Enclosed are two articles reporting on the dramatic events unfolding in Greece, specifically the decision of the Syriza government to hold a referendum vote on July 5. The Greek people will have a ‘yes or no’ choice over the austerity blackmail which the financial institutions and governments of the European Union are seeking to impose on the country.
A byline of events in Greece can be read on The Guardian newspaper. The byline reports today:
- The Greek government has closed banks for one week and imposed controls over the flight of capital from the country and limits to daily withdrawal of cash.
- A left wing protest took place in Athens on June 28 advocating a ‘No (‘Oxi’) vote against the EU’s ultimatum and also in favour of a Greek exit from the EU and the euro currency.
- In early currency trading in Asia on Monday morning, the value of the euro has dropped by 1.5 per cent in relation to the dollar.
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Greece referendum: did the euro just die at 4 pm?
By Paul Mason, Channel Four (UK), June 28, 2015
We’re staying in Europe! says the headline of the Greek liberal paper Kathimerini today. While the far left government will pose the referendum as a vote for or against austerity, the right will say it’s an in-out vote for the single currency and the EU itself.
The problem is, at around 4pm on Saturday, Europe changed. Faced with a proposal from the Greeks to extend the existing bailout until after 7 July, the Eurogroup refused.
At this point, chairman Jeroen Dijsselbloem announced there would be “a meeting of the 18” – that is the Eurogroup without Greece. Asked how such a meeting could issue a communiqué, he replied, according to a Greek witness, “we can do what we like since we are an ad hoc body”.
The Brussels press corps dutifully reported that the Greeks had “walked out”. But if the Greek account is right, what happened at that moment was the psychological breakpoint of the Euro.
The political willpower had already ebbed. The Greeks haggled over the fiscal details all week but were minded to sign an €8bn austerity package if it could be sold as (a) redistributional and (b) accompanied by a promise to discuss restructuring the debt.
What changed? By Thursday morning, it was the lenders’ document that was the basis of discussions with the Greeks allowed to propose amendments. But when the elected ministers of the Eurogroup saw what the EC, IMF and ECB had proposed they rowed back.
“We can’t get this through our own parliaments” they said: it’s too soft.
Since Alexis Tsipras would have struggled to get any compromise through the Greek parliament, what triggered the breakdown is – in fact – democracy.
So bleak has Europe become, so lacking in solidarity, that an agreement worked on for weeks, embodying further austerity for the Greeks and further financial solidarity by the rest, could not pass through either side. It was this that led to what Greeks call the “rupture”. The currency arrangements of Europe no longer fit the democratic wishes of its people.
And it is not the only breakdown of solidarity. The Schengen agreement on free movement is breaking down as the European powers refuse to absorb the refugees arriving in Greece and Spain.
So what next? The Greek strategy is to attempt to go on negotiating with its lenders, through back channels, in order to resume negotiations with a strengthened hand next Monday. Whatever they say in public, the institutions, too, will try to prepare a compromise – either for Tsipras to sign or for the next prime minister if he falls.
Today’s ECB meeting is critical. There are already calls from the group of countries around Germany to cut off aid to the Greek banks today, triggering the collapse of its banking system. If that happens it will be the second phase of psychological breakdown of the Euro – in which the institution charged with maintaining financial stability and bank solvency actually creates the opposite.
It will represent the effective capture of the ECB by elected politicians, and will puncture the illusion that it is an “independent” central bank governing a unified currency.
Either way, Greeks are in for a week of financial pain and chaos. But anybody who thinks they can predict the outcome is wrong.
The normal receptors for information do not work in Greece. The press and TV are owned by billionaires. Not unusual, but in Greeece there’s no regulation, so the incessant talk channels – which pay no tax, and no licence fees for the airwaves – will simply churn out a bleach-blond version of what their bosses want to hear.
Most Greeks, including all those inclined to vote No in the referendum, have mentally switched off from the mainstream media. Instead, this will be a battle of rumour, emotion, mass rallies and iconic speeches.
By posing the question: do you accept the deal offered by the creditors, Alexis Tsipras tosses a hand grenade into the right and centre right. The old coalition government fell because it could not accept a much tougher deal.
Many of the technocrats and young professionals who have thronged to the pro-Euro rallies, which will now become the Yes camp, are sickened to be surrounded by cashmere wearing oligarchs – the very people the young centrists think ripped the country off and built the debt mountain.
If the week starts with chaos, and gets more chaotic as the ECB grinds the banks to pulp, the outcome of the election will depend on who Greeks blame. That in turn will depend on the deeply memetic conversations taking place in the kafeneions, vineyards, hotel staff canteens.
But both sides will, effectively, be voting for options that don’t exist.
Tsipras told his voters Syriza could negotiate an end to austerity and debt relief within the Euro. He and Varoufakis believed this: because the Italian PM Matteo Renzi had told them it was possible; also Hollande and also the US State Department. The hard left of his own party were existentially anti-Euro, and pro Moscow. He was determined to prove them wrong. So it’s been a hard swallow for Tsipras to make this break.
But his new position, vote No and strengthen our hand in pursuit of an austerity-lite deal within the Euro, may no longer be based on possibility. If the ECB is just a cypher for what 18 parliaments will pass, and the Commission powerless, and if north European public opinion hardens against Greece, then the best a No vote might produce is an offer from Brussels and Berlin to fund a “velvet exit” – ie a controlled and subsidised return to a national currency.
No less delusional is the position of the Greek right. When they say “We want Europe” what they mean is: we want Europe to go on ignoring corruption, tax evasion and oligarchy on a grand scale, and to go on crashing our economy at the expense of the poor. We want, in effect, says the Yes campaign, the Europe that caused the problem.
Though they’ll join the Yes movement, many Western-educated professionals and business people will do so warily because of this.
And it will get fractious. Last week, when anarchists disrupted the pro-Euro demo, burning the EU’s flag, there was a standoff between them and a largely nouveau riche crowd. The left chanted “EAM, ELAS, Meligalas”.
EAM was the mass resistance movement in World War Two. ELAS was its military wing, led by communists, which beat the Nazis. Meligalas was a village where in 1944 the partisans defeated a battalion of Nazi collaborators, executed some, and failed to prevent others from being lynched by local villagers.
Greek debt negotiations at 11th hour: The Troika’s ‘carrot & stick’
By Jack Rasmus, Telesur, June 27, 2015
The weekend of June 27-28 marks the likely last comprehensive negotiating session between the Troika and the Greek government before the current extension of the debt agreement between Greece and the Troika formally expires on June 30, 2015.
As final negotiations come down to the wire, the class nature of the bargaining positions of the two parties is becoming increasingly clear. The Troika clearly wants Greek workers, pensioners, and small businesses to pay for any further debt deal, while the Syriza government desperately tries to have corporations and wealthy Greeks to pay more, and the Troika to absorb more of the costs of any restructuring of the debt.
Greece wants a solution that allows their economy to ‘grow out of’ the debt, while the Troika wants a continuation of spending cuts and tax hikes on workers, retirees and others—some now even more draconian than in the past—as the solution. Put another way, the Troika wants more austerity and economic stagnation, while Greece wants to lighten the burden of austerity in order to get some growth going.
Greece’s latest concessions
During the past week, bargaining has intensified between the parties. Earlier last week Greece offered new proposals to the Troika—to which the Troika responded outright rejecting the Greek new proposals and signaling they were close to their ‘take it or leave it’ final position.
At the start of last week Greek representatives provided the Troika a comprehensive 11 page written proposal, which included significant further on pensions and sales taxes—i.e. issues the Greeks have said in the past were a ‘red line’ they would not cross. But they crossed, in a last minute good faith effort to entice the Troika to try to meet them half way. They didn’t.
Specifically, in its June 23 comprehensive proposal, Greece offered to raise the early and normal retirement age for pensions in stages over the next several years. It continued to refuse to retract, however, the modest increases to Greece’s poorest pensioners it implemented since January, which reversed the extreme pension cuts made by previous Greek governments since 2010. Even with the recent modest pension restoration for the poorest, more than half of Greek pensioners still remain below the income poverty level. Greece also proposed for pensioners to increase the premiums that they pay for national health coverage, which reduces some of the pension hike. At the same time, Greece proposed that contributions by business to the national retirement system (similar to ‘social security retirement’ in the US) increase modestly.
In the proposal Greece also offered to increase the sales tax, called the Value Added Tax (VAT), even though sales taxes impact workers and retirees on fixed incomes far more severely than the rich. The Syriza government accepted the 23% VAT demanded by the Troika, providing that it include lower tiered rates of 13% and 6% for basic food, restaurants, medical supplies and other essentials, and providing as well that the many small businesses in the Greek islands, who are almost totally dependent on tourists, would remain exempt from the sales tax hike. The sales tax hikes would realize approximately $1.5 billion more annual revenue in Greece.
At the same time the government proposed to have Greek corporations and the wealthy, who have been avoiding taxes for most of the past six years, now pay more. The corporate tax rate would be raised from 26% to 29%, and an excess profits tax of 12% on businesses earning more than $550m a year in profits be introduced. In addition, the proposals called for a higher tax on luxury yachts, and supplementary income tax hikes on the rich. The combined tax hikes would raise another $1.5 billion in revenue. Another $200 million in defense spending cuts were proposed.
Greece had previously also made concessions on permitting some privatizations, although not the almost unlimited privatization plan the Troika had embedded in the prior 2012 debt negotiations deal. But significant concessions on privatizations were also included.
Just these three areas—pensions, taxes, and privatizations— amount to about 2.5% of Greece’s future economic growth set aside to service its Troika debt. In other words, Greece would have to grow more than 2.5% in 2015, and potentially even more annually thereafter, in order to generate additional income to get out of depression. The first 2.5% would go to the Troika. That’s not a modest task—and represents a major concession by Greece—given that growth rates in the more advanced sectors of the Eurozone economy, including Germany, are today not even close to 2%.
The Troika’s response
So what was the Troika’s response to this major offer from Greece?
On Wednesday, June 24, they essentially threw it back in Greece’s face, saying it was not ‘credible’ (meaning, more cuts required). They didn’t even make a counter offer. This initial arrogant response incensed Greek negotiators, and provoked an angry response within Greece. Demonstrations against the Troika immediately followed and have continued. And Greek parliamentarians rebelled—especially the left wing of Syriza—some raising the demand Greece should create its own currency as a preparation for leaving the Eurozone.
With this growing opposition at home, Tsipras met with finance ministers and Eurozone government heads in Brussels on Thursday, June 24, in a Euro Summit meeting, in what was supposed to be a final effort to conclude a deal. Nothing came of it. Troika hard liners emphasized their continued opposition and demanded Greece provide still further concessions, beyond what they offered earlier in the week.
Following the June 25 Summit meeting, IMF Director, Christine Lagard, commented “It’s still short of everything that should be expected”, and specifically rejected the idea of raising taxes on corporations and the wealthy. The European Commission called the Greek concessions only a “basis for starting negotiations”. The strongest response was from Wolfgang Schaubel, the German finance minister, the hardest of the hardliners and a public advocate for pushing Greece out of the Euro, chastised his colleagues at the EC for even suggesting the Greek proposal was a basis for negotiations and “for raising some kind of expectations” there was still room to negotiate. Schaubel added the Greek proposal indicates they had actually “gone backwards”—a statement that was clearly an outright misrepresentation.
Schaubel is the architect of what is the Troika’s ‘Plan B’ to precipitate a default as a condition to get Greece to leave the Eurozone. He has long believed the Eurozone would be stronger without Greece and that the European Central Bank’s $1.2 trillion quantitative easing (QE) money slush fund passed earlier this year would be sufficient to contain any Euro-wide fallout from a Greek default and exit.
Others in the Troika are not so sure, however, about the economic contagion effects of default or Grexit. Nor about the potential political consequences of a Greek default and exit. If Greece exited, and then recovered, it would certainly give impetus to other movements within the Eurozone, and even the European Union itself, like Britain, to consider exit. It would certainly increase the appeal of rising parties on the left and right within Europe to run for office on programs to exit.
Following the Thursday, June 25 meeting, the third in the week, late that day the Troika made its first detailed response to the Greek proposals. Here the class nature of the on-going bargaining between the Troika and Greece becomes explicitly clear.
Whereas Syriza and Greece proposed to provide relief for the poorer citizens of Greece with modest pension improvements, exceptions to the sales tax hike, and more taxes on corporations and the rich—the Troika’s proposals were just the opposite.
The excess profits tax proposed by Greece was rejected outright by the Troika, as was the increase in social security retirement contributions by Greek employers. The Troika also demanded that proposed supplementary pension payments for the poorest be removed, that limits on early retirement be implemented, and that the retirement age for pensions in general be raised. In addition, the Troika rejected proposals to exempt the Greek islands from the 23% sales tax and added harsh limits on what qualified for the reduced 13% and 6% tiers. The Troika further demanded implementation of the draconian terms of pension reform laid out in the 2010 initial debt deal, effective immediately, July 1; a shelving of minimum wage increase plans; and demanded Greece must conform to labor market reforms being proposed elsewhere in the Eurozone—meaning limits on union bargaining and striking.
Clearly, what the Troika wants has little to do with debt restructuring. It has everything to do with making workers, retirees and small businesses continue to pay for the debt. The Troika does not want taxes raised. It wants wages, benefits, and costs cut. That’s more in line with the Euro-wide strategy of ‘labor market reform’, now at the center of Euro business strategy and designed to reduce business costs, in order to make the Euro more competitive with regard to exports as the primary strategy for Euro economic recovery.
Spain has already implemented labor market reforms. Italy and France area proposing to do so. Even Germany is moving to limit the right to strike. To allow Greece to get out from under labor market reform would send the wrong signal and set the wrong precedent throughout the Eurozone. It would undermine Euro financial and government leadership plans to make workers and retirees pay for economic recovery.
The June 25-26 positions of the parties
Greece’s leaders have pinned much of their hopes in the debt negotiations on dividing the Euro bureaucrats. They know the finance ministers, central bankers—and IMF especially– want austerity as usual to continue. Tsipras and Syriza have hoped that by appealing to European unity, they could get European Commission leaders and heads of government—especially Germany’s Merkle and Holland of France—to get the finance ministers and bankers to act more reasonable in debt negotiations. But this appears to have been a false assumption and a questionable strategy for Greece so far.
Following the June 25 meeting, Merkel and Holland met with Tsipras for 45 minutes, according to the business press, urging him to accept the Troika’s “generous” offer, as Merkel termed it. During their private meeting with Tsipras, Merkel and Holland also suggested an offer might be forthcoming to provide Greece with funding to cover its debt payments until November 2015—provided, however, that Greece accept more concessions demanded by the Troika. That would amount to $17.2 billion, disbursed in four installments by November, and would include $1.8 billion with which to pay the IMF due on June 30. The offer might even include stretching out Greece’s bond principal payments by additional years and reducing the interest rates. That would reduce Greece’s annual total debt payments significantly. And it would not require approval by German and other parliaments, since it would add nothing more to their governments’ share of the total debt.
This then is the Merkel-Holland ‘carrot’, offered at the last minute on June 25-26, added alongside the Troika ‘stick’ of Schaubel and friends’ and their ‘Plan B’ to push Greece to default, and the Troika’s June 25 slightly amended ‘Plan A’ of concession demands.
Greece was then given until Saturday, June 27 to respond and meetings were set up for the weekend of June 27-28.
Greece’s latest concession proposals plus the Troika’s response for more pension cuts, sales tax hikes, and privatizations is where the bargaining will begin between the parties on Saturday, June 27 and over the weekend. Whether the Greeks will be willing to buy the $17 billion and another 4 months extension, in exchange for more concessions on pensions and taxes that the Troika especially wants, should be apparent by June 30.
Comparing strategies to date
The Troika has been following a smart strategy from its perspective and interests. Plan A formal proposals, Plan B in the background, plus a soft-cop government heads last minute intervention. Unfortunately, the Greeks have no similar apparent ‘Plan B’ that would have to include at minimum replacing the Euro with an alternative currency, controls on capital flight, funding from Russia or China, and taxes payable in the new currency. As the first serious challengers to European neoliberalism, they have few if any allies outside the bargaining table. The Greeks therefore have been largely responding to Troika strategy and tactics, rather than driving the bargaining agenda.
Greek negotiators thus go into the June 27-28 weekend meetings under great pressure to concede yet again. They can buy another four months as before—providing they agree to more concessions. For that they get more money from the Troika to pay the Troika, which changes nothing. Come November, they of course will get to play the same Troika game and make even more concessions.
On the other hand, if they, the Greek team, hold firm on the Troika’s further demands of the past week to cut pensions more, to raise sales taxes more, to provide more tax relief for businesses and investors, to sell off more public enterprises and resources—that is if they let it go to default—then Schaubel’s ‘Plan B’ will no doubt begin. It will start with the ECB not providing further liquidity to the Greek banks, which could precipitate a bank run and capital flight from Greece. Economic stress and dislocation will grow in Greece. The next phase of Schaubel’s ‘Plan B’ is no doubt political—to undermine Syriza in parliament, to get a coalition of opponents to call for a confidence vote, and to push their political and economic allies within Greece to hold new elections—in an ultimate goal of getting a more amenable government to bargain with come November.
What the Troika really wants therefore is more concessions—now or in November. It wants class-based labor market reforms. It wants to destroy the Greek promise of a reformed, no longer Europe-wide neoliberal consensus.
What the Troika doesn’t want is the example of even a moderate left wing government in Greece challenging Europe’s big bankers, their finance ministers, and their government buddies. What they don’t want is Syriza—and the example it sets to other rising parties on the left and right who might also challenge the neoliberal status quo. And if they can’t get Syriza to self-destruct itself by more concessions, then they’ll continue to search for another way.
What Syriza represents is an attempt to return to a Social Democracy of a previous day and age. And that’s just not acceptable in the new, global neoliberal world system.
Jack Rasmus is the author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, by Clarity Press, 2015. He blogs at jackrasmus.com. His website is www.kyklosproductions.com and twitter handle, @drjackrasmus.