The protracted negotiations between Greece and the troika which started after the election of Syriza on January 25 this year have reached a dead end, to which there seems to be no negotiated solution. This perception has accelerated the withdrawal of deposits from the banks which in turn brings the outcome closer. The troika is tightening the noose, and unless the victim manages to break free it will choke.
How dramatic the situation is becoming can be seen in the fact that almost three billion euros have been withdrawn from Greek banks this week, of which more than one billion was taken out yesterday (Thursday) and more is expected to be taken out today. So bad is the liquidity situation in the Greek banks that it seems unsure whether they will have sufficient funds to open on Monday.
The reason for this is that neither side can afford to be seen to be making any further concessions. And in the last few weeks we have seen a number of milestones in the hardening of the positions on both sides.
A political summit two weeks ago ended with an ultimatum on the part of Merkel, Hollande and the IMF’s Lagarde. The Greek side rejected it. Then the Greek government did not make a scheduled repayment to the IMF on June 4, and instead promised to consolidate the different repayments into one instalment, due on June 30. On June 11, the IMF team withdrew from the negotiations, saying they were not progressing. Greece’s finance minister Varoufakis presented a new series of proposals, which were swiftly rejected by the European institutions in a meeting on June 14 that lasted less than an hour. A closed door Eurogroup meeting on Thursday also failed to reach any agreement. The troika seems now to be making preparations for Grexit - a Greek exit from the eurozone.
Political aims of the Troika
At bottom, the contradiction is one between the aims of the troika and what the Greek people voted for on January 25. The basic aims of the troika (the IMF, the European Central Bank and the European Commision) are both economic and political. On the one hand it wants to protect its interests as creditor of Greece (after the last restructuring, the Greek debt is mainly in the hands of public institutions) and guarantee a steady flow of repayments. This is tied to the continuation of the failed austerity policies of the last five years. Within the limits of capitalism in crisis - and in Greece the crisis expresses itself in a particularly acute form - there is no real alternative.
On the other hand, the troika also has a political aim, which has now become dominant. It has to prevent Greece from pursuing a policy different from the brutal austerity imposed by the Memoranda. If it were to be seen as being lenient on Greece, allowing Syriza to carry out even some of the points of its Thessaloniki programme, that would send a very powerful political message to other countries. It would immediately strengthen all those parties seen as being anti-austerity, in Spain, Portugal and Ireland, and put their current right-wing governments in a very weak position. It would also put Hollande in France and Renzi in Italy under enormous pressure to abandon austerity policies.
The troika needs, therefore, to humiliate Syriza and the Greek government in order to send a clear message: you cannot disobey the austerity policies dictated by the European capitalists. The whole attitude of the troika for the last five months has been clear: either bring Syriza on board to cooperate in implementing austerity policies or force it to do so. If that fails, they have to be expelled.
For these reasons Marxists within Syriza (in the Communist Tendency) have argued, from even before the election on January 25, that the Thessaloniki programme and the whole political strategy of the Syriza leadership was flawed. The leadership's argument was that the concrete “social emergency” measures of the Thessaloniki programme could be implemented through an agreement with the troika. It was said that Greece would be able to get support from some quarters within the EU (France and Italy). Later the idea was put forward that the US or the IMF had a different, more “reasonable” position. None of that has materialised, as was predicted by the Marxists.
In the meantime, the Syriza leadership has made concession after concession to the position of the troika, in a desperate attempt to reach a deal. The formation of a coalition with right-wing populist ANEL (Independent Greeks) and the election of a right-winger as president of the Republic were early warning signs of the direction being taken by the Syriza leaders. The February 20 agreement represented another major step back from the Syriza programme. Worst of all, it was done without getting anything in exchange from the troika, other than the promise of the disbursement of 7.2bn euro left from the previous bail out programme. None of that money has been given to Greece. On the contrary, Greece has kept to all its scheduled payments to the troika, to the tune of over 7bn euro!
No matter how many concessions the troika has forced on the Greek government, this is not enough. The troika demands a full climb down. In the meantime, the initial enthusiasm and overwhelming support for Tsipras and the government, when they seemed to be standing up to the extortionists, has slowly dissipated with each concession. At no time has the Syriza leadership prepared the masses of Greek working people for a struggle against the troika. This has also demobilised European working class opinion. The solidarity demonstrations we witnessed in the first weeks, small but significant, have disappeared.
Now we have reached crunch time. The troika maintains its demands, while the Greek government realises that if it makes any further concessions it might not be able to survive. The experience of the last four years in Greece clearly shows that any government attempting to implement the Memoranda will - and has - been destroyed. After the breakdown of negotiations at the Eurogroup yesterday, a new emergency political meeting has been called for Monday 22nd June. It is not likely to lead anywhere.
In the meantime, ahead of Monday’s meeting, the Greek Finance Minister Varoufakis has published his intervention at the Eurogroup meeting, where he expressed his views and proposes even further, outrageous concessions. Those were also rejected.
The document details a comprehensive and hair-raising list of the impact of the crisis and austerity policies on Greece, which is worth reproducing:
“The public sector’s structural, or cyclically adjusted, fiscal deficit turned into a surplus on the back of a ‘world record beating’ 20% adjustment
Wages fell by 37%
Pensions were reduced by up to 48%
State employment diminished by 30%
Consumer spending was curtailed by 33%
Even the nation’s chronic current account deficit dropped by 16%.”
He then explains the impact of these brutal cuts:
“Aggregate real GDP fell by 27% while nominal GDP continued to fall quarter-in-quarter-out for 18 quarters non-stop to this day
Unemployment skyrocketed to 27%
Undeclared labour reached 34%
Banks are labouring under non-performing loans that exceed 40% in value
Public debt has exceeded 180% of GDP
Young well-qualified people are abandoning Greece in droves
Poverty, hunger and energy deprivation have registered increases usually associated with a state at war
Investment in productive capacity has evaporated.”
Even after explaining all this, he says he is prepared to make even further “adjustments”, including a privatisation plan for the next 10 years (something which is clearly in direct contradiction with the Thessaloniki programme). The whole argument, he says, is not that we don’t want to cut, it is just that we want to do it “our way”.
To stress the point, he makes a further proposal which had not been advanced before, that of an automatic mechanism to control public spending. This is how he explains it:
“Instead of arguing over half a percentage point of measures (or on whether these tax measures will have to all of the parametric type or not), how about a deeper, more comprehensive, permanent reform? An automated hard deficit brake that is legislated and monitored by the independent Fiscal Council we and the institutions have already agreed upon. The Fiscal Council would monitor the state budget’s execution on a weekly basis, issue warnings if a minimum primary surplus target looks like being violated and, at some point, trigger automated across the board, horizontal, reductions in all outlays in order to prevent the slide below the pre-agreed threshold. That way a failsafe system is in place that ensures the solvency of the Greek state while the Greek government retains the policy space it needs in order to remain sovereign and able to govern within a democratic context. Consider this to be a firm proposal that our government will implement immediately after an agreement.”
This would in effect mean an automatic mechanism for permanent austerity, regardless of the economic circumstances; and far from giving any government “sovereignty” or a “democratic context”, it would be precisely the opposite!
Here we have the sad spectacle of the democratically elected Greek representatives being forced to grovel in front of the European bankers and capitalists, begging for some crumbs off the table, asking for leniency, making promises of “good behaviour”, only for the masters to turn around and say: NO - we want more!
Having reached this point, the main problem is that the Syriza leadership did not expect a situation where an “honourable agreement” would not be possible and therefore did not prepare for it, either from an economic point of view or from a political point of view.
The Left Platform inside Syriza, which now has about 45% of the vote in the Central Committee, has voiced opposition to these concessions (see its amendment at the last CC meeting). However, there are two weaknesses in such opposition. One is that it has been erratic and inconsistent. While some representatives of the Left Platform have voiced publicly their criticism, others, with ministerial positions, have been more nuanced and cautious. The Left Platform has not taken its opposition to its logical conclusion: open agitation within the party and amongst the working masses for the repudiation of the debt and a clear socialist alternative. Even at the level of the CC of the party, it has moved amendments to the official position rather than alternative documents.
The second weakness is that the Left Platform’s alternative to the current strategy does not offer a full answer. It seems to imply that breaking with the Euro in itself would be enough to put an end to austerity policies and cuts. It does propose the nationalisation of the banks (a measure which to one degree or another would be imposed on the Greek government if it exits the euro and defaults) and a programme of taxing the rich. This, however, cannot answer the well founded fears of a large part of the population, who think that Grexit would mean an economic collapse that working people would have to bear the brunt of.
In reality, the only alternative to the utopian strategy of searching for an agreement with the lenders is what the comrades of the Communist Tendency of Syriza call a “socialist rupture”. That is, to repudiate the debt and take measures to expropriate the capitalist, bankers, landlords and ship owners, so that the wealth of society can be put in the hands of those who produce it, under a democratic plan of the economy. Breaking decisively with capitalism is also the only policy which could rekindle the enthusiasm which existed in the initial days of the government, both in Greece and throughout Europe. That is the only way forward.