Tsipras: the reverse shock doctrine

Newly appointed Greek Finance Minister Varoufakis attends a hand over ceremony in Athens

Now the euphoria in Greece has subsided, it is being matched by astonishment in Berlin and the European Union institutions. On its first day in government yesterday, Syriza cancelled a privatisation progamme of the ports and energy sector, pledged to re-employ around 15,000 workers, and announced minimum wage and pension rises costing around 12bn euros.

Palul Mason reports the astonishment in Europe cannot be expained by lack of foreknowledge.

see full article here with excerpts below

Numerous journalists who cover Greece, including me, reported in detail what Syriza planned to do: cancel the austerty and privatisations, run a balanced budget and massively hike the tax take from the so-called oligarchs and the black economy.

The astonishment comes because all the political centre’s contingency plans come apart. The centre-right did not win, the centre-left parties formed to create a moderation mechanism on Syriza in coalition did not get asked into the government (and in the case of Papandreou’s party, To Kinima, failed to get into parliament).

By tying up an immediate coalition with a far-right nationalist party, Tsipras was able to seize the apparatus of the Greek executive faster than anybody expected. That is what drove yesterday’s collapse of Greek bank shares, and the fall on the stock exchange.

Most market analysts thought before the election that Syriza would be forced into a U-turn. As someone who has grilled all of its economics team on camera, and Mr Tsipras himself, I can report they have no intention of backing down.

But their strategy is not confrontation over debt. It is confrontation over the institutional form of debt resolution. They will deal with the “troika”, as Yanis Varoufakis (pictured below) put it to me last week, “as a sovereign government” – i.e. separately. They will no longer recognise the troika, and will challenge its legality.

Fiscal union
Syriza’s international strategy remains, economically, to insert themselves into the wider debate over austerity and monetary policy in Europe. Bank of England Governor Mark Carney became the latest European policymaker to slam Germany’s begger-thy-neighbour polcies and refusal to share risk. He said:

“Cross-border risk sharing through the financial system has slid backwards. Europe’s leaders do not currently foresee fiscal union as part of monetary union. Such timidity has costs.”

Syriza, and its ally Podemos in Spain, which also has a chance to gain power this year, want Europe to be a full fiscal union. Yanis Varoufakis, the Syriza finance minister, has proposed for example that the Greek banks be “Europeanised” – with banks in Cyprus, Greece and Spain handed over to the ECB to recapitalise direct.

So long term, Syriza’s leaders know the fate of their government lies not just in debt renegotiation, but in the ability to make QE apply to Greece, to grab a part of any infrastructure money that comes out of the commission, and in forcing a strategic policy change in Germany which leads to a banking and fiscal risk-recycling union.

Extreme-right links

I want to explain here the parliamentary arithmetic. There’s been strong criticism and distaste among the European left and centre of Syriza’s coalition with the Independent Greeks (ANEL), an ultra-conservative right-wing party whose leader accused Greek Jews of not paying their taxes in December, and who are alleged to have links with the Russian extreme right.

The outcome is to create a stable government for Syriza. The Independent Greeks – who will run defence, and have ministers in tourism, the cabinet office and Macedonian regional affairs – will have little or no influence on economic policy. Even if their parliamentary group fragments, Syriza only needs two of their MPs in any confidence vote.

People looking for political synergies between Syriza and ANEL will find them in just one area: geopolitical stance towards Russia. And this is deeply rooted. Tsipras’s party emerged out of a split with pro-Moscow communism – but the Greek people have both religious affinities with Russia (orthodox Christianity) and historic sympathy (via the Communist-led resistance movement during the war). Meanwhile the Russian sanctions on EU agricultural exports have hit Greece hard.

Economically, meanwhile, Syriza can rely on the support or abstention of 15 communist MPs, who have refused to join a coalition, in any economic measures against austerity. Even if the communist KKE refuses to back nationalisations, wage rises and welfare increases on principle, just by abstaining it gives Syriza – voting alone – a majority on any measures.

Tsipras’s original position was that he would call a referendum if the ECB tried to force Greece out of the eurozone, or tried to veto anti-austerity measures. Given his unexpectedly high 36 per cent vote, the wipeout of the Democratic Left (which refused to join Syriza), and the surge of positivity that’s happened in the political centre since he won, my guess, after speaking to party activists, is that now he would do something different.

If he can enfranchise 200,000 18-year-olds the government refused to put on the register, and change the law to allow a further 200,000 Greek recent emigres to vote at embassies abroad, Syriza could probably win a snap second election.

That’s what some on the left of Syriza, queasy at the coalition with ANEL, actually want.

Before the talks begin


The game of ‘pretend and extend’ with unsustainabe debt is over. The serious negotiations are about to begin. For the first time the EU is sending clear signals it wants to negotiate a way out for Greece and the rest of Europe. Martin Schulz, the President of the European Parliament, posted on social media, which included this quote:

But for all the “antis”, Syriza is not in my view an anti-European party. I know Prime Minister Tsipras well. He is outspoken and charismatic and I also believe he is a pragmatic politician.

I have met him in Brussels and Athens, and we have debated as lead-candidates to the Presidency of the European Commission, I as candidate of the Party of European Socialists and he as candidate of the European Left. An anti-European would not stand in a competition with the aim of being chosen as President of the European Commission, no matter how improbable that option would have been for him.

On Sunday, there was thus no European drama in Greece. Tsipras will not bring Greece out of the eurozone, and the eurozone will not force Greece out. This is in no one’s interest. Yet, Prime Minister Tsipras needs to realise that to succeed he must reach out for compromise both inside and outside the country.

see full post here

So, the nuclear option has just been taken off the table and everyone wants to play nice. Good.

But Mr. Schulz, the Greek government will not forget there are millions of Greeks suffering. Words dont save lives and end debt misery. Even the weak economic growth we see now in Greece will evaporate once the debt repayment schedule comes into effect and sucks the lifeblood out of the Greek conomy. Negotiate and agree on the basis of what is needed for the future – food, shelter and security for people, with investment for economic growth.

Living in the fantasy land of recovering money that was lost by irresponsible bankers and corrupt governments many years ago is the surest way to damnation – for everyone.

Thank you Greece

wind iconA fresh wind blows across the Mediteranean. The Greek people have chosen a new government. They have spoken loudly against a chorus of scare-mongering  meant to terrorise them into another four years of subservience to austerity. That and the associated dictates of faceless men and their failed policies. In standing up to the powerful, they seek to regain their dignity. In standing up, they inspire others across Europe and beyond.

The Australia-Greece Solidarity Campaign salutes this heroic gesture of the Greek people. The new SYRIZA government assumes a great responsibility to honour the trust placed in them by the people. It will need to be decisive and courageous, agile in its tactics but clear and determined in meeting its objectives. It will need to draw on the resources of all Greek people at home and abroad that share in its vision and hope for the future. More than this, the new government will also need the active solidarity from all over the world of community organisations, trade unions, students, political parties and members of parliament. It will need all this to repel the attacks that will surely come from those threatened by its rise. The Australia-Greece Solidarity Campaign will play its part in helping to coordinate solidarity activities in Australia and forge links with similar groups overseas. We encourage all of you to join the Campaign and become active in defending the democratic will of the Greek people who have now chosen to exit from austerity and the forced habit of subservience .

For now, let us enjoy the moment.

The words below capture the significance and promise of the moment with some history to give perspective on where it came from.

The Greek people have given a clear signal…. they have rejected the ruling by European and international technocrats. They have said no to their national oligarchic establishment that has led the country to the current situation. But they also resisted the Siren calls of Golden Dawn. They have given their confidence to an untested party, with no experience in government, a party that has presented an electoral programme proposing better governance, more democracy, greater social justice and an end of austerity policies that have destroyed the economy and created unprecedented hardship while the public debt (and the private one) continued to increase. The Greek voters have sent a clear message to the rest of Europe: they want to be part of Europe, they can’t bear more austerity; they need a sustainable solution to their debt problem; they want to be a respected partner in the European Union and play an active role in the common search for a Greek and European recovery.

Europe should not see the victory of Syriza as a threat. Instead, it should be seen as a clear signal from the people and as an opportunity for Europe as a whole to reconsider its crisis response, which has already lead the continent into what may become a decade of deflationary stagnation, even with the last intervention of the ECB. There is no easy solution to the deep crisis in Europe but one thing is certain: to continue with policies that do not work, because they concentrate exclusively on fiscal prudence, is the opposite of what must be done, in giving priority to growth, investment, employment and redistributive policies.

Anyone guided by realism will recognise that Greece cannot at the same time serve its tremendous debt burden and recover economically and socially. Insisting on servicing the debt, without a strong economic recovery might be popular in some European capitals but it will just not work. Debts that cannot be paid remain un-payable even if creditors continue to insist that it should be paid.

The debt crises in Germany in the last century offer great lessons in this respect. After World War I, the victorious powers insisted that Germany should pay reparations independently of its economic performance. The results are well known: Hyperinflation in the twenties, brutal austerity in the early thirties resulting in the rise of Hitler who immediately stopped servicing any foreign debt when he came to power. After World War II, the Allies recognised that Germany had to become prosperous first and should pay afterwards. That reasoning lies behind one of the most generous debt restructuring agreements in history in 1953, when more than 50 % of the German debt was written off, repayment was stretched out over more than half a century and debt payments were made conditional on the existence of a trade surplus. The last payment of debt from World War I was actually made as late as in 2010 and payments at no time exceeded 5% of German export earnings.

In many European countries the public debate on the debt crisis is also framed in moral terms. Many claim that Greece had cheated when entering the Eurozone, that they are free-riding on hard-working Northern Europeans, that they need to be taught a lesson in order to learn financial responsibility, etc. The judgements should not be about “Crime and Punishment” but about economic viability and a better future. If debt restructuring had been guided by any moral reasoning in 1953 it would have certainly been extremely difficult to make the case for German debt relief. But it was economically, politically and socially the right thing to do and it paid off not only for Germany but for Europe as a whole…

The Greek people must be thanked for putting the need for changing the course of economic policies firmly on the European agenda. The stakes are high. A failure in Greece will be seen as vindication of austerity as the only option. It will have negative repercussions for any progressive alternative throughout Europe. Those convinced that Europe needs to change cannot sit on the fence, but need to engage in support of the new winds of reform.

from an article by Maria Helena dos Santos André (Director of the ILO Bureau for Workers’ Activities) and a former Minister of Labour of Portugal. She writes in her personal capacity.

see full article here

#LetGreeceBreathe – Nobel prize winners join list of economists

wind iconTwo nobel prize winners have joined with other economists from Australia and the UK in condemning the debt and austerity strategies being employed in Greece. Joseph Stiglitz (Columbia) and Chris Pissarides (London School of Economics) along with 13 other eminent academics and analysts have published a letter in the UK Financial Times. See their letter below.
Sir, FT columnists have recently acknowledged that debt relief is a necessary (though not sufficient) condition for Greece to recover (Gillian Tett, January 17, Wolfgang Münchau, January 5, Peter Spiegel, January 7). Only with such relief will it be able to develop a growing economy that makes full use of the skills of its people to contribute to a united and democratic Europe.

On the vexed issue of debt resolution, the writers concerned are to be congratulated for taking an ethical and pragmatic stance. Ethical in rejecting a dogmatic insistence on debt repayment in full regardless of the social and political consequences — a dogma that is already dividing Europe. Pragmatic in recognising the breathing space that debt relief will give to a government intent on pursuing reforms — in challenging corruption and tax evasion and aiming at higher productivity­ — rather than pursuing austerity per se. We would take such pragmatism further to suggest three forms of financial restructuring that have practical precedents.

First, a further conditional increase in the grace period, so that Greece does not have to service any debt, for example for the next five years and then only if Greece is growing at 3 per cent or more, and until Greece has recovered at least 50 per cent of the gross domestic product it has lost since 2008. Precedents for this include the “bisque” clause in the UK loan from the US negotiated by J M Keynes after the second world war, where the UK did not service the debt until the economy met agreed conditions.

Second, some debt reduction, especially of bilateral official debt, to further increase the fiscal space available. Third, significant money for efficient investment projects, especially for exports. The Juncker Plan could provide a good framework for such investment, to be funded, say, by the European Investment Bank, EU Structural Funds and the German KfW. As well as increasing aggregate demand, such a supply-side measure will also enhance future growth.

Debt relief is not a sufficient condition for this virtuous dynamic, however: Greece must itself carry out reforms. We believe it is important to distinguish austerity from reforms; to condemn austerity does not entail being anti-­reform. Macro­economic stabilisation can be achieved through growth and increased efficiency in tax collection rather than through public expenditure cuts, which have reduced the revenue base and led to an increase in the debt ratio.

We think that the whole of Europe will benefit from Greece being given the chance of a fresh start. After all, as Ms Tett has reminded us, it was after substantial debt relief that the German economy was able to grow — and reform itself —­ in the 1950s.

Prof Joseph Stiglitz

Columbia University, Nobel Prize winner

of Economics

Prof Chris Pissarides

London School of Economics, Nobel Prize winner of Economics

Prof Charles Goodhart

London School of Economics

Prof Marcus Miller

Warwick University

Michael Burke

Economists Against Austerity

Prof Panicos Demetriadis

University of Leicester

Prof Stephany Griffith-Jones

IPD Columbia University

Prof Gustav A Horn

Macroeconomic Policy Institute (IMK)

Prof Mary Kaldor

London School of Economics

Neil MacKinnon

VTB Capital

Prof Jose Antonio Ocampo

Columbia University

Avinash Persaud

Peterson Institute for International Economics

Helmut Reisen

Shifting Wealth Consult

Robert Skidelsky

Emeritus Professor, University of Warwick

Prof Frances Stewart

University of Oxford

Prof Robert Wade

London School of Economics

Hilary Wainwright

Transnational Institute, Amsterdam

Prof Simon Wren-Lewis

Merton College Oxford

The historic opportunity

polytechneion march Nov 13 2014“Our mission is not simply to carry out the unfinished work of postwar social democracy”, says Alexi Tsipras in this in-depth interview with Haris Golemis. The interview has been translated and printed by USA magazine The Jacobin. Excerpts below and weblink to full interview here

In the early 1990s, the European social democrats formed an alliance with the Right to promote neoliberalism across Europe — something they are now paying dearly for in the wake of the economic crisis. This is why I believe that the Left is Europe’s only hope for overcoming the crisis. The austerity policies implemented by conservative and social democratic governments have reached their tipping point, as have the fiscal targets assigned by the European Union (EU), which are unachievable for any country.

This simply can’t continue. If Europe does not turn towards the Left — embracing growth, decent work and the welfare state — its other choice will be right-wing extremism and Euroscepticism. The setbacks will have terrible consequences.

The rapid political changes across Europe spurred by the crisis have aided the Left, creating new opportunities. The social struggle for decent work and dignity is one of the most critical — and one that the left is deeply committed to. A stronger left increases the chances for major changes in Europe, shifting the balance in favor of labour. Syriza aspires to be the catalyst for these changes, creating a “domino effect.”

It is important to note that our work doesn’t just end with abolishing austerity. Our mission is not simply to carry out the unfinished work of postwar social democracy, but rather to enable the radical transformation of society across Europe, based on socialism and democracy.

This is our goal as we seek to form new social alliances that will unite the working and middle classes, the unemployed, the most disadvantaged members of society, intellectuals, and social movements, around a common struggle: the struggle to liberate society from the effects of cutthroat profiteering, and to foster social justice and democracy, an economy that will focus on people’s needs, and a welfare state that ensures education, health, and dignity for all.

The proof of the spanokopita is in the eating


The UK newspaper The Telegraph has taken a look at the only SYRIZA elected representative to hold high office. It has found Rena Dourou as elected mayor of greater Athens (Attiki) is delivering on her promise to target spending on the poorest and most needy.

After her mother’s pension was cut over 30 times, Rena Dourou knew that Greece could no longer cope with austerity.

Now, as Syriza, her political party, leads the polls ahead of the country’s general election on Sunday, she stands ready to reverse the five years of pain imposed by the European Union.

“Since the beginning of the implementation of the austerity policies, many people have had the experience of becoming second-class citizens, with no access to health care or education,” she said.

“We want to create a shield of protection for the most vulnerable.”

Ms Dourou, 40, is the only member of Syriza, a radical left-wing coalition, to hold high office. Since she was elected as governor of Attica, the vital region that surrounds Athens, last May she has increased the state’s budget for social welfare more than six-fold, from a mere Eu1.9 million (£1.46 million) to Eu13 million. It is a premonition of the huge spending splurge that Syriza has promised if it is elected nationally.