The predicted earthquake in Athens has come to pass, as voters handed a near-absolute majority to the Coalition of the Radical Left- Syriza. The 2010 bailout of the banks that had loaned billions to Greece, and its associated austerity plan for the country, has clearly failed, with the economy shrinking by a quarter and debt ratios growing even worse under the bailout regime. Last week, Spain’s El Mundo interviewed political economist Yanis Varoufakis, who has famously described the IMF/EU treatment of Greece as “fiscal waterboarding.” Today, Varoufakis was named Greece’s Finance Minister. Excerpts from a frank and very revealing roadmap to Syriza’s plans:
The most recent data shows that the Greek economy is growing. Have the austerity measures been working?
No, not at all. Greece is in the middle of a full economic depression. Those who say that the country is coming out of the crisis are just trying to pull one over on people with cheap propaganda. You’ve probably heard that the Greek GDP stopped falling for the first time in the fourth quarter of last year, that it grew by 0.7 percent, and that although it’s a small gain, it has reversed the trend. You’d have to be an economic illiterate to swallow a lie like that. The real GDP is a quotient, with a numerator and a denominator. The numerator notes income in Euros, while the denominator notes average prices. In years of inflation, if income goes up by, say 10 percent, but the prices increase by 10 percent as well, there is no growth in real GDP. But in periods of deflation, things work differently. In this fourth quarter, prices fell by 1.8 percent. And with a negative denominator, the result comes up positive, which is why the real GDP appears to have gone up by 0.7 percent. But the truth is that income has also fallen, so there has been no recovery at all.
But the Greek people can benefit from lower prices…
That doesn’t matter. The thing that matters is the debt. And the debt does not go down when the prices go down-to the contrary, it keeps going up, because it just accumulates and the interest keeps mounting. So we end up with fewer Euros and more debt. We were bankrupt and now we are even more bankrupt. What has happened in Greece is that the prices have fallen faster than income. It happened already in the United States in 1932; that was the Great Depression. But the European Union, rather than admitting the truth, has decided to pretend that this is a success, in a perverse distortion of the truth.
[…]
Are you going to try to bluff, to threaten not to pay the debt in order to force a compromise?
No, not at all. I am not talking bluffs, I am talking about not moving a millimeter on our positions. If they want they can kill me, but I will not be moving. Let’s imagine that I am named Finance Minister of Greece. In June, we are supposed to be getting a 7 billion Euro loan from our European partners. And what is this money for? To hand over to the European Central Bank. In 2010, [Jean-Claude] Trichet, the worst central bank chief who has ever existed on the face of the earth, bought millions of Euros in Greek debt, in the form of government bonds. We Greeks never asked him to do it; he did it thinking he was saving Greece, but he failed. He failed because he was stupid: he announced to the markets how much he expected to spend, which was the equivalent of telling the speculators how much to bet against him. So he bought all of those bonds, which are expiring in June. If he hadn’t bought them, their value would have fallen massively, by 90 percent. But that didn’t happen, and now we are paying for his errors. The ECB knows we don’t have that money, so it forced us to borrow it from the Germans, the Spanish, the ECB itself, in order to pay back the ECB. If I were right now the Minister of the Economy, I would tell them they can kill me if they want, kill my children, but I am not going to do it.
But that means that Greece will not carry out the commitments it has made.
Look: the Greeks are not going to vote for us to commit the same stupid errors as the previous governments. We have to break with that logic.
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Tell me what you yourself would plan to do.
We owe our European partners 280 billion Euros. Fine: we will issue new bonds worth this amount, with precisely the same repayment schedule that we had agreed, but linked to nominal, not real, GDP growth. The IMF and the European Central Bank claim that our nominal GDP will grow by 7 percent per year for the next 20 years. If this is the case, we will pay back the money they lent us. But if nominal GDP grows by between 5 percent and 7 percent, we will pay back a third of the money we committed to repay. And if [it grows]by less than 5 percent, we won’t pay anything back that year. In 2038, these bonds will expire. We will have repaid what we could. What we couldn’t repay, we wouldn’t. It is about making debt repayments conditional on progress in the real economy.
FURTHER READING:
In Jacobin magazine, Greek political scientist and Syriza Steering Committee member Stathis Kouvelakis analyzes how the leftist party did in various demographic areas, and how that will affect the new government’s policies. In the New Yorker several years ago, James Surowiecki discussed some of the European Central Bank’s biggest mistakes in dealing with the debt crisis. Finally, will a Greece abandoned and ruined by Europe turn toward Russia? In the Greek Reporter, Aggelos Skordas points out that the first act of the new Syriza government yesterday was to publicly repudiate a supposedly unanimous European Union statement calling for new sanctions against Russia. An ancient affinity renewed?
Irene Velasco Translated from Spanish by International Boulevard
28 Jan 2015