‘Greece : A Third World Country’

Saral Sarkar

Recently, during a popular German TV talk show, the moderator quoted an experienced Brussels correspondent (Mr Krause) of the channel (ARD) who had said: "Actually, Greece is a Third World country that is living like an advanced industrial country." To this, the Greek participant in the talk show, Mr Chondros, a member of the Central Committee of SYR1ZA retorted angrily, and twice: "He is talking nonsense. Convey this opinion to him with my compliments." Later, he added that the Channel ARD was mostly spreading propaganda.

In truth the root cause of the current Greek crisis lies here. Greece is certainly not a Third World country. But it has never been as prosperous as, e.g., Germany. From 2002 onward, when Greece joined the Euro Zone, it got much easier terms for borrowing at the international financial market. Whereas previously it had to pay roughly 25 percent effective interest on its state bonds denominated in Drachma, after joining the Euro-Zone it had to pay only 5 percent on its bonds denominated in the highly valued and strong Euro. The difference of 20% was a net gain for the Greeks. But at the same time, the state, perhaps also Greek banks, businesses, and ordinary citizens then became strongly tempted to borrow more than what could be economically justified.

And why shouldn't they have borrowed more? In standard economics borrowing is recommended for creating wealth and increasing income and prosperity. It is argued that an entrepreneur borrows money, invests it in some business, and makes profit. The state borrows, invests in infrastructure development or promotes industries sometimes state-owned industries. and so the nation becomes prosperous. In both cases, the debt can be serviced or even fully repaid from the increased income.

In this connection it must be said that all those who participated in the media discussions, including Greek economists, failed to say even once that Greece's current problems are not entirely of its own making. The Great Recession that began in 2007-2008, and from which also several other countries are still suffering, exacerbated the plight of the Greek economy which had already been weakened by the debt burden.

The generation of politicians who had applied for and pushed Greece's entry in the Euro Zone had falsified the statistics on the basis of which the country was judged to have satisfied the criteria to become a member. That was the original sin, if you will, the consequences of which the young Greeks of today are bearing.

Ever since January 2015, when the left party SYRIZA came to power, some of its spokespersons and supporters in the other European countries have been repeatedly saying that despite all the troubles Greece is giving the Euro Zone, the place of the country that taught Europe democracy is in Europe and not outside. It has also been reported that in 2001 the EU bosses knew that the statistics were false, but they thought they could not deny Plato the right to play in the first division.

In 2001, Europe did not need to learn democracy from the present-day Greeks. The real reason why Greece wanted to be admitted to the Euro Zone were the economic advantages mentioned above. It is, moreover, dishonest to intentionally obfuscate the difference between the European Union and the Euro Zone. During the present crisis, nobody advised Greece to leave the EU. Only some courageous people, including some serious economists and the German finance minister Mr Schäuble, said that it would be good for both the Greeks and the rest of the Euro Zone if Greece opted out of the Euro club for a few years. Exasperated at the continued obfuscation in the talk shows, a participant, namely Prof Hans-Werner Sinn, cried out (in the general sense): but the Euro is only a currency; the Euro Zone is only a currency union and not an economic or political union based on values. A currency union cannot exist if all participants feel free to ignore the rules.

This obfuscation may only have been a tactic, with which the Greeks intended to get better terms for the new credits or even debt forgiveness. And their left and green supporters in Western and Northern Europe perhaps only wanted to show that they value solidarity and sympathize with the suffering Greeks, while the conservatives, like Merkel and Schäuble, were merciless and wanted to punish the Greeks for having elected a left party to power. But neither Tsipras and SYRIZA nor their supporters could suggest any other middle-term solution of the problem than the obsolete Keynesian one: further borrowing and spending and waiting for the time when the economy would again start growing.

After the referendum of 5th July, when 61.3 percent of the Greek voters said No to further austerity, leftists all over the world waxed eloquent about democracy. But neither before nor after the referendum did anybody know what Tsipras would do if the creditors remained stubborn and refused to give Greece what it wanted unless he agreed to their harsh conditions. Would he in that case lead Greece out of the Euro-Zone? This question, widely discussed outside Greece, was never discussed in Greece, at least not in public. The referendum was therefore no good example of democratic decision making.

In other words, neither SYRIZA nor the Greek government had a plan B, for the majority of the Greeks simultaneously said No to further austerity and (in opinion polls) No to exit from the Euro Zone (Grexit). This question was a hot potato that no Greek politician dared to touch. Most No-voters simply imagined that the other 18 leaders of the Euro Zone would bow to the wish of the majority in a small member country. Yanis Varoufakis, the then finance minister said (in the general sense): If you have a debt of only 30 million, you are weak, but if it is 300 million, you are strong. This was at best naivety, if not a delusion.

After the overwhelming No vote to austerity, a few young Greeks said to TV journalists, they were very proud of Greece etc. But what exactly were they proud of? Some said they were proud because Greece demonstrated resistance in spite of the very bad situation. But can any people be proud at all, if they are so heavily indebted as the Greeks are, and can they call their No-vote resistance if through it they ask their Prime Minister to go with a begging bowl to the same hated rich creditors and beg for further debt forgiveness and easier repayment terms? They would have had reason to be proud if they had declared: we herewith end this debt-slavery, we exit from the Euro-Zone, and introduce our own new currency. But they didn't take this path.

It is not correct to speak sweepingly of "the Greeks" and for that matter, of any people, e.g. "the Vietnamese". Like any society, Greek society too is divided into classes and interest groups. And particular political proposals are generally supported or rejected on the basis of personal and class interest in the given situation. During the hours long big demonstrations on the days before the referendum, political observers could easily find out that it was mainly young people, workers, students, the unemployed, and people with a low income who would vote No. These were the people who thought they had no future, had nothing more to lose, or things could not become any worse for them. The prospective Yes-voters were mostly teachers, multilingual intellectuals connected with Western Europe, entrepreneurs, elderly people, pensioners, middle and upper middle class people, people with safe jobs, all of whom wanted to protect what they had.

After winning the referendum, Tsipras went to Brussels in a fighting spirit. But on 13th July he returned with a worse deal than the one he was offered before and which he had asked his country-men to reject in the referendum. He had to sign the worse deal, because he did not see any way out of the unsolvable dilemma he faced. In the words of Varoufakis, the Greeks "were given a choice between being executed and capitulating. And he (Tsipras) decided that capitulation was the ultimate strategy... ". So the SYRIZA leader, who had been celebrated on 25lh January after winning the election, and again on 5th July, returned to Athens on 13th July as a defeated and humiliated general. After returning home, he said totally contradictory things: he did not believe the deal he accepted would save Greece; it would certainly cause more pain and further recession. But he had to sign it and, what is worse, he must also try to implement it, for "this deal secures for Greece conditions of financial stability, gives it opportunities for recovery"; he promised that after a period of suffering, there would be light. A truly tragic figure, an anti-hero.

After this outcome, some of his radical critics called Tsipras a pseudo-leftist, accused him of betraying the people who had voted for him. This is rather unfair. To use another classical Greek imagery, he, as captain, had to steer his ship, the Greek nation, between Scylla and Charybdis? But unlike Odysseus, the hero of the epic Odyssee, who succeded in steering his ship out of the twin dangers with only moderate sacrifices, Tsipras has till now failed to achieve anything. Even the third debt relief packet, that the Euro-Zone bosses had dangled before him, may not materialize. Tsipras could not but fail.

During the whole debate—both in Greece and the rest of the EU—there was a lot of talk about values and the European idea. Tsipras once said—a few days before his humiliating capitulation in Brussels: "Europe is about democracy and solidarity". It was a mockery of the reality. For throughout the crisis period, many insults were hurled by both Greeks and Germans at each other (e.g. the Greeks want to steal money out of our pocket, lazy, corrupt Greeks. In Greece, many placards depicted Merkel and Schäuble as Nazis. The Greek government demanded reparation from the German state for the destructions and crimes of the German Nazis in the Second World War. etc. etc.)

Already before the capitulation, Varoufakis had likened the negotiation positions and style of the creditors to "terrorism". After the capitulation, energy minister Lafazanis said in a statement that the country's creditors had "acted like cold-blooded blackmailers and economic assassins". Mr Kammenos, the defence minister, angrily said: "They blackmailed the prime minister, .... This agreement is not close to our values." He also characterized the deal as "a coup by Germany" and its allies. And in Germany, the opposition leaders, supporters of the SYR1ZA government, accused Merkel and Schäuble of destroying the "great European idea".

But the "great European Idea" and its "values"—democracy, solidarity, human rights etc. are just ideology, instances of make-believe, a veil to cover up the reality. In real life, when something becomes a success, or becomes attractive for whatever reason, many opportunists want to belong to that entity, be it a political party, a nation, a football club, or an identity. They either expect to get some material benefit by joining that entity or they want to bask in the glory or good reputation thereof. Thus, in recent German history in  the 1980s, hundreds of unsuccessful leftists and members of established parties streamed into the Green Party as soon as the latter scored some electoral success. There, many of them made a political career, became MP or even minister. But there were also people who simply wanted to enjoy the satisfaction of belonging to the avant-garde of environmentalists without themselves being one.

Or take for example the young woman from Azerbaijan. In her speech in early 1990s at a youth conference she grumbled that her Azerbaijani money could not be exchanged anywhere in Western Europe. "How can we build up a united Europe", she said, "if we do not even accept each other's currency?" During a recess, this writer asked her: "You think Azerbaijan belongs to Europe? It is a Muslim majority country in central Asia!" She replied: "Europe extends from the Atlantic to the Ural and the Caspian Sea." In the mid- 1980s, Gorbachev too started talking about "Our Common House Europe". At an international conference of the Green Party of Germany, of which this writer was a rather conspicuously brown and non-German member, a senior delegate from the Soviet Union, Mr Kolontai, a Russian, was asked, whether he could imagine that also the Kazaks, the Uzbeks, the Turkmens etc.—in those days citizens of the Soviet Union—would also live in that "our common house Europe". Mr Kolontai hesitated a little before answering: Yes.

So far as Gorbachev's motive behind the idea was concerned, it was certainly not opportunistic. But today one sees how hollow this idea in reality is. Not even all citizens of all the member countries of the EU are treated equally everywhere in the EU, e.g. the Romas and Sintis. When e.g. unemployed Romanians and Bulgarians travel to Germany, German officials suspect them of trying to exploit their more generous social welfare system. To take another example, when recently the EU Commission tried to fairly distribute the burden of accommodating the tens of thousands of refugees among all EU member countries, some flatly refused to accept any. They insisted on the original agreement that the burden of accommodating refugees will have to be borne by those EU member countries where the refugees first arrive. Mr Rentsi, the prime minister of Italy, that is bearing the heaviest burden of this kind, was so angry after the failure of the deliberations that he openly said in the direction of the refusing countries: "If this is your EU solidarity, then you can keep it." The second heaviest refugee burden is being borne, of all EU countries, by the most crisis-ridden Greece. Here too no solidarity. But, in spite of the no-bail-out clause in the Euro Zone treaty, member countries showed a lot of solidarity, at least in the beginning, with Greece, Portugal, Spain and Ireland when the issue was saving the Euro. After all, it was also their currency that was in danger, whereas the poor foreign refugees were only burdens. So much for solidarity and values. Crisis times are testing times. Against the background of and due to the economic crisis, this good image of the EU, which was false from the very beginning, is now rapidly unraveling. It is doubtful that in future the EU and the Euro Zone would remain as they are today. For some time now, ideas are circulating which want to see the EU divided into two groups: the Protestant-Calvinistic North EU and the Catholic South EU, EU of "two speeds", the economically strong countries and the economically weak ones.

To come back to the Greek crisis, time and again, critics of the SYRIZA government pointed out that it is impossible for anybody to demand that poorer EU countries like e.g. Slovakia and Estonia—where the average wage, average pension and average social welfare benefits are lower than those in Greece—should also give surety for the huge credits already given to Greece and new credits that Greece was demanding. To this, the above-mentioned Mr Chondros once replied: (in the general sense) the ideal of the EU is not to bring about equality among member countries by pushing down the standard of living of the different peoples to the level of Slovakia, Estonia etc., but by raising the standard of living of the poorer member countries to the level of Greece and then further to higher levels.

It seems that Mr Chondros and all the leftists of the EU do not know what the EU fact is and what it is not. It is not a union of socialist republics, it is only a union of unequal countries, where neo-liberal capitalism, free market economy, and competition prevail. In fact, the rules of the EU and the Euro Zone do not even allow bailing out a member country that is in danger of going bankrupt. The reason why the Euro Zone leaders tried to save Greece was not sympathy, solidarity etc., but the certainty that Grexit would entail loss of trust at the international financial market in the solidity of the Euro. In reality, they wanted to save the Euro, not Greece.

And secondly, they did not want to let Greece get out for geopolitical reasons. Most EU members are also NATO members. And Greece lies in a strategically important area, very close to the Balkan states, the Ukraine, Turkey and the Bosporus Straight through which Russian war ships pass on their way to and from the Mediterranean Sea. This argument was openly articulated by Mr Röttgen, the foreign policy spokesperson of the German ruling party CDU. It is no secret that geopolitical considerations had been the force behind the creation of the EU and the currency union, (a) Without the EU, every European country would be too small—in comparison to the USA, USSR, and later China—to have sufficient weight in world politics; (b) and it is well known that the then French President Mitterrand pushed the idea of the common currency Euro, because the French were afraid of Germany again becoming the hegemonic power in Europe.

A capitulation is not per se reprehensible. And no capitulator is ipso facto a traitor. When the German generals capitulated on 8th May 1945, it was, in the given situation, the best thing to do to serve the German people. Justifying his capitulation, Tsipras said in his speech in the Parliament: he himself did not believe this deal would solve the problems of Greece. If anybody knew a better solution, he should come and tell him what he should do. But his question was a bit unclear: What should he do to solve which problem or to satisfactorily perform which task? Was it (a) to immediately prevent the impending disaster, i.e. avert state bankruptcy and Grexit, and somehow getting the banks reopened and functioning again? Or was it (b) to overcome the economic crisis in the middle and long term?

No Greek MP came forward that night to present a better solution. But, in fact, already before Tsipras signed the humiliating deal, some serious economists outside the political class of Greece had made two convincing proposals for addressing these tasks: (1) The govt. could have immediately introduced a New Drachma as a parallel currency. Euro would have remained in circulation for foreign trade. And the Greek government would have had the sovereign right to issue the New Drachma. This solution would not have had the immediate negative effects of a formal Grexit. In fact, there is a precedent for this policy, viz. Argentina in the crisis of 2001. (2) The govt. could have formally declared Greece's bankruptcy and the country's exit from the Euro-Zone, what many German economists, and Schäuble, advised them to do. The other members of the Euro Zone would have helped them in making a smooth transition to the New Drachma. And the creditors would have been compelled to agree to grant Greece substantial debt forgiveness.

In both cases the New Drachma would have been a weak currency suffering more or less rapid devaluation. It would have led to inflation by making imported goods dearer for those who would receive their income only in the New Drachma. But the weak New Drachma would also have had the advantage of attracting investors and buyers from outside and prornoting exports and thus also export industries. In the short term, of course, there would be no advantage only more pain. Particularly the standard of living would continue to fall, while the advantages would have taken some time to come.

But Tsipras, also SYRIZA, had already rejected both options. Obviously, the majority of the Greeks thought they could not bear the pain any longer, did not want to make any experiment and opted for the continuation of their debt-servitude—not a sign of a proud people. Only a few said, they would prefer to be independent again with a new national currency and were prepared to pay the price for that. Surprisingly, all the leftists collected in the SYRIZA—including ex-communist Tsipras—had not told the Greek public the truth about their situation. They had sold illusions just to win the general election. Even after winning the election, they did not at all prepare the voters for independence. So they had to capitulate. Tsipras and SYRIZA did not have even a fraction of the real power in Greece that the Vietnamese communists had in Vietnam after 1975.

Whatever path the Greeks may choose to take, their economy would not experience any growth in the near future. When Germany was experiencing a long stagnation at the beginning of the present century, supply-siders were saying that unit costs of German products were too high because wages and social welfare benefits in Germany were too high. Lafontaine, a former leader of the Social Democratic Party of Germany (SPD) replied to that view (in the general sense) that in the matter of wages, Germany cannot compete with China in the race to the bottom. So, Germans must concentrate their efforts on high-tech and sophisticated industrial products like machines, cars etc.

Greece too, with its average wage of about 15 Euro per hour cannot compete with other EU and non-EU countries in the same region, where the average wage ranges between 4 and 5 Euro per hour. And it cannot compete with, e.g., Germany, not even with France and the UK, in the matter of high-tech and sophisticated products or international finance. Low-tech goods are being produced in China etc. Ordinary products like shoes, garments etc. have long ago been outsourced into really Third World countries like Vietnam, Bangladesh, Cambodia etc. And even if a Greek government in the near future succeeds in making the economy competitive by implementing the recommendations of the supply-siders in Brussels and Berlin, where will it find the markets that are not already being supplied by its competitors? It can at most with great effort win a share of the world market in cheap products. That will, to be sure, create some low wage jobs for the Greeks and profit for foreign investors. But Greece will not become a prosperous country again.           

All that means, however much Greece may try and whichever economic policy it might pursue, there is little chance that its economy would recover up to the prosperity level of 2007. That means, there is no escape from austerity; austerity, more or less, is unavoidable. But it is not a bad thing, it is even necessary, in both economic and political interest of the Greek people as well as in the interest of the natural environment of Greece and the world. However, the pains and burdens thereof can be shared equally or unequally. Undertaking that these are shared equally or at least "fairly" is not possible without regulating the economy and a great degree of planning. That exactly is the task of a left government today. Pablo Iglesias, the leader of the new Spanish left party Podemos, of course expressed his disappointment at the deal that Tsipras had to accept on 13th July. But he also heaved a sigh of relief on noting that Merkel, Schäuble, and the Troika hawks failed in their objective, namely the overthrow of the [leftist] Greek government.

It is wonderful that in January 2015 the Greeks voted a left party into power. It was not just a protest vote, not just done in desperation. It seems a large section of the Greek people has realized that capitalism is the problem. That is why, in the years and months before this election, in many demonstrations, one could see placards and banners carrying anti-capitalist slogans. That was the case not only in Greece, but also in the other crisis-ridden countries of Europe. But in reality, capitalism is only one half of the problem. The other half is that there are limits to growth. It does not look as if the European Left (including SYRIZA and Podemos) has realized this. They are still talking of solving the problems of their people through economic growth.

But it is possible that they will come into contact with those who are propagating ideas like de-growth, post-growth economy, sustainable society, solidarity-based economy, eco-socialism etc. If that happens, and if they could be convinced of the correctness of these ideas, they may take steps toward realizing them. After all, they now have some political power.

Frontier
Vol. 48, No. 8, Aug 30 - Sep 5, 2015