Sunday, 8 March 2015


The day after the Greek left-center party SYRIZA won the election of January 2015, optimism ran across Europe’s progressive quarters, while the conservatives and neoliberals acr4oss the world insisted the new regime was extreme left and it would invite disaster. Just a few short weeks after that election, the world knows that SYRIZA was indeed a center-left regime, one trying to introduce some modest reforms in a bankrupt nation whose future is really the past of even greater dependence instead of the future of greater national sovereignty in all domains from economy to defense.

Greece has always (1832-present) been a debtor country, always suffered balance of payments deficits, always been a dependency of a Great Power, first Great Britain, then the US and more recently Germany. This was true of the Balkans that were northwest Europe equivalent of what Central America has been to the US. The larger question in the 21st century for Greece is not whether it will remain a dependency as it always has been, and it is not whether Greece can be elevated to the status of Belgium that is about the same as Greece in terms of population but has twice the GDP of Greece and much higher living standards. The future of Greece is actually the past, a reversal to the Cold War when Greece was an economically weak country on the periphery of Europe. Germany has made it clear that it wants Greece to be in line with the rest of the Balkans in terms of living standards, which means several notches down from pre-austerity levels. Therefore, continued EU integration entails not raising but lowering living standards, not greater national sovereignty but much less.

What are the possible choices for Greece in this post-Cold War environment of globalization and neo-liberalism?  
a) The Greek Communist Party KKE favors the road to Communism by nationalizing everything, repudiating the national debt, exiting NATO, EU, IMF, and all treaties and obligation. How realistic is this scenario at this point in history, and what is the percentage of the people who would support it? Considering that the Greek Communist Party has about 5% of the vote, this scenario is highly unrealistic and public support would not go above 20% at best even if the KKE came to power by magic. International isolation would be its fate and without a “Chinese-style sponsor” like North Korea has, the regime would fall.

b) Through the conviction of their ideals, Greek SYRIZA (center-leftist ruling party) can try to change the euro zone and the German-imposed patron-client integration model. This is actually what SYRIZA promised before the election of January 2015, along with a long list of social and economic measures it has failed to adopt because the EU will not permit them. The idea that Greece can change the German-imposed patron-client integration model and the current neo-liberal course of the euro zone is even more unrealistic than going Communist. Integration models are not subject to change by the weak debtor client countries whose only option is to abandon the integration model and see if it can survive.

c) Greece could stay the course with austerity and neo-liberal policies that have ruined the economy in the last five years. With weak health care, educational system, and social security, the social fabric has come unglued resulting in one-third of the people near or under the poverty line. One result is a polarized society with the neo-Nazi party becoming the third most popular. As pessimistic as this sounds it is actually the most likely scenario not because people believe the promises about light at the end of the tunnel, but because they fear disaster if they dare leave the tunnel.

d) Greece could try to switch patrons and see the degree to which China and Russia would be interested in becoming the new patrons. However, Russia is facing financial problems of its own, and China would not want to alienate either Western Europe by making Greece a Chinese financial dependency or the US that has important naval and intelligence gathering bases in Greece. Historically, the creditor country that owned the public debt of a small debtor country enjoyed hegemony in all affairs from economic to geopolitical. The idea that Greece could switch patrons from West to East is premature, though not out of the question by the end of the century when China could be the undisputed world leader.

e) Greece could re-establish a modicum of national sovereignty by introducing a policy mix on the non-aligned model of economic nationalism that was popular in a number of countries from Indonesia and Egypt in the 1950s and 1960s. With modifications to accommodate the realities of globalization, quasi-statism and a modicum of economic nationalism with aspects of neo-liberalism has resurfaced in the BRICS nations in the last two decades.  This too is an unlikely scenario because the apologists of austerity and neo-liberalism would immediately baptize economic nationalism just another form of “Communism” as they have in the past.

f) A policy mix that takes into account the current integration model and obligations to foreign creditors along with their demands for internal policy changes toward more neo-liberal course, combined with massive crackdown on public and private sector corruption to raise revenue, and combined with sharp cuts in the defense sector that absorbs 2.1-2.5% of GDP is another scenario. This is highly unlikely because every political party from far right to far left support defense spending.

Greece has been facing a technical bankruptcy and its public debt amounting to 175-180% of GDP in 2015 may not be paid off until the last quarter of the century, assuming no future obstacles. In 2015, Greece has a public debt that cannot possibly be serviced at current GDP growth rates because its revenues are not sufficient to meet internal needs and service the debt at the same time. Foreign borrowing constantly to service the debt only makes the aggregate debt larger in relationship to GDP that has shrunk by 25% under the austerity of the IMF and EU from 2010 until 2015. Because Greece is not an exporting nation and its economic activity is largely resting on consumer demand, and because it has a very low percentage of its population working full time in relationship with other EU countries, it cannot possibly service the public debt. The solution as far as IMF and EU are concerned, take the money from the middle class and workers, thus lowering their living standards even lower.

It is very unfortunate that SYRIZA adopted a left-progressive rhetoric that appealed to a disillusioned lower middle class but in fact it had nothing behind the rhetoric. In this respect, SYRIZA is no different than PASOK elected in 1980 under Andreas Papandreou who promised a Socialist government but by the early 1990s had brought the party and the country in line with neo-liberalism. SYRIZA talked a big game and enthralled progressive within the country, around Europe and around the world. However, the absence of any real leverage in negotiation was apparent very quickly when Athens yielded to everything that the IMF and Germany demanded. After initial negotiations that essentially amounted to no change on the part of the IMF and EU position regarding austerity and neo-liberalism, SYRIZA bought itself a four-month grace period to come up with a more permanent program, presumably another round of borrowing to service the unserviceable debt and another round of measures that amount to income transfer from the lower and middle classes to the creditors.

The Greek voters elected a government led by the center-left SYRIZA that promised to end austerity and renegotiate the public debt so that the country can end neoliberal policies that strengthen a few thousand domestic and foreign companies and individuals, lower unemployment, raise wages and social security, raise GDP to pre-austerity levels around one-quarter of a trillion euro and restore the middle class and workers who have been paying the costs of austerity with an estimate one-third cut in their income levels. The German government, media and financial circles have been arguing that Greece is pressuring the EU, trying to get away not paying the debt, trying to change the rules by which EU members are obligated to follow, and sending the wrong signal to the markets and other debtor nations.

For its part, Athens has argues that Germany has not paid an estimated 40 to 150 billion in war crimes reparations it owes. Therefore, it has no moral authority to speak about dead beats. It does not help of course that SYRIZA has a flamboyant finance minister Yiannis Varoufakis, interested much more in presenting himself to the world than presenting in the best possible light the program of the country he represents. This unfortunate choice for finance minister aside, the problem is the direction SYRIZA wishes to take and not the celebrity-crazed individual who seems to enjoy self-promotion. In that same spot Greece could have had Nelson Mandela and Albert Einstein together and it would not have made any difference to the IMF and Germany that do not want changes in austerity measures or neoliberal policies. 

It does not help that Greece has a serious problem with public sector and private sector corruption. One-third of the economy continues to operate under what the World Bank classifies as “black market or subterranean” economy. When the few thousand families that own 80% of the country’s wealth have taken most of their money out of the country, and refuse to pay taxes on their business operations how could any government carry on its duties? Systemic corruption under a system of “baksheesh capitalism” is not going to change any time soon no matter what policy direction SYRIZA or any other regime adopts, and not when there is no effort by the IMF and EU to help Greece fight public and private sector corruption. Fighting corruption is impossible because the largest European and Greek financial interests are involved, everyone from Siemens corporation to Greek shipping tycoons transporting narcotics and illegal crude oil and cigarettes.

Failure on the part of the EU and IMF to help previous governments pursue tax evaders who are primarily the top ten percent of the people owning 80% of the wealth has been a shortcoming, as much as failure to collect back taxes from foreign corporations. Another major failure is the insistence that Greece continue defense buying from Germany and France, despite the sharp drop in GDP. This is reminiscent of what the US was doing in the 1950s when Greece was one of the world’s poorest nations but its defense spending was the world’s second highest behind South Vietnam. Finally, the IMF and EU promised the moon in 2010 when they introduced austerity and neoliberal policies, but have delivered an unmitigated disaster by their own standards, let alone those of austerity critics.

What are the options for Greece and what are its prospects?

OPTION One: Stay the course: austerity and neo-liberalism
One option is to remain in the euro and maintain its quasi-colonial status as it has not just under austerity but since 1832 when the country declared independence and under Anglo-French stewardship provided a Bavarian King Otto to rule over it on behalf of the patron countries that had extended loans to achieve Greek independence. Staying the course without any substantial deviation from austerity and neoliberal policies would be a triumph for Germany and Western finance capital. 

The same prospect would be a resounding political defeat for all EU periphery members, sending a strong message to them that Germany is the undisputed patron of the EU operating no different than a colonial master in the 19th century when public debt was used as leverage for foreign financial, economic, trade, political and military control. Finally, staying the course after promising voters the end of austerity and neoliberal policies would be a major blow to democracy and it will result in polarized political climate. The majority of citizens back the SYRIZA regime at this point, but a few months from now they will want to see results that are tangible in their lives, like lower real estate taxes, higher income, jobs prospects for their unemployed children, etc.

Option Two: Re-establish monetary sovereignty
Another option is for the country to leave the euro zone and take its chances on its own. Establishing monetary sovereignty would go a long way to having a better handle on internal policies that governments had essentially handed over to the IMF and EU. Exiting the euro is prospect that would result in a great deal of misery for the vast majority of the people in the short-to-intermediate term, and something that would send the euro and European stock markets tumbling. Greece is still going to be a part of Europe, Western European companies will still trade with it, which means that European would have no choice but to provide it with liquidity largely because the Greek economy is so integrated with the EU, and the world economy. For example, all auto companies, all electronics companies, all communications companies, all transportation companies, including China’s COSCO shipping, among many others, will pressure their governments to come up with liquidity agreements via Greek banks and Greece’s central bank so these companies conduct business and retain market share. 

As for Greek businesspeople, they have already taken out between 500 and 900 billion euro, so they could easily bring some of it back as needed in order to conduct their domestic business. Liquidity from abroad will be slow and sluggish until some stability emerges, but it will be there especially once a new deal is struck on a debt repayment schedule. This is one scenario that would not mean Greece would become an equal to Germany and France because of national monetary sovereignty. After all, Greece was an economic, political and military dependency when it had its own currency and it will be so again. The question here is not whether it will be or not a dependent or semi-colonial country for that is a given The issue is to lessen the degree of foreign control and misery index at home by establishing financial sovereignty.

Option Three: Policy mix with focus on defense budget cuts.
 The last option has to do with one of the most wasteful sectors in the economy and one where 10% to 50% of expenses are devoted to bribes not just for government officials, politicians voting in Parliament and others linked to purchases of everything from machine guns to German subs, but even journalists and academics to mold public opinion about the importance of having even more weapons that will never be used. The easy answer for having a defense sector is that Turkey is very strong militarily and it threatens both Greece and Cyprus. Even if Greece were to double defense spending, from 2.5 percent of GDP to five percent, it would still not match Turkey that can easily defeat Greece in a few weeks.  Deterrence against Turkey is simply non-existent. The second argument for defense is that Greece is a NATO member and under collective defense agreements must maintain its current levels. This is actually what prevents the country from making any move, because if it downsizes its defense sector to border patrol, coast guard and domestic security, the US and EU could permit Turkey to have its way in Cyprus and even take a few of the Aegean islands on the eastern-most areas. 

Greek defense spending has been one of the highest in the world in per capita terms even in the 1950s when it ranked among the poorest in the world. In per capita terms, Greek defense spending ranked no 7 in the world in 2009, spending $1,230, while France and England spend in the mid-$950s, despite their lofty place among the G-7 richest nations in the world. Even during the austerity years from 2010 until the present, the defense budget continues to absorb 2.5% (2.1% by some estimate) of GDP in real terms, an amount that translates to $5 billion in a country that has been in technical bankruptcy and borrows from IMF and EU to service its public debt.

It is interesting that every single political party from the neo-Nazi Golden Dawn to the ruling center-left SYRIZA, to the Communist Party agree that defense cannot be touched. In the five years during austerity, no one political party ever uttered a word about slashing defense, though they spoke a great deal of the monumental corruption associated with the defense ministry weapons’ procurements. Why is it that no political party has suggested slashing defense to cover very basic needs, and save several billion dollars needed for other expenditures?

One reason is that all of them are nationalistic and believe without what they see as strong defense Turkey would take back the Balkan province it lost in the 1820s. Another explanation is that all political parties know there is no popular support for cutting defense. A third explanation is that all of them are taking money indirectly from defense contractors and governments that want Greece to maintain strong defense. Other explanations include the possibility that cutting defense would only result in higher unemployment in a country with 26% official unemployment. Another reason is that Cyprus among other countries including Israel wants Greece to have a strong defense. No matter what the reason, no political party is addressing the defense issue although here is a sector that could be discussed as part of a broader policy mix to save money amid a crisis. Above all, the US has been pressuring all NATO members including Greece to increase not decrease defense spending because Russia is the new old enemy, at least for now, until further notice.
What option does SYRIZA have amid such dilemma? 

The ruling party knows that Germans want Greece to keep buying obsolete weapons that will never be used, just like submarines costing billions but in constant need of repairs even before leaving port. The US needs Greece for its own military purposes and it is not about to permit defense cuts. SYRIZA Prime Minister Alexis Tsipras appointed the independent conservative-nationalist (Independent Greek party) Panos Kamenos to the defense ministry, sending a message that this area of government will not make deep cuts in defense.

Considering that the eclectic leftist rhetoric clashed with the realities of austerity and neo-liberal policies the new government will be following, there is no doubt that SYRIZA has made its choice to accept the German-imposed patron-client integration model under policies that the conservative New Democracy party and PASOK have been following in the first half of this decade. The result will be continued downward socioeconomic mobility and more college-educated people leaving the country. However, this is the history of modern Greece, with the exception of an expansionary cycle coming from 1980 until 2005 when billions borrowed were not invested in the economy but went for consumption instead of production.

There is always the unexpected in politics, the big surprise that may come as a result of a public referendum on accepting or rejecting the IMF-EU terms, staying or leaving the euro. The unexpected could come as a result of a regional war breaking out and changing conditions for Europe, or perhaps more EU members joining the anti-austerity choir and confronting Germany’s patron-client model. I do not regard these as realistic, and believe that even symbolically SYRIZA sent a strong message to the EU elites that fear democracy because they realize it entails catering to the interests of the people.

Although this government should have looked at all possible models of economic planning and development from non-aligned countries and from the BRICS, it should have looked closer at the problem associated with trying to assert partial national sovereignty, and it should have tried to be a lot more honest with the voters that still support it by at least 60  percent according to opinion polls, the question is whether it has learned anything at all from its brief experience in the last five weeks. The easy route is simply to yield to co-optation by domestic and international financial, political and military elites and take its chances fooling the voters in the next election. After all, this is exactly what previous governments did as well. What lessons are there for Spain’s PODEMOS and other progressive political parties in Europe? Do not over promise and under deliver, study all possible options before going to the negotiating table, have several back up plans and always inform the voters honestly about the limited leverage of a debtor nation when negotiating with powers that have enormous leverage as creditors.      
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