Greece and the European Project: What’s Next?
by Gaius Publius
The State Department’s Victoria Nuland explains to Greek President Tsipras that there are certain lines he won’t be permitted to cross.
When it comes to coverage of the Greek crisis, there’s no better source than Naked Capitalism. I’m going to quote from three recent (post-election) pieces hosted there, along with my own comments.
First, for the overview, something written by Joseph Stiglitz summarizes the situation going into the election perfectly. As quoted here, Stiglitz writes this about Greece (my emphasis everywhere):
Europe’s Attack on Greek Democracy
The rising crescendo of bickering and acrimony within Europe might seem to outsiders to be the inevitable result of the bitter endgame playing out between Greece and its creditors. In fact, European leaders are finally beginning to reveal the true nature of the ongoing debt dispute, and the answer is not pleasant: it is about power and democracy much more than money and economics.
Of course, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP. I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.
It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018.
Economists around the world have condemned that target as punitive, because aiming for it will inevitably result in a deeper downturn. Indeed, even if Greece’s debt is restructured beyond anything imaginable, the country will remain in depression if voters there commit to the troika’s target in the snap referendum to be held this weekend.
In terms of transforming a large primary deficit into a surplus, few countries have accomplished anything like what the Greeks have achieved in the last five years. And, though the cost in terms of human suffering has been extremely high, the Greek government’s recent proposals went a long way toward meeting its creditors’ demands.
Fast recap: After the crash of 2008, the government of Greece found itself increasingly unable to pay the interest on its debt. A crisis occurred in 2010 and again in 2012. A great deal of that debt was held outside the country and in private hands (think German and French banks, hedge funds, and the like).
The reasons for this inability to repay are many, only a few of which were the fault of the Greeks themselves. The worst of the Greek internal problems is the corruption of the Greek elite class, who have made tax evasion an art form. After the recession, the country went increasingly into recession and then depression, the economy shrank, and government revenues became insufficient to meet all demands on it. Various Greek governments have sought loans from the European “troika” as defined above, and those loans were granted, but with many cruel strings.
In a triangular arrangement, the troika would insure that the Greeks had enough money not to default on bankers and hedge funds (etc.), but in exchange the Greeks had to agree to “run a primary surplus” (have more revenue than expenses), cut spending drastically, including on social services and pensions, and sell off private property, like their airports.
Doing this allowed the troika — an assembly of European public elites very much allied with private elites like the aforementioned bankers — to accomplish two goals:
- Bail out all at-risk bankers and other investors with public money, so no big investor loses on a loan.
Stiglitz: “We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not need the money that is being demanded. Under a business-as-usual scenario, the money received would most likely just be lent out again to Greece.”
- Advance the privatizing “neo-liberal project” in which everything owned by any country should be converted into a source of private profit (think Shock Doctrine in New Orleans and the privatization of the public school system).
Stiglitz: “Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.”
For Western neo-liberal elites, that’s a win-win. The only way this plan would fail is if Greece failed to knuckle under. Greece tried to knuckle under, but it hurt so much that they elected a “leftist,” anti-austerity government, and the elites took offense (thus Stiglitz’s analysis of the troika response as an attack on Greek democracy). The new leftist government also tried to knuckle under, but the demands became too great (and the government too wishy-washy).
So a referendum on the latest austerity offer was called, the Greek people rejected it 61%–39%, and here we are. The remaining choices are to default on the debt or to borrow on terms less punitive. In case of a default on some or all of it — in the business world, that’s called a “restructuring via bankruptcy,” but morality-neutral language applies only to corporate behavior — the Greek depression will continue, Greece may leave the E.U., and it seems increasingly likely that the drachma will return, perhaps first in an intermediate form, such as government IOUs.
Again, here we are. It’s post-referendum, Greek banks are still closed as of last report, and ATMs are running out of money to dispense. For a look at the state of the Greece economy just prior to the referendum, Naked Capitalism offers this report. It’s painful reading.
What comes next? Hard-hearted Germans and regime-changing Americans? Could well be.
Eurozone Leaders May Further Harden Their Hard Hearts
Yves Smith at Naked Capitalism on the way European (and German) elites are handling this rejection:
[D]espite the responses of media outlets and many pundits that the
Eurocrats will have to beeat a retreat and offer Greece concessions,
it’s not clear that this event strengthens the Greek government’s hand
with its counterparties. Remember, Tsipras enjoyed popularity ratings of
as high as 80% and has always retained majority support in polls. And
it’s all too easy to forget that “the creditors” are not Merkel,
Hollande, Lagarde and Draghi. The biggest group of “creditors” are
taxpayers of the 18 other countries of the Eurozone. The ugly design of
the Eurozone means that the sort of relief that Greece wants most, a
reduction in the face amount of its debt (as opposed to the sort of
reduction they’ve gotten, which is in economic value, via reductions in
interest rates and extensions of maturities) puts the interest of those
voters directly at odds with those in Greece. Our understanding is that a
reduction in principal amount, under the perverse budgetary and
accounting rules of the Eurozone, would result in those losses showing
up as losses for budget purposes, now. They would need to be funded by
increased taxes. Thus a reduction in austerity for Greece, via a debt
writeoff, simply transfers austerity from Greece to other countries.
It’s not hard to see why they won’t go for that. And Eurozone rules
require unanimous decisions.
Even though the ruling coalition had said it wanted to restart
negotiations immediately upon getting a “no” vote, the lenders have
asked Greece to send a new proposal, apparently deeming the one it
submitted on June 30 to be out of date. It’s doubtful anything will
happen before the Eurogroup meeting tomorrow [July 7].
The remarks from European leaders have been mixed.Among those mixed responses, Smith notes these. First, from Eurogroup chief Jeroen Dijsselbloem:
I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece.
For recovery of the Greek economy, difficult measures and reforms
are inevitable. We will now wait for the initiatives of the Greek
authorities.
And via the Financial Times, this from a high German government official:
Sigmar Gabriel, deputy German chancellor, said Mr Tsipras had “torn
down the last bridges on which Greece and Europe could have moved
towards a compromise”.
“With the rejection of the rules of the eurozone … negotiations about a programme worth billions are barely conceivable,” he told Tagesspiegel newspaper.
Shorter Eurozone: “The beatings will continue…” Good luck with that. The meetings will also continue, in what looks like a month of failed incremental half steps that nevertheless march to the sea.
And the American Reaction? Failed State or Vladimir Putin
Obama’s U.S. government has been noticeably quiet as this plays out, but with Putin on their minds, you have to know they have thoughts. Smith on what some of those thoughts might be:
Nuland’s Nemesis: Will Greece Be Destroyed to Save Her From Russia, Like Ukraine?
Obama and Treasury Secretary Jack Lew have been far more quiet than
you’d expect given their attentiveness to the needs of the investing
classes and the threat that protracted wrangling with Greece might pose
to that. Of course, they might believe that Draghi’s bazooka is more
effective than Hank Paulson’s proved to be in the runup to the final
phase of the financial crisis. But John Helmer indicates below that the
Greek referendum has intensified the Administration’s interest in regime
change in Greece. He confirms what we’d noticed, that Putin has been
quite pointedly avoided being seen as meddling in Greece now; he can
always pick up any pieces later. Also note that the anti-Greek
government interests have connections to Hillary Clinton.
The rest of Smith’s piece is an essay by John Helmer, “the longest continuously serving foreign correspondent in Russia, and the only western journalist to direct his own bureau independent of single national or commercial ties” (full credits at the link). He starts:
A putsch in Athens to save allied Greece from enemy Russia is in
preparation by the US and Germany, with backing from the non-taxpayers
of Greece – the Greek oligarchs, Anglo-Greek shipowners, and the Greek
Church.
You really want to read that twice. He’s not speculating, but asserting. Then he continues:
At the highest and lowest level of Greek government, and from
Thessaloniki to Milvorni, all Greeks understand what is happening.
Yesterday they voted overwhelmingly to resist. According to a high
political figure in Athens, a 40-year veteran, “what is actually
happening is a slow process of regime change.”
Until Sunday afternoon it was a close-run thing. The Yes and No votes
were equally balanced, and the margin between them razor thin. At the
start of the morning, Rupert Murdoch’s London Times claimed
“Greek security forces have drawn up a secret plan to deploy the army
alongside special riot police to contain possible civil unrest after
today’s referendum on the country’s future in Europe. Codenamed Nemesis,
it makes provision for troops to patrol large cities if there is
widespread and prolonged public disorder. Details of the plan emerged as
polls showed the ‘yes’ and ‘no’ camps neck and neck.” Greek officers
don’t speak to the Murdoch press; British and US government agents do.
“It was neck to neck until 3 pm,” reports the political veteran in Athens, “then the young started voting.”
Can the outcome — the 61% to 39% referendum vote, with a 22% margin
for Οχι (No) which the New York Times calls “shocking” and a “victory
[that] settled little” – defeat Operation Nemesis? Will the new Axis –
the Americans and the Germans – attack again, as the Germans did after
the first Greek Οχι of October 28, 1940, defeated the Italian invasion?
The U.S., via the State Department’s Victoria Nuland, has been deeply involved, according to Helmer, both with Operation Nemesis and with warning off Tsipras. Helmer again:
What Nuland [photo at top] was doing with her hands is in the small
print of the release. She told Greek Prime Minister Alexis Tsipras
(right) not to break ranks with the NATO allies against Russia. “Because
of the increasing rounds of aggression in eastern Ukraine” she
reportedly said the US is “very gratified that we’ve had solidarity
between the EU and the U.S., and that Greece has played its role in
helping to build consensus.”
Nuland also warned Tsipras not to default on its debts to Germany,
the European Central Bank, and the International Monetary Fund (IMF).
Tsipras was told “to make a good deal with the institutions”. The
referendum Tsipras called on June 27 was a surprise for Nuland. The
nemesis in Operation Nemesis is the retribution planned for that display
of Greek hubris.
All of this loops the Greek story into the Ukraine story, which most people still don’t realize isn’t just about Putin, though that makes a convenient (and cartoonish) Us vs. The Villain cautionary tale. It’s about continuing the … yes, neo-liberal project … deeper into eastern Europe.
There’s much more at the Naked Capitalism link, and it makes fascinating reading. Also, there’s more about Victoria Nuland and her apparent revelations about U.S. meddling in Ukraine as well. Here’s one relatively staid write-up; the google has many more.
The Hillary Clinton Connection
Yves Smith noted in her introduction to this piece that there was a Hillary Clinton connection. Near the bottom, after working through the myriad of corporate- and billionaire-funded think tanks (funding which comes from much of the real wealth of Greece, its predatory shipping billionaires), he notes this:
[Robert] Kaplan’s think-tank in Washington [Center for New American Security] reports
that its funding comes from well-known military equipment suppliers, US
oil companies, the governments of Japan, Taiwan, and Singapore; NATO;
the US Army, Navy, Marine Corps and Air Force; plus George Soros’s Open
Society Foundations. Chief executive of CNAS is Michele Flournoy, a
founder of the think-tank which is serving as her platform to run for
the next Secretary of Defense, if Hillary Clinton wins the presidential
election next year. Flournoy is one of the drafters of a recent plan for
the US to escalate arms and troop reinforcements in Ukraine and along
the Russian frontier with the Baltic states. Here’s her plan for “What the United States and NATO Must Do” . For more on Flournoy, read this.
I personally have no trouble assigning Hillary Clinton, whatever else her virtues, to an inner circle of the “privatizing neo-liberal project,” as previously noted here and here and here. Victoria Nuland is a State Department warrior when it comes to advancing that project, and CNAS is as well. For CNAS, the ties to the military-industrial complex are clear, implying military means — “boots on the ground,” though preferably boots filled with other nations’ soldiers.
Watch the name of that think tank — CNAS. It’s come up before and will do again, especially if Clinton is elected president. Also, watch for the name Michele Flournoy. If she does become Secretary of Defense, she’ll be sold as the “first woman Secretary of Defense” so you can cheer her on through confirmation.
Bottom Line — Remaking the World
There are two ways to look at the bottom line noted above. First, from the point of view of the Western ruling classes, the high-level servants of the neo-liberal project, the “war” in Greece is a war they feel they can win (by forcing regime change in the face of crushing economic chaos), or at least drive to a stalemate. I suspect they feel good, on the march, that they continue to remake the world. That’s certainly the tone coming from the European elites quoted above, like Jeroen Dijsselbloem and Sigmar Gabriel.
But from the point of view of the Greeks and the resistance to Shock Docrine-style neo-liberal takeover, it’s possible that the “standstill” in Greece will widen cracks in the glued-together European Union that will break apart Europe itself. That will remake the world.
As David Dayen, generally not given to editorials, put it in a piece called “The end of Europe as we know it“:
[In the Euro or Drachma decision] I put myself firmly on Team Drachma …
Eurozone nations don’t want to really stick together. The northern
countries (read Germany) don’t want to pay for whom they regard as lazy,
profligate southern countries; conversely, the southern countries don’t
want to take dictation on their national policies. So the wars never
really ended, they just transferred to the economic sphere, substituting
bombs with bonds.
A No vote, therefore, reveals to European
citizens an escape hatch, a way out of a terribly misbegotten currency
union. The euro would no longer be irreversible.
I recently wrote that TPP was the biggest hot story in the country, and Greece was the biggest cold story. The cold story in Greece has just warmed up.
(A version of this piece appeared at Down With Tyranny. GP article archive here.)
GP
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