31 Jan 2015

As Greece gives its marching orders to the Troika – five reactions

Greek finance minister Yanis Varoufakis told the head of the Eurogroup’s finance ministers, Jeroen Dijsselbloem, that Greece would no longer deal with the so-called Troika grouping as a single entity – that is, it would now deal separately as a sovereign government with its constituent parts: the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF).

After the brusque press conference, Mr Dijsselbloem reportedly told the Greek finance minister: “you have just killed the Troika”. Here are my thoughts.

Newly appointed Greek Finance Minister Varoufakis attends a hand over ceremony in Athens

1. Marxists, and the left in general, have a good knowledge of military strategy. Mr Varoufakis is not a Marxist: he is a left Keynesian, but comes from a political tradition where power is understood very well. His own father was dragged from the family home, its door broken before the young Mr Varoufakis’ eyes, during the Greek military coup of 1967 – and imprisoned for several months.

Even moderate leftists in the Euro-communist tradition — which includes Syriza – have grown up studying the dynamics of power. The Italian Marxist Antonio Gramsci, after whom numerous streets are named in left-controlled cities of his home country, said the modern communist party should be the “modern Machiavelli”: able to wield power, subterfuge and tactics adeptly and leverage, above all, its social support.

2. By killing the Troika, on day five of the Syriza government, Mr Varoufakis was demonstrating a clear understanding of the power dynamic. All over Europe, people whose world view is normally never challenged are having to react to Syriza, but are confident that they control the timetable.

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The timetable is supposed to be: if Greece does not meet Troika bailout conditions on 28 February, when the current bailout extension runs out, then the ECB is free to stage the collapse of Greece’s banks. It probably won’t but is still thinking about it.

By making clear on 29 January that Greece will refuse even to speak to the Troika, and seek no extension, Mr Varoufakis demonstrated an acute understanding of the principle of momentum. Otherwise known as “go ahead punk – make my day”.

What happened – even though it was only a press conference – was that Syriza took control of the timetable. The Eurogroup and ECB will be forced to react at Syriza’s pace, not the other way around.

3. However, in military theory, there is not just momentum – there is mass. Greece has very little mass in the coming clash. It owes its creditors 320bn euros and about 15bn euros come due in the back half of the year. Greece probably has a bit of liquidity arising from the cash the Troika forced it to hold, but only Mr Varoufakis and central bank governor Yanis Stournaras really know. So it does not need to go bust as a state in March-April.

4. So Friday’s shenanegans were actually what they call in military academies “demonstrations”: I can do this if I want to, and here’s how it looks.

5. I’m covering this crisis on a “what’s just happened basis”, not “what does it all mean”. But we don’t know certain things have happened except in hindsight. We don’t know how much money has left the Greek banks until the ECB tells us, a month in arrears. But the banks do.

My biggest fear is that the Greek crisis reaches a critical denouement because the two key players — ECB boss Mario Draghi and Mr Varoufakis — are not only reading from different playbooks, but two different rulebooks: one written by Robert Schuman , the 1940s architect of European integration, and the other by military theorist Carl Philipp Gottfried von Clausewitz.

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17 reader comments

  1. SimonB says:

    “You owe me £1000, you’re in trouble. You owe me £1000000, I’m in trouble!” Clearly a Greek default and the collapse of its banks would be bad for Greece. However there’s now way, under such circumstances, that it could pay its debt. What effect would that have on the lenders? What about the wider consequences of bigger economies? Is this an economic Cuban Missile Crisis, waiting to see who blinks first?

  2. David Preston says:

    It’s good to see that the establishment is being challenged by a popular peoples party. The establishment has ruled unfettered for too long in Europe and the current Global economic mess is due to their mismanagement; constantly pushing for unrealistic growth, purely for short term profit, has severely damaged the backbone of manufacturing and the provision of mass well paid employment required for the majority. A European Common market would have worked; but the mess of the Euro zone, forged by ideology and not the economic rules that they ignored, has ensured that the gap between the greedy haves and desperate have nots( numbers increased by the corruption of our banking system) has grown to the point that the people of Greece have said enough. I wish them much success and that this May the people of Britain say no to the establishment and welcome the alternative choice that is the Green’s.

  3. Dave says:

    What a load of fanciful claptrap. Let’s skip the flowery character analyses and assumptions and stick to the facts; as of now, the Greek government and Greece’s creditors are diametrically opposed regarding the way forward. If that doesn’t change (and there is no indication that it will), Greece will eventually default on its debt and leave the Euro. Meanwhile the Greek banks will also go under as they are starved of liquidity and the bank run gathers pace before the inevitable Grexit. With the facts we have at this moment, Greece’s departure from the Euro seems inevitable and in the long run is probably better for Greece itself.

  4. Mark Crawford says:

    Thank you for your great coverage of Greece, Paul. Just a quick comment to mention that Varoufakis calls himself an “erratic Marxist”: http://yanisvaroufakis.eu/2013/12/10/confessions-of-an-erratic-marxist-in-the-midst-of-a-repugnant-european-crisis/

    I’m always checking for what you’re saying and thinking. Please keep up the good work.

  5. Joseph Marron says:

    Hello Paul, Your final comments are rather shallow. Disappointing. To suggest that there is only military strategy behind the thinking of the Greek Government is dishonest. One would expect a more thorough and rigorous analysis than this.

  6. Nigel Wilson says:

    Very wise assessment, Paul. The important thing is that everyone gets through this confrontation with what they need. We are all aware of the potential outcomes but Armageddon is a solution to nothing. The practical implementation of the policies of the Troika reduced Greece to beggary of which Syriza is the direct consequence. Having made this mess the elements of the Troika must work to find a solution.
    The Troika needs to be able to say that the debt will be paid, somehow and some-when.
    The people of Greece need a decent break to make a living.
    Syriza know that they don’t really matter but a positive outcome will be enough. History will be their judge.

  7. thaaanos says:

    “he who can destroy a thing controls a thing”

  8. Ian Young says:

    By telling Der Spiegel Euroland could now withstand a Greek exit Merkel and Schaeuble have in effect laid down their own ‘make my day’ brinkmanship. The structural problem with the Euro is that its done little to foster the liberal institutional ideals of Schuman to bring Europe closer together and instead exacerbated the trade imbalance between Southern Europe and the former DM zone countries.

  9. Ermis says:

    Varoufakis specialises in economic game theory. But then again he might have read Clausewitz, too.

  10. nick j says:

    re the debt and power relations between greece and the eu: you need to read this –

    http://mobile.nytimes.com/blogs/krugman/2015/01/28/thinking-about-the-new-greek-crisis/

    short story is that the EU can only shaft Greece by crashing its banks.

    the debt is mostly owed to sovereign institutions, so it looks as though French and German banks are off the hook.

  11. Grant R. Goldberg says:

    Mr. Mason, a clarifying comment if you don’t mind.

    “Varoufakis is not a Marxist: he is a left Keynesian”

    The finance minister refers to himself as “a Libertarian Marxist” (as reported in the Wall Street Journal and his own blog).

    As a Marxist he knows that Greece is currently in no position to build communism given the international situation and Greek industrial and agricultural underdevelopment, so he proposes some Keynesian policies to moderately improve the living conditions of Greek workers. That’s all he CAN do, realistically, but taking into account prevailing conditions when formulating his strategy does not make him less of a Marxist. Quite the opposite.

  12. Paul Dearing says:

    There is an old adage that I think applies here.

    “If you owe the bank £1000 you have a problem.

    If you owe the bank £1m the bank has a problem.

    The EU / Troika / Syriza first need to work out who has the biggest problem.

  13. Roger Gough says:

    This is the simple observation of someone who knows nothing of finance but……… On reading “Goldman Sachs faces scrutiny over Greek debt swap” (Guardian 18.02.2010) (sub heading reads “Greek currency deal with Goldman helped to disguise scale of debts) it seems obvious that there were – to say the least – ‘discrepancies’. So surely, if these discrepancies were allowed to influence the signing of contracts by the Greek Government (wittingly or unwittingly) the validity of them is cancelled by virtue of contract law. Therefore the current Greek Government can ignore them.

  14. Giannis Platis says:

    Congratulations Mr. Mason. This article shows that in contrast with the vast majority of your colleagues, you are perfectly aware with the real situation in Greece; thus you can give a serious and quite far from doomsday mambo jumbo assessment.

  15. Susan Galea says:

    This assessment of the Greek negotiation strategy and cogent critique of austerity measures imposed on a moribund small country by those who have lent it money- and profited handsomely- from its predicament is harsh and too pessimistic. Well, that’s my reading of the various views I’ve read and collated. Even the IMF and the Financial Times are facing up to the ineluctable folly of the sheer ruthlessness of the Troika’s position. I also think that Syriza is not nearly as radical or leftist as is suggested here…

    Austerity across the western democracies has been revealed to be a duplicitous and inequitable set of measures that does disproportionate damage to the weakest while enriching the bankers who are at the root of the problem that caused such calamitous ructions across the globe. They are not solely responsible, of course, but the idea that they in tandem with those wealthy who are actually getting much richer – quicker- during this crisis while the ordinary folk shoulder the deprivation is morally indefensible. The four or five major lenders to Greece did not do so out of charity after all! In reality there is blame aplenty to share, but that’s not what is happening. As ever.

    When the people are eating out of bins and suicides are piling up while the former Greek political class; the oligarchs; the tax cheats and so on grow fat it is time to accept the utter futility of trying to impose gruelling loan demands on those pointing out the European Emperor is not only naked, but morbidly obese while others don’t eat for days and are suffering genuine privation.

    Does this economic model serve the people? No, it’s not working. Why on earth can’t there be some acceptance of the obvious, and a negotiated settlement that will allow Greece to recover and pay when she can?

    Just for once let’s see Europe standing up for something of its promise at its inception. Let the Syriza cogent demands be conceded to and allow some write downs, and extension of the loans. If there is not great concessions from the Troika then Greece will have to default which will surely cause a ripple effect causing goodness knows what contagion. This, not just for the other poorer southern European countries but the fomentation of anti- Euro rabid rightwing propaganda across the continent, and of course here.

  16. Andrew Dundas says:

    Greece asked to join the Eurozone after it was already running. It should have been told “NO!” Because Greece did not meet the criteria agreed for Membership that all the EU States had signed up to. Not just because of Greece’s huge debts, but because it’s right-wing government was falsifying its national accounts, and because Greece was plainly not an open and competitive economy either.

    We knew Greece was trying to do the impossible – but we let them do it anyway.
    Doesn’t that make all the EU Members complicit in this problem?
    By the same analysis, aren’t we also complicit in the Italian, Belgian, Irish and Spanish problems too?

  17. Stephen K says:

    Quality journalism Paul.

    But 500 cleaners for a Greek Government department…… doesn’t that ring some alarm bells?

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