SYRIZA’s economic options

This election of SYRIZA is undoubtedly a defeat for the politics of austerity of the Troika and the European right writes Özlem Onaran . It is a moment of victory for SYRIZA and the social movements in Greece and a moment of hope for the left elsewhere in Europe! No ifs, no buts. Any gain in reversing austerity and the attack on working peoples’ lives, and any move towards decreasing the debt burden is a reason to increase our self-confidence for further moves. The SYRIZA government’s first priority is to launch a €2bn welfare package to secure health service, food, housing and utilities for about 35 per cent of the population living in poverty. The minimum wage and pensions are to be restored to where they were in 2010. Collective bargaining and union rights will be re-established. A programme of public investment for jobs and welfare is in the programme. Last but not least, the amount and terms of the debt will be on the table.

The road ahead for the left will be undoubtedly bumpy. Let us have no illusions about it. There is not a clear deterministic recipe, a blueprint, we can write for SYRIZA. The party came to power with large support, but two seats short of absolute majority. The popular support behind the party is very heterogeneous ranging from anti-capitalists to traditional PASOK supporters. The pace of political transformation of this mass support will be important in determining how much the left can steer SYRIZA towards a genuine rupture.

The clash

The coming weeks will see a clash between SYRIZA and the governments of the EU, notably Germany. Merkel, her finance minister Schauble, Juncker – the president of the EC, the EU Finance ministers, are all repeating the same refrain as they did before about obeying rules and agreements etc. But Hollande of France and Renzi of Italy seem to dithering as much as posturing. Stakes are high in Germany for Merkel with strong voices for a Greek exit in her own party, as well as the opposition from the Alternative fuer Deutschland or the increasing nationalism in the deprived East German cities.

On 28 February the current “assistance” programme under the Memorandum is over. There are outstanding loan repayments due by the first of March, July and August. About 80% of the €317bn debt of Greece is to the Troika. This is a curse and a blessing. It is a blessing because even a substantial write-off is peanuts for Europe. However, it is a curse because the banks in the core EU countries such as France and Germany are no longer holding a large enough portion of the Greek bonds to make Greece a large enough systemic risk as it was in 2010-12.

The systemic risk of the Grexit is related to the contagion effect to Portugal, Ireland, and in particular to Spain and Italy, but the funds of the European Stability Mechanism and most recently ECB’s massive quantitative easing (QE) programme is designed to contain this. Whether it succeeds is a different matter, but on the first day after the elections the financial speculators seem to still believe in it. The QE was on the cards for a long time, but the SYRIZA threat certainly contributed to the size as much as the clear risks of deflation due to austerity. However, even when the SYRIZA victory was expected, German members of the ECB board still resisted the QE.

The ECB’s package has been meant to exclude Greece unless it is involved in a programme of “assistance”. Furthermore Greek banks need continuous liquidity support from the ECB through the so-called Emergency Liquidity Assistance (ELA). The situation got worse in December due to speculative deposit withdrawals and may get worse through bank runs in the coming weeks and months. While Italy and France may be eager to challenge the German stance about the ECB’s posturing, the ruling classes of Spain, the other country facing the risk of contagion, is obviously facing a double edged sword with the growing support for Podemos, which not only supported, but also benefits from SYRIZA’s rise.

Although the bargaining power SYRIZA can get from a threat of leaving the Euro in the event of a failure of negotiations regarding the debt has decreased, the risks and stakes for the ruling classes of Europe are still high and several of them may blink first.

SYRIZA’s plans to stop tax evasion are probably the most likely reason the European elite will offer as a justification for negotiations in their voters’ eyes. SYRIZA’s leadership is also putting a lot of their hopes in this as well as establishing a progressive tax, but obviously the collection of tax takes time and without a recovery there are limits to tax revenues.

SYRIZA may also find some support for their demand to relax the treatment of public investment in the Stability and Growth Pact rules – a policy in the government programme of SYRIZA announced in Thessaloniki in September 2014.

The debt problem

The most important point of clash will be over debt. For a start, the financial markets seem to expect that the European elite could be pushed for a clause that would increase the maturity of the debt, decrease the interest rate, offer a lengthy grace period without debt servicing, or even link debt servicing to economic growth by setting a ratio to GDP. That is without touching the taboo of accepting a debt write-off. Olli Rehn, the Finnish ex-EU commissioner, who was a key player in the Greek bailout deal gave signals of the acceptability that the debt repayment deadlines could be extended for quite long periods giving reference to the payment of the British World War II debt to the US. However, SYRIZA’s election pledge aims to write-off the greater part of public debt and calls for a “European Debt Conference” as happened for Germany in 1953 after World War II. On Monday morning after the elections, Yanis Varoufakis, the new finance minister of Greece, in an interview at the Radio 4 said that politics is about posturing and this is what the German politicians are doing. SYRIZA will be open to negotiations. The fact that the Greek debt cannot be paid is clear to many right wing European politicians as well. The SYRIZA leadership is trying to explain the same thing to the German and other European citizens that austerity policies made it impossible for Greece to pay back the debt and the Troika loans were indeed used to bail out the European banks or the corrupt tax avoiders and not the Greek people themselves, hence their tax money has been wasted while delivering only devastation for the Greek people. Members of Die Linke in Germany or Podemos in Spain understand and spread this message.

There is also an interesting progressive option suggested by the chief economists of SYRIZA, Yiannis Milios and Dimitris Sotiropoulos and Spyros Lapatsioras, that aims to go around the taboo of debt write-off, while arriving at the same result of substantially reducing debt: “Our main strategy is for the ECB to acquire a significant part of the outstanding sovereign debt (at market prices) of the countries in the Euro Area (EA) and convert it to zero-coupon bonds. No transfers will take place between individual states; taxpayers in any EA country will not be involved in the debt restructuring of any foreign Eurozone country. Debt will not be forgiven: individual states will agree to buy it back from the ECB in the future when the ratio of sovereign debt to GDP has fallen to 20 percent. The sterilisation costs for the ECB are manageable. This model of an unconventional monetary intervention would give progressive governments in the EA the necessary basis for developing social and welfare policies to the benefit of the working classes. It would reverse present-day policy priorities and replace the neoliberal agenda with a programme of social and economic reconstruction, with the elites paying for the crisis. The perspective taken here favours social justice and coherence, having as its priority the social needs and the interests of the working majority.” The English version has been published by the Levy Institute based in the US.[1] A senior research fellow of the Levy Institute, Rania Antonopoulos , is also now a SYRIZA MP and she endorses an “Employer of Last Resort” programme for Greece with a particular focus on social infrastructure such as child care with the funds coming from debt renegotiation among other sources.

The Greek Debt Audit Campaign launched in 2011 had gone one step further by calling to stop all public debt repayments until the human, social, economic and cultural rights of all inhabitants in Greece are upheld, and form an official international and independent audit commission composed of experts but also representatives of social and labour movements with an ultimate aim to cancel all illegitimate, odious, or unsustainable parts of the public debt. Although the idea is still relevant, it has not been a theme of mobilisation for the majority of SYRIZA so far.

The Euro question

The majority of the party or SYRIZA’s supporters do not see an exit from the Euro as a precondition for debt write off or the other progressive policies. Within the Left Platform, however, there is increasing support for preparing for an exit strategy. Costas Lapavitsas, who is now a SYRIZA MP, has been a strong advocate of an exit strategy. Costas Lapavitsas and Heiner Flassbeck had written a report for the Rosa Luxemburg Foundation of Die Linke in Germany in 2013, which was discussed as a strategy at their Conference and voted down by the majority of Die Linke.[2]

Other parts of the radical left object to seeing the exit from the Euro as an immediate solution or a precondition or even a necessary condition. In the following, I will quote from a Manifesto we wrote in 2013:[3] “In our view, this is a false dichotomy and it is important to work for a viable political strategy for the immediate confrontation. Any social transformation implies the questioning of dominant social interests, their privileges and their power and it is true that this confrontation takes place primarily within a national framework. But the resistance of the dominant classes and their possible retaliatory measures exceed the national framework. The strategy of leaving the euro does not necessarily concentrate on this effort for a European alternative and in this sense, a strategy of rupture with “euroliberalism” is required in order to generate the means for an alternative policy.”

Our Manifesto suggests three points of rupture: i) finance the public deficit outside the financial markets via measures such as a forced loan on the richer households, the obligation for banks to a quota of public bonds, bold taxes on international transfers of dividends and capital operations’ a radical fiscal reform; ii) restructuring the debt via a citizens’ audit; iii) socialisation of banks for the control of credit.

In contrast, an exit from the euro is not a guarantee for rupture with ‘euro-liberalism’. Our objections include concerns that i) following an exit an inflationary process would be ignited by the devaluation …generating new problems of internal debt and unequal distribution of income,” ii) “the exit of the euro is typically presented as a strategy designed to gain market shares through a competitive devaluation. This type of approach does not break with the logic of competition of all against all and abandons a strategy of a common European fight against austerity”; iii) “continuing the fight without proposing an exit of the euro and the EU as an alternative, increases the area of manoeuvre and bargaining power of a left government, as well as the chances of spillovers of resistance to other countries in the EU. Hence this strategy is progressive and internationalist as opposed to isolationist and national.”…”In contrast with the neoliberal vision of competition, progressive solutions are based on cooperation and will work even better if they are generalised to a larger number of countries. For example, if all European countries reduced working time and charged a uniform tax on capital income, such coordination would avoid the backlash that the same policy would undergo if adopted in only one country. To pave the way for cooperation, a left government should follow a unilateral strategy combining ‘good’ measures unilaterally implemented as, for example , the rejection of austerity or the taxation of financial transactions; accompanying plans for protection such as capital controls.” …“The rupture with the European Union rules is not based on a petition of principle, but rather on the efficacy, fairness and legitimacy of measures that correspond to the interests of the majority and are equally proposed to neighbouring countries. This strategic challenge can then rely on social mobilisation in other countries and hence build a relation of forces that can challenge the EU institutions.”

According to this approach, the exit of the euro is a threat or a weapon of last resort. This approach chimed with the “no sacrifice for the Euro” approach of SYRIZA in the previous years. We acknowledge that “the refoundation of Europe cannot be the precondition to the implementation of an alternative policy. The eventual retaliation measures against a left government must be neutralised through counter-measures that effectively involve resort to protectionist measures if needed. But the strategy is not protectionist in the usual sense since it defends a social transformation emerging from the people and not from the interests of national capitalism in its competition with other capitalists. It is, therefore, a ‘protectionism for extension, whose very logic is to disappear once the social measures for employment and against austerity have been generalised across Europe.”

Open ended

In the coming months, SYRIZA’s moves will be influenced by the rank and file of the party as well as the society at large. Social transformation is a process of learning and radicalisation for working people and the social movements and solidarity networks as well as the leadership.

The bottom line is not what austerity can lead to but what left unity can achieve. In other places after rather similar economic crises such as Turkey the demise of the centre/establishment parties opened the way for more than a decade long power of the conservative authoritarian Islamist party. SYRIZA achieved its victory by refusing the sectarian lines of the Greek Communist Party which refuses to enter a coalition even after the elections.

The next stage of unity is the internationalisation of struggle. From the beginning to the day of victory SYRIZA talked to the European radical left. Time is tight to deliver a substantial internationalisation of the movement. Podemos in Spain is doing its part very well. The ball is in our corner to build Left Unity in Britain and elsewhere in Europe.

[1] Sotiropoulos, Milios, and Lapatsioras 2014. An Outline of a Progressive Resolution to the Euro-area Sovereign Debt Overhang: How a Five-year Suspension of the Debt Burden Could Overthrow Austerity,

[2]The systemic crisis of the euro – true causes and effective therapies, Just after the elections in Greece Costas Lapavitsas and Heiner Flassbeck published an ebook: Against the Troika: Crisis and Austerity in the Eurozone, Verso, 2015.

[3] What to do about the debt and the euro? A manifesto. First signatories had included Daniel Albarracín, Nacho Álvarez, Bibiana Medialdea (Spain)  Francisco Louçã, Mariana Mortagua (Portugal) Stavros Tombazos (Cyprus) Giorgos Galanis, Özlem Onaran (Britain) Michel Husson (France) wwith support from Eric Toussaint (Belgium) among others.

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