Published on 19 Jun 2015

Greek crisis: crunch time

We’re at a critical point in the Greek crisis, which is really the 2010-11 Euro crisis being unfrozen after five years of make believe solutions.

Money is leaving the banking system at the rate of a billion euros a day. Bank deposits stood at €164bn when the conservative-led coalition began to totter last December; were €132bn at last count and are probably close to €125bn and falling as I write.

The situation today has potential to turn into a bank run, especially after Luxembourg leaked details of a closed door Eurogroup meeting in which an ECB representative is said to have warned the banks may not be able to open Monday.

With reports that the governor of the Bank of Greece will seek a further €3bn in emergency credit at noon (10am UK time), the pressure is on Greek finance minister Yanis Varoufakis to impose capital controls: limiting movement of money outside Greece and limiting cash withdrawals.

Varoufakis believes what’s happening is orchestrated and, combined with last night’s rejection of his three point proposal to end the debt standoff, is part of Europe’s effort to panic the Greek government into surrendering on the terms of a debt deal, to impose more austerity.

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There is political panic too. Last night a very well-heeled crowd of people from business, finance and the old political elite joined a demonstration – ostensibly non-party political and organised on Facebook – outside the Greek parliament. The participants called for Greece to stay in Europe, but even here many objected to the austerity measures being imposed.

They swarmed up the steps of parliament, casting eerie shadows as they stepped in front of its illuminating lights. It was not lost on supporters of the far-left government that many of those doing the swarming had participated in a government that routinely truncheoned and tear gassed people for coming even close to the former barricades around the building, which the present government has removed.

So what now? There’ll be a political summit on Monday. But there was a political summit two weeks ago, after which Angela Merkel, Francois Hollande, the IMF’s Christine Lagarde and the ECB’s Mario Draghi offered Greece a take-it-or-leave it deal to secure the funding it needs to repay the €15bn coming due to creditors this year.

The Greeks rejected it, first because they cannot deliver the specific austerity measures demanded on VAT and pensions; second because the IMF/ECB is forbidding them to count in non-tax measures like fighting corruption or a crackdown on evasion, to reach their proposed fiscal target of a 1 per cent surplus this year.

And because there’s no long-term deal on debt. The Greek debt – €320bn – is unpayable because the level of austerity required to service it and pay it down is impossible for any government to deliver. That’s why the old pro-austerity coalition fell.

Plus, the structure of the Greek economy – with its small shops, high tax-exemptions for the super-rich and heavy reliance on the state to stimulate growth – means that here austerity always squashes growth. As I’ve said before, Greece is not Ireland. Plus Greece can’t devalue and export – because it’s in the Euro; wages have already fallen 37 per cent; and it can’t manufacture its way out of trouble because it is an agricultural and tourism economy, not an industrial powerhouse.

In a way the two demonstrations that thronged parliament on Wednesday and Thursday night illustrate the popular delusions that the right and left here share. The pro-Syriza demo was against austerity but, for the majority, wanted Greece to remain in the Euro. The centre-right demo is against leaving the Euro but neither wants, nor when in power could deliver, the austerity required.

So something has to give. The EU leaders are hoping it will be Greece – aided by a shove created by a full-blown bank run, stoked by leaks and frantic reporting by the right-wing owned TV stations here. The Greek leadership says it cannot budge.

I’ve reported this crisis from inside the Brussels HQ of the Eurogroup and from inside the mansion of the radical left prime minister – and of course from the streets. Here’s what I think:

First, the working assumption of the Greek leadership – that Europe would drive a hard but fair bargain that allowed them to rebalance the economy without added austerity – was wrong. They told their voters they could soften austerity but stay in the Eurozone because key people in power had assured them that would happen: the US State Department, the Italian and French prime ministers, and the old Commission.

But there’s a new Commission dominated by the right, and the Italians and the French ran into a block of countries in northern and eastern Europe who – reflecting the views of their own right wing voters – refused to budge.

The “good Euro” Yanis Varoufakis thought he could create has not, so far happened.

Likewise Angela Merkel miscalculated: having removed Berlusconi in Italy, and the socialist PM George Papandreou in Greece in 2010, she assumed political pressure would cause Syriza to split. Its hard left would leave; Alexis Tsipras would soften once inside the marble corridors of the Maksimou mansion, and form a national coalition with a small, modernised neoliberal party called Potami, and with the support of a liberal wing of the conservatives around former PM Costas Karamanlis.

This has not happened. Though Syriza has effectively three operative factions – the hard left, a softer left around Tsipras, and a more moderate social democratic group including some non-party ministers – the critical factor has been the grassroots. Syriza is not like most British political parties, whose members barely get a say on policy: its MPs and ministers are in constant contact with layer upon layer of activists and voters.

One newly elected MP, stunned even to be in parliament after January, told me: “I can’t cave in because I have to go back to my village and live there; they elected us to fight.”

Alexis Tsipras, and even some of the people around him seen as moderates and existential pro-Europeans, hardened their stance during the past three weeks. Psychologically, they have become convinced the Eurozone is being run by Germany and Germany wants Greece out.

If there is, now, an increased bank run, restrictions on withdrawals, and a crisis over bank solvency, then by Monday the EU’s leaders will have a heavy stick to beat Syriza with. But if they don’t come with a carrot, and some room for compromise, the Greek leadership will default.

Then it will be up to Europe to decide: does it rescue Greece or expel it from the Eurozone? A country with migrants flooding across an unpoliced border with Turkey, one land border away from the Islamic State, and with a left tradition that is always prepared to do deals with Moscow. That makes this a geo-strategic moment, not just an economic moment.

If you ask yourself why Syriza does not just fold, live to fight another day, you haven’t been watching the TV enough. After five years of austerity, imposed first by the socialists then a conservative-led coalition, the process has destroyed every political force that tried to make it happen.

The conservative right is fragmented, at war with itself; the old Pasok party, which once gained 40 per cent of the vote, can now fit all of its MPs around a table. Smaller parties that joined the austerity bandwagon – like the moderate Marxist DIMAR and the nationalist rightwing LAOS – just disappeared.

The Greek leadership will play this as Greece versus Euro-imperialism. They will, in the face of a totally hostile TV and newspaper media, appeal to the 41 per cent of Greeks who prize fighting austerity more than membership of a currency in which they are always the black sheep. They’ll have no shortage of supporters in the economics profession – including many traditional right wingers – who’ve observed the Euro and its hapless central bank become a dysfunctional and unpredictable structure.

The country will divide: right versus left – as it has been divided since British tanks rolled into Syntagma square in 1944 to install former Nazi collaborators into office in preference to the communist-led resistance.

But this time we don’t know who’ll win. For certain we’ll know who’s lost: everybody in Europe who argued the EU can contain the economic aspirations of the left as well as the right.

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41 reader comments

  1. James says:

    So Paul cant accept that there were EU backing protesters so he calls them “well heeled, from business & finance and old political elite” in an attempt to undermine their view.

    He then goes on to say “It was not lost on supporters of the far-left government that many of those doing the swarming had participated in a government that routinely truncheoned and tear gassed people for coming even close to the former barricades around the building”

    Pretty sad that such an obviously biased journalist is allowed on television

    1. Louis says:

      What is biased about stating the obvious? That is exactly what the previous government, at the time backed by the discredited Neo-Nazis, did.

    2. Louis says:

      Thanks Paul for an unusually well informed article on the impossible position Greece is in. It is clear you don’t just refer to the nearest file and slavishly copy ignorant sources, a disease among your contemporaries. I also appreciate your broadcasts from Athens which are inching closer to reality all the time.

      I’m not sure how far ‘balanced’ reporting will allow you to go, but I am inviting you to allow at least the suggestion that the IMF ought to ask what its left hand is doing (explicitly condemning austerity as a means to fix economies) as its right hand is trying to enforce further austerities on a people who can take no more including reducing the meagre pensions with which half the population of pensioners are supporting their unemployed children as the only source of family income. I wonder how far your can go.

      I sincerely hope that it is Angela Merkel who folds and takes with her the large mannish woman from the IMF (sorry if that’s sexist, but as a Greek Cypriot I hate her with such a loathing and all the plutocratic empires she represents) and the bullying bank of Europe. I think she has more to lose, not wishing to be the German leader who presided over the collapse of the Euro and who knows what other side effects.

      I believe that Tsipras will be hailed as a hero by history, a hero who defied this dogma of austerity that is destroying so much of Europe, including Britain.

      1. delfini says:

        Spot on. I endorse every word of that.

    3. Leginge says:

      “well heeled, from business & finance and old political elite” – the description is a correct one from what I could see, so doesn’t undermine anything. And it’s not biased either – just factual. The fact that you see it as biased says more about your own prejudice than anything about the article.

    4. Jimi says:

      James, you got it right. It is an established fact that Mason has a crush on syriza. He described yesterday’s pro-EU rally as pro-austerity claiming on twitter afterwards that “that’s what people told him”, as if there’s everyone on the planet in his right mind to rally in favor of his austerity. This was a pro-EU rally pure and simple, as the majority of Greeks still feels that they’re better off within the Euro, the alternative being a catastrophic exit.

      He goes on to draw a historic analogy from WW2 painting a civil war climate complete with nazi collaborator overtones in order to masquerade the fact that pro-state syriza (and we’re talking about a huge and very corrupt state here, syriza’s traditional clientele) has to come to its senses, embrace reality and swallow tons of pride and pre-election lies, most notable of which being that the memoranda of understanding between Greece and the Troika (now termed “institutions”, syriza newspeak ) signed by previous governments would be torn with “one law, one clause”, later to be discarded of course as “a figure of speech”.

      Unbiased reporting? no. Syriza propaganda? you bet.

      1. christine says:

        It has been proved that 5 years of pro austerity has not been successful, so yes while the majority of Greeks do want to stay in the Euro, because of fear of the unknown, what will happen if we leave??, we cannot go on with the Austerity measures that they, the institutions want,,,,,so we are at a stalemate…..Austerity does not work, so something has to change….very easy to critizise much more difficult to offer a working solution….I have lived here in Greece for 35 years…luckily for me, I have not really been affected by the crisis to date, but my 29 year old daughter has a job.750 euros a month…8 hours a day, 7 days a week, for 6 months..and 3 months unemployment in the winter…at 350 a month…and she is one of the very lucky ones….

      2. Louis says:

        I know from your writing that you are not a native english speaker, and don’t wish to be rude, but I cannot make any sense out of what you are saying except to accuse Paul Mason of partiality and of promoting propaganda for Syriza. If you really believe this, then you must be living in an alternate reality – the sub-atomic physicists and cosmologists tell us this could be possible. What is it like in your universe? Have the rich finally wiped out the average and the poor and inherited the Earth? I’m very interested to know.

      3. christine says:

        I also do not wish to be rude, but I have no idea what you are talking about….I live in Greece…

      4. Bill says:

        “This was a pro-EU rally pure and simple, as the majority of Greeks still feels that they’re better off within the Euro, the alternative being a catastrophic exit.”

        The majority of Greeks are pro-EU, but I think they all know now they can’t stay in the Euro, as they know it, without austerity, which obviously they can’t take any more of. I think this maybe where the mix up came.
        But no doubt the IMF will continue to find ‘accounts’ with Greece name on it, as it did on 5/6/2015, when they found ‘another’ account with €1.3bn that Greece didn’t know about, simply to avoid Goldman Sachs embarrassment with their CDS deals!

    5. Derek says:

      So James, you believe there is only one view permissable in this slo-mo catastrophe?
      That attitude is precisely what has brought to this insane impasse.

      1. christine says:

        and what would you suggest Derek….more of the same…its been proved that Austerity does not work….All we are saying….is Give Greece a Chance…..

    6. Mal Fidlet says:

      No an honest one who knows what is going on in Greece. The people and the culture.

    7. christine says:

      So what did you want him to say, that the protesters were Pensioners, and out of work people….out for the day….

    8. Sheik Yerbutti says:

      It comes as no surprise that Paul has nothing but bitter words for the pro EU rally in Athens. But since he was….kind enough to compare this government’s behavior to the protesters who were rallying outside the greek Parliament on Thursday night to the stance of the previous governments to rallies (tear gasses etc), let me remind him that this was a peaceful rally. Let me also remind him that in June 2011, when the greek “indignados” were protesting in front of the greek Parliament, the protesters tried to invade the Parliament with aggressive cries about the “traitors” (politicians) who should be “hanged” in the middle of Syntagma Square. By the way, it was the time when Syriza and Golden Dawn members coexisted peacefully at the Square. That same Square that Yanis Varoufakis used the same summer to become a public figure and present his “fabulousness”…But Paul was not in Athens in the summer of 2011, so i guess he didn¨t notice that the crowd of the 2011 Square is now in power or in the Parliament (Syriza/Goldewn Dawn) and is apparently annoyed by rallies that are not controlled by it. Anyhow, i think Paul should ask his friend Yanis to narrate that story one day. But i guess it΄s not in Paul΄s job description to tell that story…

    9. George Andriotis says:

      If you think that Mr Mason is biased you obviously do not have a clue of the situation in the field. This pro-euro demo is a joke for the vast majority of Greek people, who strongly support this new government, even if they did’t vote for it in the first place. It is the first patriotic government we had here since the 2nd WW and this can be tested by the fact that we see now the first ever pro-government demonstrations. As for the pro-euro-by any means, even with our pant down crowd that gathered in Syntagma, I do assure you that for the strugle hardened Greek people who paid with their blood their anti-austerity demands in Syntagma square for the past five years, it is totally redicolous to see the aggressors demonstrating in bank-backed demo along the slavish and thieving bastards that have runed corruption and deceit for the last 40 years in this corner of Europe

    10. George P says:

      It is not biased journalism, it is a report on reality as it happens !!!

    11. Drew Campbell says:

      The fact that he’s the only economics commentator on mainstream TV telling the story (semi) sympathetically to the Syriza position should be sufficient to guarantee his place on our screens if people value plurality in our news coverage. I’d say his serious questioning of the neoliberal orthodoxy is vital – as evidenced by reactionary kneejerks like you who cannot countenance your gods being undermined, even in the face of hard evidence.

      Keep at it, Paul, and more power to your elbow.

  2. George Trialonis says:

    Let us hope that Democracy and the people win, because right now a country (Greece) is fending off rapacious European and US corporations whose aim is to punish its people and capture the natural resources of the country.

  3. Meg Howarth says:

    Thanks, Paul, particularly for the reminder of the role played by we Brits in undermining the possibility of a popular, post-war communist resistance government.

  4. Yiannis says:

    “I’ve reported this crisis from inside the Brussels HQ of the Eurogroup and from inside the mansion of the radical left prime minister – and of course from the streets. ”

    ….. what mansion Paul ??? there is no mansion

    1. dandraka says:

      “what mansion Paul ??? there is no mansion”

      He’s talking about the Maximou Masion. For non-greeks, that’s the equivalent of 10 Downing street.

    2. amaenad says:

      “Μέγαρο Μαξίμου” (the building where the Prime Minister’s office is) is often translated as <Maximou (or Maximos) Mansion. Not inaccurately, in my opinion. You disagree?

    3. Sophia says:

      I’m pretty sure he is referring to the ‘Megaro’ (mansion) Maximou. It’s just as how we refer to it in Greek.

  5. John Smith says:

    HOW DARE YOU SPEAK ON MY BEHALF AND PATRONISE ME. I WAS AT YESTERDAYS RALLY AND IT WAS ABSOLUTELY *NOTHING* LIKE YOU DESCRIBED.

    Go back to your home country Mason and stop trying to stir trouble.

    You know NOTHING about Greece.

    1. Christos says:

      Actually, Paul Mason knows much more about Greek history than you Mr John Smith…Obviously some British people know Greek history, some others (like you!) don’t…
      By the way congratulations dear Paul for the fantastic journalism you do!!

    2. christine says:

      and I suppose you do..John Smith….I have lived here for the last 35 years, brough two children up and have a very large extended Greek Family….all of whom have been very badly hit by these Austerity measures….

    3. Louis Loizou says:

      What a very strange observation, ‘John Smith’ (that’s a common Greek name, is it?).

      I know of very few TV journalists who know as much about Greece and her history as Paul Mason.

  6. Kiril says:

    * “well-heeled crowd of people from business, finance and the old political elite” – obviously the employees and retirees I know that were there were closet businessmen…
    * “many of those doing the swarming had participated in a government that routinely truncheoned and tear gassed people” – how many of several thousand people had been in government?
    * “a small, modernised neoliberal party called Potami” – with mostly ex-socialist (ΠΑΣΟΚ and ΔΗΜΑΡ) politicians that in the European parliament is in the Socialist camp
    How many more lies…

  7. Matt Usselmann says:

    “Then it will be up to Europe to decide: does it rescue Greece or expel it from the Eurozone? ”

    There is no way Germany will expel Greece form the Eurozone. Schaeuble would like to, for political reasons, because he does knows he is losing propaganda battle against Tsipras and Varoufakis.

    Merkel will not let that happen, Grexit. It would be ludicrous if all of a sudden Euro 320bn of Greek debt would become bad, which massive shocks for the Eurozone, because they could not agree on 2 bn worth of cuts to pensioners.

    Merkel would go down in history as the chancellor who wanted to be stingy to Greek pensioners and hence crashed the Euro. Not a good epitaph.

    Once we accept that Greeks will have to be kept in the Euro, the negotiating position is quite strong:

    https://radicaleconomicthought.wordpress.com/2015/06/16/endgame/

  8. Hm says:

    Many of the issues (closed professions, lay offs in the public sector, reorganization of justice system to be faster, unification of insurance bodies, cutting pension income above 1500, closing down useless publicly funded institutions) were not tackled at all by any of the “Memorandum” govs. Whatever cuts they did for the public sector on wages, oh well High courts seem to take back by “interpreting the constitution”. This leftist gvt only makes things worse by prioritizing on gvt expenses and rehiring useless employees with no real experience instead of new more qualified personnel. And of course the common denominator: Raising taxes to a silly extend. They even name them temporary to avoid increasing taxation averages. They have stopped posting stats on tax returns. Come on Paul Mason!

    As for the demonstration you are completely mistaken. Most of the old elite run to Syriza a few years ago. Get your facts straight please.

  9. Dan Allen says:

    Those vilifying Mason here for his characterization should realize who the organizers were:

    spyros gkelis ‏@northaura 4h4 hours ago
    Ex PubOrder Min @NikosDendias rallied for #MenoumeEvropi. When he was Min tried to pass a law to forbid any protest.

    Standing behind Dendias were a parade of suits and some with ties even!

  10. Pavlos says:

    It obvious that many mistakes have been made, and once again we Greeks face our worse enemy: our selves and our inability to unite even though we are facing the abyss.
    I am not pro- or against SYRIZA as such, but we tried the austerity and unless one is blind, it failed. Maybe because we Greeks are worthless (as a few media like to suggest). It is irrelevant though since we need to pay back insane amounts of Money that very few economies in the world could afford.
    As long as we do not default, my limited understanding is that these sums are mostly numbers in banks, so nobody really has lost anything (except Greeks possibly by paying interests). The Millisecond we default though, they become real and unfortunately taxpayers of other countries have to take a beating. And here is where I am at a complete loss. Our creditors say we need to come up with proposals, but they also say we do not know what we are talking about and reject EVERYTHING (not even discussing!!!). Fair enough. Can you PLEASE though come up with suggestions, proposals that indeed make sense since you are so much more experienced and intelligent and knowledgeable than our idiotic (elected) government. I am reading news from every corner of the earth and I am yet to find an analyst (apart from BILD) that believes that the austerity program did actually work (not just the opinion of the “barbaric communist” Paul Mason but from more conservative analysts as well) or is likely to somehow start bearing fruit. So why the fixation to it is beyond me
    I do not know what the solution is, but my logic says that since we were silly enough to require all this money, and since the creditors were silly enough to put theirs in us, punishment is not the solution. Finding a realistic way of getting these money back though sounds to me more logical. But can you get them back from a destroyed economy? To the best of my knowledge, historically the most successive bailout was to Germany after WWII. And guess what: no austerity was imposed…
    But then again we live in times where blaming and pointing fingers feels sooooo good.
    so go ahead, do it. Blame Greeks, blame the government for wanting something different (even if wrong) Just don’t expect this to solve any problems

  11. Philip Edwards says:

    Not withstanding the thieving horror visited on the Greek people by the IMF and ECB, your propoganda has now reached a level of far right hysteria that wouldn’t be out of place in Yank style Nazis. Or a Whitehall farce.

    Take this: “…imposed first by the socialists…”

    That wants some beating even by your standard neocon bollocks. Calling the IMF and ECB “socialist” is too funny for words. As is the behaviour of you and Frei in reintroducing the mad “domino theory,” this time as “contagion.”

    It was all sooooo predictable, especially once Vladimir Putin showed support through his presence – I bet that stuck sideways in your craw.

    Contagion, that is, of ordinary citizens fighting back, a concept that makes people like you look like the media cowards and far right propagandists they are. Long may people organise and resist the corruption of that corrupt orange-faced fraud La Garde and her ilk.

    Not that you would understand that kind of courage. You’re too busy huddling with the economic thugs and thieves.

  12. Heracles Dellagrammaticas says:

    Only one word is necessary :brilliant

  13. dave says:

    the true believers will succeed, stop screwing the Greeks.

  14. Christos says:

    paul, a good read as always, but not quite right. Please understand that this is not an old style right v left. Please look at who is in potami, which is definitely not neoliberal. Also you should realise that, unlike other kinds of SYRIZA-led demos, there was no danger of these people trying to trash the parliament.

  15. Joe Murphy says:

    Last Thursday’s eurogroup meeting went down in history as a lost opportunity to produce an already belated agreement between Greece and its creditors.

    Perhaps the most telling remark by any finance minister in that meeting came from Michael Noonan. He protested that ministers had not been made privy to the institutions’ proposal to my government before being asked to participate in the discussion.

    To his protest, I wish to add my own: I was not allowed to share with Mr Noonan, or indeed with any other finance minister, our written proposals. In fact, as our German counterpart was later to confirm, any written submission to a finance minister by either Greece or the institutions was “unacceptable”, as he would then need to table it at the Bundestag, thus negating its utility as a negotiating bid.

    — Yanis Varoufakis in today’s Irish Times

  16. cos67 says:

    Since Paul Mason left the BBC, he has felt the need
    to understand political situations, and express that. That’s
    what I believe he’s been doing in Greece.
    This article deals well with the dynamics, espec. the near
    future.
    Although Britain did fund both sides of the Civil War (1944-48),
    despite Yalta, the government they installed were not
    Nazi collaborators, but RW rebels.
    Greece had nominally RW and Communist rebel groups.
    The R-L split in modern Greece started with the Civil War. Germany
    and Britain still have a lot to answer for, as we know.

    Greece’s PM in 1939 was a Fascist dictator, but he stood up
    to the Italian Macaroni Army, and was not part of the Axis.

  17. VN Gelis says:

    The irony of history is that both products of a ‘communist’ past Merkel and Tsipras are trying to square a circle that cannot be squared. On the one hand a totalitarian 4th Reich on the other social justice and an end to austerity whilst maintaining the economic base which gave rise to the original problems in the first place.
    History may indeed repeat itself, but the second time it will be a farce. The clowns who gathered in Sindagma sq to support the Troika pretend no election took place.
    Civil conflict will eventually be the outcome but it will not be as widespread as 1946-1949. The social forces of reaction are much weakened and few and far between.
    Greece can only survive if it regains some form of national economic policy which can only occur if it exits the EU and nationalised the banks.

  18. william says:

    I believe the troika will have to compromise, as the spectre of Greece asking for help from Russia, and even China, will be intolerable to the Americans. Who will already be bringing pressure to bear on the EU! And what about all these credit default swaps held by the banks, or have they expired?

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