by Costas Lapavitsas
Today marks a year since a radical left government was elected in Greece; its dynamic young prime minster, Alexis Tsipras, promising a decisive blow against austerity. Yanis Varoufakis, his unconventional finance minister, arrived in London soon after and caused a media sensation. Here was a government that disregarded stuffy bourgeois conventions and was spoiling for a fight. Expectations were high.
The reality is very different. A year ago the Syriza leadership was convinced that if it rejected a new bailout, European lenders would buckle in the face of generalised financial and political unrest. The risks to the eurozone were, they presumed, greater than the risks to Greece. If Syriza negotiated hard, it would be offered an “honourable compromise” relaxing austerity and lightening the national debt. The mastermind of this strategy was Varoufakis, but it was avidly adopted by Tsipras and most of Syriza’s leadership.
Well-meaning critics repeatedly pointed out that the euro had a rigid set of institutions with their own internal logic that would simply reject demands to abandon austerity and write off debt. Moreover, the European Central Bank stood ready to restrict the provision of liquidity to the Greek banks, throttling the economy – and the Syriza government with it. Greece could not negotiate effectively without an alternative plan, including the possibility of exiting the monetary union, since creating its own liquidity was the only way to avoid the headlock of the ECB. That would be far from easy, of course, but at least it would have offered the option of standing up to the catastrophic bailout strategies of the lenders. Unfortunately, the Syriza leadership would have none of it.
The response by EU politicians to Syriza was bewilderment, frustration and escalating hostility.
The disastrous nature of the Syriza strategy became clear as early as 20 February 2015. European politicians forced the new Greek government to agree to target budget surpluses, implement “reforms”, meet all debt obligations fully and desist from using existing bailout funds for any purpose other than supporting banks. The EU calmly turned off the liquidity tap at the European Central Bank, and refused to give a penny of additional financial support until Greece complied.
Conditions in the country became increasingly desperate as the government soaked up liquidity reserves, the banks went dry, and the economy barely ticked over. By June Greece was forced to impose capital controls and to declare a bank holiday. Syriza attempted one last throw of the dice in July, when Tsipras called a referendum on a new, harsh bailout. Amazingly, and with considerable bravery, 62% of Greeks voted to reject. Tsipras had campaigned for a rejection but when the result came in he realised that in practice, it meant exiting the euro, for which his government had made no serious preparations. To be sure there were back-of-the-envelope “plans” for a parallel currency, or a parallel banking system, but such amateurish ideas were of no use at one minute to midnight. Furthermore, the Greek people had not been prepared and Syriza as a political party barely functioned on the ground. Above all, Tsipras and his circle were personally committed to the euro. Confronted with the catastrophic results of his strategy, he surrendered abjectly to the lenders.
Since then he has adopted a harsh policy of budget surpluses, raised taxes and sold off Greek banks to speculative funds, privatised airports and ports, and is about to slash pensions. The new bailout has condemned a Greece mired in recession to long-term decline as growth prospects are poor, the educated youth is emigrating and national debt weighs heavily.