Portugal has entered dangerous political waters. For the first time since the creation of Europe’s monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest.
Anibal Cavaco Silva, Portugal’s constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.
He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order to satisfy Brussels and appease foreign financial markets.
Why a “NO” vote in Greece is a win for working people everywhere.
By Martin Hart-Landsberg, PhD
It seems certain that the political economy textbooks of the future will include a chapter on the experience of Greece in 2015.
On July 5, 2015, the people of Greece overwhelmingly voted “NO” to the austerity ultimatum demanded by what is colloquially being called the Troika, the three institutions that have the power to shape Greece’s future: the European Commission, the International Monetary Fund, and the European Central Bank.
The people of Greece have stood up for the rights of working people everywhere.
Greece has experienced six consecutive years of recession and the social costs have been enormous. The chart above and the two below provide only the barest glimpse into the human suffering:
While the Troika has been eager to blame this outcome on the bungling and dishonesty of successive Greek governments and even the Greek people, the fact is that it is Troika policies that are primarily responsible. In broad brush, Greece grew rapidly over the 2000s in large part thanks to government borrowing, especially from French and German banks. When the global financial crisis hit in late 2008, Greece was quickly thrown into recession and the Greek government found its revenue in steep decline and its ability to borrow sharply limited. By 2010, without its own national currency, it faced bankruptcy.
Enter the Troika. In 2010, they penned the first bailout agreement with the Greek government. The Greek government received new loans in exchange for its acceptance of austerity policies and monitoring by the IMF. Most of the new money went back out of the country, largely to its bank creditors. And the massive cuts in public spending deepened the country’s recession.
By 2011 it had become clear that the Troika’s policies were self-defeating. The deeper recession further reduced tax revenues, making it harder for the Greek government to pay its debts. Thus in 2012 the Troika again extended loans to the Greek government as part of a second bailout which included … wait for it … yet new austerity measures.
Not surprisingly, the outcome was more of the same. By then, French and German banks were off the hook. It was now the European governments and the International Monetary Fund that worried about repayment. And the Greek economy continued its downward ascent.
Significantly, in 2012, IMF staff acknowledged that the its support for austerity in 2010 was a mistake. Simply put, if you ask a government to cut spending during a period of recession you will only worsen the recession. And a country in recession will not be able to pay its debts. It was a pretty clear and obvious conclusion.
But, significantly, this acknowledgement did little to change Troika policies toward Greece.
By the end of 2014, the Greek people were fed up. Their government had done most of what was demanded of it and yet the economy continued to worsen and the country was deeper in debt than it had been at the start of the bailouts. And, once again, the Greek government was unable to make its debt payments without access to new loans. So, in January 2015 they elected a left wing, radical party known as Syriza because of the party’s commitment to negotiate a new understanding with the Troika, one that would enable the country to return to growth, which meant an end to austerity and debt relief.
Syriza entered the negotiations hopeful that the lessons of the past had been learned. But no, the Troika refused all additional financial support unless Greece agreed to implement yet another round of austerity. What started out as negotiations quickly turned into a one way scolding. The Troika continued to demand significant cuts in public spending to boost Greek government revenue for debt repayment. Greece eventually won a compromise that limited the size of the primary surplus required, but when they proposed achieving it by tax increases on corporations and the wealthy rather than spending cuts, they were rebuffed, principally by the IMF.
The Troika demanded cuts in pensions, again to reduce government spending. When Greece countered with an offer to boost contributions rather than slash the benefits going to those at the bottom of the income distribution, they were again rebuffed. On and on it went. Even the previous head of the IMF penned an intervention warning that the IMF was in danger of repeating its past mistakes, but to no avail.
Finally on June 25, the Troika made its final offer. It would provide additional funds to Greece, enough to enable it to make its debt payments over the next five months in exchange for more austerity. However, as the Greek government recognized, this would just be “kicking the can down the road.” In five months the country would again be forced to ask for more money and accept more austerity. No wonder the Greek Prime Minister announced he was done, that he would take this offer to the Greek people with a recommendation of a “NO” vote.
Almost immediately after the Greek government announced its plans for a referendum, the leaders of the Troika intervened in the Greek debate. For example, as the New York Timesreported:
By long-established diplomatic tradition, leaders and international institutions do not meddle in the domestic politics of other countries. But under cover of a referendum in which the rest of Europe has a clear stake, European leaders who have found [Greece Prime Minister] Tsipras difficult to deal with have been clear about the outcome they prefer.
Many are openly opposing him on the referendum, which could very possibly make way for a new government and a new approach to finding a compromise. The situation in Greece, analysts said, is not the first time that European politics have crossed borders, but it is the most open instance and the one with the greatest potential effect so far on European unity…
Martin Schulz, a German who is president of the European Parliament, offered at one point to travel to Greece to campaign for the “yes” forces, those in favor of taking a deal along the lines offered by the creditors.
On Thursday, Mr. Schulz was on television making clear that he had little regard for Mr. Tsipras and his government. “We will help the Greek people but most certainly not the government,” he said.
European leaders actively worked to distort the terms of the referendum. Greeks were voting on whether to accept or reject Troika austerity policies yet the Troika leaders falsely claimed the vote was on whether Greece should remain in the Eurozone. In fact, there is no mechanism for kicking a country out of the Eurozone and the Greek government was always clear that it was not seeking to leave the zone.
Having whipped up popular fears of an end to the euro, some Greeks began talking their money out of the banks. On June 28, the European Central Bank then took the aggressive step of limiting its support to the Greek financial system.
This was a very significant and highly political step. Eurozone governments do not print their own money or control their own monetary systems. The European Central Bank is in charge of regional monetary policy and is duty bound to support the stability of the region’s financial system. By limiting its support for Greek banks it forced the Greek government to limit withdrawals which only worsened economic conditions and heightened fears about an economic collapse. This was, as reported by the New York Times, a clear attempt to influence the vote, one might even say an act of economic terrorism:
Some experts say the timing of the European Central Bank action in capping emergency funding to Greek banks this week appeared to be part of a campaign to influence voters.
“I don’t see how anybody can believe that the timing of this was coincidence,” said Mark Weisbrot, an economist and a co-director of the Center for Economic and Policy Research in Washington. “When you restrict the flow of cash enough to close the banks during the week of a referendum, this is a very deliberate move to scare people.”
Then on July 2, three days before the referendum, an IMF staff report on Greece was made public. Echos of 2010, the report made clear that Troika austerity demands were counterproductive. Greece needed massive new loans and debt forgiveness. The Bruegel Institute, a European think tank, offered a summary and analysis of the report, concluding that “the creditors negotiated with Greece in bad faith” and used “indefensible economic logic.”
The leaders of the Troika were insisting on policies that the IMF’s own staff viewed as misguided. Moreover, as noted above, European leaders desperately but unsuccessfully tried to kill the report. Only one conclusion is possible: the negotiations were a sham.
The Troika’s goals were political: they wanted to destroy the leftist, radical Syriza because it represented a threat to a status quo in which working people suffer to generate profits for the region’s leading corporations. It apparently didn’t matter to them that what they were demanding was disastrous for the people of Greece. In fact, quite the opposite was likely true: punishing Greece was part of their plan to ensure that voters would reject insurgent movements in other countries, especially Spain.
And despite, or perhaps because of all of the interventions and threats highlighted above, the Greek people stood firm. As the headlines of a Bloomberg news story proclaimed: “Varoufakis: Greeks Said ‘No’ to Five Years of Hypocrisy.”
The Greek vote was a huge victory for working people everywhere.
Now, we need to learn the lessons of this experience. Among the most important are: those who speak for dominant capitalist interests are not to be trusted. Our strength is in organization and collective action. Our efforts can shape alternatives.
The vote on Sunday, July 5, came more than five months after SYRIZA won the January 25 elections and formed a government based on the promise of reversing austerity measures ratified by previous governments in return for a bailout of the Greek financial system. Prime Minister Alexis Tsipras agreed to a deal with the eurozone finance minsters in February that retreated on many of SYRIZA’s promises, but the rulers of Europe kept demanding more. With the lenders refusing to make any concessions–and cutting off desperately needed funds for the Greek government as blackmail–Tsipras finally announced a vote by the Greek people on whether to accept the eurozone’s latest humiliation or not.
The lopsided victory for the “no” side has echoed around the world.
With all of the ballots counted, the “no” vote has won with 61.3 percent of the vote.
This was a hard struggle. They used everything against us. They closed the banks. They canceled bank cards. Every day in the news, for hours and hours, they would show pictures of lines of people out of banks. They spread fear, promising that tomorrow, you will have no money. Tomorrow, you will have no medicine. Tomorrow, you will have no pension.
The European governments and media also helped to spread the terror. They changed the question of the referendum from “yes or no on the austerity agreement” to “yes or no on the eurozone.”
They tried everything. And against all this, the people succeeded.
People complain about debt slavery and “the system” regularly on tumblr. I do the same thing quite often but I realize that what I’m criticizing and what the majority perceive they’re criticizing are completely different constructs.
Often these people confuse “the system” with capitalism through little fault of their own, they’ve been conditioned to.
Occasionally a post about the utopian socialist nations of Scandinavia will cross my dash loaded with commentary preaching the lessons that the U.S. needs to learn from these righteous bastions of equality.
These critics refuse to examine the nature of the Scandinavian countries; what constitutes the population, the role of culture or the fact that each is struggling with reforms to their respective social welfare systems to one degree or another.
They also refuse to acknowledge Greece, Italy, Spain, Ireland and other socialist states that are either on the cusp of insolvency or are in extreme crisis.
State spending and social welfare policy has allowed various European populations to live for several generations beyond their means with the illusion of stability in perpetuity.
Fabian socialists are global socialists who coined their approach to the socialist authoritarian state the “third way”. The Third Way sought to harness the economic efficiency displayed by Hitler’s “National Socialism” and blend it with the goals of the global socialists/Marxists. Fabians are the mainline socialists throughout Europe. The Labour Party in the UK was founded by the Fabian Society.
The Eurozone/EU is a fabian socialist construct.
Fabians do not believe in an open or free society. They seek manipulation, control and implementation of their policies through stealth. Rather than through violent revolution they seek to destroy and replace through economic action, cultural subversion and long term government policy.
It is a system of social control through the authoritarian state and a heavily regulated corporatist economy. As previously mentioned it is an economic system that closely resembles the fascist economies of 1930s Italy and Germany.
What we’re seeing is that populations who have become accustomed to the all encompassing welfare state do not seem to comprehend that public debt is also their debt.
It is a distant and abstract concept that you elected a promising cult of personality to deal with and now that the payments are dwindling what recourse do you have? The government that once was your benevolent partner is now your adversary? How can you continue to live beyond your means? What if the reality is that you cannot. What if an entity from beyond your borders tells you that it doesn’t have to hurt so much if you accept terms offered to you?
All Greeks are now debt slaves regardless of how they chose to live their lives.
They will pay higher taxes, they will face external regulation and imposed terms of austerity. Their election of the socialist saviors was meaningless. It is a great fabian bait and switch. The mouse got the cheese and the trap got the mouse.
The eurozone is discovering that their nations collectively gave up their sovereignty to Brussels when they signed on the dotted line. They are learning, perhaps too late, that their leadership are no more than representatives before a Pan-European socialist bureaucracy.
What I don’t understand about the Greek crisis is how unbelievably stupid it is. The Greeks are literally refusing terms the Germans set so the Germans can make sure they get their money back.
It’s like walking into a bank and asking for a loan. The bank tells you the APR is, let’s say, 3% APR. You reject the 3% and say it should be 0%. The banker looks at you in a confused manner saying it is definitely 3%. You shout bloody murder at the banker and go home to ask the family if you should accept the 3% APR. Your family says 3% is unacceptable and they’ll only accept a 0% APR.
It is not the Greeks money and the fact that they’re unwilling to accept terms to make sure the Germans and the IMF get their money is unbelievably dumb. It isn’t up to Greece at all!
The humanitarian impact has been colossal—40 percent of children now live in poverty, infant mortality is sky-rocketing and youth unemployment is close to 50 percent. Corruption, tax evasion and bad accounting by previous Greek governments helped create the debt problem. The Greeks have complied with much of German Chancellor Angela Merkel’s call for austerity—cut salaries, cut governm ent spending, slashed pensions, privatized and deregulated, and raised taxes. But in recent years the series of so-called adjustment programs inflicted on the likes of Greece has served only to make a Great Depression the likes of which have been unseen in Europe since 1929-1933. The medicine prescribed by the German Finance Ministry and Brussels has bled the patient, not cured the disease.
Together we urge Chancellor Merkel and the Troika to consider a course correction, to avoid further disaster and enable Greece to remain in the eurozone. Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the Eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world.