Greece: Who’s to Blame, and For What?

Commentary No. 406, August 1, 2015

Anyone who has been following world events recently could not have failed to read endless analyses in the media concerning economic realities in Greece. The most remarkable thing about these analyses is how radically different they are, the ones from the others. They nonetheless can be divided into two main camps.

There is one group who say that Greece’s difficulties are self-created because successive Greek governments and Greek citizens have spent recklessly money they didn’t have in order to sustain a collective life style beyond their level of collective income. This group has a simple solution for Greece’s ills. It is to cut sharply Greece’s collective expenditures in order for it to repay its extensive loans. The advocates of this position call this proposed program “reform” and say that over time Greece will emerge stronger. This view is held to varying degrees by most members of the Eurozone of the European Union. Its most vocal and uncompromising spokesperson has been Germany’s Finance Minister Wolfgang Schäuble. He has been making two main arguments: Greece should leave the Eurozone “temporarily” and Greece should be held to the strict payment of all outstanding debts.

The critics of this program call it “austerity” and argue that it is cruel and heartless, forcing an ever-growing part of the Greek population into abject poverty. Furthermore, they say, a regime of austerity will not, cannot lead to an end to the present acute depression in Greece. They say that each successive loan has increased, not decreased, the rate of unemployment and has made it less possible to achieve its ostensible goal of restoring Greece’s “competitivity” in the world market. They call instead for substantial debt forgiveness and a reversal of the demands of creditors that Greece make cuts in pensions and other parts of the social security net. The demand of debt forgiveness has gained increasing support from prominent economists like Joseph Stiglitz and from Christine Lagarde, the president of the International Monetary Fund (IMF).

How did Greece arrive at this point of economic distress? The first debate is about when to date the starting-point of Greece’s misfortunes, itself a major point of contention. The partisans for the neoliberal reforms start the story quite recently, essentially when the military dictatorship was overthrown in 1974 and a left party, PASOK, led by Andreas Papandreou, emerged as a major force on the scene. This date puts the blame solidly on Greece itself for adopting the social-democratic policies of successive governments. The critics start the story much earlier, somewhere in the 1930s, when the West European governments, and particularly Germany, imposed a subordinate quasi-colonial system in Greece. This puts the blame squarely on capitalist and imperial forces.

Greek politics after 1974 were in many senses the usual division between a center/right party, New Democracy, and an initially left but increasingly center/left party, PASOK. As the successive governments accepted the conditions for loans and therefore more and more austerity, the vacant left space came to be occupied by Syriza, a new party founded in 2004, whose name is a Greek acronym for the Coalition of the Radical Left.

In the beginning, Syriza was indeed a coalition bringing together a variety of small parties ranging from the far left to the center/left. This party distinguished itself by its strong opposition to austerity. Its leader came to be Alexis Tsipras. In successive elections, Syriza gained more and more strength, finally obtaining first place in 2015 with 36% of the vote. Since Greek electoral rules award a bonus to the leading party, this was enough to give it 149 seats out of 300 and enabled Syriza to form a government with the support of one small party.

It was at this point that Syriza had to face up to the dilemmas of being the government, which does not allow the easy positions of being a radical opposition movement. The new government chose Yanis Varoufakis as its Finance Minister and chief negotiator with Greece’s creditors.

One of Syriza’s electoral promises had been not to deal with the so-called troika about what should be done. The troika was composed of the IMF, The European Central Bank, and the European Union. Varoufakis found that no one would talk with him if he didn’t talk with the troika. Nonetheless, Varoufakis was quite persistent and voluble about the need for debt forgiveness and for a transition loan to permit Greece’s banks to remain solvent. He wanted to buy time to enable Syriza to reduce the damages that years of austerity had wrought. And he wished to do this without Greece leaving the Eurozone, the so-called Grexit.

When the negotiations got nowhere, Syriza suddenly called for a referendum in Greece about whether or not to accept the terms offered by the troika. Everyone, including Syriza itself, expected that the results of the referendum would be close. Instead, when it was held on July 5, the no vote against yielding to the troika (called OXI in Greek) received a remarkably high percentage of 61.3 percent.

What to do now was the issue before Syriza. Its decision lay with a restricted committee of six persons including Tsipras and Varoufakis. Varoufakis proposed a so-called Plan B that he had been preparing for five months. It involved setting up a parallel payments system that would have permitted monetary transactions if there were a bank holiday and capital controls. It was a sort of Grexit on Greece’s terms. It would have faced maximum retribution by the neoliberal forces. The small committee of six voted 4-2 against implementing Plan B and Varoufakis resigned as Finance Minister. Syriza was then forced to agree to a still harsher set of “reforms” than it had faced at the beginning of the negotiations.

The locus of the political storm has now passed to Syriza itself. There are those who give priority to the survival of Syriza as a party. There are those in the so-called Left Platform inside Syriza who are denouncing Tsipras as a “traitor” and are perhaps intent on creating a new party. And there are those like Yaroufakis who think Tsipras has erred seriously in his tactics but remains committed to ending austerity.

What conclusions can Syriza (and the rest of us) draw from what has happened? The first thing to note is what is not being debated. From the very beginning in 2004 Syriza has been engaged in seeking state power to implement its objectives. It seems that alternative political routes were not envisaged. But of course, seeking state power brings with it certain very serious costs. One of these costs is that governments, all governments everywhere, are forced to make compromises in their dealing with the rest of the world. Eventually this leads to the kind of split that Syriza is undergoing now.

What is being debated is whether it is a plus or minus to remain in the Eurozone. And obviously this is a matter of short-term tactics. The Eurozone as presently constructed is a pressure to further neoliberal policies. But withdrawing from it involves serious short-term negative impact on the lives of Greeks. The enormous support for OXI was a vote for Greece’s dignity, against austerity, and for remaining in the Eurozone all at the same time.

We may expect now early parliamentary elections, in which Syriza under Tsipras will have a difficult time to get a renewed mandate. But there is no alternative for Tsipras. He is trapped by his previous decisions and the priorities of a party that wishes to remain in power.