Crisis, Democracy, and the Euro

Spyros Marchetos

Τhree years after submitting to the Troika Memorandum, Greece is falling apart. GDP has contracted more than 21% according to IMF calculations, and it is expected to dive another 6% in 2013. Never in world economic history, since statistics began, was such a fall of production recorded without being preceded by a war or a civil war. In two previous instances Greece was hit by an economic crisis while being attached to a monetary union or a strong currency. First, for some years between its defeat in the 1897 Greco-Turkish war and the 1912-1913 Balkan Wars, while the International Financial Control kept it in the Latin Union, a precursor of the eurozone. And then in 1929-1932, while it was pegged to pound sterling. Both times its political system collapsed. There is no doubt now either: in the coming confrontation, it will be them or us. The sad fact however is that, while them systematically prepare for a conflict that might turn into a civil war, the Left is relaxing.

The Pillars of Current Policy

Since 2010, Memorandum governments impose a policy based on three pillars. To be exact, they try to impose it, succeeding only as far as they can break the people’s resistance, which however remains strong till this day.

The first of these pillars is recognising a public debt that has been denounced as odious, illegitimate, or even illegal. An example of the latter case is the huge loan contracted illegally by the Athens municipality of Zografou; it was finally incorporated in the public debt by demand of the Troika. A debt audit, that would be natural if the state functioned according to private sector criteria, is not even discussed, no matter how persuasive arguments propose organisations such as ELE (Initiative for a Debt Audit Commission) or XXXE (No Debt, No Euro). The Memorandum policies produced a humanitarian crisis, recognised in international law as reason sufficient for arresting payments to the lenders. However the Troika, as well as Greek governments, insist that all debts to the bankers are sacrosanct, while state obligations towards citizens do not exist. In other words, we have regressed to conceptions of state worse than those abolished by the French Revolution.

The second pillar is bailing out bankers at the price of destroying the real economy. New pro-banker regulations contained in the proposed law on heavily indebted households, and more generally the creation of a legal frame scandalously indulgent to bankers and cruel for households and businesses, are simply tips of the iceberg. Since 2010 Greek governments sent sky-high the public debt by giving to the banks at least 168 billion euro in hot money and guarantees. And to service this debt, at credit card interest rates, they spend vast amounts of money that again end up in the bankers’ vaults. Of course nobody is being held responsible for the failure of the whole system, that might have been avoided had banks conformed to the liquidity requirements prescribed by law. In fact not only their civil responsibilities, but penal ones too should be investigated. But if politicians have by now become expendable, bankers still escape jail.

The third pillar, participation in the eurozone, has generally avoided public scrutiny till now. Few voices came out in favour of a national currency, and they were systematically marginalised. For example, all those who support the euro, and especially many so-called economists of the Left, failed to comment on the well established contrary arguments presented in the study Breaking Up? A Route Out Of the Eurozone Crisis, by the international team Research on Money and Finance. All those who enjoyed describing the imaginary horrors of exiting the eurozone have disappeared now that the consequences of keeping the euro prove even worse than these well advertised nightmares. And none of them propose any strategy to overcome the crisis inside the eurozone. They know there is none.

Sacrifices for the ECB

None of them explain how will ever production recover, or even how will the banking system survive, while money supply is being regulated by the European Central Bank, whose choices prove lethal for peripheral eurozone economies. And which, leading the Troika, pushes us presently to the abyss. None of them admit that the euro itself becomes more fragile by the day, while developments in countries like Italy or Spain can at any moment explode it. Or that, quite simply, Greece could eventually be defenestrated by Germany, perhaps when German businesses have sequestrated our national wealth. Panic is caused by the idea that all sacrifices made on the altar of the common currency might quite soon prove futile. Who will then attract the people’s rage?

Many prominent economists, Left and Right-wing, from Greece and abroad, explain that exiting the eurozone is necessary for peripheral economies. A simple example shows how vastly increased choices have those who keep control of their currency, instead of leaving it to others. In other words, it shows that having a nationally controlled currency is not a nationalistic obsession nor a minor financial detail, but a matter of elementary democracy, and even a matter of survival by now. It is not enough for a pro-people economic policy, but it is a necessary precondition for it.

Recent polls show Syriza poised to win next elections. They reflect hopes created by the vision of a leftist government. When the people’s resistance will finally lead us again to the polls, it is hoped that the Left will prevail. However, the Syriza leadership acts like if it preferred to take government as a ‘ripe fruit’, and not through mass mobilisation. In order to win over the coveted ‘centre ground’, Alexis Tsipras hails the failed American Dream, eulogises the ex strongman of the Right Constantinos Caramanlis, and smiles to the godfather of the neoliberals Constantinos Mitsotakis. Tsipras thinks that better not rock the boat, since all those despairing masses will anyway vote for Syriza. And especially better not cross the ECB, or any european government supporting the euro. But are things really so?

We almost had a bank run before the June 2012 elections, when the possibility of a Syriza win made savers withdraw 15 billion, thus sending total bank deposits at a level lower by a third to that of early 2010. Does anybody believe that we will not see a similar bank run in the coming elections? Perhaps a government of the Left will not have the hundred days in which it hopes to impose popular reforms, it might not even have a hundred seconds.

What if a banking crisis breaks out before even a new government is formed? What if people run to the banks in the morning after the elections? Will then banks have enough euros to give them back? The Irish banker Jonathan Sugarman revealed that a bank in which he had worked, a subsidiary of the italian Unicredit, fifth largest bank in Europe, kept reserves much smaller than those prescribed by law. And yet the Regulator preferred to ignore the whistleblower and look away. Why should we believe that banks are being regulated more seriously in 2013 Greece? But even if they actually keep all reserves required by law, will Greek banks find enough liquidity in a post-electoral bank run?

Then Alexis Tsipras will have to decide. A first option is taking the airplane to Berlin and begging for more euros, so as to avoid the banking crisis and the social unrest that will follow it. The price will be bowing to Memorandum policies himself, in fact turning into another Samaras. Before the 2012 elections, bankers and politicians discussed that Syriza should be asked to expressly accept the Memorandum before funds for bailing out Greek banks were disbursed. Why not repeat such a demand now?

There is a second option however. It includes taking immediately into public control the banking system, stopping the service of the public debt and deleting it, and avoiding the banking crisis by exiting the euro. When you pay in your own national money, you can have as much of it as you want, while overlords lose their current blackmailing potential. They can no more shut the taps of finance at will.

If anyone sees a third option, let them disclose it. If not, then the Left must clearly explain to the people that exiting the Memorandum entails exiting the eurozone. Not to add that there is another possibility too, of a bank run coming before the elections. Then guarantees might be asked from Syriza in good time to destroy its genius electoral strategy, which is to decouple Memorandum from euro.

Democracy means that citizens decide on economic policy, and that they decide this while knowing the alternatives. Do we really have a democracy when basic decisions are being taken by the European Central Bank, that lacks popular control, while the people themselves do not even get a chance to hear about the economists’ doubts on the euro?

Published with minor alterations in the political weekly Epikaira, issue of March 14th, 2013. Simultaneously published in the internet, at the Club of Defiant Theory, at http://tinyurl.com/d2su4ce

Spyros  Marketos teaches History of Ideas at the Political Sciences School of the Aristotle University of Thessaloniki.

 

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