By Michael Roberts
THE NEWLY ELECTED LEFTIST SYRIZA GOVERNMENT IN GREECE has climbed down in its confrontation with the Eurozone leaders and agreed to extend the existing programme of credit from the so-called Troika – the European Central Bank (ECB), European Commission and International Monetary Fund (IMF) – for another four months to the end of June.
In return for receiving credit of about €7.2bn between March and June from the EU and IMF, the Greek government has had to agree conditions with the Troika on maintaining ‘debt sustainability’ and fiscal targets. In effect, the Greek leftist government has agreed to reverse its campaign pledge to end Troika control and demand the cancellation or renegotiation of its debt.
This climbdown was forced on the Greek government because the ECB made it clear that it would no longer provide credit to the Greek banks if Greece was no longer under Troika control. The Greek banks were in effect bust, as customer deposits are flowing fast out of their accounts into mattresses and cash safety deposit boxes. and only ECB credit was keeping them afloat. The Syriza government caved in so that they could still carry through changes that will relieve the ‘humanitarian crisis’ in Greece.
And there is such a crisis. The Greek people have seen their living standards cut by 40% and public services have been decimated. Free or subsidised healthcare has been stopped. Pensions have been cut by 25% and would have been halved under the Troika agreement if the conservatives had won the election. The Syriza administration in Athens is feeding 1,400 people a day.
One third of the population are in poverty as measured by the standards of what used to be called the Third World. Nearly 20% are struggling to get enough food and heating. One third of households are unable to meet their basic bills. Around 30,000 homes and businesses a month were having their electricity cut off due to unpaid bills until Syriza stopped this. Roughly one in four Greek workers do not receive their wages on time, some waiting several months to get paid.
The Greek economy remains in a parlous state. Unemployment was more than 25% at the last count. GDP has collapsed by more than 30% since its peak before the crisis: a decline comparable only to that seen in the US during the Great Depression.
The global financial collapse and Great Recession of 2008-9 had driven the Greek capitalist economy into a slump, just as elsewhere. But Greek capitalism was particularly weak and the Greek political and business elite especially corrupt and venal. So Greece has been at the mercy of French and German bankers who refused to lend any more credit and demanded repayment of maturing bonds. The EU and the IMF stepped in to provide a series of loans. 78% of Greece’s public sector debt is now held by the Troika.
But these loans were not to preserve the living standards and production of the Greek people and its economy. On the contrary, the loans were merely to pay back the Eurozone banks and hedge funds. Only 10% of EU-IMF loans went into the Greek government’s spending budget over six years. The rest was recycled back to foreign bond holders. The banks got most of their money back, leaving the Greek people with the bill.
Again, it is a cruel irony that the Troika ‘aid’ of €7bn coming in the next four months is no aid at all. Most of it will be used to repay IMF loans and the bonds held by other creditors. As Yanis Varoufakis, the new Greek finance minister, put it, “the Troika programme is the problem, not the solution”. The Troika austerity programme has helped keep Greece in a permanent depression and yet the debt ratio has not fallen at all, because debt has fallen less than GDP. There is no way that Greece will ever pay off this debt.
The Syriza government has already retreated from its campaign position of calling for a write-off of part of the ‘odious’ debt. Now the Troika demands they impose the austerity measures they were elected to reverse. EU leaders were intransigent because they do not want concessions to Greece that could undermine them at home, where other Syriza-type movements are growing in strength, like Podemos in Spain.
The Troika has made it quite clear that the future under the Eurozone is one of bleak austerity. The democratic wishes of the Greek or any other people that conflicts with the power of capital will be ruthlessly disregarded.
But the confrontation is not over yet. Syriza will have to make a choice – now or in four months time. Will it fail to reverse austerity and cow to the Troika or will it defy them and implement radical measures to save the Greek economy and the living standards of the people? If the ECB cuts off credit, capital controls on outflows of cash and credit must be immediately imposed. The debt to the IMF and the EU must be cancelled. The government must carry through its reforms: raise pensions and the minimum wage; re-employ sacked public sector workers; revoke the property taxes and write off mortgage arrears for the poorest. This can only be paid for by having a proper collection of taxes on the rich who evade paying and launching a programme for investment and employment involving the people at all levels.
Investment and growth won’t come from a failing Greek capitalist sector. So the government needs to act to take over the Greek banks and the major strategic companies to enable an investment plan to start. Public ownership of the banks and strategic industries should be a central part of Syriza’s programme for economic revival.
But Greece cannot turn things around on its own. That’s why there must be a campaign by labour movements across Europe to support Syriza and socialist measures for Europe’s economic revival.
It is not too late.
» Michael Roberts blogs at thenextrecession.wordpress.com