To be or not to Plan B

Plan BAmbrose Evans Pritchard from the the UK Daily Telegraph runs a story on what is claimed to have been a secret cell at the Greek finance ministry which hacked into the government computers to implement elaborate plans for a system of parallel payments that could be switched from euros to the drachma at the “flick of a button” .The revelations have caused a political storm in Greece and confirm just how close the country came to drastic measures before premier Alexis Tsipras gave in to demands from Europe’s creditor powers, acknowledging that his own cabinet would not support such a dangerous confrontation. Yannis Varoufakis has claimed its not the full story and its being used to serve other political ends.

Segments of the the story are provided below. Full article can be found here

Yanis Varoufakis, the former finance minister, told a group of investors in London that a five-man team under his control had been working for months on a contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system, as it in fact did after talks broke down and Syriza called a referendum.

The transcripts were leaked to the Greek newspaper Kathimerini. The telephone call took place a week after he stepped down as finance minister.

“The prime minister, before we won the election in January, had given me the green light to come up with a Plan B. And I assembled a very able team, a small team as it had to be because that had to be kept completely under wraps for obvious reasons,” he said.

Mr Varoufakis recruited a technology specialist from Columbia University to help handle the logistics. Faced with a wall of obstacles, the expert broke into the software systems of the tax office – then under the control of the EU-IMF ‘Troika’ – in order to obtain the reserve accounts and file numbers of every taxpayer. “We decided to hack into my ministry’s own software programme,” he said.

The revelations were made to a group of sovereign wealth funds, pension funds, and life insurers – many from Asia – hosted as part of a “Greek day” on July 16 by the Official Monetary and Financial Institutions Forum (OMFIF).

Mr Varoufakis told the Telegraph that the quotes were accurate but some reports in the Greek press had been twisted, making it look as if he had been plotting a return to the drachma from the start.

“The context of all this is that they want to present me as a rogue finance minister, and have me indicted for treason. It is all part of an attempt to annul the first five months of this government and put it in the dustbin of history,” he said.

“It totally distorts my purpose for wanting parallel liquidity. I have always been completely against dismantling the euro because we never know what dark forces that might unleash in Europe,” he said.

The goal of the computer hacking was to enable the finance ministry to make digital transfers at “the touch of a button”. The payments would be ‘IOUs’ based on an experiment by California after the Lehman crisis.

A parallel banking system of this kind would allow the government to create euro liquidity and circumvent what Syriza called “financial strangulation” by the ECB.

“This was very well developed. Very soon we could have extended it, using apps on smartphones, and it could become a functioning parallel system. Of course this would be euro denominated but at the drop of a hat it could be converted to a new drachma,” he said.

Mr Varoufakis claimed the cloak and dagger methods were necessary since the Troika had taken charge of the public revenue office within the finance ministry. “It’s like the Inland Revenue in the UK being controlled by Brussels. I am sure as you are hearing these words your hair is standing on end,” he said in the leaked transcripts.

Mr Varoufakis said any request for permission would have tipped off the Troika immediately that he was planning a counter-attack. He was ready to activate the mechanism the moment he received a “green light” from the prime minister, but the permission never came.

“I always told Tsipras that it will not be plain sailing but this is the price you have to pay for liberty,” he told the Telegraph.

“But when the time came he realised that it was just too difficult. I don’t know when he reached that decision. I only learned explicitly on the night of the referendum, and that is why I offered to resign,” he said. Mr Varoufakis wanted to seize on the momentum of a landslide victory in the vote but was overruled.

He insisted that his purpose has always been to go on the legal and financial offensive within the eurozone – placing the eurozone creditors in a position where they would be acting outside EU treaty law if they forced Grexit – but nevertheless suggested Syriza did have a mandate to contemplate more radical steps if all else failed.

“I think the Greek people had authorised us to pursue energetically and vigorously that negotiation to the point of saying that if we can’t have a viable agreement, then we should consider getting out,” he said in the tape.

“Schauble believes that the eurozone is not sustainable as it is. He believes there has to be some fiscal transfers, some degree of political union. He believes that for that political union to work without federation, without the legitimacy that a properly elected federal parliament can render, can bestow upon an executive, it will have to be done in a very disciplinary way,”

“And he said explicitly to me that a Grexit is going to equip him with sufficient terrorising power in order to impose upon the French, that which Paris has been resisting: a degree of transfer of budget making powers from Paris to Brussels.”

Mr Varoufakis told the Telegraph that the Mr Schauble has made up his mind that Greece must be ejected from the euro, and is merely biding his time, knowing that the latest bail-out plan is doomed to failure.

“Everybody knows the International Monetary Fund does not want to take part in a new programme but Schauble is insisting that it does as a condition for new loans. I have a strong suspicion that there will be no deal on August 20,” he said.

The End of Europe


The crisis in Greece is part of a larger disintegration of the European project argues Ceedric Durand, a Professor of University of Paris 13.

The myth of intra-European convergence has also revealed itself. In the last five years, the apparent convergence between countries has evaporated, reinstalling the economic hierarchy between the German European core and the peripheries with a vengeance. While Italy now lags behind its pre-euro level in terms of GDP per capita, others like Greece, Spain, and Portugal have slipped into full-scale social despair, with ever-larger segments of the population unable to meet their basic needs.

The tragic irony is that all of this suffering is in vain. Debt-to-GDP ratios have risen despite harsh austerity measures, locking peripheral countries and their working classes into an endless cycle of debt peonage vis-à-vis financial markets and sovereign creditors. At the same time, internal trade imbalances within the eurozone persist, and the tighter coordination of neoliberal prescriptions at the EU level offers no mechanism to tackle the underlying structural problems of uneven development.

The adverse winds of economic depression have turned European governance into a class-warfare machine. The great leap forward of integration in the past few years has resulted in steadily declining control for national elected parliaments over economic policy.

Originally published on The Jacobin website

From a European perspective, the financial meltdown of 2008 was the prologue of a full-scale, continent-wide crisis. The US-made financial debacle triggered a complex chain of unexpected events throughout the old continent, contaminating all spheres of social life and resulting in a radically new landscape plagued by political and economic crisis.

As Ada Colau, the newly elected mayor of Barcelona and head of a coalition inspired by the indignados, says: “No one will come out unchanged from this crisis. What awaits us is a feudal horizon, with a sharp increase in inequality, an unprecedented concentration of wealth, new forms of insecurity for the majority of citizens. Or, a democratic revolution, where thousands of people are committed to change the film’s ending.”

We are very likely arriving at this historical turning point. The landslide victory of No in the July 5 Greek referendum indicated that the popular classes want a halt to decades of neoliberal European integration. This reopening of what Auguste Blanqui called the “chapter of bifurcations” is taking place in the middle of tectonic shifts shaking a continent that has fallen into a spiral of rancor and resentment not seen since the middle of last century.

Fifteen years ago, the successful launch of the single currency fueled a wave of Europhoria across the continent. The 2000 Lisbon Strategypromised to make the European Union “the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion.” Enthusiasts portrayed the union as “a beacon of light in a troubled world.” Marcel Gauchet and Jürgen Habermas argued that the new European formula — in terms of supranational democratic governance and the welfare state — was destined to serve as “a model for the nations of the world.”

The expectations of Europeanist days never materialized. On the contrary: in retrospect, the whole sequence appears a story of uninterrupted failure. The region lagged behind almost every other region in economic growth before and after the crisis, and the 2010 turn to austerity produced a magnificent economic debacle. GDP has still not recovered to its pre-crisis level, making it one of the worst economic crises in recent history — beaten only by the catastrophic Russian capitalist restoration of the nineties.

A straightforward confession of the irrelevance of economic management during this period is the sober statement by the OECD, shown below, that the expected follow-through to the initial recovery has been repeatedly delayed.

Figure 1: Past OECD economic outlook projections of euro area GDP (quarter 1, 2008 = 100)

Unemployment last year soared, with more than 44 million people unemployed or underemployed within the Union. This is not only a painful personal drama for workers and their families, but also a spectacular illustration of social irrationality resulting in a gigantic economic waste, especially considering European workers are among the most productive in the world.

The myth of intra-European convergence has also revealed itself. In the last five years, the apparent convergence between countries has evaporated, reinstalling the economic hierarchy between the German European core and the peripheries with a vengeance. While Italy now lags behind its pre-euro level in terms of GDP per capita, others like Greece, Spain, and Portugal have slipped into full-scale social despair, with ever-larger segments of the population unable to meet their basic needs.

The tragic irony is that all of this suffering is in vain. Debt-to-GDP ratios have risen despite harsh austerity measures, locking peripheral countries and their working classes into an endless cycle of debt peonage vis-à-vis financial markets and sovereign creditors. At the same time, internal trade imbalances within the eurozone persist, and the tighter coordination of neoliberal prescriptions at the EU level offers no mechanism to tackle the underlying structural problems of uneven development.

The adverse winds of economic depression have turned European governance into a class-warfare machine. The great leap forward of integration in the past few years has resulted in steadily declining control for national elected parliaments over economic policy.

Rule-bending, bureaucratic supervision by the commission and core governments, the installment of independent technocratic bodies controlling fiscal policy, and the enlargement of the European Central Bank (ECB) competencies has reduced the field of economic policy options for national government to the one-size-fits-all fundamentals of the old-fashioned Washington Consensus of the nineties: consolidation, privatization, and liberalization.

Unpopular austerity packages and labor market reforms have been met with huge popular mobilizations in southern countries of a magnitude not seen in decades, with multiple general strikes and quasi-insurrectionary phases in Spain and Greece. When the determination of national governments weakened, the European center resorted to open authoritarianism: bureaucratic coups ousted several prime ministers, while the ECB, led by former Goldman Sachs vice-president Mario Draghi, explicitly blackmailed recalcitrant leaders.

In no other case did the confrontation surface with such clarity than in Greece. In a mid-June statement, International Monetary Fund chief economist Olivier Blanchard wrote candidly: “Greek citizens, through a democratic process, have indicated that there were some reforms they do not want. We believe that these reforms are needed.” By explicitly contrasting democratic choices and bureaucratic neoliberal requirements, Blanchard was simply repeating the mantra of European leaders that there is no alternative to the status quo.

The discussions with Greece are thus a formal process designed to politically defeat Greece’s left forces, burying any prospects of meaningful political change across the continent. This is the only explanation for the creditors’ inflexibility despite Tsipras crossing all Syriza’s red lines in terms of pensions reforms, tax policy, privatizations, and market liberalization. This punitive stance was made crystal clear by late June, when the ECB actively incited a bank run, warning of an “uncontrollable crisis,” and abruptly capped its emergency loans to the banking sector, triggering bank holidays and capital controls.

However, the inflexibility vis-à-vis the Greek government is not only caused by a shameless neoliberal political will. It reveals a much deeper problem of Europe, which is the non-maneuverability of this political vessel.

A central part of the problem is the size and the legal complexity of the EU. Basically, EU governance is the painful sedimentation of hard-settled compromises into rules, which are almost impossible to circumvent. The decision-making capabilities of European polity are extremely narrow and tethered to the previous political balances of forces, making radical change almost impossible to contemplate.

Moreover, the European bureaucracy is tiny, with about thirty thousand public servants and a budget less than 1 percent of the EU’s GDP. Its sole political force results from an accumulation of rule-bending and procedures that the European elite is eager to preserve, even though it has resulted in a systematically chaotic management of the crisis over the past few years.

At a deeper level, the lack of EU maneuverability is a paradoxical outcome of the landslide victories of transnational and financial capital over the previous decades. These victories resulted in the building of EU state-like institutions focused primarily on capital’s core interests — competition, trade and money — while labor and social problems were reduced to adjustment variables in the European political arena.

Consequently, the European proto-state may be strong in promoting the immediate interest of a finance-led power bloc, but it lacks the consensual side of hegemony, which is indispensable to keep diverse societies and social strata together in turbulent times.

The combination of economic and social failures and limited political maneuverability has resulted in a diminishing appeal for the European project and the reactivation of centrifugal forces across the continent.

Europe is one of the most sophisticated political landscapes in the world, and its idiosyncratic mixture of strong and contradictory political legacies of liberal, fascist, and communist traditions with multilevel statehood governance and democratic legitimacies, vibrant social movements, and contradictory geopolitical ties is boiling once again.

In this context, regardless of what happens next, the political turmoil in Greece is already a landmark in the history of the continent. The country that in the early eighties exemplified the ability of Europe to provide a solid anchor in liberal democracy and socioeconomic stability to a post-authoritarian regime is now becoming a symbol of failure and disunion.

Syriza’s attempt to escape from the neoliberal cage has been met with nothing but sabotage and vituperation from the others governments and European institutions, leaving it with no alternative but capitulation or rupture, neither a positive outcome as far as the attractiveness of the EU is concerned.

Centrifugal forces are also growing as a result of the fading appeal of Brussels. Britain is demanding a substantial reversal of integration bythreatening to leave, reinforcing the attraction of the US. On the Eastern border, the definitive disillusionment vis-à-vis European integration leaves an open field for nationalistic forces (although with contradictory sentiments towards Russia’s newfound assertiveness). Even within the historical core, there is a growing sense of despair.

This enables the rise of far-right parties such as the National Front in France, but also racist discourses in mainstream media — exemplified by Berthold Seewald’s recent call in the leading German conservative newspaper, Die Welt, for the ethnic disqualification of Greece from its European membership.

Recalling the context of the 1820s Greek independence war, he wrote that at that time “the idea that modern Greeks are descendants of Pericles and Socrates, and not a mixture of Slavs, Byzantines and Albanians, was erected as a common belief in Europe.… This is why we accepted the Greeks breaking into the European ship in 1980. One can admire the consequences every day.”

In the meantime, signs of discouragement among mainstream leaders are abundant. Reduced to complicated calculations and deprived of any political inspiration, Europe is fueling nothing but acrimony and resentment.

The lack of solidarity surfaced once again when heads of governments discussed the migrant crisis. While thousands of migrants are dying in the Mediterranean, European leaders’ response has been revealingly focused on military attacks, and when discussing sharing asylum seekers between countries, selfishness is self-evident — prompting, Matteo Renzi, the fading Italian star of the European center-left, to say, “If that’s your idea of Europe, you can keep it.”

Recent polls in Spain and the UK confirm that disappointment with Europe is translating into diminishing votes for the “extreme center” in national political fields. Whether or not their ideological convergences translate into domestic alliances, the right-wing and the left-wing of the center are tightly knitted together in a permanent European grand coalition.

In this process, the so-called social-democratic parties are experiencing the highest toll; as their traditional positions on socioeconomic issues melted in the face of neoliberal dogma, they left their core constituencies with no further reason to vote for them, leading to higher rates of abstention or the emergence of new kinds of political movements.

On the Left, the emergence of new political movements across countries is related both to structural factors such as the intensity of the austerity and more contingent issues related to the organization of the political field. But regardless of their political fate in the short term, none of them will be permitted to delay discussions on key strategic points any longer.

Two years before becoming Greece’s finance minister, in his “Confessions of an Erratic Marxist,” Yanis Varoufakis endorsed the mission of saving European capitalism from itself. The Greece battle shows that this could prove more challenging than he anticipated.

Uneven and combined developmental dynamics in the European periphery highlights the need for the Left to move from a defensive fight against austerity toward a positive agenda of systemic alternatives. The Greek experiment demonstrates that, on this path, there is no other choice than breaking with neoliberal European institutions and regaining democratic sovereignty on domestic currencies.

This is a daunting challenge, however, considering how reluctant most people are to bear the transitional costs of the breakup, even if they could be convinced of the benefits of such a rupture in the long term. Formulating policy proposals guaranteeing people a safety net during this transition will be key to facilitating new electoral victories, beginning with Spain’s elections this fall. There, Podemos and its social movement allies have a significant chance to win.

As the Greece experience has shown, the European elite can be expected to be nothing less than merciless. As a member of the Podemos leadership recently advised me, “you had better be prepared.”

Decoding the IMF: Greek deal doomed, exit likely

Paul Mason from Chanel 4 offers a dispassionate account of the failure of successive Greek parties (when they come to power) to grapple with the Euro and the damage done. The SYRIZA leadership is falling into the same trap. It is preparing to implement a woeful program (which it has fought tooth and nail) just so it can remain in the Euro.

The article is taken from the here

It’s easy to get drawn in to the detail. I spent some of yesterday in the hot corridors of the Greek parliament where the various factions and groupings within Syriza, the radical left party, were working out their postures on today’s vote.

No to the rescue deal, says the left. Abstain, say others. Vote yes while declaring it’s been done at gunpoint, says Alexis Tsipras in a live TV interview. But step away from the argument, bitter as the black coffee served in the parliament’s canteen, and the bigger picture is: the deal will pass, Syriza will vote for it.

13 greece r w  Decoding the IMF: Greek deal doomed, exit likely

Step back further and take in the implications of the IMF’s secret report, leaked yesterday, into the dynamics of Greece’s debt. The IMF says – after the weeks of dislocation caused by the relentless bank run and the capital controls – that the austerity deal is pointless. Greece needs a massive debt write-off or large upfront transfers of taxpayers money from the rest of Europe. It needs a 30 year grace period in which it will stop repaying the loans.

Yet the entire deal done on Sunday night was premised on not a single cent worth of debt relief. Vague commitments to “reprofile” debt – pushing repayment times backwards and lowering the interest rates – were all Angela Merkel could be persuaded to do.

What this means is very simple: the third bailout agreed in principle on Sunday night is doomed to fail. First because the IMF cannot sign up to it without debt relief; second because, without debt relief it will collapse the Greek economy. This is even before you factor in issues like mass resistance to its details, or the total lack of enthusiasm for execution of the deal by the Syriza ministers who will have to do it.

IMF report

But on both sides of the Greek political class there is cognitive dissonance, and it’s being generated by the same thing: a blindness to what the Euro has become.

The Greek centre and centre right will keep Syriza in power today on the grounds of being good Europeans. Syriza will vote for a deal it opposes, and which anybody who’s read even a summary of the IMF report now understands is doomed. Again on the grounds that it is demonstrating commitment to Europe and that, as Alexis Tsipras argues, “rules out Grexit”.

The implication of the IMF report is that Grexit is inevitable. Without debt relief the Greek debt to GDP ratio will rise to 200%. It will be using 15% of its GDP simply to make interest payments and payments coming due.

So we go back to the old problem that has dogged Greece since 2010. Yes it has an inefficient, state-dominated economy that needs to be reformed; yes it has antiquated and corruption-inducing restrictions on who can run certain businesses. But you can’t modernise a place like Greece amid the relentless downward pressure on growth that austerity measures produce.

By saying this – albeit in a secret document the Europeans wanted suppressed – the IMF has shown it is a learning organism. It has abandoned the dogma that predicted austerity would bring a 4% fall in GDP and drawn conclusions from the 25% fall in GDP that actually occurred.

One of the recurrent features of this crisis is the mismatch between the speed at which political parties learn things and how people do.

I’ve found, among ordinary people who were passionate supporters of the No vote in the referendum, the widespread acceptance that – to go forward with measures on social justice or alternatives to austerity – Greece will have to leave the Euro. Most people I talk to want it done in a controlled manner, consensually and with some kind of mandate from the people.

They’ve realised that Angela Merkel’s absolute refusal to countenance debt write-offs inside the Euro, alongside the IMF’s absolute insistence that they should happen, have created a cul-de-sac no Greek government can get out of without reversing out of Euro membership.

Syriza – which was always a coalition of left social democrats, New Left marxists and a harder left communist group – is finding it institutionally hard to accept this logic.

Opponents of exit argue that, with the Euro question “solved” they can get on with prosecuting a domestic crusade against corruption, poor police methods and the dysfunctional judiciary and the state.

What nobody knows is how much of its absolute sovereignty over domestic law the Eurozone would actually use if, for example, Syriza tried to cleanse the judiciary. Would this be deemed as “politicising the state?” Nobody knows – because the European Commission and ECB have never had to have policies on such things before.

‘Third bailout will be a disaster’

Equally uncertain is: what kind of party does Syriza now become? Right now it is still, basically, an expression of the desire of large numbers of Greek people to stay in the Euro with less austerity.

The Greek electorate’s pattern over the past 5 years has been to put parties into power who say they will mitigate austerity but stay in the Euro. First Papandreou, then New Democracy – who also, now barely remembered – once opposed an austerity memorandum – and now Syriza.  By throwing successive parties into the European mincing machine, the outcome has been to shred party politics. Pasok was shredded, New Democracy was shredded and it’s possible that Syriza too will split, be vilified, denounced as traitors etc.

21 greece protest w  Decoding the IMF: Greek deal doomed, exit likely

We know from opinion polls that about 35% of Greeks want to leave the Euro but that a further 25% of those who voted No in the referendum probably fear what Alexis Tsipras spelled out last night: €250bn has left the country over the past 5 years and if Greece leaves the Euro this “drachma lobby” would be able to return to Greece and buy out everything and everybody.

But listen to the IMF report – which implies the third bailout will be a disaster; and to the intransigence of Angela Merkel – who says no debt relief within the Euro. The more I look at it, logically and dispassionately, that €250bn waiting outside Greece for Grexit now looks like very smart money. And you the highly logical and dispassionate investment community is drawing that conclusion too.

The levels of economic pain and dysfunctional borrowing set to be inflicted on Greece mean that at some point in the next 12-18 months there is a chance that centrist 20-30% of public opinion will flip to a policy of controlled, or maybe temporary exit from the Eurozone. The only question then is: which party will offer a convincing narrative and lead it.

The OXI Revolt of 2015

oxiThe OXI revolt that burst out of Athens on July 5th sent a political tremor around the world. But very soon the defeat of the Greek government in its July negotiations with the lenders dealt a massive blow to SYRIZA and the government as a whole. In turn it has deflated many people across the world.  SYRIZA has a long history of managing internal conflicts and serious tensions as it has grown from a coalition of parties and social movements. It will neeed to use all that experience if it is to learn and move on from its mistakes and disagreements.

Now is the time to quickly comprehend the significance of what happened and emerging options to regain political initiative. The observations and comments are based on my time in Greece during these past few dramatic weeks. They draw on conversations with activists, SYRIZA party members and general discussions with people on the street.

What happened is relatively straight forward. The SYRIZA led government was elected on a platform to end austerity and negotiate a write-down of the Greek national debt. Immediately upon being elected the Greek government prosecuted this case with alacrity and conviction. Indeed many people within Europe and across the world were convinced for the first time of the Greek cause and the unjust terms imposed on the Greek people. The lenders too could no longer pretend they did not know or were told different things by their Greek counterparts –they were told in detail the damage done and the inevitable further damage that would arise from austerity and a failure to write-down the debt. To help them along there were even very creative solutions offered that could help them manage the domestic political constraints they would have to negotiate.

The initial political response to this from the European lenders and the IMF was unadorned belligerence. They ended 5 months later with a nasty vindictiveness and a final humiliating deal that does not have a hope of being fully implemented, and in even its partial implementation will do a great deal of harm. A deal that shocked even hardened insiders like former IMF boss Strauss-Kahn. The hard line position of the German led negotiators shatters any pretence of an honourable and humane Euro consciousness upon which the Euro project was founded and exposes a restless German dominance. It can be described as a neo Euro-imperialism.

Most likely within a couple of years of Memorandum 3 being signed, Greece will find itself again depressed economically and with little further assets to sell. At that point, most probably a partial debt write-down will be agreed, but given the absurd cruelty of the current lender mind-set, even this cannot be assumed.

In moving forward, the initial political question is – why did the Greek government fail to move these lenders to a more favourable position? The short answer is that it did not appear to have a plan that could give them more leverage than relaying a simple truth – that the people of Greece and Europe would be better off if a fairer deal was struck. Of course, the Greek government did explore options for seeking external support from countries such as Russia, China, Latin American countries and even the USA. It is true that it received support and help in various ways from all of these. In the end, however, the lenders were supremely confident that Greece was still left in a position that it had to accept any deal offered by its existing lenders.

By the close of negotiations the lenders were coalescing around two positions. One position was to offer Greece a third bailout with conditions that ranged from tough to humiliating. The other was to force Greece into an exit from the Euro-currency (and possibly even the European Union). The so-called Grexit would not have been undertaken under terms that would have been favourable towards Greece. Indeed, we now know that a detailed plan was developed over a one month period within the European Commission to deal with a Grexit. That plan reportedly is still under lock and key within the EC. The Kathimerini newspaper has reported that one staffer involved in its preparation considered the Grexit scenario so volatile it would have led to tanks being deployed in the streets of Athens.

Two weeks before the final agreement, Alexis Tsipras played his final card. He called a referendum on whether Greece should accept the harsh terms of an agreement proposed by lenders. The resounding OXI of the Greek people gave Tsipras a gasp of breath and a fresh mandate to negotiate against the harsh conditions.

The response of the lenders was worse than neutral. Outraged that a government should refer to its people before making a critical decision, the lenders responded with vindictiveness by toughening their conditions and humiliating the Greek Prime Minister. The humiliation was precisely in the fact that they “forced” him to sign an agreement (which he has declared he does not believe in) to prolong a strategy that had already proven a grotesque failure and which was deemed by the IMF analyst’s themselves (one day after agreement) to be unviable. The IMF analysts have confirmed what many other economists around the world have joined together to declare – the current debt load is unsustainable and any further debt is plainly irresponsible.

For many people the burning question is – why did Tsipras agree to further harsh austerity?  The answer is because he saw no other alternative other than an exit from the euro. An exit for which his government was thoroughly unprepared to manage. This would mean the country would have been at the mercy of the lenders. Given the savagery of their negotiating stance, he could only realistically expect the worst.

In the wash-up discussion of what happened, he will be criticised by some as selling out and betraying the cause. I believe that when it came to that final week, Tsipras had no option but to sign. The critical errors had already been made – it would have made no sense to turn those critical errors into a fatal error. If Tsipras had walked away it is more than likely Greece would have descended into chaos as the banking system dissolved, trade and business froze and resentment grew on the street. It would have been the easiest thing for hostile forces to sow discontent and move the country towards the precipice.  More than likely, the government would have fallen and the Left would have been saddled with the charge of bringing the country an economic and political disaster.

But if Tsipras was right in swallowing all pride to agree to horrible terms for the country, he was dead wrong in not insisting beforehand on the preparation of an exit plan from the Euro. The badge he proudly displayed (I do not have a Plan B) was a mark of weakness fully exploited by the lenders.

Tsipras was proven correct in plotting a winning electoral strategy that promised to stay within the Euro and yet overturn austerity and reduce national debt. He had a right to preserve his compact with the Greek people until he had a mandate to do otherwise. But this strategy also locked him into an untenable bargaining position with lenders.

The Left Platform now appears correct in arguing (from before SYRIZA assumed government) that an acceptable agreement with lenders most probably could not be found within the Euro-currency.

SYRIZA should make the most of the fact that under Tsipras it did everything feasible to get a better deal for Greece within the Euro. SYRIZA took the Greek people down a path of sincere negotiations armed only with the truth and a claim for justice. It has won many friends to the cause across the world and has even produced a split within lenders on the critical issue of the write-down of debt. This accomplishment has not produced tangible results, yet augurs well for future concessions on debt.

But on austerity, it went mostly backwards.  It should accept (apart from some concessions) it has extracted a draconian austerity package for the country. It is significant that people (even those set against him) acknowledge that he and his negotiating team argued as hard as humanely possible. There is an emerging consensus that it’s not possible to extract a more favourable deal from within the Eurocurrency arrangements. This is a significant development.

Unless SYRIZA now accepts that hyper-austerity is tolerable, it should recognise that it (and any other responsible Greek government) must have a viable and advanced strategy for exiting the Euro currency. It would be entirely irresponsible (when the lenders are developing such strategies behind closed doors) for Greece to be idly whistling in the wind.

In other words, the agreement Tsipras was forced to sign, is also an instrument to buy time. One track will be locked in an absurdist farce set around negotiations for a third memorandum of horrors. The other track should be laying the groundwork to plan and prepare people for an exit from the Euro. There is nothing schizophrenic or irrational about this – its called having live and competing options and it is exactly what the German-led lenders did to Greece in the first round of negotiations that ended in July.

Critical in all this will be keeping alive the message (in Greece and abroad) that austerity is a program imposed upon Greece by lenders. We should always remember that this SYRIZA government has fought hard against austerity.. A detailed alternative plan and hard work from below is now needed. This can allow it to negotiate with confidence by knowing it has somewhere to go if the lenders again bare their teeth.

The German newspaper Die Welt reported in July 2015 there is already a growing belief across Europe and the rest of the world of a German government tendency for domination. All efforts should be made to ensure that German government and business understand the growing resistance towards their foreign and economic policy in Europe.

For its part, the Australia-Greece Solidarity Campaign remains committed to working with all those in Greece who are resisting the politics of austerity and seek an end to the tyranny of an unsustainable debt.

On July 5th, the Greek people showed courage and defiance. They will be greatly helped in the next round if the OXI revolt gets global support.

Adam Rorris

National coordinator, Australia-Greece Solidarity Campaign

IMF admits: We failed to realise the damage austerity would do to Greece

The International Monetary Fund admitted it had failed to realise the damage austerity would do to Greece as the Washington-based organisation catalogued mistakes made during the bailout of the stricken eurozone country.

In an assessment of the rescue conducted jointly with the European Central Bank (ECB) and the European commission, the IMF said it had been forced to override its normal rules for providing financial assistance in order to put money into Greece.

Fund officials had severe doubts about whether Greece’s debt would be sustainable even after the first bailout was provided in May 2010 and only agreed to the plan because of fears of contagion.

Live Greek debt crisis: Grexit possible, says EC boss – live Eurozone finance ministers and leaders meet in new effort to find a deal. While it succeeded in keeping Greece in the eurozone, the report admitted the bailout included notable failures.

“Market confidence was not restored, the banking system lost 30% of its deposits and the economy encountered a much deeper than expected recession with exceptionally high unemployment.”

In Athens, officials reacted with barely disguised glee to the report, saying it confirmed that the price exacted for the €110bn (£93bn) emergency package was too high for a country beset by massive debts, tax evasion and a large black economy.”

Under the weight of such measures – applied across the board and hitting the poorest hardest – the economy, they said, was always bound to dive into an economic death spiral.

“For too long they [troika officials] refused to accept that the programme was simply off-target by hiding behind our failure to implement structural reforms,” said one insider. “Now that reforms are being applied they’ve had to accept the bitter truth.”

The IMF said: “The Fund approved an exceptionally large loan to Greece under an stand-by agreement in May 2010 despite having considerable misgivings about Greece’s debt sustainability. The decision required the Fund to depart from its established rules on exceptional access. However, Greece came late to the Fund and the time available to negotiate the programme was short.”

But having agreed that there were exceptional circumstances that warranted the biggest bailout in the Fund’s history, officials were taken aback by the much bigger than expected slump in the Greek economy. The country is now in its fifth year of recession and the economy has contracted by 17%. The IMF thought it would contract by just 5.5%.

In the evaluation of the package provided in 2010, the IMF said: “Given the danger of contagion, the report judges the programme to have been a necessity, even though the Fund had misgivings about debt sustainability.

“There was, however, a tension between the need to support Greece and the concern that debt was not sustainable with high probability (a condition for exceptional access).

“In response, the exceptional access criterion was amended to lower the bar for debt sustainability in systemic cases. The baseline still showed debt to be sustainable, as is required for all Fund programmes.”

In the event, the report added, the Fund was open to criticism for making economic projections that were too optimistic.”

While the report says a deep recession was unavoidable, it is critical of senior officials in Brussels and European capitals who said Greece would fare better outside the euro. Concerns that Greece could be ejected from the euro and return to the drachma intensified an already febrile situation.

“Confidence was also badly affected by domestic social and political turmoil and talk of a Greek exit from the euro by European policymakers,” it said.

Brussels also struggled to co-ordinate its policies with the ECB in Frankfurt, according to the report. “The Fund made decisions in a structured fashion, while decision-making in the eurozone spanned heads of state and multiple agencies and was more fragmented.”

The Greek media recently quoted IMF managing director Christine Lagarde describing 2011 as a “lost year” partly because of miscalculations by the EU and IMF.

The authoritative Kathimerini newspaper said the report identified a number of “mistakes” including the failure of creditors to agree to a restructuring of Greece’s debt burden earlier – a failure that had had a disastrous effect on its macroeconomic assumptions.

“From what we understand the IMF singles out the EU for criticism in its handling of the problem more than anything else,” said one well-placed official at the Greek finance ministry.

He added: “But acknowledgement of these mistakes will help us. It has already helped cut some slack and it will help us get what we really need which is a haircut on our debt next year.”


Hope Wins and Austerity Loses – The Greek People Have Spoken

The Australia – Greece solidarity campaign welcomes the resounding decision of the Greek people to say OXI (No) to further austerity. This incredibly courageous vote by the Greek people underlines the abject failure of the austerity agenda and the Euro power brokers that have been prosecuting it. The great hope now is that sanity will prevail and that debt relief and pro-growth policies replace the Troika’s strategy of asphyxiation that has resulted in this mess.

We publicly thank the ACTU and the trade union movement as well as the Greens Parliamentarians and community activists who have been strong advocates of the Greek people in their mission to broker a just deal. Their show of solidarity is commendable and highly appreciated by both Greeks and progressive Greek Australians. The Australian Government must now play its part to ensure the IMF gets back onto a sensible path of pro-growth policies.