Breaking the vicious circle

March 24, 2015

Greece's Prime Minister Alexis Tsipras met with German Chancellor Angela Merkel on Monday as the European rulers' pressure on the left-wing government remained unrelenting, pushing Greece closer to bankruptcy.

In February, Tsipras and his Finance Minister Yanis Varoufakis accepted an agreement with the Eurogroup finance ministers that retreated from SYRIZA's election commitment to reverse the austerity measures contained in the so-called Memorandums signed by previous Greek governments. The Eurogroup deal extended the bailout of the Greek financial system and the associated Memorandum program of austerity, and left Greece under the supervision of the Troika--the European Union (EU), European Central Bank (ECB) and International Monetary Fund (IMF)--though its name was changed to the "institutions."

But this was still not enough for Europe's financial and political elite, led by Germany's Finance Minister Wolfgang Schäuble. European officials are warning that even basic measures taken by the SYRIZA-led government to cope with the humanitarian crisis will be deemed a breach of the Eurogroup agreement. Meanwhile the government is scrambling to find the funds to cover debt repayments and continue basic operations, much less expand spending to help workers and the poor. Earlier this month, Tsipras wrote an open letter to European leaders stating that Greece was on the verge of having to choose between paying off its lenders and paying wages to public-sector workers.

In the latest issue of its newspaper Workers' Left, the socialist group Internationalist Workers Left (DEA)--a co-founder of SYRIZA in 2004 and a leading force in the party's Left Platform--published this article arguing for a radically different course.

THE GREEK government is facing a naked attempt at blackmail. The lenders, reinforced by the concessions they achieved from the government in the February Eurogroup agreement, are now demanding concessions on the government's planned measures to counter the impact of the Memorandums before they allow the flow of funds to Greek banks and the government.

By accepting Yanis Varoufakis' commitment that Greece's financial obligations to the lenders will be paid "in full and on time," the government now must try to square the circle: To pay regular installments on the debt and pay salaries and pensions on time while living up to their promise to not implement additional austerity measures.

The job has been made even more difficult by the harsh attitude of Wolfgang Schäuble and Mario Draghi, who are not only rejecting foreign borrowing by the government, but essentially any additional internal borrowing as well. If the government manages to survive March--by taking all available public funds to pay off a loan to the IMF--then April presents an even more difficult test, with additional payment obligations and currency reserves running dangerously short.

Greek Prime Minister Alexis Tsipras (left) talks with French President François Hollande (right)
Greek Prime Minister Alexis Tsipras (left) talks with French President François Hollande (right)

Thus, it is clear that the February agreement has brought the dilemma facing the SYRIZA-led government into sharper focus: Sooner or later, it will face the choice of bankruptcy or signing a new Memorandum.

The overwhelming pressure on the government as it faces these options was revealed in an inadvertent comment from Elena Panariti, a former consultant for the neoliberal dictatorship of Alberto Fujimori in Peru, who today advises Varoufakis. Panariti told reporters that one proposal of the lenders was for the government to not pay state wages or pensions for a period of some months. The proposal was renounced immediately by government officials and SYRIZA leaders, but it's telling that this hideous possibility--with its politically devastating consequences--is even a topic of public discussion.

IT'S OBVIOUS that the lenders' main tool of blackmail is the threat of a banking system failure. But despite the political upheaval resulting from the January elections that put SYRIZA in power, the banks are still run by the same champions of neoliberalism who have been in charge PASOK's Costas Simitis was prime minister--they continued as a bloc in the service of Memorandum policy, even during the government led by Antonis Samaras of the center-right New Democracy.

The statement by Yannis Stournaras, the governor of the Bank of Greece--that the government's promises to halt and reverse privatization and take other anti-Memorandum actions threaten "the results of the sacrifices of the Greek people"--shows which side the bankers will take.

This attitude will not change with pleas and appeals made by government officials, especially when they come with the promise attributed to Deputy Prime Minister Yiannis Dragasakis that "any movements in the banking sector will be carried out in concert and cooperation with shareholders and the 'institutions.'"

Some in the government believe that one way out of the extortion is to emphasize Greece's geopolitical importance. This is like wanting to put out a fire by throwing oil on it. Emphasizing the country's "geopolitical" importance means increasing Greece's involvements in regional antagonisms, and that means more spending on weapons.

Supporters of a turn toward the U.S. government as an antidote to Merkel and Schäuble got an answer from Barack Obama's Deputy National Security Adviser Caroline Atkinson, who stated publicly that any scenario other than a compromise would be catastrophic.

But it is the pro-U.S. IMF that is currently tightening the noose around the neck of the government with the repayment due this month. And besides, what exactly would a "compromise" with the lenders mean?

The government would have to: a) indefinitely postpone its election commitments, put forward last fall at the Thessaloniki International Trade Fair, for immediate and unilateral measures to relieve Greece's humanitarian crisis (reportedly, Varoufakis has already promised this); b) agree to implement some basic Memorandum measured assumed from the preceding governments led by New Democracy and PASOK; and c) reach a new agreement with the Eurogroup, including a commitment to repay Greece's debt, rather than renounce it.

By then, such a compromise will have weakened the hopes workers and the popular masses, paving the way for the defeat of the government or its transformation into a "national unity" government, together with pro-austerity parties.

This vicious circle must be broken now, by moving in the opposite direction. This means quickly and unilaterally implementing the basic anti-austerity program announced at Thessaloniki; declaring Greece's refusal to make interest payments or installment payments on the debt; and defending the anti-austerity program by any means necessary, including controls on the banks and the movement of capital.

Such a policy would solidify the government's support among workers in Greece and entitle it to expect solidarity and support from movements internationally, thereby building up an alternative power against the extortion of the lenders. Any other path is all but certain to lead to further concessions and defeats under the pressures from Schäuble and the world he represents.

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