European Union


Initial Thoughts on the Results of the Greek Elections and Lessons for Ireland

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The Greek Elections’ Results

The number of the people that did not vote is the largest one in the elections history so far. This is to do with the capitulation of Tsipras, and the enforcement of the left TINA, as well as with financial restrains for the voters that had to travel.

Syriza’s victory was not based on ‘hope’ or any expectations for a more socially just governance. It was a personal victory for Tsipras, which tapped into the emotional “he’s a good kid, the EU were hard on him, at least he negotiated hard” on one hand, and the more moderate, centrist “Now that he got rid of the left burden, he will be more sensible and the government will be more stable” on the other. The new left TINA, in particular, played a role in reversing the radicalisation of large groups of the Greek population (especially the young, and working class urban areas), and appealed to the collapsing middle classes. “Stability” has entered Syriza’s vocabulary.

Tsipras’ victory was also based on the ideological and organisational defeat of the left alternatives. KKE’s stance in the memorandum sounded like a broken clock that tells the time correctly twice a day, but they failed to support and express the OXI. LAE (Popular Unity) ran for the elections attempting to express the OXI, while at the same time attempting to revive Syriza’s -in my view bankrupt- programme. However, their focus was on humourous TV spots, rather than the programme itself and the fact that it was mostly a party/front of prominent ex Syriza MP’s that have not addressed what their role in the Syriza government was turned a lot of people off. Antarsya-EEK, going through a split (with ARAN and ARAS siding with LAE), got a few thousand votes more than they did in the January elections. However, their programme needs to be substanciated. It also has not reached the wider population (partly due to the small organisation and lack of access to the media) and they failed to present it in detail. In this sense, Antarsya is seen as a useful force for the struggles, but not good enough as a parliamentary force.

A separate mention to the declining votes of Golden Dawn is necessary here. Golden Dawn did not manage to grow in an environment, which is characterised by disappointment on one hand, and the refugee crisis on the other. Even though their votes were higher than last elections on the Islands of Kos and Lesvos, they were not significantly higher and they were mostly votes that came from other right wing parties, such as New Democracy. It is also important to stress that dispite their attempts they have not managed to build a fascist movement on the streets as their presence, on those islands too, is very limited and they are outnumbered by the activists standing in solidarity with the refugees.

In all, the 2.86% (155000 votes) of LAE. the rise of votes to Antarsya-EEK (by 4200 votes), as well as smaller maoist and troskyist parties, such as the ML KKE-KKE (ml) coalition and OKDE, and the stability in the votes of KKE would not allow anyone to say that the Greek left is dead and buried, far from it. This is evident especially in comparison to the losses of votes for Syriza, and the establishment parties. Syriza lost 320000 votes, while New Democracy lost 192000,To Potami lost 151000, Golden Dawn 8800.

Regardless of the voting outcome, I believe, discussions and other collaborative efforts from a movement-building perspective between LAE and Antarsya-EEK and other anticapitalist organisations-parties will take place the following period, as the struggle against the 3rd Memorandum will start unfolding.

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Cameron’s Swarm is Europe’s Solution

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David Cameron labelled them a ‘swarm’. Thousands of them have died in the Mediterranean.  Border fences are being built to keep them out:  Hungary, Spain, Bulgaria, Calais.  The Slovakian Government will take a handful of them but only if they are ‘Christian’ (apparently they don’t do Muslims or Mosques).  And all the while millions are being spent  on aperverse mini-stimulus – as ‘defence contractors, outsourcing companies and security forces find willing buyers for their security-based “solutions”, bringing new surveillance systems, patrol vessels, co-ordination centres and detention facilities to the market with little scrutiny or due diligence.‘  A rational political and economic response gives way to militarisation.

This is what has been labelled the ‘migration crisis’ – as hundreds of thousands are seeking refuge, asylum, work and a better life while risking oppression and even their lives to come to Europe. 

Much has been written on this subject – including this insightful analysis by Dr. Vincent Durac.  I don’t intend to survey all the issues or appropriate responses as this crisis has many origins and dynamics and will require substantial doses of enlightened national policy combined with international cooperation.  But here are a couple of thoughts.

First, the men, women and children that make up Cameron’s swarm – they are not a problem, they are a solution.  They are a solution to Europe’s ageing demographic, skill base and employment crisis.

A key part of this is the fact that Europe is growing old.  Using the EU’s main scenario demographic projection, we see that the EU’s total population will rise by 17 million while the number of over 65s will rise by 54 million.  Working age population will fall by 34 million.  12 of the 28 EU countries are actually projected to experience an overall fall in their populations.  With a higher proportion of elderly and a falling number of working age men and women, Europe is set to suffer a slow age crash.

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Strengthen Ties with the People and Maneuver Cleverly: The Tasks of the Greek Radical Left

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The last few weeks have seen a number of crushing developments in Greece. Especially the Greek referendum and the signing of a new memorandum by the SYRIZA government are historical events which will strongly influence not only the future of the Greek but of the European Left as well. They will also influence the further course of the EU and the Eurozone, which came on the verge of dissolution and showed by the way it dealt with the crisis its true class nature.

SYRIZA’s signing of a new memorandum cannot be called otherwise but a heavy, unacceptable compromise and a capitulation. This is all the more true, since the Greek people, with its decisive “No” had expressed a massive support for a break with the memorandum policies in the Greek referendum just a week ago. The SYRIZA leadership, however, and Alexis Tsipras personally, chose to come in line with the spokesmen of “Yes”, the bankrupt bourgeois Greek political forces that supported the previous memoranda and the corrupt Greek and European elites.

This choice of the SYRIZA leadership does not in the least diminish the importance of the daring “No” raised by the Greek people in the referendum. This was a “No” not only to the EU agreement proposals, but the memorandum and austerity policies as a whole. The Greek people stood up against unbearable pressures by the Greek mass media, the parties of the ruling class and the EU leaders and showed, by their stance and vote, that they are ready and willing to support another road and overthrow the austerity policies. This result, unexpected even to the most optimistic commentators of the Left, is a proof of the possibility and a call for resistance of the European peoples, as the only force capable of producing radical change.

The decision of the SYRIZA leadership to compromise at all cost with the lenders must be criticized by all Left activists and Marxists in particular. However, it is essential to provide a serious criticism, which points exactly and explains its mistakes.

A number of ultra-Left forces here in Greece, and perhaps elsewhere too, respond to SYRIZA’s compromise by shouting “betrayal”, arguing it proves the bankruptcy of reformist tactics and the fact that the revolutionary overthrow of capitalism is the only road. However, this kind of criticism misses the fact that the situation in January, when the SYRIZA-ANEL government was formed, was not revolutionary, and it is neither so now. In such a situation it is necessary to maneuver and arguing that focusing on maneuvers and reforms leads to a deadlock, is the wrong way to argue. While this is true on the long run, it does not rule out the necessity to deal seriously with the phases of the struggle when maneuvering predominates and this cannot be done by calling for the immediate application of revolutionary tactics.

In fact, the SYRIZA leadership must be criticized not for maneuvering in general, but for maneuvering badly. It must be criticized for the vacillations and lack of planning it showed during this phase of maneuvers, leading it to a position where it was forced to accept an intolerable compromise. In particular the following points should be noted:

  • SYRIZA lost too much time in meaningless negotiations for months. The dragging on of these negotiations was just a means for the ruling circles of the EU to drive the Greek economy to the present financial suffocation, after exhausting its reserves. The supposed progresses during these negotiations, like the Greek 47 pages proposal, were all sham, a plot intended by the German ruling circles to bring about the present situation.
  • The election of Prokopis Pavlopoulos as President of the Greek Democracy was also an unnecessary concession. It indicated SYRIZA’s leadership readiness for further moves to the Right, when the situation called for cautious moves to the Left.
  • The payment of roughly €8 billion in February-June from the Greek reserves to the EMF was also a step leading to direct capitulation. If the SYRIZA government wanted to base itself on the people, it should have led things to a referendum in February or March, when it had still the means to resist for some time the economic sabotage from the EU. Obviously, if the Greek government had some billions € in reserves this might not suffice to support a break with the EU, but it could help endure for some months a situation with closed banks, etc, and this would put the EU ruling elites under pressure, as the consequences of the protracted instability would begin to be strongly felt by their economies too.
  • Apart from these Right mistakes, the SYRIZA leadership made, in our opinion, a “Left” mistake when it rejected the conciliatory proposal made by Merkel just before the decision for the referendum. This proposal for an extension of the present memorandum for 5 months would have provided the Greek state €15.5 billion for this five month period. It would have been a harsh compromise, including an “evaluation” by the “institutions”. However it would last for only 5 months leaving further options open, while not including the devastating, enslaving conditions of the new memorandum, like the sell-off of public property. During that time the Greek government would build up some monetary reserves from various sources (EU inputs, tourism, taxation etc). Moreover, the end of this five month period would coincide with the parliamentary elections in Spain. A Greek referendum at that time, together with a possible victory of the Left forces in Spain (especially if they are able to unite), would have given a strong thrust to popular movements across Europe.

All this comes to show that, despite all negative aspects, this would have been an acceptable compromise. The reason the SYRIZA leadership failed to take advantage of that opportunity is its fear of the people, together with its illusions about the real intentions of the EU leading circles. As a result it never considered seriously the prospect of a rupture at a suitable moment and of preparing the people for it, but chose to reach a “final” agreement at all costs, falsely hoping it would not be so harsh.

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The defeat of Syriza and Its Implications for the Irish Left

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The EU has enforced a humiliating surrender on Greece.  The Syriza government that was elected to end austerity has been forced to implement it.  The meaning of Wolfgang Schauble, the German Finance Minister’s infamous phrase ‘we can’t possibly allow an election to change anything’ is now clear.

The scale of the brutality is astounding.  To take just one example:  there will be a ‘significantly scaled up privatisation programme’ to generate a fund of €50 billion. This fund will then be effectively controlled by the EU to ensure that bank debt and bondholders are paid off.  Up to now €7 billion worth of privatisation has been pushed through by other governments in Greece.

The Irish government helped humiliate the Greeks. The former Greek Finance Minister, Yanis Varoufakis, has stated that Ireland – along with Spain and Portugal – were among his ‘energetic enemies’. He explained why,

the “greatest nightmare” of those with large debts – the governments of countries like Portugal, Spain, Italy and Ireland – “was our success”. Were we to succeed in negotiating a better deal, that would obliterate them politically: they would have to answer to their own people why they didn’t negotiate like we were doing.

This attitude became public when the Labour Minister, Alex White, welcomed the ‘fair’ deal. The Taoiseach, Enda Kenny, went further and claimed that, under the deal Greece, would ‘thrive and prosper’

The Irish government tried to invoke an undertone of nationalist rhetoric to bolster its position. ‘The Greeks are looking for more money from us – they should take their medicine like we did’ was the message. But the issue cannot be framed in such terms because the original €7.5 billion that the Greek government requested as a loan was never going to be used to fund public services. It was earmarked to repay previous loans because Greece had been put on a treadmill of austerity from which it could escape.

In 2012 the Troika intervened in Greece to safeguard wealthy private creditors. In return for a haircut on their loans, these investors got EU institutions and the IMF to fund a Greek loan that guaranteed them re-payments. These ‘loans’ triggered further austerity and created the latest crisis.

So the issue was never about Greek people begging from others in Europe. It was about a devious mechanism to make the Greek people pay for debts to wealthy bondholders. Which is precisely what happened the people of Ireland.

The Irish government’s strategy of using ‘quiet diplomacy’ to get  the Irish debt reduced has proved an abject failure. But by backing Germany’s brutal approach, it has copper-fastened debt re-payment from Ireland until 2053.


Stathis Kouvalakis, a member of Syriza, has described the outcome as ‘the most resounding defeat of any leftwing government in Europe after the war’. It certainly represents a turning point in leftwing politics.

Ever since the crash of 2008, there has been an increasing call among activists to forget ‘old’ debates about reform or revolution. Yet the betrayal of Syriza re-opens this very question. To understand the implications for future socialist strategy, it is necessary to analyize the motivations of both the EU elite and the political strategy of Syriza.

For Paul Krugman, the actions of the EU in humiliating Greece are an act of ‘madness’. The assumption that the EU acted irrationally also finds an echo in Varoufakis’ efforts ‘to save capitalism from itself’. He had aimed  to put ‘forward an analysis of the current state of play that non-Marxist, well meaning Europeans who have been lured by the sirens of neoliberalism, find insightful’. In other words, to present a rational case for why austerity policies would harm capitalism. More generally, Syriza’s strategy was premised on the fact that it could persuade its European ‘partners’ to move away from austerity.

Once they came into government, Syriza found that their words literally fell on deaf ears. Here is Varoufakis’s description of what occurred when he spoke to eurozone finance ministers

‘there was point blank refusal to engage in economic arguments. Point blank. You put forward an argument that you’ve really worked on, to make sure it’s logically coherent, and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply.”

There were a number of reasons why it was not possible to even get them to listen.

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Supporting Syriza

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Question: which Eurozone government has 61 percent public support for their position in the Greek bailout negotiations?  Answers on a small postcard.  

Last January Syriza won 36 percent of the vote, which allowed them to enter government as the senior coalition party.  Yesterday, 61 percent of the Greek people supported Syriza’s rejection of the terms laid down by the 18 other Eurozone governments.   There can be no doubting the Syriza Government’s mandate. 

The next week will be crucial in hammering out a deal – if that is possible given the intransigence of the creditors to date.  How can we, in Ireland, provide concrete assistance to the people of Greece?

We can look to the honourable behaviour of the Greek Finance Minister Yanis Varoufakis as a guide. This is not the time, however tempting, to use the referendum result for domestic political purposes.  The Greek people need concrete support.  We should be calling on the Irish Government to take up the following positions in the upcoming negotiations. 

First, we should demand that the Irish Government now engage constructively in the negotiations with Greece:  first, by calling on the ECB to comply with their own commercial mandate and provide the necessary liquidity to allow the Greek banks to open.  In the short-term capital controls and withdrawal limits would have to remain, but re-opening the banks would take the pressure off businesses and households.  Failure to do this is a coercive political act.  Opening the banks should be the Irish Government’s first diplomatic stop.

Second, the key short-term issue is budgetary – allowing the Greek government to run a deficit.  Given the humanitarian crisis and the collapsing of the productive economy, the demand for a primary surplus (i.e. more revenue than expenditure when interest payments are excluded) is not only penal and irrational; for creditors it is the surest way to guarantee that debts will never be repaid.  Greek businesses need space to start growing and employing; fiscal policy should be assisting, not thwarting this.

Third, the Irish Government should support the establishment of a European Debt Conference.  This does not commit any government to a particular position but it at least provides a space, outside the day-to-day politics of the Eurogroup and the EU, to consider medium-term solutions – not only for Greece and the peripheral regions – but for the entire Eurozone.  My own preferred solution would run along these lines, but the Irish Government need not take up any position prior to such a conference being held.

And, fourth, the Irish Government should support the release of structural funds already committed to Greece to kick-start a badly need investment programme.  This could also involve reframing the National Strategic Reference Framework to allow Greek businesses to access the funds allocated to them but denied because of inflexible rules.

These should form the core of any progressive campaign to re-align Irish Government policy:

  • Open the banks
  • Suspend austerity (the first step in getting rid of it)
  • Support a European Debt Conference
  • An investment programme for the Greek economy

The Greek government would still be under strict supervision and required to make progress on reforms:  rehabilitating the tax collection system, ending corruption and patronage, and ending the dominance of oligarchical control over economic sectors.  But this wouldn’t pose a problem for the Syriza government.  These policies already form the core elements of the programme they were elected on.  These reforms will take time and can only succeed when the economy and society are given the fiscal and political space to implement them.  Hard to do much when your banks are closed.

Let’s not demand too much.  The Irish government does not bring the biggest battalion to the Eurogroup.  But it has a potentially influential voice given our experience of a bail-out.  And given the importance of this issue (keeping the Eurozone intact) it is amazing there has not been a parliamentary debate over what position the Government should adopt in these negotiations.  This should change immediately.

The Irish Government should be required to come into the Dail and explain and debate its negotiating position.

We have an opportunity to push the default button.  When Syriza was elected in January, the Eurozone governments should have been relieved: for finally, there was a Greek government that was intent on tackling the issues of reform – corruption, the patronage, the oligarchical controls; reforms which the previous New Democracy and PASOK failed at (or didn’t even try).  That didn’t end well.

There has now been, in effect, a second election in the form of a referendum.  There is no doubting Syriza’s mandate.  Nor is there doubting their continuing commitment to the reform and modernisation of the Greek economy. 

Let’s start anew.  There is still time.  And the Irish government can play a pivotal role in that.

That is the least we should demand of our elected representatives the EU.

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Greece; Deathplace of Democracy

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The word Referendum comes from the Latin referre (to bring back) anddemos is Greek for the people as a political unit; demos is the root of the word Democracy; so a referendum brings a decision back to the people. As representative democracies European States hold elections to choose their governments giving elected representatives a mandate to represent their political choices. The Greek people chose Syriza to represent them in the broken institutions of a European Union in crisis; the Greeks chose to end Austerity. If representatives can’t make a political decision, because it is contrary to their mandate, the decision can be brought back to the demos in a referendum; or at least that is how things used to work.

Welcome to post-crisis EU democracy.

Since 2009 and the financial crisis in the EU, decision-making has been deferred to a financial triumvirate, the Troika, and to the Eurogroup. In latin triuviratus means unofficial coalition of power. Julius Caesar, Pompey and Crassus were the first triumvirate. When the Senate told Julius Caesar to step down as military leader of Rome, he crossed the Rubicon. He proclaimed himself “dictator in perpetuity”. Triumvirates are not known for love of democracy.

The Eurogroup works with the Troika’s mandates (called Memoranda of understanding). The group is democracy light, or rather, it used to be. This flexible ad-hoc ‘group’ has one representative (a finance minister) for each nation in the Euro currency. Neither Denmark nor the UK are members because they don’t use the Euro. As and from Monday the 29th of June, neither is Greece.

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Irish Living Standards Fall Further Behind Europe

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In 2014, GDP increased by 4.8 percent – as often said, the fastest growing economy in Europe.  In 2014, employment increased by 40,000.  In 2014, the recovery started.

In 2014, living standards fell even further behind the EU-15 average.

Eurostat measures living standards through actual individual consumption.  Unlike private consumption, or consumer spending, actual individual consumption

‘ . . . encompasses consumer goods and services purchased directly by households, as well as services provided by non-profit institutions and the government for individual consumption (e.g., health and education services).’

It, therefore, measures consumption not only of goods and services, but public services provided by the government.  As Eurostat states:

‘Although GDP per capita is an important and widely used indicator of countries’ level of economic welfare, (actual individual) consumption per capita may be more useful for comparing the relative welfare of consumers across various countries.’

In short, actual individual consumption can be treated a proxy for living standards.  So what is the relative welfare of consumers (i.e. everyone) across Europe?  The following captures the relationship of real (after inflation) living standards in purchasing power parities between EU-15 countries and the EU-15 average.

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Syriza’s Moment of Truth


Syriza came to power on the back of an impossible pledge – namely, to end austerity whilst keeping Greece within monetary union. The party’s pre-election Thessaloniki Programme promised to write-off most of the country’s €330 billion public debt through a European Conference. They also promised €4 billion in public investment, the creation of 300,000 new jobs and a rebuilding of the welfare state.[1] Politically, Syriza is committed to remaining within European Monetary Union (EMU) in an effort to democratise it. As a heterogeneous organisation with roots in Euro-communism, Syriza wants to move towards socialism through the existing institutions of the European Union. Instead of setting out to smash the capitalist state and exit the euro, they are trying to prise them open from the inside out. This is not an insurrectionary strategy based on mass struggle and workers councils. Rather it is one that emphasises the building of a dominant (hegemonic) block with parliamentarians in the vanguard of the struggle. One of their leading thinkers, Stathis Kouvelakis, recently defined it as “seizing the state from outside and inside, above and below”.[2] Economically, their policies are best described as left-wing Keynesianism. Here the idea is to use the state to engage in public investment projects whilst redistributing resources through progressive taxation. If successful, the results of this process should be twofold. Firstly, the great humanitarian crisis should start to be relieved. Secondly, the economy should be freed from the current spiral of debt and deflation through higher levels of ‘economic demand’. This strategy basically amounts to saving capitalism by ending neoliberalism. In the words of Greek Finance Minister, Yanis Varoufakis, we must remember “capitalism’s inherent failures while trying to save it, for strategic purposes, from itself”.[3]

The problem for Syriza is that none of this is remotely compatible with the intentions of European capitalism. Since the early 1980’s, the European project has been hardwired with neoliberalism to ensure that profits and political power are accumulated by capitalist elites. Syriza may have costed their proposals in line with EU rules, but they are not taking cognisance of the ‘real politik’ of the European project. Even if they wanted to, the European elites could not allow Keynesian expansionary policies. European capital has worked hard to institutionalise neoliberal policy making, with the likelihood of them suddenly changing tack negligible at best. Be-that-as-it-may, the EU elites are actually out to smash their opponents. Syriza’s election represented genuine hope for millions of people across the continent. If they are seen to be successful, the effects on worker’s organisations in other parts of the Eurozone would be transformative. For this reason, the Troika are determined to crush Syriza regardless of the wider effects on Greek society. Focusing on changing the EU from the inside out therefore becomes an extremely dangerous strategy, particularly if Syriza are not mobilising the Greek working classes in sufficient numbers to support them.

What has happened since the election?

From the outset Syriza presupposed that they would be able to negotiate. Specifically, they assumed that support for expansionary policies would be forthcoming in other depressed regions of the Eurozone (France and Italy in particular). Failing this, they believed that the capitalist elite could never afford to let them leave (a so-called Grexit). Unfortunately, the Troika have so far had other ideas. During the first weeks of their tenure, Syriza immediately found themselves on the back foot. First off, the European Central Bank blocked liquidity for the Greek financial system. Thereafter, the Troika strategically withheld €7.2 billion from a previous bailout to force Syriza into another memorandum. Greek capital has also played its part, evacuating billions from the country’s banks, whilst steadfastly refusing to pay their taxes. Safe in the knowledge that the Greek government would soon run out of cash, the Troika have been incredibly aggressive. Meanwhile, Syriza have crossed many of their previously stated ‘red lines’. On February 20 they signed a four month extension of the hated memorandum, effectively relinquishing debt write-down as a policy position. Debt reduction remains an aspiration, but has quietly been dropped as a red line issue. The problem with this is that Greek debt currently stands at a whopping 180% of GDP. Without some way to write this down, Syriza will be forced to implement the austerity they were elected to reverse. Piraeus Port has already been earmarked for privatisation, despite assurances that this would never happen. Syriza have also accepted neoliberal labour market reforms, delayed payments to struggling pensioners and cancelled payments to low paid workers.[4]

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The EU Fiscal Rules: Not Fit for Purpose

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What would you say about a system for your car that was sold on the basis that it would alert you to an upcoming crash?  A good idea, no?  Except that the system only warns you after the crash.  There you are, in a massive, multi-car pile-up, bleeding all over the M50 – and only then does the system kick in:

‘Warning, warning, you are an imminent danger of having been in a crash – warning, warning.’

You’d be right to sue.

That’s how the EU fiscal rules operate:  it purports to provide an early warning system against economic crash but, in fact, it does no such thing.  We should return it to the manufacturer, unopened, postage due.

Remember the Fiscal Treaty campaign?  It was claimed by the proponents that we needed these rules because it would prevent things like the Great Recession and, in particular, the Irish crash of 2008.  We needed these rules because we Irish are irresponsible – along with the other PIGS states.  If only we had these rules we could have escaped the crash, the debt crisis and the recession – which was, of course, brought on by our fiscal irresponsibility.  That was the narrative. 

But the cold reality is that were these EU fiscal rules in active operation they would not have seen, predicted, never mind warned of the impending crisis.  It would have been as useful as a diviners’ rod.  How can we know this?  Because the EU Commission, the fairground purveyor of these miracle rules, tells us so.

The rules focus on the structural deficit.  This measures the deficit when all the cyclical components are stripped out – that is, all the boom and the bust parts of the economy.  It purports to tell us what the deficit would look like if the economy were on an even keel. 

If so, then the EU rules should have been blaring warning sounds with red lights and sirens in Ireland in the years before the crash.  Everyone knew (if only in private) that during the period of 2000 – 2006 Irish public finances were dangerously over-reliant on revenue from the speculative boom.  Everyone – except the EU Commission and their rules.

 Let’s look at the estimate from the EU Commission itself.  Remember:  if the figure is in plus, that means we were fiscally responsible, our public finances were robust, and we were almost German-like when it came to prudent budgeting. 


Oh, my:  according the EU rules and methodology we had extremely sound public finances.

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Greek Myths Retold

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This article originally appeared on Socialist Economic Bulletin on Friday the 24th of April. 

The world economy is not strong and the President of the United States is sufficiently concerned about new shocks to it that he recently met the Greek Finance Minister to urge ‘flexibility on all sides’ in the negotiations between the Syriza-led government and its creditors. US concern is fully justified. 

In any attempt to reach agreement it is important both to have an objective assessment of the situation and to understand the perspective of those on the opposite side of the table. In Mythology that blocks progress in Greece Martin Wolf, the chief economics commentator for the Financial Times argues that negotiations to date are dominated by myths. He demolishes some of these key myths in turn: that a Greek exit would make the Eurozone stronger, that it would make Greece stronger, that Greece caused the crisis driven by private sector lending, that there has been no effort by Greeks to repay these debts, that Greece has the capacity to repay them, and that defaulting on the debts necessarily entails leaving the Eurozone. 

Together, these provide a useful corrective to the propaganda emanating from the Eurogroup of Finance Ministers and ECB Board members. Some of this is slanderous, in repeating myths about ‘lazy Greeks’ (who have among the longest working hours in Europe). Much of it is delusional, based on the notion that Greece can be forced to pay up, or forced out of the Euro without any negative consequences for the meandering European or the world economy. 

Austerity ideology

A genuine belief in a false idea, or a demonstrably false system of ideas constitutes an ideology in the strict meaning of that word. Inconvenient facts are relegated in importance or distorted, and secondary or inconsequential matters are magnified. Logical contortions become the norm. 

All these are prevalent in the dominant ideology in economics, which is supplemented by another key weapon, the helpful forecast. In Britain for example, supporters of austerity argued it would not hurt growth and the deficit would fall. Now there is finally a recovery of sorts, they argue austerity worked, ignoring all the preceding five years and the unsustainable nature of the current recovery (and the limited progress in reducing the deficit). 

For Greece the much more severe austerity and its consequences means that supporters are still obliged to rely on the helpful forecast to support their case. The Martin Wolf piece includes a chart of IMF data on Greek government debt as a percentage of GDP, which is reproduced in Fig.1 below. 

The IMF includes not only data recorded in previous years but its own projections for future years. From a government debt level of 176% of GDP in 2014, the IMF forecasts a fall to 174% this year and 171% in 2016 and much sharper declines in future years. The IMF has also forecast an imminent decline in Greek government debt ever since austerity was first imposed in 2010, which has not materialised. 

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What would Europe Win from a Grexit? ‘Peace and quiet. (Pause…) For a period’

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Two recent interviews with Marxist economist, and now Greek MP Costas Lapavitsas are worth have a look at, particularly as they outline his view of the strategies that Syriza need to follow during the engineered ‘breathing space’ created by recent negotiations with the European institutions. He also outlines how a strategy he has long advocated, a Greek exit from the Euro, should be managed.

The first, published on the 12th of March in Jacobin magazine. The interviewer was Sebastian Budgen, an editor at Historical Materialism.

And Varoufakis himself explicitly located his position within a kind of Keynesian framework, and is allied with people like James Galbraith who are openly Keynesians.

Let me come clean on this. Keynes and Keynesianism, unfortunately, remain the most powerful tools we’ve got, even as Marxists, for dealing with issues of policy in the here and now. The Marxist tradition is very powerful in dealing with the medium-term and longer-term questions and understanding the class dimensions and social dimensions of economics and society in general, of course. There’s no comparison in these realms.

But, for dealing with policy in the here and now, unfortunately, Keynes and Keynesianism remain a very important set of ideas, concepts, and tools even for Marxists. That’s the reality. Whether some people like to use the ideas and not acknowledge them as Keynesian is something I don’t want to comment upon, but it happens.

So I cannot blame Varoufakis for that, for associating himself with Keynesians, because I’ve also associated myself with Keynesians, openly and explicitly so. If you showed me another way of doing things, I’d be delighted. But I can assure you, after many decades of working on Marxist economic theory, that there isn’t at the moment. So yes, Varoufakis has worked with Keynesians. But that isn’t really, in and of itself, a damning thing.

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Syriza’s Only Choice: A Radical Step Forward

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An article by Spyros Lapatsioras,[1] John Milios[2] and Dimitris P. Sotiropoulos[3]

 “One must know how to employ the kairos of one’s forces at the right moment. It is easy to only lose a little, if one always keeps foremost in the mind the idea that unity is never the trick, but the game.” [4]

1. Introduction

The transitional “bridge Agreement” of the 20th of February is a truce intended by the Greek government and welcomed by the other side (the European “institutions”). Within the truce period (the next four months), the conditions for negotiating the next agreement will be shaped. This could mean that everything is still open. However, that is not true for two reasons. First, the very transitional agreement changes the balance of power. Second, the “hostilities” will continue in the course of the next four months (i.e. the review of the commitments and the re-interpretation of the terms by each party).

2. The agreement of the 20th February: A first step on slippery ground… 

2.1 Negotiation targets

In the first substantive phase of negotiations at the Eurogroup of the 12th February, the Greek government sought an agreement on a new “bridge program” stating that it would be impossible to extend the existing program on the grounds that it has been rejected by the Greek people:

  1. The “bridge program” would not involve conditions, reviews and so on, but should be an official manifestation of the willingness of all parties to negotiate without pressure and blackmail and without any unilateral action.
  2. In the above context, Greece would forgo the remaining installments of the previous program, with the exception of the return of the 1.9 billion euros that the ECB and the rest of Eurozone’s national central banks gained from the holding Greek bonds (programs SMP and ANFA). Greek authorities could issue treasury bills beyond the limit of 15 billion euros to cover any liquidity emergencies.
  3. At the end of this transitional period: (a) Greece would submit its final proposals, which according to the program of the government would include a new fiscal framework for the next 3-4 years and a new national plan for reforms; (b) the issue of a sovereign debt restructuring-reduction would come to the negotiating table.

The German government and the “institutions” (EU, ECB, IMF) came to the negotiations with the position that Greece had to request a six-month “technical extension” of the existing program – renamed as the “existing arrangement” – to enable its successful completion. 

2.2 The outcome of the negotiation

The agreement of the 20th of February includes a four-month extension of the “Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments.” The extension of the Agreement (“which is underpinned by a set of commitments”) means: (a) evaluations by the three “institutions,” (b) commitments and conditions, (c) scheduled installments as they appear in the previous Program, subject to a positive evaluation, (d) return of the profits from holding Greek bonds by the ECB and national CBs, but subject to a positive evaluation by the “institutions” (even given the “independence” of the ECB).

In short there is a rejection-withdrawal of the Greek government’s negotiation targets (1) and (2). In addition, there is no explicit reference to how the government will cover its short term financing needs (e.g. issuing treasury bills to cover bond redemptions, interest payments and other possible emergencies) until the completion of the assessment. In this regard, the reference to the independence of the ECB may imply its “discretion” in assessing the extent to which the Greek government responds positively to the “commitments” that accompany the extension of the agreement (something which undoubtedly will complicate any “interpretative” attempts in relation to the agreement on the part of Greek government).

At the same time, the February 20 Agreement includes the statement: “The Greek authorities have also committed to ensure the appropriate primary fiscal surpluses or financing proceeds required to guarantee debt sustainability in line with the November 2012 Eurogroup statement.” This means that the Greek government refrains from the target of debt restructuring-reduction and adopts the sustainability plan based on debt repayment mostly through primary surpluses. This implies the rollback from point (3b) of its initial negotiating package.

What the Greek government has won (aside from the mere change in terminology, about which there was intense debate) is:

  • A. Part (a) of section (3) of its initial suggestions, namely the right to propose reforms to the “institutions” for approval with regard to fiscal consolidation and growth. The policy measures agreed by the previous government (reduction of pensions and increase of VAT in the islands) were thus taken out. Both sides agreed to give particular emphasis to the “overdue” fight against corruption and tax evasion, public sector efficiency, improving the tax system, etc.[5]
  • B. Further negotiations on the size of the primary surplus for 2015. Instead of the previously agreed 3% of GDP, the new agreement leaves open the issue of a lower primary surplus for 2015: “The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.”

It is clear that the new agreement is a truce, but truce is by no means a tie. The agreement is a first step on slippery ground. The Greek government may have gained time, but the political landscape seems quite tough, having minor similarities with the initial minimum negotiation targets set by the Greek side on the 12th February.

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Greece – The Rocky Road Ahead

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It’s been a week now since the guns fell silent between Greece and its creditors and a 4 month armistice was agreed – so what are we to make of the outcome? Yes it’s true that Tsipiris, Varoufakis and Co. were not able to deliver on one of their two main election pillars – debt forgiveness – but does that necessarily make it the complete capitulation that some have said? Would an honourable defeat be a more accurate appraisal? Or could it be that the agreement was simply a crucial exercise in buying time and space?

These are certainly valid questions but unfortunately valid questions don’t always elicit easy answers. For the position we take on this temporary agreement is in many ways determined by how we viewed the bargaining power of Syriza relative to the European establishment from the outset. In other words; hows we perceived that power differential helps determine what range of outcomes we would have considered possible.

So for example if you thought that in the negotiations Syriza held the trump card and all that was required was calling the Eurogroup’s bluff and threatening the nuclear option (Grexit) then you would see the agreement as a relative failure largely attributable to a leadership that lost its nerve. Thus all that was required was different players made of tougher stuff.

If on the other hand you believed that Syriza was negotiating from a much weaker position given that they were seemingly less prepared (and more scared) of Grexit than their interlocutors, then you could rationalise the agreement as best that could have been bargained for whilst providing the necessary breathing room to prepare a potential Grexit strategy.

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The Money Exists for Investment in Greece

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This article originally appeared in Socialist Economic Bulletin on Friday, the 27th of February

The fraught negotiations between the new Greek government and representatives of the EU institutions are likely to be prolonged. They have centred to date on Syriza’s efforts to find room to alleviate some of the worst effects of austerity and address what is called the ‘humanitarian crisis’.

This is entirely justifiable given the depth of the fall in living standards with widespread malnutrition in Greece, a health crisis, hundreds of thousands of homes cut off from electricity supply and other ills.

Policies aimed at income redistribution can help in this key area, so it is entirely correct to attempt to increase tax revenue from the rich in order to ameliorate the effects of poverty on the poor. But any sustainable improvement in living standards must be based on increasing the productive capacity of the economy which requires investment. Any transfer of income will be a one-off effect if income does not grow. Yet the austerity measures imposed by the Troika (EU Commission, European Central Bank and IMF) and the existing burden of debt interest payments prevent the government from investing and provide a further disincentive for the private sector to invest of its own volition.

Domestic sources of investment

There are two key sources of funds that could be tapped for investment; domestic and international.

Domestically the Greek business class claims the highest share of national income in the whole of the OECD. In 2013 (in nominal terms) the Gross Operating Surplus of Greek firms was €102.2bn from a GDP total of €182.4bn. This profit share in GDP of 56% is way in excess of the customary levels in the OECD. By comparison the German profit share in the same year was 39.3%.

A high profit share is not itself directly harmful to growth and prosperity. If firms were investing profits the productive capacity would be rising rapidly and new high-quality and high-paid jobs could easily be created. But the opposite is the case in Greece, which also has the lowest rate of investment as a proportion of GDP in the whole of the OECD. Again in nominal terms investment (Gross Fixed Capital Formation) in Greece in 2013 was just €20.5bn or 11.3% of GDP. By comparison the German proportion of investment was 19.8%.

This is not to hold up the German economic model to be emulated. Like all the Western economies (including Britain) the rate of investment in the German economy has slowed dramatically over several decades, which is the cause of the ‘secular stagnation’ of the Western economies over the same period.

Even so, the disparity in the profit rate and the investment rate is exceptional in Greece. The proportion of uninvested profits in Germany is equivalent to 19.5% of GDP (profits equal to 39.3% of GDP minus an investment level equivalent to 19.8%). This level of uninvested profits is very high by historical standards. But the proportion of uninvested profits in Greece is 44.7% (profits of 56% of GDP minus investment of 11.3%). The nominal level of profits and investment is shown in Fig. 1 below.

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