The Real Movement

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Tag: Grexit

Can SYRIZA be fixed? Can Greece?

If this Jacobin article, Becoming Syriza Again, is any indication, even the remaining radicals within SYRIZA have no idea why it is failing.

The writer acknowledges that the debate over Greece leaving the euro, which raged within SYRIZA for a period of time before the split, was an oversimplification. However, even now he proposes no alternative economic program that would allow SYRIZA to achieve its stated aim of bringing austerity to an end while avoiding Grexit.

He proposes a 5 step solution in which SYRIZA must:

  • Hold onto power;
  • Stop fighting with KKE and other Leftists;
  • Eliminate opportunism in its ranks;
  • Reconsider staying in the eurozone; and,
  • Put forward a new vision that inspire the country.

Here is my problem with this essay.

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The Left is trying to distance itself from the SYRIZA debacle

This statement passed my twitter TL the other day:

“I’ve fallen into the opinion that Tsipras and Syriza were fake plants all along. “

The epithet, “fake Left” is all the rage among many of the folks I follow on twitter and for good reason: no one wants to be associated with the disaster in Greece right now.

In my thinking, however, it is very convenient for the Left to disown its failures by claiming “X wasn’t really Left after all.” Convenient, but a terrible mistake. The way you explain a defeat is important, because it is evidence that you have learned from experience. If the only thing the Left has to learn from SYRIZA is that it was a ‘fake plant’, I think this is nothing more than the Left dissembling.

Essentially, the Left is saying the fault lies not with SYRIZA’s strategy but with its personalities.

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Mass hysteria in Greece: Compliments of the European Central Bank

At what point will SYRIZA tell the Eurogroup and ECB to go fuck themselves?

This was the thought that occurred to me after reading Yves Smith’s latest post, “Greece: Default or Grexit?. Smith explains there is an impasse between Greece and its creditors where the options facing SYRIZA are default or Grexit.

Impasse? What sort of impasse?

Everybody knows Greece is broke. Everybody knows Greece cannot squeeze more out of its population to pay the debt. If this were not true, SYRIZA would not be in power. The impasse on vampire-desktop-hd-wallppers-fulldisplay is that Greece is broke and has already defaulted, but no one wants to admit to it. There is no real impasse here; only people who don’t want to recognize losses that are already on the books.

Smith argues, “the best of Greece’s bad options is a default while staying within the Eurozone”. She states this option depends on what the European Central Bank (ECB) decides to do; only, it turns out, the ECB can pretty much do whatever it wants. This is not unlike the case in Michigan, where Washington arbitrarily decided to bail out GM and let Detroit go bankrupt.

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What happens ‘when something has to give”, but nothing likely will?

There is an interesting and much retweeted article today from Paul Mason, “Greece: why something has to give”. According to Mason, pressure is growing for a split in SYRIZA:

“So there is pressure growing, from within and without, to force a split in Syriza, with the Left Platform leaving the parliamentary group, and Tsipras now forced to rely on centre-left and Karamanlis-wing conservative votes to get any deal through the Hellenic parliament.”

Singularity-Brain-2Mind you, this is all over a debt that everyone knows cannot be repaid, no matter who is in power. It is not just that the EU is using the debt to beat SYRIZA down, SYRIZA seems intent on using the debt against itself.

Of course, a split in SYRIZA cannot fix Greece’s debt problem, as bondholders and anyone with an ounce of common sense knows:

“Let’s start by considering the raw numbers. Greece can’t borrow big money on the global markets, because its €320bn debt is – rightly, I think – seen as unpayable. No level of austerity bearable by Greek society could pay down the debt.”

The previous government lied about the state’s finances, capital is fleeing, the ECB is waging economic warfare against SYRIZA; and the ECB and Eurogroup have no desire to come to an agreement with SYRIZA. As the EU adds pressure from the outside, Mason argues, the Left Platform is organizing for a split from the inside.

This can’t go on, explains Mason. At some point, something somewhere has to give.

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Will someone please tell Lapavitsas to shut the fuck up!

Costas Lapavitsas latest interview reminds me of that scene from 007, where the bad guy has an elaborate plan to kill off Bond that you know is going to fail. Bond is tied down, helpless, handcuffed to an atomic bomb or sharks with lasers on their heads or some shit.

i2NncpcCDoctor Evil parodies the scene in one of the Austin Powers movies:

Dr. Evil: Scott, I want you to meet daddy’s nemesis, Austin Powers
Scott Evil: What? Are you feeding him? Why don’t you just kill him?
Dr. Evil: I have an even better idea. I’m going to place him in an easily escapable situation involving an overly elaborate and exotic death.

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Costas Lapavitsas and the growing desperation of the underconsumptionist school

In an interview with Jacobin, “Greece: Phase Two”, Costas Lapavitsas defends Yanis Varoufakis and, in the course of this defense, highlights the forces behind the increasing desperation of the Marxist underconsumptionist school:

“Let me come clean on this. Keynes and Keynesianism, unfortunately, remain the most powerful tools we’ve got, even as Marxists, for dealing with issues of policy in the here and now. The Marxist tradition is very powerful in dealing with the medium-term and longer-term questions and understanding the class dimensions and social dimensions of economics and society in general, of course. There’s no comparison in these realms.

But, for dealing with policy in the here and now, unfortunately, Keynes and Keynesianism remain a very important set of ideas, concepts, and tools even for Marxists. That’s the reality. Whether some people like to use the ideas and not acknowledge them as Keynesian is something I don’t want to comment upon, but it happens.

So I cannot blame Varoufakis for that, for associating himself with Keynesians, because I’ve also associated myself with Keynesians, openly and explicitly so. If you showed me another way of doing things, I’d be delighted. But I can assure you, after many decades of working on Marxist economic theory, that there isn’t at the moment. So yes, Varoufakis has worked with Keynesians. But that isn’t really, in and of itself, a damning thing.”

maxresdefaultI guess I am not so much speechless that Lapavitsas said this as I am speechless that it is completely true. After 150 years, Marxists still have no other policy tools in their book bags except Keynesian ones; Marxist economists have yet to give birth to their own policy tools derived organically from the premises of labor theory of value.

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Pavlopoulos’ and Vassalos’ unscrupulous demand for democratic control of currency in Greece

Anti-euro advocates increasingly have to characterize the SYRIZA government as a failure. Thus, SYRIZA is trapped between bourgeois ideologues who spin its brief stint as government a failure and Leftists ideologues who do the same.

The problem: Dimitris Pavlopoulos and Yiorgos Vassalos argue that even the mildest Keynesian policies are not possible within the eurozone:

“If one thing has become clear, it is that the long-expected change of course in Greece and the EU more broadly, will not come just because SYRIZA has come to power. The question that emerges is whether things could have gone, and can still go, differently. Is it possible for a left government in an austerity hit country to apply even a mild Keynesian policy while remaining within the eurozone and the EU? The answer is simply NO!”

91KBeL9mdJL._SL1500_But it was already understood by most observers before SYRIZA won the election that Keynesian policies could not be successfully implemented within the eurozone. This problem has nothing whatsoever to do with SYRIZA, but with the structure of the eurozone itself, which essentially strips the nation state of its fiscal and monetary powers without creating an alternative authority to implement countercyclical policies during economic downturns.

The Left and SYRIZA already knew this before the elections and should not be complaining about it now.

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Grexit is not a fix for low wages and low labor productivity in Greece

I came across this post on the Lenin’s Tomb blog today. See if you can tell why I am tearing out my hair.

Syriza’s mauling at the EU negotiations:

“Syriza has been defeated in the first round of negotiations.

After a period of enjoyable defiance, during which they won the backing of the overwhelming majority of the Greek people – 80% according to a poll taken before the latest deal, published in today’s Avgi – they have come back with small change.  Pushed to the point where they were at risk of a collapse of the banking system, and unprepared for a Grexit (and thus unable to use it as a bargaining chip), they accepted the most comprehensive drubbing.”

Yes, Grexit — a ridiculous term meant only to show how revolutionary one is. I cannot understand how people see Grexit as a bargaining chip or a threat to use in negotiations. I really don’t get that.

The only people who think Grexit is150105_Open_Europe_Blog_Greece_exit a good idea also think the problem in a crisis is that currency is over-valued. From that point of view — of Krugman and Keynesians generally — the euro as a currency is over-valued in terms of the productivity of labor in Greece.

The solution of these people is to exit from the euro, replace it with a currency the Greece government controls and allow that new currency to depreciate against the euro. If this neo-Drachma were allowed to depreciate in purchasing power by 50%, they argue, Greece goods would become relatively cheaper exports would rise, while imports from the euro-zone would fall as goods produced in the rump eurozone became increasingly expensive in drachma-terms. The net result is the expansion of the export sector at the expense of imports.

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If SYRIZA-EU negotiations break down: two views on what Grexit means for Greece

kick-outThings don’t look very promising for those who hoped Germany would give in to pressure and accept a write down or delay of Greece debt obligations. With that in mind I decided to look at the most likely outcome of a collapse of negotiation: Greece’s voluntary or forced exit from the euro and European Union.

Of course this post is highly speculative and not to be taken as a prediction.

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The strange case of the missing growth plan in the SYRIZA-EU debt deal

If things go as rumored, tomorrow SYRIZA finance minister Yannis Varoufakis will meet withgermanys-finance-minister-had-a-frightening-plan-to-deal-with-greece Germany’s finance minister, the vile and much hated Wolfgang Schauble. The meeting is widely anticipated by both bourgeois simpletons and Europe’s radical activists alike. On it hinges much of the hope on the part of the radical Left for successfully breaking out of the austerity regime said to responsible for much of the unemployment and slow growth across Europe.

The problem: nothing in the rumored deal explains how Greece will restore growth and end austerity

Folks like the International Committee of a Fourth International are trying to make heads or tails of the rumored SYRIZA-European Union deal on offer by Varoufakis. The outlines of the debt deal look very similar to the one described by James Meadway and carried in the Financial Times of London — the writers are clearly working off the same set of notes.

In the predicted agreement, perhaps to be presented to Germany on Thursday, the current debt package would be replaced by two packages. In the first, with the EU, bonds would be indexed to the growth in GDP; and in the second, the ECB would carry the debt on its books forever. Essentially, the first bond (owed to the EU) would only be paid if Greece’s economy grew; while the second bond would be carried on ECB books until such time as a Greece government chose to pay it. In both cases the repayment of the debt would be pushed back at least until Greece’s economy began growing.

The deal is a thinly disguised agreement to let Greece’s default on its obligations. There is no question that the ratings agencies will treat it as a default, but the package seems to be marketed as a way for Angela Merkel to save face.

To make an analogy, suppose you wanted to buy a house and need help on a down payment. If you are loaned a partial down payment on a house by your parents, they agree never to ask you to pay it back. The debt is still there in theory, but since your parents insist they will never press you for it, it is effectively a gift.

Another source for the down payment on your house might come from a friend. In this case, your friend fully insists on being paid, but he agrees you only need pay him from any raises you get from future employment.

Now, both of these deals have to be approved by the IRS — or, in this case, Ms. Merkel. The IRS can classify the loan from your parents as a gift or a loan, and this decision has tax implications. If the IRS classifies the loan from your parents as a gift, you are going to get socked with a crapload of taxes.

Will Merkel hold her nose and sign off?

In the same way, Ms. Merkel may not buy the face-saving cheat being offered here that the ECB debt is still on the books. She may rightly point out that the ECB has actually agreed to wipe out Greece’s debt — as it has.

On the second bond swap, Ms Merkel has to agree to demand a debt payment from Greece only if Greece’s economy grows; but, who knows when that will happen? (And there are real questions about this as I will show.)

Honestly, what has been crafted here by all accounts is Greece’s default on its debts to the EU and ECB thinly disguised as a new agreement framework. People like the ICFI, who call this a repudiation of SYRIZA’s election plank, are simply being assholes because the term. “default”, never appears on paper. However the ratings agencies will most probably label this a default event.

If the deal has any fault, it is that, as Meadway explained, it is just a little too cute for its own good. No one in their right mind is going to judge this as anything other than what it is: full-blown default. And this means everyone is expecting Ms. Merkel to hold her nose and sign off on a deal she knows grants permission to Greece to default.

Spain, Portugal, Ireland, etc. will also know that Greece was just given permission to default by Ms. Merkel. And, in contrast to Greece, Spain is one of the largest economies in the eurozone. If Podemos goes to its voters and say “See, Merkel, the EU and ECB are a bunch of cowards who back down when we stand up.”, this will have a big political impact in other countries hit hard by the troika’s austerity regime. Even the right parties in Spain will begin talking about renegotiating Spain’s debt.

The unanswered question: Where will the growth come from?

The reports so far assume Merkel will go along with the SYRIZA deal when it is not at all clear, but this is not even the big issue here. The debt is not, as the ICFI and the focus of most media attention would have you believe, the central plank in SYRIZA’s platform; it is more like an obstacle preventing SYRIZA from actually working on its central plank: reversing austerity.

Even if Merkel agrees to this tissue-thin default deal, SYRIZA will still face 27% unemployment, massive poverty and a depression that has shrunk the economy by nearly 30%.

And the deal includes the ultimate neoliberal (even Austrian) talking point: a permanent commitment to budget surpluses. Essentially, SYRIZA has agreed to forever avoid any Keynesian countercyclical deficit spending — even in the middle of a crisis.

In short, if this agreement is signed off on by all parties, the fascist state and Keynesian counter-cyclical policy is dead in Europe and neoliberalism has won on the continent.

The Greece of the future will rely on attracting capital from other countries for its growth like New York and Chile.

The playbook SYRIZA is likely working off of now was written with two fascists, James Galbraith and Stuart Holland. One thing that will be noted is that the Varoufakis-Holland-Galbraith plan concentrates even more power in the hands of the ECB. Essentially, the ECB is the critical institution for mobilizing global capital for investment in the various member states. And all economic growth in the EU will be forced to rely on four unelected bureaucracies:

  • The European Central Bank – ECB
  • The European Investment Bank – EIB
  • The European Investment Fund – EIF
  • The European Stability Mechanism – ESM

This implies a lot of new jobs for technocrats with economics backgrounds, but a whole lot less democracy in Europe. It is not even a little bit clear whether these folks gave any thought to democracy at all, except as an impediment. For instance, at one point they write:

“At the political level, the four policies of the Modest Proposal constitute a process of decentralised europeanisation, to be juxtaposed against an authoritarian federation that has not been put to European electorates, is unlikely to be endorsed by them, and, critically, offers them no assurance of higher levels of employment and welfare.”

This misses the point that their own plan, no less than “authoritarian federation”, will never be put to the European electorate either. Pot meets Kettle.

Grexit … Stage Left?

However, if the SYRIZA plan is agreed to, there will still be little room for addressing the severe impact of five years of austerity. The plan will partially solve the immediate problem of the crushing debt, however SYRIZA will lock itself into a commitment to avoid running deficits. Much like Massachusetts or California, SYRIZA will be locked in a balanced budget regime where, during downturns, it must reduce spending.

This pro-cyclical fiscal policy will mean Greece cannot get out of a recession on its own through Keynesian stimulus, but will be utterly dependent on EU policy. The problem for Greece will be that there is no Washington to run trillion dollar deficits when a crisis erupts. Certainly Massachusetts balanced its budget in 2008, but Obama stepped in with billions in “infrastructure investment”. In every state all those signs suddenly blossomed by the side of the road proclaiming the Obama stimulus was funding road construction. There will be no road signs in Greece.

Thus, even with Merkel’s acquiescence, SYRIZA will still face the possibility of a Grexit. This is because, within the limits of strict assumptions of bourgeois political-economy, each new job created in the economy must now produce an average rate of profit. Jobs will not be created simply because the capitalists like bossing workers but because they believe they can accumulate still more capital.

The easiest way to create jobs rapidly in an advanced economy is still the tried and true Keynesian method of cutting wages through currency devaluation. Just off the top of my head — i.e., pure speculation — what is missing in the discussion of Greece debt and future plans for a eurozone-wide investment plan is the announcement of a temporary Greece exit from the euro to allow a sharp devaluation to occur. And, not surprising, this idea was already floated by Germany in 2012:

“It all comes down to the fact that Greece will need a third loan. Even if everyone denies it, we all know it’s unavoidable,” this official said. But because of rising political pressure in Germany and other core Eurozone countries, “this decision will be delayed as much as possible.”

He added that, “the hawkish team of the German finance ministry believes that since Greece will need more money, it would be better given as a bridge loan to facilitate a temporary exit.”

The official noted: “It would be better received politically within Germany, the Netherlands, Finland and other countries like Slovakia and Estonia if the new loan were sold as the final one and tied to a Greek exit from the Eurozone, which would be regarded as punishment.”

So, KKE and the rest of the dumb Marxists may get their fascist fantasy of a return to the drachma, but the result will be nothing like what they imagine. If SYRIZA is allowed to leave the euro, even temporarily, wages in Greece will be crushed on a scale not even seen in the depression so far.