In a joint interview with German daily Der Tagesspiegel and ThePressProject International, Syriza MP and economist Costas Lapavitsas says that the time has come for Greece and its partners to understand that “they are flogging a dead horse”.
I mostly agree with the analysis of Lapavitsas, however I am not convinced that a Grexit can be anything other than disorderly, and thus very, very costly for the Greek people, I also have some disagreements when he identifies the idealogical problem as being “Europeanism”. I think it is true that the Euro was conceived by the elites in France and Germany as a primarily political project, an economic mechanism that would drive political union, thus disastrously putting the cart before the horse. Yannis Varoufakis offered an insightful analysis of the political origins of monetary union in this article from August 214 and a follow up audio presentation 6th November 2014 on the origins of monetary union.
But I also think, as I argue in this post, that the almost unnoticed hegemonisation of the European project by Ordoliberalism has been a very big factor in Europe’s wrong turn. Once the decision was made to drive political union via monetary union then Ordoliberlaims filled in all the blanks and offered an apparently superbly practical toolkit for building the apparatus of the eurozone, with dire consequences.
The Costas Lapavitsas interview is worth reading in total, here are some excerpts.
“The Syriza strategy has been – and it remains – that a change in the political alignment of forces in Greece, in Europe, or generally, would act as a catalyst in the Eurozone. This strategy has now come to an end. The real question is how long it will be before people understand it.
What we’ve seen is that the institutional framework of the Eurozone and the ideological machinery attached to it are not susceptible to arguments that come from electoral realignments.”
“I think that the leadership of the party knows that it has a very tough choice ahead of it: Do we persevere with the programme that we proclaimed to the Greek people? Or do we submit to what the institutions, the Brussels Group, the troika, whatever you want to call it, want us to do? These two things are incompatible.”
So what should the Greek government do in your opinion?
Greece needs to consider the true alternative path which is to leave this failed monetary union. It is clearly the only way that was there from the beginning – which is basically exit. If you are going to apply such a programme, as Syriza has proclaimed, which is not radical – Syriza’s programme is just moderate Keynesianism -, you need to think seriously of how you are going to get out of the confines of the Eurozone.
Do you think Syriza has the mandate for it?
“A straight answer is no. Syriza has a mandate to fulfil its programme. Indirectly, not directly, it has a mandate to keep the country in the Eurozone. But this question was never openly posed to the Greek people.”
“Because the monetary union in my judgement is a major historical failure. It’s Europe’s biggest failure in decades. And it will not last. But obviously it might last long enough for Greece to be dead. Of course the EZ proponents believe it is going to last forever. It is a historical delusion. Monetary unions don’t last this long. Let them believe it. Fine.”
“In 15 years the monetary union has undone all the goodwill generated in Europe by the EU. The state of relations in the European countries today is probably worse than it’s been for decades. The state of affairs between Germany and Greece is appalling, absolutely atrocious. And this because of the euro.”
Germany is the country that is the most delinquent in Europe. Not Greece, not Spain, not Italy. And certainly not France. France is playing far more by the book than Germany. Germany has been not keeping the rules and I can make it very simple for you: Germany often accuses Greece – Schauble for instance does – that Greece has been living beyond its means. It’s true. But Germany has also been systematically living below its means, and this is how exports are generated, not because of technology, productivity and all that. That’s why it is so successful.
But when you are in a monetary union it cannot be a bad thing to live above your means and a good thing to live below. The real rule must be to live by your means. So Germany has not kept the rules and the price is paid by the German people. I understand full well how the German people live. I know very well that wages have not risen for years, that one third of the labor force lives under precarious conditions. Precarious employment, wages below productivity…,
So what you are saying is that the euro has not been good for the German people either…
“This also explains why the German people are annoyed and angry when it comes to sending money abroad, paying for others. Of course, I would be angry too in that position: you live in a very tight way, you count your beans and then somebody comes and tells you, you have to pay.
On the other hand, German exporting business, the German banks, this is a different story. They ‘ve done very well. But that’s for the German people to sort out.”
Probably, a wild cat idea but is it possible Syriza half expected this all along? I understand that Grexit was once their policy but a) they knew not the current view of the Greek people and b) would need to stop money/capital flowing out once clear happening and print new currency before happened.
Is it possible they have been putting measures in place to deal with b) and that the Greek people now seeing how the Troika refuses to acknowledge their democratic choice will vote for Grexit in a referendum?
The positives would be that Greek exports would be cheaper and imports more expensive so current deficit would reduce and default would cut debt. Guess none would loan for a while and Greek economy would be a fortress economy but Argentina and Ecuador defaulted and seemed to live to tell another day but is that because have more needed resources? (Ecuador had oil)?
What do you think the consequences of Grexit would be for Greece?
Good points and good questions. I would be very surprised if there was no plan B in Athens but in a recent panel discussion Yanis Varoufakis said that Syriza won’t talk about Grexit because that would be like talking about being hit by a comet in a universe where comets are attracted to people who talk about being hit by a comet. I honestly don’t think Syriza wants to leave the Euro but rather they want to act as a catalyst for a change of direction in the leadership of the eurozone. Unfortunately there does not seem to be any support for an anti-austerity block in the EU.
Its pretty clear that Greece is in purgatory because of being in the eurozone and because the European banking system was bailed out by loading all the debt on Greece. If it had not been in the euro it would have never run up such debts, it would have defaulted, its debts would have been restructured and it would have devalued.
I still think that a Grexit should it occur will most likely be very disorderly and costly, and Syriza do not yet have a mandate from the Greek people to go down that road. The only realistic route for Syriza is to try very, very hard to get some sort of a deal but if that proves impossible then to go back to the people in either in a referendum or election to get a mandate for something more radical. What I think Syriza cannot do is go into Grexit without the explicit endorsement of the majority of the Greek people. If they did that then it would destroy them politically and lets remember that the Nazi party came third in the Greek election.
Agreed they would have to be endorsed by the Greek people in a referendum but if they are given no option by the Troika, I can’t see how bailing out would be worse (though can’t claim a great knowledge of the implications!)
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