Understanding the Greek election and the prospects of the Left – Part 2 of 4. Part 1 can be seen here.
Greek Finance Minister Yanis Varoufakis understood early on in the negotiations that the Troika would not compromise with the left-wing government in Athens. He was simply asked by the Eurogroup President, Jeroen Dijsselbloem to sign on to a third bailout Memorandum of Understanding or Greece would face the consequences of the ECB cutting off cash flow to its banks and prompting a complete meltdown. During the several months of negotiations, German Finance Minister Wolfgang Schauble admitted to Varoufakis that for the common currency to function there would have to be “fiscal discipline” (another euphemism for a non-redistributive economy) throughout the EU, it was implicit that this discipline could of course only be imposed by Germany. Varoufakis explained that the finance minister meetings were only “show trials” in which the conductor was clearly Schauble and no matter what discussions were had once the conductor sat on the table, the group was quickly brought to order. Of course, explaining this (and other oddities) in public, won no sympathy from Varoufakis’ colleagues. Schauble’s plan was for the Troika to become a virtual federal government of the EU, and be present in the finance ministries of each member state under the hegemony of Berlin. France stood in the way of this plan and so did Italy. The lynchpin of the plan was and remains a Grexit. Varoufakis said that Schauble firmly believes that Greece should exit the Eurozone as this would put the “Fear of God” in Paris and Rome, thus breaking any possible opposition to a Troika run EU. Berlin knows that the ‘bailout’ agreements which only lend money to Athens to pay back old loans are unsustainable and will not end the deepening recession. These loans are provided if Athens acquiesces to ‘reforms’ such as privatizations of public assets, mass layoffs in an economy of over 30 percent unemployment and 60 percent youth unemployment and further cuts to pensions which already fail to meet basic human needs. The carrot is that Greece’s banking system is allowed to survive and as such people get to keep their deposits.
In recent interviews Varoufakis has openly stated that Schauble told him directly of this Grexit plan. In fact, the former Greek Finance Minister said that Schauble only became engaged in talks when they spoke privately about Gexit, during all other conversations, and when presented with non-recessionary debt restructuring plans, Schauble had “turned off.” But Varoufakis also understood later in their private talks that the German Finance Minister had no such mandate from the Chancellor. There was indeed a real division between the Merkel and Schauble camps, and as such, Varoufakis believed that the Grexit threat was only that, a threat.
Nevertheless, since the Greek government was being openly threatened with a Gexit and financial collapse it did draw up a contingency plan early on its mandate. Varoufakis under Tsipras’ request began to prepare for such a clandestine plan in the event of an economic assault that was only known to a handful of people.
During the referendum, the first phase of Schauble’s plan was executed, liquidity was cut off prompting the Greek government to place a 60€/day bank withdrawal maximum which further slowed down a depressed economy. The priority of the Tsipras government was to stave off a forced exit and save the deposits of working class Greeks who unlike the Greek Oligarchy had not moved out billions of untaxed Euros to German, French and Swiss banks.
The Greek contingency plan was to take over the Bank of Greece (run by the ECB) and effectively nationalize the banking system or at least run the sector from Athens. Greeks technically owned around 65 percent of it, as public money was used to recapitalize the banks during first memorandum of 2010. Varoufakis had devised a plan where e-banking pegged to the Euro could be used to provide cash flow to the private business sector. Public expenditures, salaries, pensions etc. would also be made with California-style IOUs. Finally, a plan was also devised to hack into the ministry’s own databases to copy tax systems codes. The plan included creating reserve accounts attached to every tax file number; each reserve account would be euro-denominated but at the “drop of a hat” could be converted to a national currency (new drachma) if Greece was forcefully pushed out of the Eurozone.
Varoufakis believed that by not acquiescing to the Troika’s hardline, and resisting as long as possible, would not only cause a crisis within the higher echelons of the Troika but of NATO as well. He was convinced that even though a Grexit was in the cards and part of Schauble’s plan, the U.S., the IMF, France, Italy and especially Angela Merkel would veto it and a compromise would be made. Merkel had no intention of going down in history as the European leader that ended the common currency. Paris and Rome did not want a precedent that would further and severely weaken them vis-à-vis Berlin. The IMF did not want a situation in which a debtor country would not be under some kind of bailout program in order to service the debt owed to it. More importantly, Washington would not allow the disorderly bankruptcy of a NATO state near the middle-east with all its unforeseeable consequences. Even though this geostrategic reality was well understood by the Greek government, the Tsipras leadership thought that Varoufakis’ contingency plan was too dangerous and that there was not enough support at a political European level to put it into place. Moreover, the plan could not be a bluff, Greece would have to go all the way and actually prepare for leaving the monetary union. Syriza had no mandate for a euro exit and the Tsipras government was not willing to risk the deposits of working class people vanishing into thin air. The plan was clandestine; it was a defence plan, just in case things went wrong. Tsipras believed that such a radical option would have to be debated in public. His government had pledged to stay in the euro, defend Greek bank deposits and get a better deal so as to slowly creep out of the austerity nightmare in order to open paths for a new economic order. Thus the plan was rejected after the referendum and Varoufakis resigned as he knew the other option was signing on to a new memorandum, i.e. austerity as usual.
Varoufakis argued that although there was no original mandate for a rupture with the EU, a rupture between the Greek people and the troika had de facto occurred. The referendum result gave the government a clear mandate to not sign on to any more austerity measures even under the very aggressive threats of the EU establishment.
Varoufakis had also argued that Greece, early on in the negotiations, should have presented its own non-recessionary formal memorandum to the creditors once it became clear that the negotiations were going in circles. He said this would have formally put the Greek proposals in the European public eye throwing the ball in the court of the creditors to accept or reject such a proposal and forcing them to explain themselves in public. Not doing so was a strategic blunder on the part of Syriza. Tsipras refused to go that route as most of his advisers who were from the more reformist establishment side of the party wanted to play nice with the EU establishment in the hope that their good manners would simply lead to a light memorandum that Greeks would find acceptable. A Greek formal proposal would be seen as an aggressive move on the part of Athens.
Other voices in Syriza, such as Costas Lapavitsas, wanted to campaign on a euro exit and negotiate with the EU an orderly departure from the common currency. Yet, 70 percent of Greeks wanted to keep the common currency, and Syriza’s goal was to begin a process of transforming the Eurozone, not exiting it. This can only be done with the election of more like minded governments and with building a pan-European anti-austerity movement whose goal would be to democratize European institutions. Costas Lapavitsas believes that this is impossible and the project should be simply dismantled, and Greece should jump ship as soon as a safe raft has been put in place.
Varoufakis agrees that the Eurozone was horribly structured and Greece should have never entered, yet he goes on to explain that the Euro is like walking down a path and discovering you’re somewhere you never wanted to be, but the reverse path behind you has disappeared and replaced by a cliff.
A Grexit is not simply an economic matter it is mostly political. Greece is an important geostrategic piece of the Euro-Atlantic empire run by Washington, a “rogue state” one heartbeat away from ISIS, that charts an independent political course, will not be tolerated by U.S. state planners. Tsipras supporters argue that a Grexit may not even be a political option in the end as it will open up a new can of worms that may further jeopardize the Greek state and its damaged democracy. The Tsipras government claims that it was not in any geostrategic position to go to war with Washington and that Russian or Chinese alliances were simply not there. A Mediterranean alliance similar to the ALBA in Latin America was also not there. The Tsipras leadership believed it was cornered and had no mandate let alone popular support for any of the other difficult alternatives.
Another view, held by John Milios, a member of Syriza’s Central Committee, author of the Thessaloniki Program and chief economist for the Party until Varoufakis and Tsakalotos took over the reins represented a tendency that did not call for a national currency but for a rupture with the EU powers at be. Milios did not believe that negotiations would lead to a resolution, as he agreed with Lapavitsas that the EU functioned in a systemically neo-liberal manner, but that a resolution would only come out of a confrontation in which the system itself would be put in crisis. He argued that FDR style compromises only happen once the Ruling Class feels that it is in danger of losing systemic control. He goes on to explain that Greece should not have played nice; it should not have made any loan payments until an agreement was signed and until the ECB provided the funds it owed to Greece since the fall of 2014. It should have immediately moved against the Greek Oligarchy with tax increases and audits and should have demanded that Europe’s banks assist the Greek state in retrieving the billions of untaxed Greek euros they held. It should have moved early on with alternative modes of production, helping cooperatives get credit, assisting the myriad of economic solidarity networks and promoting the growth of workers’ councils. As such, it would get the ball rolling internally, allowing grassroots initiatives to prosper all the while confronting the Oligarchy head on and early on. In tandem, it would not be faced with economic asphyxiation as it would hold back on loan payments until the EU made it payments.
The counterargument to this position was that the Syriza government did not even have the infrastructure, whether legal, bureaucratic or administrative to move against the Oligarchs. They did not have the enthusiasm of European governments to seize accounts in major private banks of untaxed billions. Why? Such a move, well within the reach both legally and politically of the major EU states would have provided leverage to the Tsipras government. It would have provided the Radical Left administration with enough liquidity to hold firm on their negotiating position. The goal of the EU establishment, the Greek Oligarchy, the old political system and much of the upper echelons of the Greek bureaucracy was to get rid of this government, to asphyxiate it internally and externally. Not a single iota of incalcitrant behavior could be tolerated and its resistance throughout the ‘negotiating’ period was becoming a major embarrassment.
But there was also an internal problem, the Ministers within the Syriza-Anel coalition cabinet realized that the Greek bureaucracy functioned in an odd way. Personal business relationships between bureaucrats and major business officials were needed to get things done, such as getting supplies brought in certain docks into the country for distribution. The very nature, the very functioning of the state was clientelistic. The relationships fostered between state functionaries, Greek Oligarchs, banks, the Media and the establishment parties was the matrix in which the Greek political economy functioned. These relationships remain unchanged and feel deeply threatened by the election of a “left-wing riff-raff” made up of Marxists, social activists and other “undesirables.”
But then again, Syriza knew much of this, maybe not the extent of how the bureaucracy worked but in general terms, they had already identified the basic architecture of the Greek state-oligarchy nexus and apparatus. As such, there should have been more preparation on how to deal with this problem and how to build institutions or at least ad hoc structures outside the state system – that can turn into new institutions. These ad hoc structures would work outside the existing bureaucratic matrix explained above.
A serious criticism of Syriza is that it spent too much time dealing with the various left wing groups that originally made up the coalition, as well as with political personalities and egos instead of discussing an alternative polity and economy in real structural and strategic terms rather than in inspirational generalities.
This unfortunately is endemic in the Left.