I always had trouble with faith, in everything and especially politicians (in Greece and abroad). At the end of 2014 though I tried to believe that things could be different. I tried to believe that Syriza could bring about some change for the better in Greece.
Having researched and written about the Greek crisis since the very beginning, I came to the conclusion that the orthodox advice of austerity would lead to 20 years of stagnation. This felt excessive in 2009-10, but look at us now, already 5 years into a crisis worse than the Great Depression. Is it too much to think that doing the ‘right’ thing as our lenders advise us to do will lead to another 5 years of this and then another 10? Oh yes, the Troika will argue, but look at Ireland. Mr Dijsselbloem has no trouble pointing to the successes of other states that kept up with the programme. Sure, but ‘success’ is a fluid concept. On a neoclassical measure Greece too could succeed this way, but you wouldn’t want to live there.
The conclusions of my work and my call for allowing democracy to determine economic governance meant that I had to support Syriza in the January election. Reading the works of Tsakalotos helped in explaining the European commitment of Syriza’s leadership and offered some balance to the Grexit desires of the left factions (and authors like Lapavitsas). I felt at the end of 2014 that the time was right for Europe to rethink austerity and that a push was needed for a relaxation of the programme. This push could well have come from a left government in Greece that would act as a focal point for anti-austerity voices from across the continent. Syriza (at least in its official versions) is pro-european and pro-euro, but anti austerity and recessionary programmes. Who can argue with that? All major economists in the world agree.
I supported Varoufakis in his European Tour in the first couple of weeks after the election. It was necessary to explain to the European political elite, and the public, that the programme was not working for Greece and why it could not work. Even though the super-star style was not great, it helped generate some media buzz that brought the issues to wider public attention.
Where things started to go wrong for me was the 20 February agreement. It was obvious that a bridge programme was needed for Greece to deal with the liquidity problem. Repayments to loans were continuous and Greece had not received any bailout funds since the summer of 2014, so something had to be done. It would not be entirely consistent with the Thessaloniki programme, but no-one expected it to be. A comprise is that -a compromise-. Everyone gives a little and everyone lives to fight another day. In February there was still some desire in Europe to ameliorate the programme, without deviating from its main objectives. Syriza and Varoufakis were right to ask for major amendments, but it quickly became clear that this would not happen. A key reason was the lack of support from other Periphery nations. Why did they not support Varoufakis? It is quite simple in retrospect: acknowledging that something different to austerity was possible, would undo the elites in Ireland, Portugal, Spain that pushed austerity as the only option for reform. Varoufakis could not hope for assistance, and this was one of the major mis-calculations of the European-leaning team at Syriza.
After February though Syriza committed a series of cardinal mistakes (of which I present the main 5) that have caused me to lose faith in them and have brought Greece to the brink of default (and possibly worse to come).
1. Varoufakis failed to present a credible list of measures.
Relying instead on constant calls for a grand ‘political’ bargain Varoufakis progressively lost support in the Eurogroup by a) excluding monitors, so that the lenders have no independent view on what is going on and b) presenting partial, unlikely and fiscally dubious proposals (including the farcical secret tax inspectors and online gambling tax schemes). These negotiations are in essence technical and there is no desire from anyone on the lender side to reach political agreements ignoring the details.
2. Varoufakis continued to tour and preach.
Even after it became obvious that no-one was convinced by Varoufakis analysis, he kept at it, touring the world, making speeches and writing about it on his blog. The problem here is that Varoufakis is almost 100% right in his analysis, but very wrong on charting a route to success in practice. In the process he alienated almost everyone, leading to his eventual side-lining.
3. Syriza declared war on the Germans
A momentous mistake has been linking the bailout negotiations to the War Reparations discussion. This was felt necessary by Tsipras in order to maintain a combative front internally and appear to fight tooth and nail in the face of (primarily) German resistance. It has however been incredibly foolish and has lost the support of public opinion in Germany. Almost all interaction I had with German citizens through my work has brought up the issue of the War and the unfairness (in their view) of blaming Germany who is trying to help now for the crimes of the Nazis. Of course I do not think Germany is trying to help at all, and I also think that there is an open legal dispute on reparations. What I am saying though is that this was the wrong move at the wrong time.
4. The self-defeating blackmail
I have written before on this blog about the utter stupidity of a referendum on Grexit. Launched as a ploy by Tsipras to blackmail the lenders, it soon became obvious that a referendum would be disastrous economically, impossible legally and dangerous politically. The whole idea collapsed when none other than Schaeuble himself endorsed it!
5. The internal default
The liquidity situation has become so critical that the government has had to turn out the pockets of the entire public sector and state sponsored enterprises to get together the funds to pay pensions and public sector salaries. This hides the internal default that is taking place. There is anecdotal evidence of state suppliers, contractors, various types of employees going unpaid. While Syriza is preaching against the lenders vowing to default on the ECB and the IMF to protect the Greek workers it is already failing to pay large proportions of people dependant on state disbursements. This will become very noticeable soon and may trigger all sorts of unpleasant responses. I wonder, is it a good idea to avoid a credit event, yet spark a run on the banks if people panic?
The conclusion of all this is that Syriza has squandered its chance and brought the country to the edge of oblivion. I hate to say this, but this ended up playing out like that horrible election ad of New Democracy where the negotiations fail and all hell breaks loose. There are no options left (in any case no good ones, if there ever where any). A deal is needed NOW. Am I a traitor for suggesting this? I don’t care what the Syriza trolls, or German hausfrau think. We need to face reality: a default and collapse of the banking system (with or without Grexit) will bring horrors on the Greek population. This needs to be avoided at all costs, unless Prof Lapavitsas has a plan for Grexit that can avoid the interim 10 years of chaos (before things start getting better – in theory).
Parading the ‘holy bones’ of Agia Varvara with state sanction will not do!