Greece Called the Bluff of Europe's Biggest Bankers - A Big No to Austerity

Just after 7 PM Greek time on Sunday, I was told that the “No” vote (Gk. Oxi) was winning approximately 60/40. The “opinion polls” showing a dead heat evidently were wrong. Bookies across Europe are reported to be losing their shirts for betting that the financial right wing could fool most Greeks into voting against their self-interest. The margin of victory shows that Greek voters were immune to the mainstream media’s misrepresentation during the week-long run-up as to whether to accept the troika’s demand for austerity to be conducted on anti-labor lines. (James Galbraith summarizes the misrepresentation in “9 Myths About the Greek Crisis,” Politico.)


It should not have been so great a surprise. Voting age for the referendum was lowered to 18 years, and included army members. Faced with an unemployment rate of over 50 percent, Greek youth understandably wanted no more of euro-austerity.

The Troika’s demand was for austerity to be deepened solely by taxing labor and reducing pensions. Its policy makers had vetoed Syriza’s proposed taxes the wealthy, vetoed steps to stop their tax avoidance, and that the IMF had vetoed cutbacks in Greek military spending (far above the 2% of GDP demanded by NATO), despite even the European Central Bank (ECB) and German Chancellor Merkel agreeing to this. Instead, Jean-Claude Juncker, President of the European Commission, threatened that the EU would expel Greece from Europe – despite there being no law permitting this to occur. And instead of doing what a central bank is supposed to do – provide liquidity (and paper currency) to banks, ECB head Mario “Whatever it takes” Draghi forced them to shut down even their ATM machines for lack of cash. Evidently this was intended to frighten Greek voters to think that this would be their country’s future if they voted No.

It is an old strategy. Andrew Jackson expressed his vindictiveness toward the Second Bank of the United States by shutting it down when it refused to appoint his selected corrupt cronies. He deposited the U.S. Treasury’s money in his “pet banks.” Draghi thus has shown the ECB not to be “technocratic,” but a cabal of right-wing political operatives working to bring down the left-wing Syriza government, even at the possible cost of empowering the far-right Golden Dawn party. The eurozone’s class war in support of finance against labor is now open and in earnest.

The media have not explained that the ECB has set out to wreck Greece’s banking system by refusing to do what central banks are supposed to do: provide liquidity as lenders of last resort. The banks are running out of cash, because Greece’s central bank is not run by the Greek government, but by the ECB following a right-wing agenda. What Greece needs is a domestic central bank – or failing that, a national Treasury – empowered to create the money to monetize government spending on economic recovery.

The vote throws into question just what it means to be what pro-austerity advocates call “committed to the European project.” It evidently means a commitment to yet further economic shrinkage, privatization and hence higher prices for hitherto public utilities, higher value-added taxes on consumers, and lower pensions for labor. Accepting troika demands thus would have been a commitment to financial class war.

U.S. popular media echoed the European right by trying to frighten Greeks and their sympathizers into believing that the vote is whether or not to remain part of Europe – as if Britain does not have its own currency while remaining part of the European Union. So successful has pro-creditor disinformation been that the Euro-Left movement has expressed bewilderment that the Syriza party did not begin immediately, upon its election victory in January, to educate voters on what actually is at issue.

What does it mean to be “committed to the European project”? Committed to financial war against labor – to austerity, privatization, high prices for basic hitherto public utilities. Committed to higher taxes for labor, lower taxes for the One Percent.

This topic was at the center of a meeting at the European Parliament in Brussels on July 2.** There was of course unanimous support for a “No” vote to the anti-labor, pro-creditor demands by the IMF, European Central Bank and European Council. But there also was concern that the Syriza leaders had not spelled out their logic to lead an informed and more detailed discussion of why remaining in the eurozone, subject to public policy being dictated by the IMF and ECB, will make the economy subject to chronic debt deflation, economic shrinkage, pension cutbacks, higher taxes on consumer (but a veto on higher taxes on business), faster privatization selloffs (but not to Russians if they offered higher prices), and no rejection of past insider deals.

There might even be a silver lining in letting the Greek banks go under, if the government nationalizes and indeed, socializes them. A public banking option could provide low real-cost charges rather than the current monopoly pricing. And of course a government-run bank would not lend for money laundering or financial speculation.

But instead of spending the past six months educating the public over just what is at issue with the Troika, Syriza focused on sparring with Europe, evidently to demonstrate how firmly the bank was committed to austerity, and how self-serving IMF head Christine Lagarde has been in overruling IMF staff and board to defend French interests. The problem today, as it was in 2010-11 under Dominique Strauss-Kahn, is that French banks are the major holders of Greek bonds (including via their ownership of Greek banks).

One factor that may have incensed Greeks to vote “No” was the revelation that an internal IMF Debt Sustainability Analysis – which Lagarde had sought to suppress – had endorsed what Syriza’s leader Alexis Tsipras has been saying all along: Greece needed a debt writedown, and had needed it ever since Strauss-Kahn overrode his staff in 2010-11 when they urged the IMF not to capitulate to ECB demands to pay French, German and other private bondholders with Troika bailout loans and making Greek taxpayers liable.

Two weeks ago the Greek Parliament released a report by its own Debt Truth Commission explaining why Greece’s debt to the IMF, ECB and European Council was “odious” and had been imposed on the nation by the demand by Ms. Merkel and other pro-bank leaders that Greece not hold the referendum on the bailout (of French and German banks) that Pasok Prime Minister Papandreou had offered. Finance and democracy have become antithetical in Europe – which prompted the late Frankfurt Allgemeine Zeitung editor Frank Schirrmacher to write his famous editorial, “Democracy is Junk.”***

The left-wing Syriza members with whom I met in Athens, Delphi and Brussels felt that more should have been done to educate the Greek public and expose how impossible it was for Greece to pay the debts with which the Troika (and its pro-bank Pasok/New Democracy coalition that had ruled Greece for a generation). The creditor institutions have refused to climb down on the question of including debt relief in the current talks, pretending that this is an issue for later.

Last Tuesday, Tsipras made his most desperate attempt yet to bring the issue forward. He and finance minister Varoufakis have been widely criticized in the U.S. media for seeming to capitulate to Troika demand. The reality is that they have taken a polite conciliatory stance all along, if only to show how totalitarian and unyielding the Troika has been. The Syriza position has been “We’d like to pay. But there simply is no money – as the IMF’s own calculations have clearly and explicitly shown.”

The Troika have refused to write down a single euro of unpayably high debt. That is what enabled Tsipras to depict his nation as being victimized by the eurozone’s vicious class war. He made the point that the Troika had put nothing in writing about debt writedowns. His seemingly conciliatory position dared them to back up their promises in writing. He was not going to make the tragic mistake that Russian leader Gorbachev made when he was gullible enough to yield to merely verbal NATO promises that it would not move into the post-Soviet countries of Central Europe and the Baltics. The Troika’s position was “Impose austerity now. We’ll talk about debt writedowns later. But first, you must sell off what remains of your public domain, lower wages by another 20%, and force another 20% of your population to emigrate. Only then, when we’re sure that we can’t get another euro out of you anyway, then we at least be willing to talkabout writing down some of your debt – when we see that you really have nothing left to pay!”

The press represented Tsipras’s position as a back-down. It was actually calling the bluff of the eurozone leaders.

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