Saturday, March 5, 2016

Will Greece leave the eurozone?

Barbara playing music on her island Thassos
I have a sister, Barbara, married to a Greek, who lives on a Greek island for almost thirty years. I asked her what she thought of my previous post in which I suggest that it might be better for the majority of the Greeks to leave the eurozone. Rather than saying what she thought herself (she works in tourism and has a clear vision on what's happening in her second fatherland) she suggested I should read what Costas Lapavitsas has to say about it.

On internet I found a recent interview with Lapavitsas, in the Spanish newspaper El Diario: "La cuestión del euro y la pertenencia de Grecia a la unión monetaria volverán a estar sobre la mesa".

I also asked my Czech / Chilean / British friend Stephany Griffith-Jones what she thought of my previous post. She answered immediately: "Yo pienso que hay que reformar el euro, pero no desarmarlo. Creo hay que cambiar Maastricht criterios, aumentar cap fiscal europea, etc." Later she added: "When I wrote EU fiscal cap, I meant EU fiscal capacity, the idea being that the EU budget should be much larger, eg 3% of EU GDP, very necessary to fund more intra EU public investment, and increase transfers to poorer regions and countries."

For those who do not understand Spanish, Stephany's initial answer was: "I think we have to reform the euro, but not disarm it (do away with it). I believe we have to change the Maastricht criteria, increase the European fiscal capacity, etcetera."

One of the things Costas Lapavitsas says in the interview with El Diario is:

La situación del país [Grecia] está otra vez convirtiéndose en crítica. Podría decirse que se encamina hacia una tormenta perfecta. La economía está otra vez en recesión y va a ir a peor este año. El mercado de valores se está comportando muy mal, el diferencial de la deuda griega frente a la alemana está incrementándose, el Gobierno no puede completar la revisión del programa [de asistencia financiera] porque no puede aprobar fácilmente la legislación... Y por encima de todo esto está la presión derivada de la cuestión migratoria y los refugiados, que supone un desafío directo a la soberanía nacional griega. La combinación de estas presiones es enorme: hay agricultores, ingenieros, abogados y otros que se han quedado en la calle. Es una situación muy tensa. Espero que la cuestión del euro y la pertenencia de Grecia a la unión monetaria vuelvan a estar sobre la mesa próximamente.

The Tsipras government should have prepared for exiting the euro

On internet I also found an assessment by Lapavitsas of the Tsipras government a year after it was elected, One year on, Syriza has sold its soul for power. He is very critical of both Tsipras and his former finance minister Varoufakis saying that their negotiating strategy implied that they should have prepared for leaving the euro. But they were not prepared at all, says Lapavitsas, with the dramatic result that Tsipras is now carrying out an austerity programme that 62 percent of the Greeks had rejected in a referendum.

Lapavitsas: "Tsipras had campaigned for a rejection but when the result [of the referendum] came in he realised that in practice, it meant exiting the euro, for which his government had made no serious preparations. To be sure there were back-of-the-envelope “plans” for a parallel currency, or a parallel banking system, but such amateurish ideas were of no use at one minute to midnight. Furthermore, the Greek people had not been prepared and Syriza as a political party barely functioned on the ground. Above all, Tsipras and his circle were personally committed to the euro. Confronted with the catastrophic results of his strategy, he surrendered abjectly to the lenders."

"Since then he [Tsipras] has adopted a harsh policy of budget surpluses, raised taxes and sold off Greek banks to speculative funds, privatised airports and ports, and is about to slash pensions. The new bailout has condemned a Greece mired in recession to long-term decline as growth prospects are poor, the educated youth is emigrating and national debt weighs heavily."

In Lapavitsas' view the result of Tsipras' (and Varoufakis') policy has been disastrous: "Syriza is the first example of a government of the left that has not simply failed to deliver on its promises but also adopted the programme of the opposition, wholesale. Its failure has strengthened the perception across Europe that austerity is the only way and nothing can ever change."

Lapavitsas has an important lesson for the European left:

"Syriza failed not because austerity is invincible, nor because radical change is impossible, but because, disastrously, it was unwilling and unprepared to put up a direct challenge to the euro. Radical change and the abandonment of austerity in Europe require direct confrontation with the monetary union itself. For smaller countries this means preparing to exit, for core countries it means accepting decisive changes to dysfunctional monetary arrangements. This is the task ahead for the European left and the only positive lesson from the Syriza debacle."

No comments: