The advocates of ‘pride’, ‘resistance’, ‘honour’ and such like (even if it leads to ‘rupture’) know not what they do, nor what they speak of.
A common response to my resistance to the “Kougki” rhetoric of the left in Greece (Kougki meaning blow it up in pride, rather than capitulate) is that I don’t understand how bad it is in Greece.
I fully understand how it is in Greece and what a new ‘memorandum’ will bring. I have written about it aplenty. I have written a whole book on how undemocratic and shortsighted and damaging neoliberalism and austerity are.
Yet there is something that sets me apart from the revolutionaries of Syriza. Revolutions are built on the corpses of existing people to benefit an abstract future generation. I care about the people living in Greece now, get it? The people who will need to survive the first post-euro year or two. I agree in a way with Lapavitsas when he says that the growth prospects of Greece would be better after Grexit. They will be, but the ‘better’ will be a long way off.
Let’s talk then about what is to happen in June if Greece starts defaulting, first to the IMF and then more generally.
If Greece does something that is classed as a default in ANY of its contracts this will trigger cross default clauses in all other agreements. This means that selective default is not possible on the kind of debt that Greece’s creditors now hold. Will failing to pay the IMF on 5.6.15 have this effect? Not immediately, but if the payment is not made within a month, then probably.
What happens then? The key issue is liquidity and bank capitalisation. The advocates of default claim that if Greece doesn’t pay the Troika, then no problem, there will be money to spend internally. Wrong! Greece still has a primary surplus (it seems) but such surplus cannot be used to capitalise the banks, it isn’t enough! If support is lost from the ECB as may well happen post default, the banks will collapse due to lack of capital to fund outflows.
People often ask whether Greece can default yet stay in the euro. If ECB turns off the ELA tap, then the banks close down. What will Tsipas do? Two options exist: 1) nationalise the banks and bail in depositors. All deposits gone, or a Cyprus style haircut. Anyone fancy that? It may not even be enough. Bye bye to everyone’s money. 2) print own money which means of course Grexit. And what’s wrong with that? Paying for your supermarket shopping 40-50% more after devaluation is what. Fancy paying for the baby formula (now €20 for what I pay £8.50 in London btw) the equivalent of €50?
But the ECB might not stop ELA, it may wish to protect citizens even if the state has defaulted? This cannot happen as the inevitable bank run will render the banks insolvent and cut them off ELA anyway.
To get to the chase. How does the left faction and all those prideful Greeks deal with all this? Come on Mr Lafazanis, let’s hear it. What will the government do with the banks? How will it buy essentials, how will it pay salaries and pensions post default? Time to cut the nonsense about Greece’s geopolitical significance and talk specifics. Do you have any clue what you are about to unleash?