26 September, 2020

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Euro-capital Imposes U-turn On Tsipras

By Kumar David

Prof. Kumar David

Prof. Kumar David

It is the most humiliating surrender of a leftwing government in living memory, but others may say it is a Brest-Litovsk moment when it survived to fight and perhaps to win on another day. If Tsipras was Lenin, I would not hesitate to endorse the surrender – but is he? Was it capitulation or a Brest-Litovsk moment? The 5 June referendum ratified two points: (a) No further austerity and (b) Greece must remain in the Eurozone. The political powers in Europe torpedoed the linkage: Either swallow harsher austerity and surrender national sovereignty, or get out of the Euro and face instant catastrophe; crumbling banks, economic strangulation and social turmoil. Tsipras buckled as he saw the alternative as Armageddon. This has a parallel with the Brest-Litovsk Peace Treaty of March 1918 when the four month old revolutionary government in Russia capitulated, ceded huge territory, agreed to pay compensation for war time Tsarist acquisition of German property and signed a humiliating treaty with the Central Powers.

Here is the Brest-Litovsk story in two paragraphs. Immediately after the revolution the Russian army had collapsed and Trotsky had still to build the Red Army out of its rag tag remnants. The Germans advanced, ominously ignoring Lenin’s call for peace without annexations; extinction of the revolutionary flame stared the Bolsheviks in the face. Urgent negotiations were called at a Byelorussian-Polish border town, Brest-Litovsk. Germany demanded harsh concession. Trotsky, leading the Russian delegation as People’s Commissar for Foreign Affairs (Foreign Minister), refused, walked out on 8 February 1918 and sided with Bukarin’s Central Committee (CC) faction which wanted to fight on till revolutions in Central European were victorious and came to the rescue.

Lenin was adamant: “Sign the deal, forestall the destruction of the Russian Revolution and live to fight another day”. There was conflict in the Bolshevik CC, but the Germans were advancing and the infant Red Army was threatened with invasion on 17 fronts by White Russians (loyalists of the Tsarist monarchy, armed and financed by Britain, the USA, Japan, France and Italy). Under German and Civil War pressure, Trotsky’s group abstained at the next CC meeting in March and Lenin pushed through his capitulation to German demands. Interestingly, in seven months Germany lost WWI, the Russians tore up the treaty, reoccupied surrendered lands and paid none of the reparations.

KDAngela Merkel for Kaiser Wilhelm II, German Finance Minister Wolfgang Schauble for Field Marshal von Hindenburg (during the war, more powerful than the Kaiser), European finance capital for the Central Powers, a 18 nation Eurozone and Troika (EC, ECB, IMF) onslaught for a 17 front invasion; the parallel has merit. Furthermore, Tsipras says he had no choice, “a knife was held to my throat” and he has no confidence the deal will work (the IMF, the Economist magazine and ECB President Mario Draghi agree). One would be hard pressed to find better words in which Lenin could have couched the predicament of the Russian Republic (there was no USSR yet). But the similarity abruptly ends; on the “What Next?” question, Alexis Tsipras and V.I. Lenin part company.

What is Tsipras going to do next? He has to implement the programme he has signed up to; steep new consumption taxes (13 to 23%), pension restrictions and wage freezes, if action on the streets does not stall him; privatisation of ports and the state’s share of banks, if public sector strikes fail to scuttle it. Will he use police-military machinery to suppress protests? I think so; he is evolving into an as yet mildly authoritarian Bonapartist. Syriza is internally split; 40 of its 149 members refused to support Tsipras in parliament. European finance capital intends to use him as its battering ram to bust the left alternative in the European periphery and put out the fire lit in the streets of Athens before it reaches Spain, Portugal and Italy. He seems willing.
Many have parted company with Tsipras’, but not with Syriza. Its left is led by Energy Minister Panagiotis Lafazanis joined by Political Secretary Tasos Koronnakis. Lafazanis, Labour Minister Panos Skourletis, the Deputy Defence Minister and the Deputy Social Security Minister have been removed from Cabinet; earlier Finance Minister Yaris Varoufakais was kicked out; Deputy Finance Minister Nadia Valavani rejected the deal and resigned; House Speaker Zoe Constantopoulou called it “social genocide”. As a Marxist Tsipras is damaged goods; his government hangs on a gossamer thread.

Lenin’s post Brest-Litovsk intentions were opposite. Yes, he was restricted in Europe to a rump European Russia and lost most of the south, Armenia, much of Georgia, to the Turks – Germany’s ally. Siberia and the East was undeveloped hinterland. Nor could he have foreseen that war would end quickly and that he could shove the Brest-Litovsk Treaty in the commode so serendipitously. Nonetheless, he had full control of albeit a rump state, was determined to nurture its socialist ideas in that part of Russia (and that was vast given the size of the country), and he was committed to using that state as beacon and launching pad for revolution elsewhere. The score then is: Tsipras 0, Lenin 2.

How did Greece get here?

What follows is a brief account of the genesis of the debt catastrophe. It refers to the fifteen years before Syriza came to power in 2015 January. A freewheeling bonanza for European finance-capital, and free-living populism for the Greek populace commenced in 2002 when the country joined the Euro. Greece became the offshore banking playground of European financial operators, Russian oligarchs and money launderers; its banks a vehicle for German and French investors to buy up the Greek economy in the halcyon days of Euro mesmerised capitalism. Money was raised by the Greek state and European investors thanks to the modest yield-spread from the German bond and a general mood of confidence.

The active side of the economy was tied to the roulette wheel of financial speculation, corruption and deliberate misrepresentation of government accounts – the best know case was with the connivance of Goldman Sachs. Misrepresentation of official accounts covered-up rising fiscal deficit (16% of GDP in 2009) and burgeoning state debt. Successive governments from 2004 ran up budget deficits to ‘pay off’ the public with populist policies of never ending good times while finance-capital made glorious profits in a Hellenic sun of endemic scam. Industrial growth, investment, productivity enhancement – development in the broad sense – was effete as somnolent Greek capitalism remained a slave to the roulette wheel. The people’s work motto was not “Never on a Sunday” but never on week days either! As the chart shows debt as a percentage of GDP had begun to rise even in 2005-2008 well before the 2008 global crisis.

The global financial system went kaput in Q4 2008; banks and governments with weak balance sheets hit the pits; loss of confidence led globally to capital flight from dicey institutions. Interest rates (yield) demanded of Greece rose sharply, at one point reaching 15.5% (spread of 14% above Germany), private sources dried up, existing ones refused to renew. The debt crisis ran out of control and Greek banks were on the verge of collapse. A Holy Trinity, the Troika, was incarnated (EU the Holy Ghost; ECB God the Son; IMF God the Father); its first job was to rescue European finance-capital stuck in Greek banks. The diabolical rescue mechanism was: (a) Greek government to take over the bonds of the banking sector, that is finance-capital’s booty, (b) the Troika to pay off these bond holders, and (c) Greece to become indebted to that amount to the Troika.

Step (b) rescued European investors using European tax-payer money (the Greek government was not allowed to touch it; the Troika reimbursed bondholders directly). By step (c) the Greek people (state) became debtors of the Troika; that is European and global (IMF) taxpayers. This is where we are now; Greece owes the Troika $400 billion on which it cannot pay interest nor service repayment; the IMF says repayment and economic recovery will take till 2050, that too only if loans are restructured (repayment schedules pushed back) and a haircut (write-off of a top slice of all debt) is implemented. The $93 billion debt relief package now on the table is just another piece of the ongoing Ponzi scheme.

‘Grexit’ the only way

Greece cannot survive with austerity; the economy is crippled, 58% youth unemployment and spiralling mass hardship; this is what every economist and tacitly the IMF says. There is no investment and recovery possible in the prevailing gloom; only economic suffocation and civil strife. When banks opened on Monday, on a lifeline thrown by Eurozone emergency funds, there was relief, gasps of a rescued drowning man and a brief up-tick in Tspiras’ popularity. But that’s premature; in the coming months the screws will tighten. The new Finance Minister Euclid Tsokalotos (also a Marxist and friend of Varoufakis) predicts that the fiscal tightening will not benefit the economy and that the government was forced to accept them. After five years of austerity, not recovery but misery is spreading.

Even ardent original enthusiasts now concede the Euro project was flawed. You cannot have one currency, one monetary policy and unique exchange and interest rates for 19 countries, but at the same time 19 different budgets and 19 different debt structures! In this wacky scenario Greece cannot do what it urgently needs to do; devalue. Even wackier, a state whose banks have dried and businesses shut down does not have a central bank as an instrument of survival. It has no primary tool of intervention in the face of a national catastrophe. And it’s a one-way street; if you get in there is no way out. Tory leader William Hague called the Euro “a burning building with no exit”. Greece is trapped in this building. Now the Eurozone powers are taking control, laying down policy and shoving national sovereignty aside. This is perverse proof that currency unity sans political unity is infeasible.

There is no option for Greece but ‘Grexit’ (exit from the Euro) followed by a bold state led economic policy-drive like other countries that recovered from war, revolution or disaster (Japan, Korea, India after independence, China, Vietnam, and Argentina a weak example). Grexit will be hard at the start and the EU must ease the way. The IMF’s backroom plan foresees 20% forced devaluation of the new drachma at the start and price inflation up to 25% even with ECB stabilisation help. Then the hard road to recovery will start; there is no other road but Tsipras does not have the courage to tell his people that they have no option other than Grexit.

I am aware of the downside of state-owned enterprises, but a dirigisme-thrust is not about ownership, it is about policy drivers. Also, the Greek economy cannot recover in isolation as the previous examples show; it needs to diversify investment sources – China, the USA, Russia, Europe of course, and what about the $150 billion Iranian funds soon be unlocked. The sine qua non however is leadership and a determined work ethic; nothing can be achieved without effort. And a driving national and social ideology is imperative; the Greeks aren’t going to kill themselves for capitalist bosses.

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Latest comments

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    This guy has stereotyped the poor Greeks to the utmost of mendacity. He also cleverly throws in the Russians as villains, and makes out the Greek economy was on one giant roulette wheel of speculation. How will he compare that with the Swiss economy, hey! Swiss are not boisterous like the Greeks, and so riding around on bicycles and looking meditative makes Switzerland’s economy look more respectable, although it probably is far worse where all the money laundering is concerned- hence they stay afloat.

    The whole of Europe and the Western world lost their farmlands and forests. They can do nothing else in this present age but produce money out of the invention of unnecessary machines and then throw it on the world money market for speculation and money creation. China is following suit by destroying all her farmland and forests, and trying to beat the West at its game. And Tamil Nadu – now Tamil Nadu has 12-million Dalits to cushion a Greek style disaster (although Tamil Naduians are working very hard for the West…..helping them to create all their machines to make money)

    Now how nice it will be if Sri Lanka takes the middle-path, is cautious and humble, keeps her farms and forests, and plays the superpower game only a little –we can’t be that isolated. In the meantime, we too will invent some machines of our own.

    • 0
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      This Ramona Therese person either has difficulty with simple English or knows not a farthing’s worth about the Brest-Litovsk events. Most likely both! The writer of this piece does not “throw the Russians in as villains”, on the contrary, he throws Lenin in as a good guy! (Whether one agrees or not is another matter).

      Somebody should donate a grade-1 primer on idiomatic English; as for Russian history, there is no hope for her.

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    Tsipras was the ‘common candidate’ in Greece, and is as much a ‘success’ today as the Sri Lankan counterpart.

  • 1
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    Capitalism have clearly not been working in the way that their boosters of big capitalist class claim.

    Greek system are supposed to be unstable ,nexus with global financial crisis showed that they could be very unstable with devastating consequences. We all noted a number of ways that taken by last several ruling parties in Greek that help the Central Bank of Greek helped the other major banks and capitalist big enterprise, especially in the financial crisis. CB of Greek lends to the banks at very low interest rates that, specially in times of crisis are far below the market rate. If Greek banks can barrow at close to zero and buy a long-term bond yielding say 4% or 5% it makes a nifty 4% or 5% profit doing nothing.

    Lend the banking system a billion dollars or Euros a year and that ‘s a $ 30 million gift. But can often do batter that they can lend to triple rated companies, prime customers at much higher interest rates. If Greek banks can lend at 10% percent ,then the government’s willing to lend them a billion euro or dollars at close to zero, interest rate is $ 10 million a return as gift to Bank.

    On the other hand Greek Banks also deposit money in their Central Bank, and they now for the first time receive interest on those deposits, that has be another hidden transfer from taxpayers to the Banks.
    Mostly major bailout strategy of Greek put the first interest of the large banks and big capitalist ahead of the rest of our economy. Money was given to big banks allegedly so that the flow of credit would not be interrupted ,but no conditions were imposed on big banks and other financial institutions receiving funds. Much of funds given to the banks went to bonuses not to bank recapitalization.
    More money went disproportionately in Greek large Banks, which were more interested in speculation and trading than in lending. The Greek government’s money for the most part did not go the small and medium industries -size enterprises.

    It was Greek that not surprisingly hundreds of these smaller banks and enterprises went bankrupt and hundreds more were in such a precarious position that they had to curtail lending.

    These are certain features of Capitalist crisis in Greek.

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