There is endless commentary in the media about which way Greeks should vote to avoid an apocalypse. Some say Greeks should continue to accept the conditions required by the IMF, the European Central Bank and the European Commission. Others say Greeks should reject those conditions and go back and negotiate with a stronger mandate.
How can we make sense of this? What advice should Greeks accept, and on what basis? Let’s look at the different positions:
Accept the austerity?
By voting yes, Greece votes to accept the package of measures negotiated since January but which the Athens government has been finally unable to accept, recognising that it goes way beyond the mandate they were given by the electorate.
If Greece would vote yes, the country would almost certainly be plunged once more into another election. It is inconceivable that the Syriza-led coalition government could stay in power without winning another election. So it would likely be that Greece would turn to a centre-left or -right government which would do what the institutions say.
In this case taxes will rise, pensions will be cut, everything will be privatised and austerity will become a way of life for a generation. Human and especially employment rights will be eradicated until everyone, except a small upper and upper middle class, is living in poverty. Greek youth will follow the paths trodden by Syrian, Iraqi and Afghan refugees, pack what they can on their shoulders and move West in search of employment. At least Greek refugees will not be stopped at the border because of irregular papers – or maybe they will as there will be millions of them…
After a few years, foreign investment and tourist revenue will flow in, call centres and factories will be built and staffed with highly educated people but also the country will have been taken down to the social level of developing countries such as Bangladesh and India where outright poverty lives alongside extreme wealth.
Reject the austerity?
By voting no, Greece rejects the measures and Alexis Tsipras can go back to his European partners strengthened by the fact that he has the Greek people’s support. He can insist that the measures are unacceptable and tell them what his final negotiating position is and they can take it or leave it.
In that situation the institutions are the ones who must decide what to do. They can either change their negotiating position and agree to the less austere proposals tabled by Greece or they can insist that Greece pays its debts under the agreements made with the previous governments. In the latter scenario, Greece doesn’t have the money, has to declare itself bankrupt and issues a new currency in order to allow the domestic exchange of goods and services.
What are the consequences of leaving the Euro?
The new currency will rapidly loose value, but internal trade can continue. Anyone who has savings in the bank will have their money exchanged to the new currency which will effectively mean a loss compared to the value previously in Euros. Anyone who compares the value of their assets to their value in other currencies will feel that they have lost a substantial amount of wealth, but if a house is worth 40,000 euros one day and 40,000 drachma the next, it doesn’t matter because its value relative to other houses in the country is still the same.
Businesses that owe money to businesses overseas will suddenly find that they are unable to pay their invoices because the devaluation of the Drachma against other world currencies will mean that these invoices are now several times more expensive than what they originally were.
Anyone in Greece saving for a foreign holiday will suddenly be unable to afford it. Anything bought overseas will become phenomenally expensive and so Greece will have to build factories to manufacture everything that it needs.
Overseas banks owed money by the Greek government will make huge losses.
Comparison to Argentina
It’s easy for the institutions and commentators to say that Greece is facing an apocalypse, but this doesn’t take into account that Greece is already in an apocalypse!
When you walk through the streets of Athens there are thousands of people living on them. When you walk out of a supermarket there are hungry people begging for a packet of biscuits. It is estimated that 11,000 people have committed suicide since 2008! Others are dying for lack of access to medical services, even some who get seen by a doctor may not be able to get drugs or the tests they need to monitor their condition. Children are going to school hungry because there’s no money in the family to pay for breakfast. This is a developed country we are talking about, not sub-Saharan Africa!
In this scenario it is interesting to see what happened in Argentina in 2001 because a similar situation occurred. Argentina’s currency was effectively linked 1:1 to the US dollar. The situation became unsustainable, the banks took all the dollars out of the country, the peso lost value overnight. People with money in the bank for life-saving medical procedures overseas sadly died. The country was a mess, especially for anyone with money in the bank. From morning to night people with money in dollars stood outside the banks and banged their cooking pots to make noise in protest. They never got back their money.
However, there was a revolution: a non-violent, economic revolution. The government refused to pay its debts to overseas creditors it went bankrupt, the money was used instead to invest in the economy. The exchange rate of peso to dollar went from 1:1 to 4:1, exports and tourism boomed. In 2005 Argentina made a final payment to the IMF to repay its debt – thanks to support from oil-rich Venezuela – a programme of nationalisation was implemented and the country has experienced some of the best economic growth in the world. However, inflation is currently high and currency controls are in place so it’s not all perfect in the country.
So what would I do?
First what is at stake here? If the people vote for austerity the banks win. If the people reject austerity the banks lose.
What does it mean if the banks lose? It means that they won’t get the money back from their loans to the Greek government. They will have to write them off completely or make some agreement to accept much less than they want. Maybe some of those banks go bankrupt themselves and foreign governments will have to protect individuals and small and medium sized businesses and secure their deposits, but the commercial side of those banking activities, the side that makes money from speculation will be finished. This wouldn’t be a bad thing as speculation is the reason we’re in this mess. The Greek economy could implement a new currency and the economy will feel an immediate improvement.
What does it mean if the banks win? It means that the people of Greece will effectively be paying money to the banks for the rest of their working lives with very little money going to actually repaying the loans, mostly it will pay interest, and very little will go to rebuilding the economy.
When individuals are in austerity, when they have no money and when there is no support from the state, or from their family living in a similar circumstance, they end up living on the streets in terrible conditions and die a premature death. It’s as simple as that.
So, in considering how to vote I’d be very careful about what I listen to in the media. For some, a vote against austerity is a vote to leave the European Union. Don’t believe the media that say this, it would be like saying that a vote against austerity is a vote to leave NATO. There is no connection.
If it were me voting on Sunday, I’d be voting for human beings and not for banks. I hope the people of Greece come to this same conclusion and vote for human beings, not only for their sakes, but for every ordinary, working person in Europe, because if the banks kill Greece, they will surely come next to another country, and then another.
