- Back in January upon coming into office, Syriza
probably could not have won a referendum on whether to pay or not to pay. It
didn’t have a full parliamentary majority, and had to rely on a nationalist
party for Tsipras to become prime minister. (That party balked at cutting back
Greek military spending, which was 3% of GDP, and which the troika had helpfully
urged to be cut back in order to balance the government’s budget.)
unyielding the opposition was, Syriza’s stance was: “We would like to pay. But
there’s no money.”
This kept throwing the ball back into the troika’s court. The Institutions
were so unyielding that Syriza’s approval rating in the polls rose by 13% by
June. Greek voters became increasingly incensed at the Troika’s demand for
further pension cuts and privatizations.
Tsipras and Varoufakis were willing to pay the IMF with the IMF’s own funds,
in what V. called “extend and pretend.” But their only interest in keeping
current on debt was to obtain additional funding that could be used to pay
domestic pensions and other basic government budgetary expenditures.
The basic tactic in such tensions between creditors and debtors is clear:
once debt repayments exceed new loans, stop paying.
So when The Institutions made it clear that no more credit would be
forthcoming without Syriza adopting the old Pasok/New Democracy capitulation to
Troika demands, Tsipras and Varoufakis decided it was time to call a referendum
eight days hence, on Sunday, July 5.
Late Friday night and into the early Saturday morning hours, Greeks ran to
the ATM machines to convert their checking and savings deposits into euro notes,
expecting that the end game would involve a likely 30% depreciation of the
drachma – and that indeed, the ECB would stop lending to support Greek banks
(the only role the ECB wanted to play).
Syriza had no love for the banks. They were the vehicles through which the
oligarchs controlled the Greek economy, after all. For a month, they had been
discussing how to separate the banks into “good bank” and “bad bank,” either
nationalizing them (wiping out stockholders) or creating a Public Option
Most important, once out of the eurozone, Greece could create its own
Treasury to monetize its spending. The Institutions called this “scrip,” but the
Greeks could establish it as their national currency. They would escape from
euro-austerity – except, of course, to the extent that the ECB waged economic
war on Greece by imposing its own capital controls.
By going through the sham negotiations with The Institutions, Syriza gave
Greeks enough time to protect what savings and cash they had – by converting
these bank deposits into euro notes, automobiles and “hard assets” (even boats).
Businesses borrowed from local banks where they could, and moved their money
into eurozone banks or even better, into dollar and sterling assets. Their
intention is to pay back the banks in depreciated drachma, pocketing a 30%
What commentators miss is that Syriza (at least its left) wants to be
transformative. It wants to free Greece from the post-military oligarchy that
evades taxes and monopolizes the economy. And it wants to transform Europe, away
from ECB austerity to create a real central bank. In the process, it demands a
clean slate of past bad debts. It wants to reject the IMF’s austerity philosophy
and refusal to take responsibility for its bad 2010-12 bailout.
This larger, transformative picture is at the center of Syriza-left plans.
I’m in Germany now (on my way to Brussels), and have heard from Germans that
the Greeks are lazy and don’t pay taxes. There is little recognition that what
they call “the Greeks” are really the oligarchs. They have gained control of the
old coalition Pasok/New Democracy parties, avoided paying taxes, avoided being
prosecuted (New Democracy refused to act on the “Lagarde List” of tax evaders
with nearly 50 billion euros in Swiss bank accounts), orchestrated insider
dealings to privatize infrastructure at corrupt prices, and used their banks as
vehicles for capital flight and insider lending.
This has turned the banks into vehicles for the oligarchy. They are not
public institutions serving the economy, but have starved Greek business for
So one casualty apart from the credibility of the eurozone, the ECB and the
IMF will be these banks. Syriza is positioning itself to provide a public option
– public banks that will promote the economy, and a national Treasury that will
spend government money INTO the economy, not drain it to pay the Troika for
having bailed out French and other banks back in 2010-1.
The European popular press is as bad as the U.S. press in describing matters.
It warns of “hyperinflation” if a central bank monetizes as much as one euro of
government spending in the way that the U.S. Fed does, or the bank of England or
any other real central bank. The reality is that nearly all hyperinflations stem
from a collapse of foreign exchange as a result of having to pay debt service.
That was what caused Germany’s hyperinflation in the 1920s, not domestic German
spending. It is what caused the Argentinean and other Latin American
hyperinflations in the 1980s, and Chile’s hyperinflation earlier.
But once Greece frees itself from the odious debts forced upon it at
financial gunpoint in 2010-12, its balance of payments will be roughly in
balance (subject to some depreciation of the drachma; 30% is a number I heard
bandied about in Athens last week).
To mimic Margaret Thatcher, “There is No Alternative” to withdrawing from the
eurozone. The terms dictated for remaining in it was to sell off all of what
remained in Greece’s public sector to European and U.S. buyers, at insider
prices – but not to Russian buyers, even for the gas pipeline that was to have
Evidently the eurozone financial strategists thought that Tsipras and
Varoufakis would simply surrender, and be promptly voted out of power, thereby
crushing their socialist policy agenda. They miscalculated – and are now hoping
to create as much anarchy as possible to punish the Greek people. The punishment
is for not continuing to support their client oligarchy, which has moved most of
its assets out of reach of the government.
But instead of Syriza losing credibility, it is the ECB – which refuses to
create money to finance economic recovery, but only to pay the oligarchs’ banks
so that they can continue to control the government. This control is now being
weakened precisely because their banks are being weakened.
Greece’s Parliament last week released its Debt Truth Commission report
explaining why Greece’s debts to the IMF and ECB are odious, and were taken on
without a popular referendum approving these loans. Indeed, Mrs. Merkel and Mr.
Sarkozy obeyed Mr. Obama and Geithner when the latter insisted at a G8 meeting
that the ECB ignore the IMF economists’ analysis that Greece could not pay its
debts, and bail out the banks. Geithner and Obama explained that U.S. banks had
placed big financial bets that Greece would pay its private bondholders, so the
ECB and IMF had to lend the government the funds to pay – but had to overthrow
the country’s Prime Minister Papandreou who had urged a referendum on whether
Greek people really wanted to commit economic and political suicide.
Financial technocrats were put in place to serve the domestic oligarchy and
foreign bondholders. Greece was under financial attack just as deadly as a
military attack. Finance is war. That is this week’s lesson.
And for the first time, debtor countries are realizing that they are in a
state of war.
This is why markets are crashing on Monday, June 29.
* * *
Eurozone financial strategists made it clear that they wanted to make an
example of Syriza as a warning to Spain’s Potemos party, and anti-euro parties
in Italy and France. The message was supposed to have been, “Avoid our austerity
and we will cause chaos. Look at Greece.”
But the rest of Europe is interpreting the message in just the opposite way:
“Remain in the eurozone and we will only create money to strengthen the
financial oligarchy, the 1%. We will insist on budget surpluses (or at least, no
deficits) so as to starve the economy of money and credit, forcing it to rely on
commercial banks at interest.”
Greece has indeed become an example. But it is an example of the horror that
the eurozone’s monetarists seek to impose on one economy after another, using
debt as a lever to force privatization selloffs at distress prices.
In short, finance has shown itself to be the new mode of warfare. Resisting
debt leverage and financial conquest is as legal as is resisting military