-owned company were used as money
http://www.nakedcapitalism.com/2013/12/philip-pilkington-hjalmar-schacht-mefo-bills-restoration-german-economy-1933-1939.html
I wish economists would study economic history but they are not interested in learning how their policies don’t work. Unfortunately,they are also not interested in policies that might have some interesting lessons..
I am certain the EU would not tolerate that
I cannot imagine in the current circumstances that the EU would accept the Schacht system for Greece, either.
There were fundamental differences with Schacht in the 1930s. He was a close friend of Mantagu Norman, then Governor BoE and he also attended the BIS policy meetings so it is fair to say that his scheme was fully approved by the international bankers.
Why the bankers chose to turn a blind eye to the re-arming of Germany is another question altogether!
As I understand it certain US states are net beneficiaries of millions of federal dollars year after year. To me it seems a natural consequence of a continent wide currency and interest rate given the different natural and human resources of the different states. How is the Greek case really any different, and why do the EZ leaders expect to be?
This is also my understanding, and, according to his Minotaur book, that of Yanis Varoufakis, who says that this was Keynes’ view and that such a surplus recycling system is a sine qua non of any continental currency. It is very clear from the EU opposition to the idea that we are definitely NOT all Keynesians now, after all! (Or if the politicians are, then they have a lot of work to do to persuade the banker masters!)
I would suggest that your assessment is very accurate, Richard.
Paul Mason (C4 News) raised the question last week as to whether Grexit was not Yanis Varoufakis unstated intention all along. But that, of course was not the mandate he was given by the electorate. He and Alexis Tsipras do now have a case to take back to the Greek nation. The absolutism and intransigence shown by Germany has done much to convince the Hellenic peoples that they can either have Europe, or they can have democracy.
Despite Wolfgang Schäuble’s triumphalist trumpeting (am I the only observer who feels an uneasy sense of historical resonance at the arrogance and disdain that the German political class has shown towards Greece?), this is far from over.
Anyone who imagines that the Syriza government have come this far just to give up at the first hurdle understands little about Yanis Varoufakis, and less still about the Greek national character. Herr Schäuble would do well to take a lesson from his own country’s history. As Germany, Italy, and Bulgaria discovered in WWII Greece will only be defeated when their are no Greeks left. The German finance minister would also do well to remember that when a mighty ego meets a mighty intellect in the field, it is the intellect that wins the day.
The end for Greece’s ill-fated foray into the Eurozone will come as somewhat of a shock, I suspect, for many and (as you rightly suggest, Richard) at the time of the Greek government’s choosing.
What Germany and its Neo-liberal allies are keen to portray as a humiliating climbdown for the Greek ‘upstarts’ is not, I would suggest, ‘the end, nor is it the beginning of the end, it is simply the end of the beginning’.
What Athens really needed they have got. Time. The problems of immediate liquidity, capital flight, and access to European capital markets can all be addressed in a timely fashion between now and the next repayment period in the Summer.
But what Schäuble, Merkel, and Djisselbloem forget in their Eurocentric arrogance is that the world does not end at Europe’s borders. Before the Autumn we will see a huge investment by China into Greek infrastructure, particularly in the ports of Piraeus and Heraklion (which would be an ideal terminus for shipping arriving, via the Suez Canal, from the South China Sea) and the roads and infrastructure beyond towards Europe.
Given the increasing cosiness between Moscow and Beijing it is far from inconceivable that this will take the form of a Cino-Russian joint venture. For Mr Putin it would allow access (via Thrace and Macedonia) into the republics of the former Eastern Bloc area of Europe, including several who, despite being European Union members, are increasingly enjoying closer relationships and economic ties with the Russian Federation.
Germany should think long and hard about the capability such an arrangement would offer to Moscow to turn off the gas pipelines that currently drive German industry, whilst maintaining a steady flow of energy to more friendly European nations.
More worryingly still driving Greece into bed with Russia would offer the Russian Pacific fleet based in Vladivostok (via the same route) a home in the soft underbelly of European defence, the Mediterranean region.
In a recent communiqué from Washington President Obama urged Germany ‘to stop bleeding Europe dry’. It is becoming increasingly difficult (even for someone who was until recently broadly pro-EU) to see the European Union as anything more than a vehicle for German neo-liberal expansionism that has secured more through economic means than the might of Hitler’s Wehrmacht did.
German intractability will push Greece out of the European Union rather than give one inch of ground (and probably Spain, maybe Italy too) at a time when the fundamental founding principles of a united Europe have never been more needed. Wolfgang Schäuble’s pompous utterances may turn out to be the sound of a very frightening butterfly flapping its wings.
Martin
We might both be wrong
But I hope not
I think you’re right here
Richard
I have to say Martin I have thought of this too but in my scenario I saw Greece going to other non EU nations for further funding to help them re-organise their economy along endogamous lines (agreement within Greece about what to do) rather than having the Euro-austerity foie gras forced down its throat.
I actually thought they might go to Russia directly. And you are right – they could approach China. An act like that would go down like a merde sandwich in Brussels.
But why, in the name of democracy would you NOT try to do that if you were placed in the sort of strait jacket that ECB has placed Greece in?
The isssue there would be to look at what ‘extra’s were attached to the new funding regime. If Russia or China were to want to make a point, just providing that funding night be enough because they know the geo-political significance of such an act.
Why not indeed, Mark?
Like you or I (and unlike our own politicians) I believe SYRIZA are true patriots. And what patriot wouldn’t do whatever it takes to save their citizens?
suspect China will jump at the chance as part of their ‘new Silk Road’ initiative. Likewise the Russian Fed for the opportunity to link up with the North-Eastern republics. Putin will be more than happy to leave the threat of a friendly base in the Med to cast along and glowering shadow over European defence.
For now…
Why wouldn’t you go to Russia or China for funding? Because of conditions attached. Because Russia/China would be fickle, and drop you again when it suited their geopolitical games. Because you would first have to default on your entire existing debt, which would be a lot more hostile to the rest of the EU than Greece wants to be, even after how they’ve been treated.
In Greece’s situation, you are unlikely to get funding on attractive terms from anybody. Which is presumably why they are not asking for funding at all now, in the sense that they want to target a small primary surplus – but, within that constraint, want to run their economy as they see fit, not according to neo-liberal diktat.
Greece has effectively been threatened with having the ECB pull the plug on its banking system (which could force Greece out of the euro) if it does not
a) reach agreement with its creditors; or
b) follow the neo-liberal script.
That is a massive power grab by the ECB/EU. A banking system needs the support of the central bank to operate normally. The insolvency of a government is no reason to allow the banking system to implode; a disagreement with that government’s policies is even less reason.
So Greece wants funding (i.e. normal operation) for its banking system. It doesn’t want funding (i.e. a primary deficit) for its government. It does want to run a low enough primary surplus that its debt will always continue to increase; a formal default / restructuring would be tidier, but the rest of the EU doesn’t want to face that yet.
Maybe it shows the UK was right to keep out of the Euro. And perhaps it’s time for the UK to withdraw from part of the EU gravy train anyway. Trading union yes, Defence cooperation of course, but ever closer union under the present structure, no way.
To say that you conclusion does not flow from your premise is to be kind to your argument
@ Phil Lanch
Phil,
You seem somewhat surprised that Greece would look to Russia and China for support.
Perhaps you should ask the Hungarian Government who have received £bn’s in aid to finance a new, Russian built fast breeder reactor. Or France’s Front National who have taken delivery of the first installment (£9m) of a £40m loan. Or the British diplomats who (until less than 12 months ago) were negotiating the building of a new nuclear power station by (Russian State energy company) Rosatom. Or our own darling Chancellor who has spent much of the last two years assiduously courting Beijing for investment in our nuclear power stations (resulting in China building the new plant at Hinckley). Or the determination of our politicians to drive forward the HS2 rail scheme, given that they have promised the Chinese investors (who have bought swathes of land along the route) that it will go ahead. Or our Government who are happy to introduce sanctions on Russia that hurt normal citizens, but refuse to contemplate troubling the bank accounts of the Russian Oligarchs who are stuffing Tory coffers.
You see for all the ‘bogeyman’ rhetoric the World is more than happy to take Russian and Chinese money.
In its deep water harbours and mainland location Greece has something of great value to trade in return for inward investment. I seriously doubt that any other nation would let their principles stand in their way.
To suggest that Greece should do so is either hypocrisy or naivety.
In putting German banker’s profits (or as Wolfgang Schauble’s deputy put it on C4 news last night, ‘a point of principle’) before Greek lives, it is Berlin that is acting recklessly in the Geopolitical arena.
Agree very strongly with that last comment
Well said, Martin. And note also that in the case of our own government this “outsourcing” involves what were for decades regarded as strategic resources. But then again, I’ve argued previously that the Tory party has a great affinity with the Chinese Communists: one rules a one party state and the other wishes it could (and if they win the next election pretty much will).
Quite so, Ivan.
I do often wonder what the point is in military spending when a foreign power can simply turn off the lights…
Also agree on the aspirations of Neo-liberals in the Tory party. Suspect China is very much what their wet dreams look like.
FDI for specific investment projects would make sense for Greece, including from Russia or China. Since their general government finances are very constrained. I was arguing against going to Russia/China for general funding of government finances, which would lead to conflicts about who should be repaid first, existing creditors (including the ECB) or new creditors – given that they are not in reality going to pay the existing debts in full.
Incidentally, there is much less sense in the UK government encouraging FDI, when it is in a position to borrow additional money very cheaply, or to print money for investment (green QE).
C4’s Paul Mason confirms his suspicion that SYRIZA has shifted internally from a Pro-European to a Eurosceptic position and will be maneuvering towards exit by Summer.
What else can yjue do?