Greece’s choice: save the people or the banks?

The recent rise to power of the left wing party Syriza with Tsipras as Prime Minister has renewed expectations about the paths that the country can take to resolve her crisis. Tsipras’s promise to put an end to the extreme measures generated favourable expectations, but the question that arises is how far can Greece go without definitively breaking the supervision of the Troika, declare a debt default and leave the Eurozone. In order to analyse these options we must briefly review the roots of this crisis and what the consequences of the bailout policies applied until now have been.

It’s true that even before the international financial crisis, Greece was accumulating a deficit and an unsustainable level of debt which the general crisis ended up detonating. It’s true that the losses in Greek finances forged over time by different governments has had a lot to do with corruption and an excess of spending. It’s also true that levels of competitiveness in the Hellenic economy don’t correspond to the living standard of some sectors of the population and so they financed themselves with debt.

But it is also true that when all of this happened, it’s because on the other hand there was someone making a good business encouraging debt in order to make profit through speculation and usury, promoting consumerism to increase the income of multinationals, or negotiating with weapons. So the people of Greece today suffer the consequences of a lethal cocktail of corrupt politicians and financial power, such as has been happening around the world for a long time.

Many compare the situation in Greece and other European countries with the situation that Argentina went through in 2001 and, in effect, there are some points in common. In the 90s neoliberal policies applied to the country led it to a colossal debt, with which a kind of fixed exchange rate under the regime of currency convertibility was financed for a few years which allowed import of goods and services at less than cost price. And the national deficit was financed with debt and above all the juicy profits of speculative capital that obtained elevated interest rates in dollars. When the debt became unsustainable, the crisis exploded and to start with a default of the debt was declared, and then currency convertibility was abandoned which provoked a devaluation of over 300%. But the greatest economic crisis in Argentina’s history also caused an enormous institutional and political crisis that put an end to the neoliberal tendency of governments. The more progressive and industrialising profile of the new governments allowed advantage to be taken of the effects of devaluation in order to gain in competitiveness, increase exports, substitute imports and reduce unemployment. And the political decision to get out of debt through development and growth and not through orthodox spending cuts allowed the country to recover before starting to restructure its debt. This allowed for a decade of untold growth and debt repayment and a remarkable improvement in the living conditions of the population. The situation of the last two years, in which due to the international context there is no growth as there was before and the people have to live with inflation, in no way invalidates the example of how Argentina was able to get out of the crisis successfully and finance the economy for 10 years and this was achieved with sovereign expansionary policies and not with cuts monitored by the IMF.

Maybe it’s not valid to totally extrapolate the Argentinian case to that of Greece and other European countries in crisis, but it is clear that there are some points in common. In Argentina the convertibility regime prevented currency devaluation that could have improved competitiveness; this is a similar situation in countries of the Eurozone that cannot control their own monetary policy. The improvement in competitiveness occasioned by a devaluation can have different effects according to the potential for production of each country, and it’s clear that it can’t be seen as a magic solution, because in this case every country would be permanently participating in a devaluation competition; but it is true that in the case of countries in crisis with high unemployment and a commercial deficit, there will always be a positive impact. In Argentina, the policy of supporting the consumption of goods and services of the least protected sectors of society, firstly benefited the population but it simultaneously strengthened the internal market and reactivated the economy, which in turn improved tax receipts. Whereas, extreme austerity policies and cuts being used by some European countries to try to balance their budgets only achieve a suffering of the population, while the debts continue to mount, or in the best of cases debt levels are maintained, because the cuts diminish expenses but also income due to the effects of recession.

The consequences of the cuts in Greece have today left a good part of the population in an urgent situation; tax increases, the sacking of nearly 200,000 public sector workers, salary and pension reductions, and social spending cuts have had serious consequences. With 27.4% unemployment, 30% of the population without health insurance, and 10% of children with nutritional problems, the social situation is unsustainable. And with all these cuts the economy has shrunk by 25% since the crisis exploded, as a result of which tax receipts are even lower and the deficit hasn’t been reduced so that debt can be repaid. And the IMF and ECB have opted for a financial bailout, not because they wanted to save Greece, even less the people, but rather because they wanted to save the banks, the majority of which are German and French, because they would collapse if faced with a default. And they also strive to avoid a final collapse of Greece and a possible exit from the Euro which could be contagious to other countries in crisis such as Spain, Italy and Portugal. Definitely, the financial sector is the major culprit for the debt crisis, just as it is the true target of the bailouts coordinated by international financial institutions and it continues to make profits thanks to its intermediation in all the refinancing deals.

So, in order to respond to the question about what choices Greece has, bearing in mind the above, it would be good to clarify what should be the aims, the procedures and who should be the executors. Because for those of us who aspire to a big Universal Human Nation, it is logical to think that an intermediate step, such as regional integration, goes in this direction, and we could conclude therefore that efforts should be made so that the European Union is not undermined. But we must ask ourselves if this European construction is a construction of the people and for the people, or if it is a construction of the economic powers for their own benefit. And today, everything points to the fact that, when crisis comes, the priority is not the people, but the banks. Therefore, if we want to change the aims so that priority is the people, maybe we must reformulate everything. Because of course Greece’s exit from the Eurozone will have an important impact and there will be difficulties; of course the best would be that everything is resolved maintaining stability of the EU. But for that to happen the decisions must be different, the ECB should behave as a driver of development in every part of the territory. The ECB should give priority to social spending to alleviate the people’s situation, instead of taking care that inflation doesn’t go above 2% annually, and so protect financial assets. But the EU was not founded on humanist ideals, but rather on economic interests with a neoliberal agenda. So it will be very difficult for it to change its policies.

It’s in this context that the Greek government should propose the paths to follow. The priority must be the people, and inhuman cuts cannot continue in an attempt to generate a budget surplus that allows for creditors to continue to be repaid. Debt repayments must be suspended, for at least a period that allows the country to recover, to improve the social situation and reduce unemployment, so that afterwards it can propose restructuration of the debt in order to pay it without sacrificing the population. And if the EU cares about the situation of the Greek people, not only should it accept this decision without reprisals, but moreover it should financially support Greece to drive forward its development. But as it is very difficult for the executors of an expansionary policy to emerge from the Troika, surely Greece must leave the Euro in order to be able to control its monetary policy and recover by itself. The problems that this can generate at first will be less, socially speaking, that what the Greek population is now experiencing. Surely they will have to resolve many internal issues and fight against internal government corruption, but it will be in order to improve the quality of life of the people, and not in order to make the usurers richer.

If the EU does not revolutionise within and modify its neoliberal policies, sooner or later, Greece and maybe other countries will end up leaving the Euro. If this happens, it shouldn’t be seen as a setback in regional integration, but rather an advance towards another integration paradigm: an integration in which the people, and not those who have today turned into their main enemy – the banks, are the priority.