Comments on: Greece: Phase Two

Greece: Phase Two

Noisy Pink Bubbles — Fri, 13 Mar 2015 14:58:16 -0800

Greek MP Costas Lapavitsas on the economic barriers ahead for Syriza and the challenges of eurozone exit "I want to come clean, and this a good venue to do it, and say the following: the obvious solution for Greece right now, when I look at it as a political economist, the optimal solution, would be a negotiated exit."

The title of the piece refers to Greece: Phase One, an interview with SYRIZA member Stathis Kouvelakis published weeks earlier. (Previously, previouslyer, previouslyist)

By: Kevin Street

Kevin Street — Fri, 13 Mar 2015 15:08:58 -0800

But wouldn't that lead to a financial apocalypse? Syriza's Finance Minister seemed to think so in that other FPP. Yanis Varoufakis: "It's one thing to say you shouldn't have gotten into the euro, it's quite another to say you should get out of the euro. If we backtrack, we fall off a cliff. This is my argument to everyone."

By: phaedon

phaedon — Fri, 13 Mar 2015 15:28:09 -0800

This is such an incredible story, I don't even know where to begin.

By: rustcrumb

rustcrumb — Fri, 13 Mar 2015 15:32:50 -0800

Financial apocalypse for who, though? For Greece? Or for the rest of the EuroZone, after Portugal, Ireland ,Greece, and Spain, all bail out? I wonder if the purpose of this interview is to bolster Greece's negotiating position with the ECB and its members, by building credibility for the idea that the "Grexit" is popular among the citizens and has support of factions inside the government.

By: bradbane

bradbane — Fri, 13 Mar 2015 15:41:50 -0800

The more hardliners in Syriza have been pushing for Grexit from the beginning. But in Mr. Varoufakis' own words...

A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe would be in the grip of vicious stagflation. Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe's public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone. I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s.

I don't disagree with him even though I am sympathetic to the far left within Syriza. Grexit would be far more brutal than austerity in the short term, and it's not the left that will benefit from that state of affairs. It's the neo-nazis.

By: Kevin Street

Kevin Street — Fri, 13 Mar 2015 15:53:41 -0800

I do like the way that Jacobin magazine interview is laid out, with the hyperlinks to specific questions and no horrible floating bars that follow you as you scroll. Very nice design.

By: Another Fine Product From The Nonsense Factory

Another Fine Product From The Nonsense Factory — Fri, 13 Mar 2015 16:02:44 -0800

I don't know what to think about Greece any more - my instinct/limited friends make me want to go along with those in the German finance ministry who are apparently openly calling Greece a "gangrenous limb" but when I speak to people who actually know economics they wince at that - look the Adam Smith Insitiute, the British version of Cato backs Varokafis's plans - I feel like if you get the "erratic Marxist" and the libertarians to agree on a plan maybe there is an indication that there is a bigger deal here than just a balancing books! ... Varo's plan might save Greek people the pain that any other solution would pose and might even on the most optimistic level get some of their creditors back some of their money in the long term - seems like no other option even thinks that is possible so is trying to get the biggest creditors (probably German banks?) paid off so they won't be first up against the wall.

By: biffa

biffa — Fri, 13 Mar 2015 16:04:01 -0800

On the limited list of options for Greece this is at least ahead of 'the Germans bombed our chippy'.

By: gorbweaver

gorbweaver — Fri, 13 Mar 2015 16:09:28 -0800

Are you KKE-curious? Find Mr. Varoufakis' Paris Match shoot rather bourgeois? I recommend this blog.

As I pointed out in my commentary on this "intuitive" trend, the boundary line between "diagnosing" a fascist danger and in fact blackmailing others that if SYRIZA doesn't get the money it wants, you yourself will go for the fascists --the boundary line between "diagnosis" and "threat"-- is pretty blurry. But this isn't the only complication that attends the "dilemma." There is also the directly related question of whether SYRIZA and Golden Dawn really represent a clear, mutually exclusive choice. Is political reality in Greece interpretable in terms of the dilemma "SYRIZA or Golden Dawn" or is it rather that there is no dilemma, that the real formula for how capitalist power exercises itself at present in the country is in fact "SYRIZA and Golden Dawn"?

By: RogerB

RogerB — Fri, 13 Mar 2015 16:10:31 -0800

Worth it for this line alone:

So greater restraint in calling or not calling people "Marxist," please. This is no longer university amphitheater politics — this is real, okay?

From your mouth to every online-ultraleftist pundit's ears. I don't disagree with him even though I am sympathetic to the far left within Syriza. Grexit would be far more brutal than austerity in the short term, and it's not the left that will benefit I agree completely. But I'm sorry to say I don't think Jacobin does, considering the extent to which their Greece coverage is presenting only the pro-exit side of what's evidently a pretty big schism within Syriza.

By: sobarel

sobarel — Fri, 13 Mar 2015 16:20:33 -0800

Financial apocalypse for who, though? For Greece? Or for the rest of the EuroZone Absolutely for Greece. This isn't 2010. The fear of "contagion" has much abated, and the ECB has much better planning and emergency funding in place in case of a Grexit. It wouldn't be pretty of course, but the Eurozone could take the hit and move on. This is what I never understood about Syriza's negotiation strategy. Where was their leverage? Threatening an exit/default is like holding a gun to your own head and saying "Stop or I'll shoot!" And that's sort of what Mr Lapavitsas is saying here. There are only two options open to Greece. (1) Stay in the Euro and accept Greece is powerless to do anything other than play by the rules of the club they've joined. Or (2) leave the Euro and accept a massive and unpredictable economic hit, but gain some autonomy in the medium/long term. Syriza came to power essentially by offering a third way. Stay in the Euro - which remains very popular in Greece - but somehow negotiate a new set of rules for Greece and somehow get creditors to stop asking for their money. It hasn't worked out terribly well so far, and the absurdity of raising dead issues like war reparations from Germany seems like a fairly desperate distraction technique. I kept thinking to myself that Mr Varoufakis seems like a smart guy, he must have something clever up his sleeve that I'm too dim to discern ... but, well, nope. Not so far anyway. So, says Mr Lapavitsas, it's time for (2). But the third way this time is for a negotiated exit in which the EU and ECB step in to impose capital controls, oversee a controlled devaluation of a new drachma, and prop up the Greek banks. This is maybe plausible. Especially if the only alternative left looks like an uncontrolled exit. But then going on to talk about nationalising the banks with "popular control and workers' participation", forging alliances with "Russia, Venezuela, China, Iran", and bringing back Lenin's NEP (!) - this is not plausible.

By: bradbane

bradbane — Fri, 13 Mar 2015 16:20:44 -0800

Very nice design. Side note, you should subscribe, the print magazine is beautiful.

By: Talez

Talez — Fri, 13 Mar 2015 16:28:09 -0800

Let's assume that Greece does exit the eurozone. You can bet your ass its citizens will be lining up to convert their worthless drachmas to euros the second they get them. Capital controls? They'll pack up and leave. And there's your massive stagflation in a nutshell. There's no way Greece can leave the Eurozone without the complete collapse of the Greek economy.

By: pravit

pravit — Fri, 13 Mar 2015 16:34:39 -0800

But wouldn't that lead to a financial apocalypse? For Greece, yes, but a Grexit at this point matters far less to the rest of the Eurozone than it did in 2010. These days most Greek debt is held by other European governments, the ECB, and the IMF, as opposed to back in 2010 when European banks had most of the exposure and a Greek default could have been Europe's "Lehman moment." Is there still some contagion risk to Portugal, Spain, etc., in the case of a Grexit - maybe but those countries are in better shape than before, and most importantly, Draghi and Merkel have a powerful tool they did not have in 2010: sovereign QE.

By: CincyBlues

CincyBlues — Fri, 13 Mar 2015 17:11:19 -0800

A couple of recent Michael Hudson interviews: Greece: Austerity for the Bankers QE Intentions All Too Obvious

By: pyramid termite

pyramid termite — Fri, 13 Mar 2015 17:13:47 -0800

If we backtrack, we fall off a cliff. if wile e coyote looks down, he'll realize that that there's nothing but air under his feet greece is bankrupt - everything that people have been negotiating has been an effort to avoid this simple fact they have two choices - default and exit the euro - default and let the rest of the EU decide how they're going to deal with it one way or another, they're going to default - they're already off the cliff

By: Chocolate Pickle

Chocolate Pickle — Fri, 13 Mar 2015 18:09:22 -0800

I think the biggest thing I fear is that if Greece exits the Euro zone and returns to the Drachma, there would be a run on Greek banks, and no European Central Bank to give them emergency loans to tide them over. So lots of Greek banks collapse. After the banks collapse, then you get capital flight out of Greece itself, leading to a currency collapse. It could take 20 years to recover from the chaos. That scenario applies to any nation that tries to leave the Euro except Germany. If Germany returns to the Mark, then everyone else faces runs on their banks and a general collapse of the Euro. One of the smartest things the UK ever did was to keep the pound.

By: Zonker

Zonker — Fri, 13 Mar 2015 18:47:13 -0800

Greece's position is like the old Woody Allen quote:

"More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly."

Leave the Euro, and face sheer economic chaos, or stay in and be forced to endure brutal levels of austerity. Hell of a club, that one.

By: phaedon

phaedon — Fri, 13 Mar 2015 19:31:58 -0800

Capital flight is in full swing in Greece; plus the Greeks with real money never had it there to begin with.

By: Renoroc

Renoroc — Fri, 13 Mar 2015 19:51:29 -0800

Phase 3 has to be "profit", right?

By: PMdixon

PMdixon — Sat, 14 Mar 2015 03:36:50 -0800

It all comes down to whether Schäuble is more dedicated to the European Project or to ordoliberalismus.

By: bukvich

bukvich — Sat, 14 Mar 2015 06:44:18 -0800

Thomas Piketty on the Euro Zone: 'We Have Created a Monster'

By: C.A.S.

C.A.S. — Sat, 14 Mar 2015 08:30:28 -0800

Its not true that Greece can't leave the Euro without destroying its economy. The Euro is a monster, driven by political aims that conflict with economics. Krugman has written much about this topic. There is a concept in economics called the "optimal currency area". The Euro does not overlap with one. Mobile capital and (in practicality) immobile labour, macro economic policy for economies as diverse as Greece and Germany, a political infrastructure and fiscal policy machine that doesn't align with the monetary policy infrastructure - this is not a good scenario. The Euro as it is now has to essentially put steady deflationary pressure on the Southern countries, it isn't just Greece. In my gut, I believe that after a short shock of exit you might be surprised by the speed with which Greece normalises. The European Union can help steady the banking sector, it will be in their interests to contain the damage. A low currency will restore the tourist trade and investment. 20 years is far too pessimistic, there are historical examples. Otherwise its a slow and grinding death for years and decades with no solution. And from Hungary to Greece to even the Northern European countries, there is a far right nativist force with fascistic tendencies that is being fed by this deflationary press. The Euro should evolve to a Northern European currency for the old European Coal and Steel Community area basically.

By: adamvasco

adamvasco — Sat, 14 Mar 2015 08:33:24 -0800

The Greek election: why I went home to vote for the first time. It seems that German Finance Minister Wolfgang Schaeuble is possibly not the right person to be intervening, leading to denials of a feud which have been mentioned since mid february.

By: anotherpanacea

anotherpanacea — Sat, 14 Mar 2015 08:56:31 -0800

Is it austerity if you're still living well beyond your means? It seems like Greece wants to default on its loans but then keep getting loans. I'm all for default, because the creditors have been getting a massive risk premium. But you can't expect to fool people twice. At some point Greece has to start taxing in addition to spending.

By: Noisy Pink Bubbles

Noisy Pink Bubbles — Sat, 14 Mar 2015 09:36:33 -0800

I wonder if the purpose of this interview is to bolster Greece's negotiating position with the ECB and its members A negotiated exit is not a new political position for Lapavitsas. Even if it was, I doubt the Troika members are looking to small-distribution American socialist magazines to see which way the wind is blowing (some of them might not even be literate in English)! My reason for posting this interview was not that it is a bold original position but, rather, that it is a thoroughly explored position which gives a sense of what the mood is in Greece on the SYIRZA left (and, I might mention, in other political groupings like ANTARSYA) right now.

By: TheophileEscargot

TheophileEscargot — Sat, 14 Mar 2015 11:20:39 -0800

Very interesting and detailed article, thanks for posting. Good to see a sensible discussion of Marxist economics without either fits of the vapours at the M-word, or hissing denunciations of heretics who think that a hundred and fifty years of developments might mean adapting something. I think the Yanis Varoufakis How I became an erratic Marxist article has been posted before, but it's interesting and worth a read. I also stumbled across this 2002 Metafilter discussion of the Eurozone. I think a few commenters deserve credit for pointing out problems, but despite the hindsight that's everywhere now, most people seemed pretty optimistic.

By: Rustic Etruscan

Rustic Etruscan — Wed, 01 Apr 2015 21:13:28 -0800

The New Yorker: What Austerity Looks Like Inside Greece

Two months on from the election, the government's pledge to address what Tsipras has repeatedly called a "humanitarian catastrophe" is colliding with the stipulations of Greece's creditors, who continue to say that austerity measures are necessary for the country to regain solvency. Last week, the European Commission, one of the "troika" of institutions that oversee the bailout and austerity program, warned against putting forward a Syriza bill intended to provide free electricity and food stamps for cash-strapped households. (Under the terms of the bailout, which was extended by four months in a deal signed in February, Athens must get approval for any anti-austerity measures.) For Syriza to stick to its campaign promises, it would have to contravene the rules of its bailout, which could catalyze a series of reactions that would ultimately force Greece out of the euro. Despite growing dissent in the party's hard-left wing and its activist base, most Syriza leaders, as well as most of the public, oppose an exit because of the economic troubles it would provoke, at least in the short term. So the impasse won't be solved anytime soon. For the time being, though, the wave of ebullience brought about by the election has yet to subside. Athens hums with optimism, and the belief that an escape from the crisis is finally possible. Ask around in the city's crowded cafés, and you'll hear what has become something of an unofficial mantra about Syriza: "Even if they do ten per cent of what they say," Alexopolous told me, "they'll change Greece forever."

By: Noisy Pink Bubbles

Noisy Pink Bubbles — Fri, 03 Apr 2015 09:49:11 -0800

Greece draws up drachma plans, prepares to miss IMF payment (in other financial news: Emerging markets: The great unravelling)

By: Noisy Pink Bubbles

Noisy Pink Bubbles — Sun, 05 Apr 2015 16:17:28 -0800

Greece plan to release 3,500 illegal immigrants from asylum centres sets it on a collision course with Europe