Greek Forum Update by Nantina Vgontzas
February 25, 2015
It has been a month since Syriza took power, half a month since our forum, and unfortunately in its first test last week, the Greek government blinked.
Syriza has agreed to a four-month extension of the previous memorandum, now renamed the Master Financial Assistance Facility Agreement. Under this deal, the government has agreed to have all its fiscal measures approved by the Troika, or the Institutions. In other words, Syriza is committing to not rolling back austerity unilaterally. And indeed, the first set of measures that Varoufakis submitted earlier this week and that were approved by the Institutions shortly thereafter amount to a continuation of much of the same, with the exception of some funds allocated toward addressing the humanitarian crisis. It should be noted that these funds insufficiently cover the Thessaloniki Program in its entirety and that, moreover, the party's previous plan to finance the rest of the program using other European funds is also much less certain now. After all, following its success at playing hardball in this first round and coming out of it on the offensive, why would the EU turn around and subsidize later measures? Hence, what we have at the end of the day is essentially a slightly more humane implementation of austerity. Austerity with some antipoverty measures coupled with a firmer commitment to combatting tax evasion.
But as for the minimum wage, pension reform, privatizations, trade union rights: these remain to be determined, and at this point, we have little reason to be optimistic. Though much of the language in Varoufakis's list is vague, certain phrases should be read as warnings. For instance, regarding labor market reforms, the government commits to “achieve EU best practices across the range of labor market legislation through a process of consultation with the social partners” and a number of organizations like the OECD. Later in the document, with respect to product market reforms, the government vows to work with the OECD to “remove barriers to competition.” The kind of reforms that the OECD proposes, of course, are quite similar to those of the IMF, the World Bank and all other institutions functioning according to neoclassical economics. In a context where collective bargaining agreements were altogether terminated with the passage of prior memoranda and where labor relations continue to be degraded, that the Greek government would look to the OECD both for labor market reforms and business reforms is of great concern.
Last, the government retreated nearly entirely on its initial demand of a debt writedown. In agreeing to a target of 4.5% primary surpluses for 2016, Syriza is agreeing to massive restrictions on its budgetary capacities. Even taxes on the wealthy won't bring the government enough revenue. Its creditors have supposedly compromised by vowing to consider “for the 2015 primary surplus target...the economic circumstances in 2015 into account.” But again, this is hugely dependent on the amount of leeway that the European elite are willing to give Syriza. Every penny will be scrutinized in this tussle.
The party's leadership insists that the deal was the best they could get under the circumstances. Proponents argue that Syriza is buying time to show creditors that they're capable of carrying out reforms and hence that they deserve more breathing room. Perhaps, even, they're waiting to for more potential allies to come on board. The shortening of the deadline from six to four months, however, makes this even more of a fleeting possibility. August may have been close enough to a possible Podemos victory in the fall, but June is quite off the mark. And with all other governments having signed off on austerity in their own home countries and hence not ready to explain now to their voters why they should subsidize lenience for Greece, there is literally no one else in the room that Syriza can rely on to defect from Merkel's hardline. They can expect nothing from the likes of Hollande.
Now, there's the very real issue of capital flight. Over 1bn euros were withdrawn from Greek banks on Friday alone, in addition to the estimated 20bn since December. To refuse to compromise would have put Syriza's leadership in the position of needing to impose capital controls and perhaps even nationalizing the banks. This option, of course, would also have accelerated the possibility of Grexit. Why didn't Tsipras and his inner circle go down this route? Or why didn't they at least use it as a legitimate threat in the negotiations?
There are various ways to interpret the leadership's actions, or lack thereof. The more generous interpretation is that they deemed that the government still lacks support for that kind of radical break, and hence these next four months will prove crucial in continuing to expose the intransigence of Euro elites, building alliances with potential partners like Russia, China, Venezuela, and opening up the conversation so as to begin publicly discussing other options and building support to that end.
The more cynical interpretation is that the Syriza leadership is not preparing for a Plan B and is committed to staying in the Eurozone at all costs. In fact, as suggested by leading Left Platform member Stathis Kouvelakis, who is on Syriza's central committee, because the leadership has been so committed to this position since 2012, they weren't even willing to contemplate using Grexit as a proper threat. As he writes in Jacobin,
Fearing the Grexit more than it feared its interlocutors, entirely unprepared in the face of the absolutely predictable contingency of bank destabilization (the system’s classical weapon internationally for almost a century when faced by leftist governments), the Greek side was essentially left without any bargaining tools whatsoever. It found itself with its back to the wall and with only bad options at its disposal. Friday’s defeat was inevitable and marks the end of the strategy of 'a positive solution inside the euro', or to be more accurate 'a positive solution at all costs inside the euro'.
The question then becomes: why did Syriza's leadership fear Grexit more than their lenders? I would argue that this political calculation takes into account the concerns of investors as much as it does those of the ordinary voters who elected Syriza.
In the past month, there have been numerous statements of support for Syriza by major Greek capitalists, each noting that the party is committed to creating stable investment conditions by keeping Greece in the Eurozone. When I made the case in my talk earlier this month for a left developmental approach, I should have noted that, though it's possible to make alliances with a section of Greek capital around a new growth model given their dependence on airwaves or real estate, they wouldn't automatically jump on board. Rather, if not compelled into supporting such a transition, they would prefer remaining in the Eurozone, even amid conditions of contraction.
The truth is that there is little immediate benefit for most of Greek capital in an exit scenario given the weakness of the industrial base; devaluation would benefit only a very small section in the short term. The rest of those who would stick around would only do so because they have nowhere else to go, and that's of course the basis on which the party could begin intervening in investment decisions.
The leadership of Syriza, however, has now shown quite clearly that that's not their endgame. They gestured at this months before the elections when they said they wouldn't nationalize banks, and now they've demonstrated that they weren't just posturing. At most their plan for disciplining capital, as it stands now, entails taxing it. Of course, this in and of itself would be a major change given current levels of tax evasion among the wealthy in Greece, but it just isn't enough for leveraging a truly anti-austerity politics. We've seen now that that requires confronting political and business elites, both domestic and foreign, much more head on.
Kouvelakis and others in the left wing of Syriza, including the MP Costas Lapavitsas, the Resistance hero Manolis Glezos and the Energy minister Panagiotis Lafazanis, have suggested that the party has reached a new phase where strategic debates must be revisited and revised. It is time for Syriza to consider and actually substantiate a Plan B. Of what might this plan consist, and how could the leadership be pushed to embrace it?
The most extreme version of a potential Plan B, of course, is Grexit and necessary accompanying measures in the short term, including bank nationalization, capital controls, controlled devaluation and appropriate rationing of food, pharmaceuticals and fuels. In the longterm, to really make this plan work and to convince people that the immediate consequences are worth it, the government would have to be very proactive about the kinds of industrial policies and trading partnerships I had identified in my talk. Enforcing a Plan B especially of that extreme would require, in other words, a plan. But there are other steps the government could take to transition to this scenario. It could begin imposing capital controls prior to an exit. It could introduce a parallel currency. It could continue to vie for a debt equity swap. These are, of course, unilateral actions that would most likely spur the Institutions force Greece out of the Eurozone, but this is precisely the counterthreat Greece needs to pose! Perhaps even more importantly, these are actions that would require Syriza not to court capital to simply support their administration, as they have done until now, but to discipline them into a new accumulation strategy. This appears to be an even weaker blind spot that the administration currently faces.
Now, for any of these ideas to even be entertained by the leadership, we should anticipate a major battle to occur within the party. Until now, the Tsipras team has been moving increasingly with little deliberation with their comrades on the central committee. The time constraints of the negotiations facilitated this dynamic; though frustrated, even the left wing of the party was willing to give their leadership some space until a deal was reached. But at this point, as Kouvelakis suggested, we should expect a reassessment of the current “good Euro” strategy. And that can only occur if the party's leadership is compelled to redemocratize their internal processes. Thus far we have seen quite a few members of the party unwilling to flinch in this daunting moment and publicly declare their frustrations. And in fact, one third of the parliamentary team has rejected the deal in an internal vote. These early disagreements might lead to the deal not being taken to a parliamentary vote. And even if it is, we can still expect those frustrations to become increasingly vocal, especially as popular disappointment escalates as well.
And here's the key. There will have to be a fight not only in the party but on the streets, as it were. As it becomes clearer that people won't be rehired, or that unemployment won't be alleviated, there will necessarily have to be an uptick in popular mobilizations that place pressure on the government. But even that won't be enough. There will necessarily be a very crucial component of popular education accompanying these kinds of demonstrations. People's fears around a Plan B have yet to really be addressed. This is the time for the left to do so. That both the working-class base of Syriza and its parliamentary team lie to the left of the leadership can make us all the more hopeful. It is on them and on other forces of the left to facilitate discussions where questions about capital flight, currency devaluation, rationing of basic goods, trade partnerships, even the longer term prospects of disciplining capital must be raised and answered. It is only under conditions where people are informed are don't feel as though they're leaping into the dark that any Plan B could work. Of course, the constraints are massive, the pressure unfathomable. But at this point, no one is under the illusion that reversing austerity will be easy. The Greek voters know that viscerally perhaps more than anyone else.
Nantina Vgontzas, a Greek-American PhD student in sociology at NYU focusing on political economy and social movements. She is a member of the UAW Graduate Student Organizing Committee and involved in the nationwide Academic Workers for a Democratic Union reform movement. She grew up in the US but has lived in Greece at different points in her life, most recently during the year after the 2012 elections. This summer she will be in Athens to study developments in the labor movement amid the transformation of the party system.