Monthly Archives: June 2015

Greece – what is Syriza’s plan?

The rather sudden and unexpected decision by the Greek government to hold a snap referendum on the latest proposals from the Troika has caught everyone by surprise. Something does need to be done to bring this long running and seemingly never-ending merry-go-round to an end, one way or another. Whether this particular referendum will help resolve the crisis is open to question.

The basics are pretty well known. Greece is effectively insolvent. Its debt burden is too great for it to have any prospect of ever repaying this debt. The unprecedented additional austerity measures proposed by the Troika, in the view of most people, will only make things worse. Most of the additional loans go immediately back to the lenders in the form of repayments on previous loans. Hence the merry-go-round analogy. Very little of the loans go to helping the Greek population. While the greater the austerity the greater the long term damage to the Greek economy.

Yet the Troika seem even more determined than ever to force further austerity on Greece. As Paul Krugman puts it, it has been an act of monstrous folly on the part of the creditor governments and institutions to push it to this point.

How should Greece respond? The Syriza led government has responded by proposing to hold a referendum for next Sunday. The Greek parliament has voted in favour of holding this referendum. But will the referendum provide a clear cut result for a way forward?

Various international observers seem to think so. Paul Krugman for example supports the referendum for the following reason: “… until now Syriza has been in an awkward place politically, with voters both furious at ever-greater demands for austerity and unwilling to leave the euro. It has always been hard to see how these desires could be reconciled; it’s even harder now. The referendum will, in effect, ask voters to choose their priority, and give Tsipras a mandate to do what he must if the troika pushes it all the way.”

This is in line with the view of those who believe that leaving the Euro offers the best option for Greece, at least in the long run. Unfortunately the actual question being put to the Greek people does not support this interpretation. According to Reuters, Greeks will be asked the following question: “Greek people are hereby asked to decide whether they accept a draft agreement document submitted by the European Commission, the European Central Bank and the International Monetary Fund, at the Eurogroup meeting held on June 25.”

Alexis Tsipras, the Greek Prime Minister has stated that an emphatic “no” vote would strengthen Greece’s negotiation position. The obvious question here is negotiating what? An improved bailout agreement or an exit from the euro? The referendum question says nothing about the euro and only refers to the bailout agreement. There is a further doubt about the validity of the referendum and that is that the draft document referred to, in effect no longer exists. So the Greek people are being asked to accept or reject a proposal that is no longer available. What’s the point of this?

A further problem with the referendum is that in order to secure any kind of strengthening of Greece’s negotiating position, Greece needs to still be in euro by the time the referendum is held. Will it? The Greek government has asked the EU to extend the current agreement for another two or more weeks to allow the referendum to take place, but this has been rejected. Unless something is agreed today, Sunday, then on Wednesday, 1st July Greece will have defaulted on its repayment to the IMF. Before then, absent an agreement with the EU/ECB, there will most likely be a run on Greek banks. To prevent this the Greek government will have to declare an extended bank holiday and probably institute capital controls to prevent euros draining out of Greece.

This is where it all gets very messy indeed. Greece almost certainly needs to default on most, if not all of its debts. The real issue is whether this is done in an orderly and agreed manner, or is done abruptly without agreement. This could happen if Greece is either forced out of the euro, or voluntarily decides to leave the euro.

The big problem for Syriza is that all the indications are that a large majority of Greeks want both an end to austerity and to stay in the euro. Which is why the referendum question does not mention the euro. However if by the time the referendum is held, next Sunday, it is clear to all that a rejection of the bailout agreement means leaving the euro, how will the Greek people vote then?

For underlying all this is the uncomfortable reality that there is no good option for Greece in the short to medium term. And the long term may be a very long time coming. Leaving the euro will not bring about an end to austerity. It may change who suffers most from continuing austerity, but things are likely to get even worse for many Greeks with a euro exit. There is no short term, painless fix for the Greek economy.

A further complication is that many legal and economic commentators have opined that even with a default there is no need for Greece to leave the euro. In fact it seems there is no legal, treaty based way for any eurozone country to be expelled from the euro. So, at least in theory, Greece could default on some of its debt, and try and remain in the euro. What this might mean in practice is unknown and at the moment unknowable. Much would depend on how willing the ECB and Greece’s partner countries would react. The prospects do not look good.

A final point on the portrayal of the referendum as a battle between democracy and the nasty world of finance. This is just nonsense and not at all helpful. Democracy is not just for Greeks. A commentator on another site puts it nicely and succinctly. “It is normal that a vote in Greece is not binding for Germany, France, Ireland, and the poorer than Greece countries of Eastern Europe. The Greek vote is valid only for Greece’s government. The democratically elected governments of the remaining Euro Group are negotiating according to their own voters opinions. The outcome may please some and not others.”

I agree with Paul Krugman that the governments of the eurozone countries have been acting with monstrous folly in relation to Greece. Alas democracy has never guaranteed the election of sane and reasonable governments. In the eurozone all governments have the same democratic validity. It does no good to anyone to pretend that the wishes of the Greek people are more worthy than the wishes of others.

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Filed under Economics, European Union, Greece

Opposing Austerity

Last weekend saw various marches and demonstrations across the UK against the Tory government’s further austerity plans. Pretty substantial ones in London and Glasgow by all accounts. All very good in a way, but what does it achieve? Richard Seymour has a very good, short piece on his Lenin’s Tomb blog on this, which you can read here. I am very much in agreement with Richard on this. Opposing austerity is relatively speaking easy. Write a few letters or articles, blog away about how nasty and self-defeating austerity is, and of course go on any number of marches and demonstrations. However stopping austerity is an altogether harder nut to crack.

The big problem is that the battle against austerity was lost decades ago. Ironically, as Simon Wren-Lewis points out, the one place were the austerity bandwagon has failed is in the economics profession. See this article for details of how the academic world views austerity. Alas, the same cannot be said for the world of politics and public opinion. The austerians have successfully won the battle of public opinion. The majority of people agree that the two Ds – debt and the deficit – pose a real and existential threat to the survival of our country. The image of the UK as a big family which has overspent and misspent on its credit card has struck a chord with most people. The fact that this is economic illiteracy is irrelevant. This view, backed up by just about all of our media has almost obliterated alternative views.

In this task, the right has been immeasurably helped by the complete failure of the both Labour and the LibDems to mount any kind of sustained opposition to the “austerity is needed to save our country” message from the Tories and their allies. Even worse, these two parties have either explicitly or implicitly acknowledged the key message that some degree of austerity is necessary. If all you have to offer is austerity lite, you might as well vote for the real thing and get it over with.

This is the real challenge which faces the left across the UK, and in the rest of Europe it must be said. We urgently need to find ways to challenge and replace the dominant neo-liberal consensus in the media, the mainstream political parties and most of all with the public. While the odd march and demonstration will continue to play their part in this, the real work needs to be done elsewhere. The various strands on the left, including the Greens and the SNP, Plaid etc, need to develop an alternative story as to how we got into this mess and how to get out of it. The ingredients are there – financial deregulation and the over mighty power of banks and other financial institutions for one. However as yet no simple to convey and simple to understand alternative story has made it regularly into the media and into popular perception.

It would be good if the Labour party were to become part of this counter attack on austerity. But the omens are not good. Previous Labour governments did little or nothing to anticipate or prevent the crash. Government spending did not cause the crash. However the lax attitude of Labour governments, bordering on the irresponsible, did create the regulatory framework which allowed the crash to happen. All this means that Labour are unlikely to be part of any solution. The party still seems to be in thrall to big finance and the precious role of London as a world financial centre. God bless them, they seem all to willing to admit to overspending, which they didn’t do, but unwilling to admit to favouring the rich and big business.

This is where we need the more creative and economically aware people on the left to get involved in developing an alternative and popular story. A lot is already being done and available via our exciting alternative media – Bella, Newsnet, Wings, Common Space etc. However in large measure these outlets are preaching to the converted. How do we get our message and our alternative story out into the parts of the population that the Sun et al manage to reach? And onto out TV and radio programmes?

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Will the SNP 56 change England?

The return of 56 SNP MPs to Westminster has generated much comment on just what they can hope to achieve. 56 is a lot in Scottish terms, but still a small minority in the grand scheme of things at Westminster, where they make up less than 11% of the total. Most, if not all, the focus has therefore been on what they can achieve for Scotland. Or more accurately what they will not be able to achieve for Scotland – stopping Trident, reversing austerity etc. However there is another aspect to the increased presence of SNP MPs at Westminster – their potential to change attitudes and perceptions in England.

56 MPs, though a minority, nevertheless represents a quite significant visual presence in the chamber. Particularly if they sit together and turn out in numbers to support each other, as seems to be the case. Such a presence is difficult for the media to ignore completely. The print media will probably try to, unless it is to highlight something they regard as improper behaviour, clapping for example. However the broadcasters will find it more difficult to ignore this presence. Angus Robertson will get two questions every week at PMQs, while there will be SNP members on every select committee. TV and radio will find it very difficult to simply not show this in their reports. The SNP should also find that one of their number appears much more frequently on Question Time and other discussion programmes.

The question then is what effect might this increased visibility have on people and politics in England? The Tories are unlikely to be impressed by anything the SNP do or say, so they can be discounted. Their voters may react differently and more positively, but in the end Tory voters or UKIP voters are most unlikely to change their votes due to anything the SNP say or do. This is not the case though with the Labour party or their voters and potential voters. The same may be true for the remaining and potential LibDem voters, assuming they can ever recover. I suspect that it will be the broad swathe of Labour and LibDem voters who are most likely to be impressed and surprised by the increased coverage of the SNP.  What might impress them?

The first surprise will probably be that the new Scottish contingent looks and sounds a lot like them. A variety of Scottish accents will be heard, but all will speak in ways that will be clear and understandable to everyone across the UK. Taken as a whole, the SNP group is probably more reflective of the country than either Labour or the Tories. They represent a better  balance in terms of gender, age and previous experience.

A particular and in many ways the stand-out example of this is that there are no Oxbridge graduates in the SNP group. Unlike Labour, which seems to have been taken over by an Oxbridge and London elite, at least at its leadership level. Many Labour members and voters may begin to ask why the Labour party has allowed itself to become dominated by such a narrow and restricted base.

The most important difference of course will be in the political message that the 56 will articulate with clarity and passion. They will challenge the Westminster consensus on austerity, immigrant bashing, punishing the poorest etc. They will also vigorously oppose the attempt to revoke the Human Rights Act. In general they will put forward a more positive alternative. Not based on the narrow individual aspiration that Labour seems to have borrowed from the Tories. But a positive vision that is more collective, people working together to improve the public services that benefit all of us. Dare I say it, a kind of pooling and sharing of resources. But one that involves the rich and better off contributing a bit more, and finally challenging the damaging dominance of the UK economy by an out of control financial sector, that only seems to benefit London. And only some Londoners at that.

While the SNP will of course continue to present the case for independence, during the life of this parliament they will also argue for more powers for Scotland within the UK. This too is likely to strike a chord with many people not just in England, but in Wales and Northern Ireland too. For greater powers for Scotland can be presented in the context of fundamentally changing the UK into a Federal country.

There is thus every possibility that many Labour voters will begin to ask why the Labour party is not more like the SNP in terms of its progressive and challenging policies. This will take time and any change will come too late for the current Labour leadership contest. But five years is a long time in politics and if the SNP get the coverage their numbers merit, their presence and actions can only be a positive force in England.

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Filed under Scotland, UK