Greece is Being Blackmailed. Exiting the Eurozone
is its Way Out
By Costas Lapavitsas
June 26, 2015 "Information
Clearing House" - "The
Guardian"
-
A few days ago the
Greek government submitted a list of proposals hoping to break
the deadlock with the “institutions” – the European Commission, the
International Monetary Fund and the European Central Bank. The
government basically agreed to tough primary surpluses: 1% in 2015
and 2% in 2016. To achieve these targets it proposed to raise VAT on
a range of widely consumed goods as well as imposing a host of taxes
on enterprises and families of “high” income. It also proposed
substantial savings on pensions. The measures added up to roughly
€8bn over 2015-16, and would be immediately implemented.
The package is certainly deflationary at a moment
when the Greek economy is again on the threshold of recession. There
is little doubt that it would contribute to output contraction and
higher unemployment in 2015-16, particularly as there is little
prospect of being offset by an investment programme funded by the
EU. It is a major retreat by the government of
Syriza.
To general astonishment, the response of the
“institutions”, led by the IMF, was to demand even tougher measures
to achieve the same targets. These include more severe increases in
VAT, a lessening of the tax burden on enterprises and greater
pension savings. If these demands are met, the government will not
even be able to claim that it has shifted some of the increased tax
burden away from workers and the poor.
For Greece as a whole, the prospect of a deal
achieved on this basis
would be simply appalling. The country would be forced to adopt
harsh austerity measures dictated by the lenders, without any
realistic possibility of substantial debt relief, or of a
significant investment programme. The “institutions” are once again
attempting to impose the policies that have failed abysmally since
2010, causing huge contraction of GDP, vast unemployment and mass
impoverishment. It would be a national disaster accompanied by the
complete humiliation of the Syriza government.
For those who look at the European Union without
rose-tinted glasses, there is no surprise regarding the attitude of
the lenders. The EU and the eurozone in particular are in thrall to
austerity, even institutionalising it through the
so-called six-pack and two-pack. The lenders have inevitably
objected to lifting austerity in Greece, and appear to believe –
foolishly – that austerity “works”. Furthermore, they are keen to
inflict a political defeat on a leftwing government that has dared
to challenge the European status quo. Europe has shown a harsh and
cynical face toward Greece, whatever might be the faults of Greece
itself.
The real question is, will the government of
Syriza accede to these extraordinary demands? Will it submit to
blackmail? Syriza won the election in January 2015 with a strategy
that promised to lift austerity and bring radical change to Greece,
while remaining within the eurozone. It believed that its strong
democratic mandate would help it succeed in tough negotiations with
the lenders. Reality has proved to be very different as the lenders
have used the framework of the eurozone to create a liquidity and
funding shortage that has crippled the Greek side. At the same time,
both the lenders and the domestic forces that wish to continue with
the policies of austerity – including, mostly, the rich and the
financial elite – have been scaremongering shamelessly about Grexit.
Faced with the power of the purse, the strategy of Syriza is
unravelling.
Greece and the government
of Syriza have now come face-to-face with the ruthless reality of
the eurozone. To keep the country in the monetary union, the lenders
are demanding that it should submit to blackmail and accept policies
that would lead to national decline. Greek society would face low
growth, high unemployment, entrenched poverty and emigration of its
skilled youth, as the experience of the last five years has shown.
There is an alternative path for Greece, and it
would include leaving the eurozone. Exit would free the country from
the trap of the common currency, allowing it to implement policies
that could revive both economy and society. It would open a feasible
path that could offer fresh hope, even if it entailed significant
difficulties of adjustment during the initial period.
The choice ultimately rests with the Greek people.
Despite the frequently reported polls presumably showing strong
support for the eurozone, the reality on the ground is anger and
frustration among workers, the poor and the ravaged lower-middle
class. These are the social layers that could put the country on a
different trajectory of growth with social justice. In this respect,
it is incumbent upon Syriza to rethink its strategy and offer fresh
leadership to the Greek people. In the coming days a significant
intervention by its influential left wing, the Left Platform, can be
expected. Greece needs a rapid public debate and a reshaping of
policy. The country has the strength to survive and it will.
Costas Lapavitsas is a professor of economics at
the School of Oriental and African Studies (Soas), University of
London, and a Syriza MP© 2015 Guardian
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