Greek Bailout Offer Passes
Same As the Old Boss - Alexis Tsipras
How Germany Reconquered Europe
Yanis Varoufakis: Germany Won't Spare Greek Pain It Has An Interest in Breaking Us
Stop Selling Your Children to Bankers
Greece'd: We Voted "No" to Slavery, But "Yes" to Our Chains
German Pot Calls Greek Kettle Black
A Hostage Situation: Greece Yields to Austerity Demands Just Days After Historic "NO!" Vote
Greek Government Approves Brutal Austerity Measure in Proposal to EU
Prognosis for Greeks Is Not So Nice
Tsipras Betrays Referendum, Sells Out to Banks
Earth Economics Is Upside Down (For an Obvious Reason)
When you have too much money (and venality to match), it is even more possible than usual (amidst all belief to the the contrary) to be really dumb about the consequences of your self-serving actions.
And it catches up to everyone eventually (see "Ray Donovan).
And it will screw up their lives.
At every level.
But the wealthy of the world continue on as though even more dire behavior towards the vulnerable on their own behalf will result in no severe consequences.
And now, from Thomas Piketty, our international economics man on the scene who knows a thing or three:
Friday, July 10, 2015
Thomas Piketty, author of Capital in the Twenty-First Century
by Gaius Publius
This is yet another piece about Greece, much shorter, but long on irony served cold. Thomas Piketty is the author of the ground-breaking study of wealth inequality that came out last year, Capital in the Twenty-First Century. He's also French, and François Hollande, who ran as a critic of austerity, has been off and on in agreement with Merkel's hard stance against Greece, as the interview reveals. (For what it's worth, French banks are involved along with German ones as investors the EU elites have been trying to protect.)
Piketty was interviewed about Greece in a German magazine, Die Zeit, and I suspect the Zeit reporter didn't do his homework. It appears he thought, first, that he was talking with a mainstream economist, perhaps because the book was a number one best seller; and second, that because Piketty is French he'd side with Holland and with the Germans. Wrong on both counts. Piketty is deeply critical of wealth inequality (criticism of that is anathema to European elites), and he thinks Hollande is making a serious mistake. He also thinks Greece and Europe are being destroyed, though there are ways to pull back.
The interview is notable not just because of Piketty's analysis, but because of the (professional) conflict between himself and the interviewer. Note that this is for a German publication, and Piketty wants none of what the Germans are smugly doing to Greece.
Here's Tyler Durden at Zero Hedge with an introduction, followed by some of the interview. Durden (my emphasis throughout):
One year after Tomas [sic] Piketty sold a record number of economic textbook paperweights which virtually nobody read past page 26, once again showing the power of constant media hype, the French economist and wealth redistributor is out and about, this time pouring more gasoline on the fire started by the IMF last week when it released the Greek debt sustainability analysis showing Greece needs a 30% haircut, only to be met with stern resistance by, who else, Germany who know very well that should Greece get a debt haircut it will unleash the European dominoes which not even all the bluster and rhetoric of the ECB can halt.Since his successful book, Capital in the Twenty-First Century, the Frenchman Thomas Piketty has been considered one of the most influential economists in the world. His argument for the redistribution of income and wealth launched a worldwide discussion. In a[n] interview with Georg Blume of Die Zeit, he gives his clear opinions on the European debt debate.
As magazine interviews with economists go, this turns into a bit of a cage match, catching the Zeit reporter by surprise. The following is from an English translation of the interview. It doesn't even start well:
DIE ZEIT: Should we Germans be happy that even the French government is aligned with the German dogma of austerity? [Note that the French are implicated here.
Thomas Piketty: Absolutely not. This is neither a reason for France, nor Germany, and especially not for Europe, to be happy. I am much more afraid that the conservatives, especially in Germany, are about to destroy Europe and the European idea, all because of their shocking ignorance of history.
ZEIT: But we Germans have already reckoned with our own history. [I think he means they've confronted their Nazi past.]
Piketty: But not when it comes to repaying debts! Germany’s past, in this respect, should be of great significance to today’s Germans. Look at the history of national debt: Great Britain, Germany, and France were all once in the situation of today’s Greece, and in fact had been far more indebted. The first lesson that we can take from the history of government debt is that we are not facing a brand new problem. There have been many ways to repay debts, and not just one, which is what Berlin and Paris would have the Greeks believe.
ZEIT: But shouldn’t they repay their debts?
Piketty: My book recounts the history of income and wealth, including that of nations. What struck me while I was writing is that Germany is really the single best example of a country that, throughout its history, has never repaid its external debt. Neither after the First nor the Second World War. However, it has frequently made other nations pay up, such as after the Franco-Prussian War of 1870, when it demanded massive reparations from France and indeed received them. The French state suffered for decades under this debt. The history of public debt is full of irony. It rarely follows our ideas of order and justice.
ZEIT: But surely we can’t draw the conclusion that we can do no better today?
Piketty: When I hear the Germans say that they maintain a very moral stance about debt and strongly believe that debts must be repaid, then I think: what a huge joke! Germany is the country that has never repaid its debts. It has no standing to lecture other nations.
Then the reporter digs in, and gets even more of a history lesson:
ZEIT: Are you trying to depict states that don’t pay back their debts as winners?
Piketty: Germany is just such a state. But wait: history shows us two ways for an indebted state to leave delinquency. One was demonstrated by the British Empire in the 19th century after its expensive wars with Napoleon. It is the slow method that is now being recommended to Greece. The Empire repaid its debts through strict budgetary discipline. This worked, but it took an extremely long time. For over 100 years, the British gave up two to three percent of their economy to repay its debts, which was more than they spent on schools and education. That didn’t have to happen, and it shouldn’t happen today. The second method is much faster. Germany proved it in the 20th century. Essentially, it consists of three components: inflation, a special tax on private wealth, and debt relief.
ZEIT: So you’re telling us that the German Wirtschaftswunder [“economic miracle”] was based on the same kind of debt relief that we deny Greece today?
Piketty: Exactly. After the war ended in 1945, Germany’s debt amounted to over 200% of its GDP. Ten years later, little of that remained: public debt was less than 20% of GDP. Around the same time, France managed a similarly artful turnaround. We never would have managed this unbelievably fast reduction in debt through the fiscal discipline that we today recommend to Greece. Instead, both of our states employed the second method with the three components that I mentioned, including debt relief. Think about the London Debt Agreement of 1953, where 60% of German foreign debt was cancelled and its internal debts were restructured.
There's an interesting back-and-forth I won't quote (but which you can read). After that, the reporter puts on his reporter hat and asks two good questions to close:
ZEIT: What sort of national egoism do you see in Germany?
Piketty: I think that Germany was greatly shaped by its reunification. It was long feared that it would lead to economic stagnation. But then reunification turned out to be a great success thanks to a functioning social safety net and an intact industrial sector. Meanwhile, Germany has become so proud of its success that it dispenses lectures to all other countries. This is a little infantile. Of course, I understand how important the successful reunification was to the personal history of Chancellor Angela Merkel. But now Germany has to rethink things. Otherwise, its position on the debt crisis will be a grave danger to Europe.
ZEIT: What advice do you have for the Chancellor?
Piketty: Those who want to chase Greece out of the Eurozone today will end up on the trash heap of history. If the Chancellor wants to secure her place in the history books, just like [Helmut] Kohl did during reunification, then she must forge a solution to the Greek question, including a debt conference where we can start with a clean slate. But with renewed, much stronger fiscal discipline.
In the unquoted part, Piketty expands on the idea of a Europe-wide debt conference. He also expands on the idea of democracy, something Joseph Stiglitz also discussed. All in all, fascinating, and brutally honest on Piketty's part.
See more here.
The horizon is not so far as we can see, but as far as we can imagine
2015 July 10
Syriza’s mandate, given twice, is as follows:
End austerity without leaving the Euro.
This mandate cannot be executed. Without leaving the Euro they can cannot reduce their debt sufficiently, nor avoid imposed austerity from their creditors.
Does that mean they must accept any deal?If they do, they have violated their mandate as well. They have not left the Euro, sure, but they also haven’t ended austerity.
So, they are forced to choose between two parts of a mandate. They may end austerity. Or they may leave the Euro.
I will suggest that since the austerity is what is killing and impoverishing Greeks that, given a choice between these two opposed goals, they should leave the Euro.
The counter-argument is that leaving the Euro will make things even worse.
This is true. But there is a very strong argument that it will do so only for two to three years and that after that Greece would be better off than it would be still in the Euro, and therefore, still in austerity.
It is insane to say, “This mandate has two parts, we cannot do both, and therefore we must choose the one which will lead to suffering for which we can see no end-date, rather than taking a chance will likely end the suffering sooner, and in the forseeable future.”
Greece did have its own currency, you know. And the economy was better then. It is not like no one still alive remembers a Greek economy outside of the Euro. Acting as if the world will end if it goes back to the Drachma is deranged.
That is all.Responses:
July 10, 2015
The real problem here are the Greeks. Syriza is a political animal and does wants to stay popular. The problem is the Greek people are sick of the austerity but not of the false dream of EU membership. That is to say they have doubled down on wishing really, very hard that the pain will end and good times will return just like before. They are not willing to make the choice they actually need to make (austerity or Grexit), and as the saying goes if you don’t make choices someone will make them for you. That someone is Germany and the EU central bankers. Can’t give someone medicine when they won’t accept it, no matter how much they need it.
July 10, 2015
I suspect Yves is trying to say “if they’d just accepted the first deal offered they’d have had a better deal than this.” We’ll know if that’s true soon. Syriza has been incompetent, in my opinion: they did not have the necessary contingency planning and all indications are that they honestly though the Europeans would cut them a better deal (delusional). The second one would be tolerable if they’d at least had the sense to still do the contingency planning.
You simply do not go into negotiations without a BATNA (you “walk” position) unless you’re an idiot or have absolutely no choice. They had other choices.
In other words, I believe there was something else he could have done. If you go back through my posts, you’ll see I think they should have prepared for Grexit and been willing to do it if they didn’t get a good deal.
Zot: if that’s what they’re doing they’re morons. Austerity will destroy their popularity far more surely than leaving the Euro. People forgive all if you actually make the economy improve.
Instead they will now be fully associated with all the pain that is about to go down.
I explained this in posts further down.
No, Tsipras is either stupid, weak, both or genuinely thinks the Euro is more important than austerity. I’m not sure which of those would be a greater indictment.
July 10, 2015
Both Golden Dawn and the communist party refused to be part of this government of “national unity” so it looks like as you say Ian, that they will be the only ones with their credibility intact.
July 10, 2015
The basic principle has been demonstrated: the EU means German dominance. That lesson will be tested again until there is another war. Only a matter of time.
July 10, 2015
What if Syriza has been told that Grexit = military coup?
July 10, 2015
If Ambrose Evans-Pritchard’s reporting is accurate, Tsipras is trying to fall on his sword. The U.S. has taken over negotiations of a new bailout deal, equipped with harsh austerity, in exchange for debt relief. The Germans are resisting principal writedowns because this puts immense domestic political pressure on Angela Merkel. They want an extension of maturities and lower interest payments. There’s still a chance Germany can scuttle this, so nothing is over until the ink is dry.
Tsipras appears to have given up. Unless he’s smarter than all of us, and he was planning a Grexit all along, he’s prepared to swallow whatever terms are granted to him and just hope a U.S.-brokered deal throws him a bone. Even if he gets debt relief, the harsh austerity will end his government. Austerity has more impact on the public than debt relief. It’s still possible Greece will be forced out of the Euro by the German-led northern bloc, but it doesn’t appear Tsipras has the chops to leave on his own. Syriza’s lack of preparations for a Euro exit underscore this.
July 10, 2015
A deal like this will throw Greece into political turmoil. Syriza will crack up and Greece will be led by a very unstable coalition of pro-bailout forces like Pasok, To Potami an(d) what remains of New Democracy. It remains to be seen if Syriza’s Left Platform can reach an accommodation with the Communists to form a hard left challenge to Greeks membership in the common currency. If not, the hard right, probably an ultr nationalist mix including Golden Dawn will fill the breach.
July 10, 2015
I find myself returning again and again to Alexis Tsipras’ original vision. Within days of his election, he published this “original vision” as an open letter to the people of Germany, which he titled: “Open Letter to Germany: That Which You Were Never Told About Greece”..
As one would rightly imagine, this “vision” and its meaning is now buried in the past six months of pounding neoliberal brainwashing and media bullying. Tsipras was clearly aware this would happen; had been happening; would continue to happen — and addressed it in his first sentence:
Most of you, dear [German] readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds biggotry, nationalism, even violence.What I am not finding is any confusion in the meaning of the mandate. Not then and not now — after the referendum.
As a legal aside, I also see no conundrum in Greece’s continued participation in the EU or EZ, if they so choose. Even after a default. Greece might, after all, continue both for a period of time to assure a stable transition. There is no legal mechanism for expelling Greece from the EU. As for use of the Euro, Greece may choose to use it as a primary currency or a parallel currency for as long and wishes to do so. (Naturally, the currency protections from the ECB drop away, but the immediate nationalization of the banks can ameliorate this, and it is a safe and convenient way to introduce a parallel currency.) After all, many nations use the US Dollar as a national currency without permission or implied obligation of the US.
I notice punitive thinking toward Greece is rife these days. Without it, the picture becomes much clearer.
In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.And, this:
In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the ‘extend and pretend’ tactic would lead my country to a tragic state.
My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to.At the time Alexis Tsipras wrote these words on January 26th, 2015, I would say he was in a state of enlightened clarity about the nature, purpose, and strategy of Neoliberal banking. It is not as if there was no record of this happening to one South American country after another, ultimately leading to the privatization of their natural resources and/or valuable geographical features, such a deep water ports. Tsipras is well aware that Greece is on the path of being turned into “40 acres and a mule” for Europe’s profit and pleasure.
Let me be frank: Greece’s debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding.Can this possibly be made any clearer? Is any sentient being on this planet not aware that a new “bailout” for Greece will be used for only one purpose: to service the debt, without a principle pay down? Whom does this benefit? Greece assumes a significantly greater non-payable debt and even more nation-destroying austerity, while the shareholders pocket the profits and the banking system does not enter toxicity in their books.
Here is the mandate:
Our target is the country’s stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end ‘extend and pretend’ logic….Everything that has happened since this letter was written is kabuki, staged for your entertainment. You know this to be true, because every time you leave the theater, nothing in the real world has changed. Greece is merely lobbing the ball back into Brussels’ court, and will continue to do so, for eternity.
Dear readers, I understand that, behind your ‘demand’ that our government fulfills all of its ‘contractual obligations’ hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for ‘reforms’, as long as these ‘reforms’ do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.
Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.
Or, in so many words:
Write the damned debt off because there is no money to pay it.
The laws of physics are merciless.
July 10, 2015
Their mandate is the electoral platform upon which they stood and is the basis upon which they were elected by the Greek electorate. Not some letter written to foreigners . . . Also, Grexit is an unfortunate term. Exiting the Euro is a sensible, nay moral action, Greece exiting the EU is foolish, at this time. Grexit is unclear as to its meaning, perhaps, EuroDrop would be a much more descriptive term.
The EU [an effort to end European conflict] and the Euro [an effort by right wing extremists* to destroy democratic institutions while providing long term welfare to Germany] are inherently incompatible. One is faulty institution with many flaws, but a noble justification, the other, a Trojan horse that will be used to slaughter those who bring it inside their national borders.
*Not to be confused with “conservatives” who thought the Euro moronic.
July 10, 2015
This is a well-written tract by Tsipras. He clearly understands what’s being done to Greece by the Troika. Greece has the moral high ground here. The wrongs committed against it give it the right to reject its membership in the Eurozone.
They should do it. The question is, are they prepared to do it? Do they have the fortitude? Have contingency plans been made? Has the public been mobilized to confront it? Maybe Tsipras has been angling for an exit all along. Given the facts we have, it does not appear so.
A disorderly Grexit would threaten Tsipras’ power. He may have already decided he can’t win no matter what he does. Given the results of Sunday’s referendum, he can’t sell an austerity-laden bailout package to the population. We know he can’t sell it to his Left Platform.
July 10, 2015
“Their mandate is the electoral platform upon which they stood and is the basis upon which they were elected by the Greek electorate. Not some letter written to foreigners.”
But, Mark, SYRIZA did perform in all aspects of the electoral mandate they received from the Greek people:
The day after Alexis Tsipras was elected Prime Minister of Greece on January 26, 2015, he made good on his promises to voters. The young leftwing leader of the Syriza party swept away the age of austerity. The barricades came down outside the Greek parliament, followed by an announcement that the IMF privatization schemes of Greek public property and services would be halted and all pensions would be reinstated. Then came the news of the reintroduction of the €751 monthly minimum wage. And this all happened before Greece’s young new prime minister had got his first cabinet meeting under way.– from, “The Last Temptation of Greece”
After that, fees for prescriptions and hospital visits were scrapped, collective work agreements were restored, workers who had been laid off in the public sector were rehired, and citizenship was immediately granted to migrant children born and raised in Greece.
Barely 48 hours after storming to power, Alexis Tsipras and the Syriza party ended the biting austerity that had so thoroughly destroyed the Greek economy and caused so much suffering. January 26th was a new day and a new chapter in the history of Greece.
The electoral mandate is a done deal. Syriza was NOT elected to take on more crippling debt and austerity. Quite the opposite.
That is why Tsipras called for a referendum. Europe was making demands that were not part of Syriza’s electoral mandate — and Tsipras could not sentence the Greek people to even more extreme endless suffering, without their permission.
I do not think the events of the past six months are that complicated.
I found the following official document about the Greek economy to be illuminating:
Prime Minister Alexis Tsipras’ article in Der Tagesspiegel: German taxpayers are not paying for Greek pensions
July 10, 2015
The “mandate” excuse is BS.
In 1932 FDR campaigned on a promise to balance the budget, criticizing Hoover for running up the deficit on wasteful spending. There was no mandate to leave the gold standard and run up the deficit.
Next time someone brings up the “Syriza didn’t have a mandate to leave the Euro” excuse, ask them “Did Syriza have a mandate to cut pensions? To raise taxes on the working class? To sell public property? To privatize public infrastructure? To bail out German bankers? To kowtow to the Troika?”
10 July 2015 / TRUTH-OUT.ORG
_ _ _ _ _ _ _
Tuesday, 07 July 2015Amy Goodman, Democracy Now! | Click Title for Video InterviewAs Greek voters reject further budget cuts and tax hikes in exchange for a rescue package from European creditors, who is to blame for the debt crisis embroiling Greece? Is Germany trying to crush Greece to set an example? Will Greece leave the eurozone? What does this mean for the global economy? We speak to Richard Wolff, emeritus professor of economics at University of Massachusetts, Amherst, and visiting professor at New School University. He's the author of several books, including, most recently, Democracy at Work: A Cure for Capitalism. Still with us in Athens, Greece, is Paul Mason, Economics Editor at Channel 4 News.
AMY GOODMAN: Richard Wolff, Germany clearly is controlling this situation, of any country. Why do they want to crush Greece? Or do they?
RICHARD WOLFF: I think the Germans face a choice. They’re worried that as the richest country, as the country that controls the situation, and as a country that historically has benefited from the very thing that Greece now wants, which they don’t want to give to the Greeks, that they face the risk that if they crush Greece, it will produce the reaction Paul has described. On the other hand, they will send a message to the Spanish, to the Italians, to the Portuguese and others, who are basically in a very similar situation, only they’re much larger, and the Germans are therefore afraid they’ll have to bail out all of Europe. They can’t afford it. They’re terrified. On the other hand, if they don’t cut a deal with Greece, then they face the possibility of left-wing governments in these other countries and a whole transformation, and they’re choosing between them.
The irony here, the historical irony, is something I think we need to understand. Back in 1953, the Germans, with a very crushed economy—in that case, because of the Great Depression and the fact that they lost World War II—went to the United States, France and Britain and said, "We can’t join you as a bulwark against the Soviet Union unless you relieve us of our enormous debts, which are hampering our ability to grow." Across 1953, they had meetings in London. When those meetings concluded, with the so-called London Agreement, here’s what Germany got from the United States, France and Britain: 50 percent of their outstanding debt, which was very high, was erased, and the other 50 percent of their debt was stretched out over 30 years. In effect, Germany got the relief of all of its basic indebtedness, based on two world wars that they were held accountable for, and that enabled them to have the so-called "Wirtschaftswunder," the economic miracle that happened. They now refuse to give to Greece what they got. They refuse to allow Greece to have the chance to solve its economic problems just the way Germany asked for and got. And this discrepancy between these two countries is producing a stress inside Europe that is, what Paul Mason correctly points to, fundamentally dangerous to the whole project of a United States of Europe.
AMY GOODMAN: Well, Paul Mason, what about, for example, the people of Germany and other European countries versus their governments that are pressuring Greece right now? And also, in addition to your analysis of Germany’s role, Paul, people cannot take out more than what’s equivalent to $60, 67 euros, from the bank right now, the banks actually closed until Wednesday, if not beyond. And what does that mean? Is there a rift between younger people, who voted overwhelmingly no, and pensioners, who were more supportive of a "yes" vote?
PAUL MASON: No, no. I mean, let’s take that, to start with. Greek society is divided between left and right, between the grandchildren of people who fought in a civil war here in the late 1940s and indeed the Communist resistance movement that defeated the Nazis in 1944. So that goes back a long way. That’s the real division. And therefore, you know, one of the first sets of people on the streets when Tsipras even tried to make a compromise were 70 coachloads of Communist pensioners who tried to storm the street his office is in. So, don’t think it’s young v. old. Look, it is left v. right. And it is class—as Tsakalotos says there, it is a class issue, as well. The richest areas voted 80 percent yes, the poorest areas voted 80 percent no. But the Greek elite got a lesson that the poet Percy Bysshe Shelley taught the English elite in the aftermath of the 1819 Peterloo Massacre in the famous line from his poem: "Ye are many," to the working class—"they are few." You can’t win a referendum with only rich people. So, that’s the issue here.
On the question of the 60-euros-a-day withdrawal, again, it is, in a strange way, redistributive. Young people here earn, on average, 400 euros a month. That’s what you get for waiting tables. And you’ll find many graduates and Ph.D.s waiting tables. If you draw 60 euros a day out of your account, you’ll clear your 400 euros in a week. You’re not going to be drawing 60 euros a day out. Some people are walking around this city with five euros in their pocket. Now, that has been survivable for them, but not really survivable for businesses. And I’m finding, in the businesses I talk to, extreme pain. It’s the payments mechanism. It’s the supply chain. It is the ability to settle accounts. And, of course, I understand that large corporates, the big global corporates, are keeping supplies coming in, even while they’re not being paid. They’e been advised to do that to avoid reputational damage. But it’s the Greek corporates, it’s the Greek medium and large enterprises that don’t have that ability, where things are breaking down. So if the banks were to go on top of that, that would really be an awful situation.
And that is what — you know, to sum up here, because I do have to rush and do my day job, and indeed complete the documentary that we’ve been working on for six months here, is — the sum-up here is the Europeans cannot afford to let this country go. As Rick says, it’s about Europe. But we are one border here away from the Islamic State. So we have the Turkish border and then the Turkish border with the Kurdish areas, and that’s the Islamic State. Some Greek islands are five miles away—less than five miles away from Turkey, where Syrian refugees are pouring in at thousands a week. And then we are in the region of Vladimir Putin and the newly belligerent Russia. Do you really want a state that has the biggest spend per capita on military, in NATO, in Europe, to fail? That’s the issue. And it’s the issue, I know, that the American State Department is well aware of. The State Department are pressuring the Germans very heavily.
The problem is, as you suggested there, the German people. Don’t get your hopes up about a German mass revolt in favor of Greece. Yes, the left party, Die Linke, is a sister party of Syriza, and, yes, it rules a couple of regions. But the leader of the German Social Democrats has been saying to the Greeks, basically, "Get lost." And many German voters who vote for that party, this German socialist party, and the two right-wing parties that run Germany, the CDU/CSU, have kind of switched off their solidarity with southern Europe. They’ve begun to think very nationalistically in terms of their own economy. And, of course, if you’ve got the Greeks voting for their own bailout and the Germans voting against, democracy is beginning, in other words, to tear the euro apart. I’m afraid that is—if Merkel makes a deal tonight, she’ll probably do it against the wishes of her own party and her own people.
AMY GOODMAN: Paul Mason, thanks for being with us, economics editor at Channel 4 News, producing the forthcoming documentary about Greece titled And Dreams Shall Take Revenge. Go to your day job. Speaking to us from Athens, Greece. And Richard Wolff is still with us. In our next segment, I want to talk to you about what’s happening here at home in the United States, and particularly the rise of the Democratic candidate for president, Bernie Sanders, who is a socialist himself, and what that means in this larger global context. But this whole issue that Paul Mason was just referring to, leaving the eurozone, what does that mean, actually? Especially for people in the United States, it’s hard to understand anything besides dollars as a currency.
RICHARD WOLFF: Well, basically, what the Greeks would achieve if they left the European Union is they would revert to their own currency. They could go back to the drachma, which was their currency before, or a new one. And once they control their own currency, they can also control the relative worth of that currency, relative to others. If that currency becomes much, much cheaper relative to the euro, which is what will happen, then everything priced in that local currency will appear very cheap to people with dollars or people with euros. And suddenly a Greek vacation will become much cheaper than a vacation anywhere else. Greek olive oil will outprice everybody else’s. And that has traditionally been the way that a country blocked into this dead end crawls its way out of that dead end. It’s painful, but they at least have the prospect that their goods will become very attractive around the world, what they have to sell, and they’ll begin to recoup.
The reason they want to go more and more in that direction is that the austerity imposed on them since 2010 has given them lots of suffering with no improvement, with no chance to get out of it, therefore they were choosing between a proven dead end and a difficult strategy, but one that has in the past worked and might in the end work again here, especially if leaving the euro meant they could also cancel their debts, with or without the approval of their creditors, the way the Germans arranged it. But if they had less debt and a cheaper drachma as their own currency, that’s a strategy that at least has a chance, whereas what they were in was endless promises that it will eventually work, that never came true.
AMY GOODMAN: What exactly is happening there, when you say the pain they are now feeling in Greece? What is the pain? And what do you see the future looking like if they do pull out of the eurozone? How will their economy be shaped?RICHARD WOLFF: Well, they’re being squeezed by 25 percent or more unemployment, by a cutback in public sector, which is the largest part of their economy, of about 40 percent since 2010, drop in their actual wage. Businesses are closing because they can’t solve the payments problem that Paul talked about. So you have a general disintegration that has been worse in Greece than in any other country. That’s why they keep saying, "We’ve been the ones who have borne the brunt of all of this. And don’t make us do more.
That’s unjust and not solidarity with the rest of Europe." So, they’re struggling to keep their pensioners having enough to live, to prevent, for example, the continued exodus. They have lost tens of thousands of young Greek citizens, who were educated at the expense of the Greek economy and are now taking what they’ve learned to go to other countries and work and be productive over there. A country like Greece, which is small to begin with, can’t keep hemorrhaging its best and brightest young people at the same time that everybody else’s salary is collapsing. This is an economy that—where you have to look for a metaphor, go back to the depths of the Depression in the 1930s, when we had comparable kinds of situation of desperate people and rampant poverty. They want out of that, because, otherwise, they face an indefinite future of this kind of behavior.
AMY GOODMAN: What happens to the rich people in Greece? And what about the issue of taxes?
RICHARD WOLFF: Well, you know, that’s the unspoken but real story behind all of this, because the more the Europeans squeeze the Greeks, with a left-wing government, that government, especially strengthened by that referendum now, has to sooner or later — and Paul referred to this — go after the wealth that’s there in order to solve some of these problems. They should have done that a long time ago, but they never had a leftist government with a mindset to do it. Now they do. And that’s the great danger, that you’re converting a problem of European disequilibrium and inequality into a real class struggle between the mass of the Greek people, on the one hand, and the one place where wealth exists inside Greece, among the rich and the corporations, to help them solve a problem. So you’ve converted a European problem into a class struggle. And if Syriza can pull that off, the message sent to the comparable groups in every other European country is a staggering reconception of what the future of Europe may look like, where the words "anti-capitalism" become a unifying slogan for people across that continent. Merkel’s great danger is that in pushing as hard as she has, she may reap a whirlwind of results.
AMY GOODMAN: Is she aware of this?
RICHARD WOLFF: I’m sure she must be, although they are so caught up. The Germans are victims of their own propaganda. They converted an economic crisis into a nationalist, we-versus-them mentality—we, Germans who work hard, against the Greeks, who don’t. Reminded me of nothing so much as Mr. Romney’s unfortunate remark in the last campaign where he divided Americans into the 47 percent moochers and the 53 percent who work hard, trying to get the 53 percent to believe they were carrying the other 47. That’s what the Germans have done. "We Germans work very hard, and we’re carrying these lazy Greeks."
This — put aside the questionable issue of whether the Germans ought to play such a nationalist card, given their history, but this is a way of solidifying opposition to what’s going on, and this is a very, very dangerous track. But she may be trapped by it. She has done it now. So, as Paul said, her own people wouldn’t support making a deal. She’s made that impossible for herself.
AMY GOODMAN: A few months ago, we talked to Professor Noam Chomsky about what’s happening in Greece.
NOAM CHOMSKY: It’s very significant. But notice the reaction. The reaction to Syriza was extremely savage. They made a little bit of progress in their negotiations, but not much. The Germans came down very hard on them.AMY GOODMAN: You mean in dealing with the debt.NOAM CHOMSKY: In the dealing with them, and sort of forced them to back off from almost all their proposals. What’s going on with the austerity is really class war. As an economic program, austerity, under recession, makes no sense. It just makes the situation worse. So the Greek debt, relative to GDP, has actually gone up during the period of—which is—well, the policies that are supposed to overcome the debt. In the case of Spain, the debt was not a public debt, it was private debt.AMY GOODMAN: That’s Noam Chomsky speaking in March. Are we in a very different or a very similar situation right now, Richard Wolff? You actually have just returned from France.
It was the actions of the banks. And that means also the German banks. Remember, when a bank makes a dangerous, a risky borrowing, somebody is making a risky lending. And the policies that are designed by the troika, you know, are basically paying off the banks, the perpetrators, much like here. The population is suffering. But one of the things that’s happening is that the—you know, the social democratic policies, so-called welfare state, is being eroded. That’s class war. It’s not an economic policy that makes any sense as to end a serious recession. And there is a reaction to it—Greece, Spain and some in Ireland, growing elsewhere, France. But it’s a very dangerous situation, could lead to a right-wing response, very right-wing. The alternative to Syriza might be Golden Dawn, neo-Nazi party.RICHARD WOLFF: Yes, in France, the very fear that Noam Chomsky referred to is a reality, that the anti-austerity position was taken by the far right, by Madame Le Pen, who has become an important political leader in France, who declared her solidarity with Syriza. That’s why the complicated politics of this. She sees the future of an anti-capitalism in France enabling her right wing to capture that kind of idea. But it’s a sign that the—below the surface, the anger about austerity, the resentment of the burdens of this crisis being shifted onto average people, is becoming a European problem. And the Germans may discover that they have isolated themselves yet again in European history by being the champion of something which is provoking a backlash larger than anything they had foreseen.AMY GOODMAN: Do you think President Obama could be pressuring them in a different way?RICHARD WOLFF: There’s no question in my mind, from the evidence we have, that the American government is more interested with a stable Europe than with provoking this kind of a split inside Europe, partly because of the ramifications here in this country, where the same anti-austerity is building. That’s one of the causes for the support for Bernie Sanders, for example. But he’s also concerned that the Germans are making a classic political error, going way too far, and that this will disturb global markets. The economic recovery in this country is very weak and very fragile, and that doesn’t want disturbance to come from a powerhouse like Europe.AMY GOODMAN: We’re going to talk about the United States after break. Richard Wolff, our guest, professor emeritus of economics at University of Massachusetts, Amherst, visiting professor here in New York at The New School. This is "Democracy Now!" Back in a minute.
Amy Goodman is the host and executive producer of "Democracy Now!," a national, daily, independent, award-winning news program airing on over 1,100 public television and radio stations worldwide. "Time Magazine" named "Democracy Now!" its "Pick of the Podcasts," along with NBC's "Meet the Press."