23 Feb 2015

Greece: a debt colony with a bit of ‘home rule’

On Friday night the Greek finance minister, Yanis Varoufakis, averted total surrender to a German led demand for Greece to implement the total austerity programme of its former conservative government. He did so by signing up immediately to a compromise that, in his mind, retained about 20 per cent of the programme Syriza was elected on.

But the entire deal depends on the Greek government submitting a list of proposed reforms to EU finance ministers today, and it being approved tomorrow by teleconference.

But the timing is appalling. By late Friday, I and other journalists were aware of a rapid uptick in Greek deposit withdrawals. The ECB, which effectively controls the Greek banks, told Varoufakis he would have to limit both ATM withdrawals and movement of money abroad on Tuesday morning, after today’s bank holiday in Greece.

That’s why the substantive deal was designed to be done tonight. When I asked Varoufakis, at a late night press conference, if the banks would open Tuesday he said: “Tuesday, Wednesday and ad infinitem”.

If Friday’s deal holds then Greece – which Varoufakis describes as a “debt colony” will effectively be a debt colony with a bit more “home rule” – and, to continue the analogy, minus what development theorists used to call the “comprador bourgeoisie”.

Syriza revolt

But two factors could destabilise that. First the revolt within Syriza at the scale of the climbdown. Syriza’s veteran MEP, war resistance hero Manolis Glezos, who tore down the Swastika from the Acropolis in 1941, called for mass mobilisations to resist the agreement.

But Mr Glezos is not as crucial as the organised Left Platform within Syriza, led by the economy minister Panagiotis Lafazanis, and backed by London SOAS professor, turned MP, Costas Lapavitsas. If the Left Platform were to formally oppose the deal in the Greek parliament, Syriza would have to rely on centrist votes to get it through – and Lafazanis (and possibly some junior ministers) would have to leave the government.

Over the weekend there were reports that Greece is seeking leeway to enact around €8bn of anti-austerity measures, paid for by a crackdown on tax evasion, a new tax on ship owners, and the collection of tax arrears.

If the eurozone’s finance ministers OK this, I would expect there to be a four month grace period, in which Syriza will remain in office to implement the non-fiscal aspects of its programme, which are a mystery to financial journalists clustered in Brussels but very close to the hearts of the 42 per cent of Greeks who backed Syriza and, to its left, the communist KKE.

Sea change

However, there is a sea change going on within Syriza. In the past 48 hours I’ve heard people who were staunch believers in the “good euro” – a euro that can accommodate by negotiation a radical left government – say, effectively, they were wrong.

I would expect the cost of a non-rebellion by left MPs in Syriza to be a rapid and overt move towards a “friendly default and exit” strategy. The “New Drachma” notes circulated as spoofs three weeks ago look more and more like becoming reality – though as with all economic shocks, it may take weeks for ordinary people to understand what is happening.

Though it’s happening to a stricken country, on the edge of Europe, the choices presented to Greece are being understood throughout Europe – and will resonate with the British electorate. What Germany did to Greece on Friday can be done to any country: obey or leave. And it can apply not just to the eurozone but to the European Union itself, or to the Schengen and Dublin Treaties on migration, or to Court of Human Rights.

To stick with the “debt colony” analogy: the old British empire, faced with successful revolts, was adept at saying “you’ve won, now let’s manage the path to independence smoothly”. We’re about to find out what a Europe dominated by Germany, backed by Finland, Slovakia and Latvia, can muster by way of diplomatic largesse.

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36 reader comments

  1. Harry Tsopanos says:

    Syriza was not elected to do what it does,austerity won’t produce any relief for us,if Syriza wants to continue this way they must ask the Greeks if they want it too,otherwise it will make another illegal party that took power based on lies.
    A referendummust be the solution.

    1. Dan Allen says:

      Response to Harry: Most Greeks wanted to stay within the euro. So Syriza did actually follow the wishes of most Greeks, even as it got a better deal than Samaras was offered in November. The only reason they accepted the deal is because the ECB was going to crash the Greek banks this weekend. So prepare for leaving the eurozone.

      Mason has it right. There is no amount of reform that can improve the Greek economy in the next year, not when you have a ton of debt that scares all investors away.

      It is indeed time for Greeks to take the step out of the eurozone and possibly out of the EU. But, make it very difficult for the Germans–just to piss them off.

      By the way, the current gov’t has several unorthodox economists in the ranks who will serve Greece a lot better than those with neoliberal tendencies. I would stick with the current Greek gov’t if I were you since they have the imagination that Greece needs at this point.

    2. Laurette says:

      I think people are misinterpreting what happened. Syriza merely bought the time they needed. All this talk of them caving is BS.

  2. Derek O'Flaherty says:

    Shame Greece can’t muddle through til the Spanish elections. In any case the new nature of the EU beast is being shown up clearly for the first time. With a burgeoning and reunified Germany (no longer just li’l old FRG) a traditionally weak France and a disengaged Britain, it’s a dismally familiar old Europe. If the UK pull out we’re all f’d.
    Greece can make difference, like the Canary in the mine.

  3. Neil says:

    So, what will happen if the “institutions” can’t reach agreement with The Greek government today? A bank run then……….. How could this develop out to the wider EU and markets?

    Whatever is agreed, will the Germans, Fins, Spanish (and 15 other member) all ratify this tomorrow. What happens if one of them says “no”?

  4. VN Gelis says:

    In 19th century German imperialism moved in to Africa to abolish slavery by instituting colonies. Today they show solidarity to Greece by saving it from the Debt. The times may have changed but the excuses remain the same. Greece has to be destroyed in order to be …saved.

  5. Pie-man says:

    Why are we still entertaining this Greek audacity. Granted they should never have been allowed into the Euro as they could not qualify based on their economy, but they did, and they burrowed billions, and spent, and bought, and now are used to a certain level of lifestyle and luxury. But why should the rest of Europe pay. A Greek exit will wipe their debts, and then we can re-strengthen entry requirements to the Euro. If Greece is not willing to take the good with the bad, stop the good…..simples.

  6. Breandán Mac Séarraigh says:

    Sorry Paul but not a good analogy. The usual British approach to successful revolts was to say: “you’ve won, we have no choice but to leave, but we will foment civil war, partition your country between the ethnic and religious groups we have encouraged to hate one another (usually by supporting minorities, sometimes specifically imported for that purpose) and leave your economy and infrastructure crippled. As examples: Ireland, India, Palestine, Iraq/Kuwait, Nigerian/Biafra, Cyprus and (without the partition) Sri Lanka, Kenya, Fiji and various southern African states.

  7. Jan says:

    Good to spell it out.

    Isn’t this what happens when rightwing CDU politicians and their rightwing allies in the EU decide to confront and face down a left wing government in another country ?

    This is also the stitch up that the Commission is trying to impose through TTIP, which would have us all under the heel of major corporations who would use the law to prevent governments taking decisions those corporations didn’t like.

  8. Philip Edwards says:

    What would a far right propagandist like you know about fairness and decency?

    My guess is that you would know about the same amount as, say, the IMF and the WB. Which is nil.

    Syriza were always likely to run up against a brick wall if they didn’t have transnational support. But at least they showed fight against an evil organisation.

    They will almost certainly fail this time round. Nevertheless they’ve laid down a marker for history, as did the British miners in 1985. As economies continue to deteriorate in coming decades – the next depression, whenever it comes, has every chance of being the worst ever – future dissidents will have the lessons, just as we learned lessons from the Atlee government of 1945.

    Decency may well be on the retreat and trampled down, but it will NEVER be defeated. One day far right propagandists like you will fail. That day can’t come soon enough.

  9. Margaret Eleftheriou says:

    I’ve just seen your interview with Stefan Kampeter. So moral authority rests only with the rule of law in the EU? So Grezos has NO moral authority? No wonder the Cretans in the village where I (mostly) live say that during the last occupation, the German killed our people, they blew up our villages house by house, they took all our produce and left us with snails and wild horta to eat. At least this time we will be able to keep the food that we grow.
    It seems to me that many Germans are in denial as to what actually happened within living memory.

  10. gerry watt says:

    nice to see paul mason putting the deputy german finance minister thru the sqeeky bum treatment. it was a joy to watch. keep up the good work paul and good luck to greece.
    gerry watt

  11. Mike Haraseviat says:

    It is not a case of “what Germany has done to Greece” but what Greece has done to themselves. The empire has been crumbling for 2000 years. Greece cooked the books to get accepted into the Euro and now it is clear it was a mistake to let them in. This a great example of why Turkey should never be allowed in.

    1. Tressa says:

      The simplistic notion of cooking the books! So poor Germans were cheated, the bad Greeks, the lazy Greeks! Well, how convenient! I believe you have a great understanding of history, economics, and of course morality! Well, Spain did not cook the books, take a better look what is happening there!

  12. Aka Joe says:

    i find Paul Mason’s populist coverage of the greek debt crisis pretty lame – nazis here, freedom fighters there, total surrender, germany taking over europe ….its all pretty predictable. maybe tone down on the rhetoric, add some balanced facts and let the reader decide who is to blame for what..

  13. Nick C says:

    Exchange rates between countries are gods way telling if your economy is shyte.
    Locking them together is akin to price manipulation.
    Time for a bit of price discovery.
    Thank You.

  14. Chris Alvi says:

    That was a fantastic interview. At last, someone holding this corrupt cartel to account for effectively pauperising the citizens of a fellow European democracy. Congratulations.

  15. Yiannis says:

    Your analysis is as usual much more accurate than that of most, but the mini-rebellion will not affect Syriza now. There should be a four month grace period before a new MOU is signed. If that programme, rather than this procedural bridge programme, is indefensible then Syriza should go into new elections (not a silly referendum) even if it is fractured to “pro-Euro/MOU#3” or “anti-Euro/MOU#3”.

    That will be the time for choosing course, not now.

  16. Nathan says:

    I agree if you ask a person any person that does not have a job, has no immediate prospects of being able to find one, has little money, and looking forward can see their life as a long drawn out struggle; whether they are prepared to gamble returning to their own currency, having independence and freedom from a system which is in fact causing those very problems, then what would they say? I know what I would say!

  17. Martin Raynes says:

    My goodness! Your interview with the German Deputy Finance minister was extraordinary . He was reasonable and considered and your whole stance was hopelessly compromised
    You seem to think the Greek people are free from blame and I cannot see how that is an intellectually honest position to take.

  18. lawguy says:

    I’d say that this was the last chance of democracy in Greece for quite a while. What follows is going to be from the far right.

  19. anton says:

    Greece said that will stay in EU after all the crime done on Greece….and now Greece is forced to be a slaved still after looking for its freedom,asking for it !

  20. J.Boer says:

    Please calm down Paul. If the British are so fond of Greece, why are they not lending them some money? To be honoust, I found mr. Kampeter very reasonable, You are much to emotional. Try some more independant journalism again.

  21. Bob Smith says:

    Paul, with 13 trillion in debt, what would you call the U.S. economy?

  22. Pavlos says:

    Wasnt it MalcomX that said :begging for your salvation is not free, it comes at a price?
    We have begged for it (wrongly I believe) because we made mistakes and it is obvious that there is no solidarity in this European Union. If anything Greece seems to have exposed a rather scary agenda in Europe. That should teach us Greeks and I believe the rest of The world quite a few lessons.
    1) Learn to live with what you have and if you want more build on your strengths and do not rely on others that offer you easy money. They will ask for it double and more
    2) when your time comes (as it came for Greece after the Second World War) be ruthless and not forgiving (writing off debts from the people that slaughtered your people, demolished your country and are on it again).
    Goodnight European (???) Greece. The sooner the better. It is a one way road anyway.
    And hopefully, with work and persistence good morning free Greece

  23. shirley frost says:

    Well the Germans et al are wrong. Firstly Austerity, according to Professor Paul Krugman is a false doctrine (NY Times 6.6.13) and so it proved to be as the predictions by the troika for the Greek economy were spectactularly wrong. Secondly they are being very short sighted as this is not just about money ; its about people and politics as well.Despite all their pretensions the money men are taking a big risk in terms of inflaming the political sentiments of both left and right. Thirdly they are being dishonest and callous about the beneficiaries of their largesse i.e. the banks not the Greek people. To ignore this is to totally discredit themselves. The Spanish, the Portuguese and the Irish are taking note.

    1. silvia says:

      Greece paved its way into the Euro by faking its statistic data. Repeatedly. They clearly shouldn’t have done this and would have never been allowed to join the Euro if they had provided their real deficit figures. On the other hand their data should have been checked more thoroughly. Yet Greece was welcomed to join with rather blind optimism and trust. This cannot be undone, we can only learn lessons from this.

      Shirley, but why is it that Britain is not contributing much more to the debts of the Greek, offering them more loans and free money?? After all it was a co-founder of the European Union and currently is still part of it. Why not show some solidarity, match and surpass the Germans and other major European contributors? Is it because it is totally demoralising and irresponsible for any person who works,saves and tries to live within their means to see somebody else to try and live off pure illusion and borrowed money? Is it because this in the end would mean economic suicide for all?

      Unless Greece leaves the Euro and possibily the Union, the remaining member states will tie conditions on giving money. Else conditions can (and should) be moderated while Greece earns back the trust of their partners.

  24. silvia says:

    Dear Paul Mason

    Clearly a change in direction is required so that Greece as a country can recover and their younger generation can look more positively into their future.

    However, some of the assumptions raised in yesterday’s interview with Germany’s Deputy Finance Minister boggle my mind: It appears that Greece continues to blame Germany for their total economic dilemma. This is in some ways only comparable to the RBS rebuking the British Government and Tax Payer for bailing them out!

    To date Greece has done too little to reflect on the roots of what at its core is a homemade economic failure fueled by reckless borrowing, tax avoidance and tax evasion. It appears that instead there is a tendency of looking for an easy scape goat outside their nation. Rarely does Greece seem to care about their impact on other Euro zone countries. There is little appreciation in Greece for the fact that many European (and yes, first and foremost German) tax payers took it for granted to help Greece whilst cuts rage in their own countries. This is not purely for economic reasons! After all Germany is and has been a highly successful federation with longstanding experience in stronger, wealthier states (‘Bundesländer’) helping the poorer ones. However, German people are outraged by Greece’s accusations where their chancellor is compared with Hitler. Surprisingly they are not amused that, when their politicians insist on Greece operating within agreements, this is compared with fascim. This is utterly inacceptable. I am somewhat disappointed about Channel 4’s uncritical journalism here – it makes saucy headlines treading the old ground of Nazi Germany, doesn’t it? Time to move on. Maybe you could take the first step here, Channel 4? Inappropriate, racist phrases should be criticised strongly, no matter which nation is insulted. Politicians and economists should focus on resolving the issues factually and be allowed make the best decisions possible where easy solutions are unlikely to be available.

    1. Jay says:

      Germany’s role in the European crisis is not nearly as benign as you would have it – while Greece has certainly many internal difficulties and faults which contribute significantly to its situation, Germany is by no means innocent. If Greece and others ‘borrowed recklessly’ – how exactly would you judge those German and other lenders who lent unbelievably recklessly, offering cheap credit to service their own economies and crippling others in the process. Germany was also behind allowing Greece, against all best advice and analysis, into the eurozone when it was well known that they did not come anywhere near meeting the criteria – this was done for ideological reasons related to Germany’s view of the European project and was deeply irresponsible. There are many complexities here and Greece have many issues to resolve but to paint Germany as some kind of innocent benefactor who everyone has now turned on is wrong. German policy, like the ecb’s, allowed individual states (like Ireland) to take huge economic hits to safeguard not merely the eurozone but German investors, they failed to engage in burden sharing after they forced states to take on the debts of private banks in order to maintain the stability of the eurozone and forced the Irish state for one to pay off UNSECURED European bondholders (who invested in Irish private banks not the Irish state) which meant that Irish taxpayers had to pay off the failed private investments of wealthy German, French and other Euro speculators which had never even been guaranteed by them.

      This FT article goes a long way to showing how and why Germany’s reading of the nature of the crash and its solution may be misguided. http://ftalphaville.ft.com/2015/02/06/2113951/michael-pettis-explains-the-euro-crisis-and-a-lot-of-other-things-too/

  25. Bob J says:


    Paul Mason’s interview with Herr Kampeter shows very clearly (yet again) the utter blindness of the Eurocracy; his questions were alarmingly near the knuckle. Depressingly there is only one way for this to end and that is with some sort of crisis which cannot be finessed away; it is a tragedy for all those unemployed on the continent and indeed for people generally.

    I’m not surprised that the Eurocracy is fighting this battle tooth and nail because of course it isn’t just Grexit that’s at stake, nor even the Euro. For, if the Euro crumbles, then so does the European project.

  26. Anton Du Fay says:

    Whilst the Greek Authorities in power leading up to the crash of 2008 and the Bank Bail Outs of 2010 were greatly at fault this cannot mask the failure of the ECB and the EU in managing the “Tsunami” of German/French Euro capital flows into the PIIGS Countries causing massive inflation both in property and everything else. The ECB has imposed an “odious debt” on Greece and other PIIGS Countries and this must be written down to a sustainable and justifiable level. Germany itself was the largest defaulter and also recipient of Foreign Aid/debt write downs in the 20th century …how quickly eaten bread is forgotten. Yes Greece must rope in ALL Greeks to pay taxes on a fair and equitable basis but the Eurozone and EU is looking more and more like a one way “STRASSE” and “Straight-jacket” . Germany forgets that much of the money lent was spent on German goods creating employment and wealth.Almost 5 million Germans visit Greece every year. They ( The Germans) knew damn well what they were getting into when they agreed for Greece to enter the EU and Eurozone.

    1. Jay says:

      Spot on. Germany’s failure to see its their own agency in the creation of the crisis itself and the deepening of austerity for the hardest hit countries is mind boggling but sadly predictable.

  27. steve bird says:

    Syriza are spinning plates at the moment. They’re playing away against an osteoporositic dinosaur that manufactured the cards on the table. They carry the burden of a legacy from the previous oligarchic series of corrupt, dishonest governments. They stand on the brink of an imminent Greek economic meltdown. All of this bullshit about u-turns is coming from people who have been sucked into a system that promises instant gratification. What do they expect? The Good Fairy with her twinkling wand? What Syriza achieved, very cleverly, is a sea-anchor to weather out this current squall. From here the building can start. These guys could herald a renaissance in conscientious politics, given the leave by Those Who Are Impatient.

  28. James says:

    Mr Mason suggests that Greece will leave the Euro which is completely absurd, as to do so would plunge Europe and a lot of the World into a recession deeper than the last. If Greece did leave the Euro then the currency would devalue massively, withdrawals through the Euro zone would be massive. This would then bankrupt Europe (yes, including Germany) and us with it. Would the Germans let this happen? No. Would the Greeks? No. So any real suggest of Greece leaving the Euro is absurd.

    1. Harry Tsopanos says:

      That’s why we should leave asap,Eu was created by Nazis after ww2 in order to control Europe later on,we have no reason to stay there,see how E.u supports a nazi goverment in Ukraine.

  29. Badger says:

    There are a few points in Paul’s defence. (For Silva)

    1) This project has been rushed. Particularly EMU. They all fudged the criteria to let all these states in rather than putting in place a process of necessary convergence of economies. More importantly, the INDEPENDENT auditing of convergence and continued compliance when in the EMU.

    2) The act of EMU means the euro will find a gravitational level in response to the size and strength of the member states. This means Germany permanently gets a cheaper euro that an equivalent DM. and weaker states economically have to suffer a stronger currency.

    The effect is that growth is promoted in the states with a weaker currency and stilted in the weaker states causing an economic divergence. As the stronger states get bigger faster than the smaller weaker states the disparity continues to grow.

    3) Politics

    Any weaker state will sign up because you get a short term sugar fix. Immediately you have low interest rates and much lower borrowing rates. This is very easy to sell to an electorate and therefore gives the ruling government a boost in popularity which will get them elected.

    However, the reforms required need to be large scale and unpopular so they don’t bother with those as you can’t get a turkey to vote for Christmas.


    Leave the above porridge to fester slowly and draw a veil over short term tensions with politics (continually kicking the can down the road) and wait for a crisis of severe depression to find all the flaws.

    Economic disparities widen further and the electorate start to see the euro stars fall away from their eyes and the necessary discipline has to be implemented otherwise it all falls apart.

    The austerity to save the euro means that many people will have to live in poverty or near poverty for pretty much all their lives, not something many will sign up for.

    The result is desperation, a move to far left/right politics and the emotive politics of injustice and all political good will is lost.

    German are good at doing their maths and should have seen that the lax rules in the EU and more especially the EMU firmly sewed the seeds of the plants we are seeing now.

    Germany knew it would benefit massively from a depressed currency and in effect the richer countries (with depressed real currency) are benefiting from the weaker nations (with artificially strong currency) in inverse proportion to their ability to pay.

    Germany, as the architect and general overseer of this project has a lot to answer for.

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