Published on 28 Jun 2015

Greece referendum: did the euro just die at 4pm?

We’re staying in Europe! says the headline of the Greek liberal paper Kathimerini today.

While the far left government will pose the referendum as a vote for or against austerity, the right will say it’s an in-out vote for the single currency and the EU itself.

The problem is, at around 4pm on Saturday Europe changed. Faced with a proposal from the Greeks to extend the existing bailout until after 7 July, the Eurogroup refused.

At this point chairman Jeroen Dijsselbloem announced there would be “a meeting of the 18” – that is the Eurogroup without Greece. Asked how such a meeting could issue a communique he replied, according to a Greek witness “we can do what we like since we are an ad hoc body”.

The Brussels press corps dutifully reported that the Greeks had “walked out”. But if the Greek account is right, what happened at that moment was the psychological breakpoint of the Euro.

The political willpower had already ebbed. The Greeks haggled over the fiscal details all week but were minded to sign an €8bn austerity package if it could be sold as (a) redistributional and (b) accompanied by a promise to discuss restructuring the debt.

What changed? By Thursday morning it was the lenders’ document that was the basis of discussions with the Greeks allowed to propose amendments. But when the elected ministers of the Eurogroup saw what the EC, IMF and ECB had proposed they rowed back.

“We can’t get this through our own parliaments” they said: it’s too soft.

Since Alexis Tsipras would have struggled to get any compromise through the Greek parliament, what triggered the breakdown is – in fact – democracy.

So bleak has Europe become, so lacking in solidarity, that an agreement worked on for weeks, embodying further austerity for the Greeks and further financial solidarity by the rest, could not pass through either side.

It was this that led to what Greeks call the “rupture”. The currency arrangements of Europe no longer fit the democratic wishes of its people.

And it is not the only breakdown of solidarity. The Schengen agreement on free movement is breaking down as the European powers refuse to absorb the refugees arriving in Greece and Spain.

So what next? The Greek strategy is to attempt to go on negotiating with its lenders, through back channels, in order to resume negotiations with a strengthened hand next Monday. Whatever they say in public, the institutions, too, will try to prepare a compromise – either for Tsipras to sign or for the next prime minister if he falls.

Today’s ECB meeting is critical. There are already calls from the group of countries around Germany to cut off aid to the Greek banks today, triggering the collapse of its banking system. If that happens it will be the second phase of psychological breakdown of the Euro – in which the institution charged with maintaining financial stability and bank solvency actually creates the opposite.

It will represent the effective capture of the ECB by elected politicians, and will puncture the illusion that it is an “independent” central bank governing a unified currency.

Either way, Greeks are in for a week of financial pain and chaos. But anybody who thinks they can predict the outcome is wrong.

The normal receptors for information do not work in Greece. The press and TV are owned by billionaires. Not unusual, but in Greeece there’s no regulation, so the incessant talk channels – which pay no tax, and no licence fees for the airwaves – will simply churn out a bleach-blond version of what their bosses want to hear.

Most Greeks, including all those inclined to vote No in the referendum, have mentally switched off from the mainstream media.

Instead this will be a battle of rumour, emotion, mass rallies and iconic speeches.

By posing the question: do you accept the deal offered by the creditors, Alexis Tsipras tosses a handgrenade into the right and centre right. The old coalition government fell because it could not accept a much tougher deal.

Many of the technocrats and young professionals who have thronged to the pro-Euro rallies, which will now become the Yes camp, are sickened to be surrounded by cashmere wearing oligarchs – the very people the young centrists think ripped the country off and built the debt mountain.

If the week starts with chaos, and gets more chaotic as the ECB grinds the banks to pulp, the outcome of the election will depend on who Greeks blame. That in turn will depend on the deeply memetic conversations taking place in the kafeneions, vineyards, hotel staff canteens.

But both sides will, effectively, be voting for options that don’t exist.

Tsipras told his voters Syriza could negotiate an end to austerity and debt relief within the Euro. He and Varoufakis believed this: because the Italian PM Matteo Renzi had told them it was possible; and Hollande, and also the US State Department. The hard left of his own party were existentially anti-Euro, and pro Moscow, and he was determined to prove them wrong. So it’s been a hard swallow for Tsipras to make this break.

But his new position: vote No and strenghten our hand in pursuit of an austerity-lite deal within the Euro, may no longer be based on possibility. If the ECB is just a cypher for what 18 parliaments will pass, and the Commission powerless, and if north European public opinion hardens against Greece, then the best a No vote might produce is an offer from Brussels and Berlin to fund a “velvet exit” – ie a controlled and subsidised return to a national currency.

No less delusional is the position of the Greek right. When they say “We want Europe” what they mean is: we want Europe to go on ignoring corruption, tax evasion and oligarchy on a grand scale, and to go on crashing our economy at the expense of the poor. We want, in effect, says the Yes campaign, the Europe that caused the problem.

Though they’ll join the Yes movement, many Western-educated professionals and business people will do so warily because of this.

And it will get fractious. Last week, when anarchists disrupted the pro-Euro demo, burning the EU’s flag, there was a standoff between them and a largely nouveau riche crowd. The left chanted “EAM, ELAS, Meligalas”.

EAM was the mass resistance movement in World War Two. ELAS was its military wing, led by communists, which beat the Nazis. Meligalas was a village where in 1944 the partisans defeated a battalion of Nazi collaborators, executed some, and failed to prevent others from being lynched by local villagers.

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34 reader comments

  1. Dorian courtesi says:

    Let’s see now. If the ECB and IMF force Greece to default and European Union is forced to drift into anarchy and chaos possibly leading to a nightmare conflict of epic proportions with Russia and Islamic extremists. Do you think I give a damn about the piffling little amount that Greece owes to these unelected banksters.
    if they force the Greeks hands like this and destabilise my future and my family’s then I won’t be blaming the Greeks I will be demanding that those blood suckling banking vampires should be sentenced and put in prison for crimes against humanity.

  2. Colin Sampson says:

    Something extraordinary is about to happen, but I have no idea how this crisis will play out.

    Voters have to pay for what they vote for . Voters in Scotland don’t pay in full for what they vote for and the Germans are finding out that there are many politicians in European countries who are happy to make promises to their electorates and have the Germans pay for them.

    There has to be alignment and voters have to take responsibility for what they vote for.

  3. Izzie says:

    Again, a clear-sighted and most welcome analysis. Many thanks for your work on Greece!

    A ‘no’ vote is the only socially just and democratic reponse now but I find it hard to believe that in practice it’ll do what Tsipras wants it to do. Europe seems determined not to change its approach. Why would the 18 who are so busy impoverishing their own people and denuding their states care for the newly-affirmed democratic wishes of Greece?

    A ‘no’ vote will solidify and define Tsipras’ position but I fear it will not strengthen his hand in negotiations, because I doubt whether there ever was any serious intent to negotiate among the 18. Yesterday, Dijsselbloem’s cartoonish feigned confusion over what the vote could be about seemed almost to be pushing Greece to frame it as an in-out question.

    1. Tim Salmon says:

      The trouble is you people have absolutely no idea how Greece got itself into this mess.It is and has been since its inception in the 1820s a clientelist state. What we call corruption is simply the system. This is true, as a friend of mine, says of most states east and south of Rome. You cannot understand this without living it and without speaking the language, which very conveniently serves as a pretty impenetrable screen against outside eyes. If you could read the Greek papers you would see that “experts” like Paul Mason are talking pretty good nonsense. If you cannot understand Greek, then an opinion piece in June 29’s Financial Times by Alexis Hatzis, a Greek economics prof, will give some idea of what the underlying problem is. It may be true that “austerity” is not the best or only way of dealing with national bankruptcy, but before you apportion blame you need to understand how the situation came about. Basically, this crisis has been in the making at least since WWII. It is not of the EU’s (or anyone else’s) making.

  4. Mick says:

    Brilliant article as always Paul. I hope the No prevails. Europe no longer knows what it stands for. The greedy and corrupt have had a devastating effect on huge sections of society. The rich get richer the poor get abused. Hopefully the fightback starts now. I admire their bravery

  5. Frank says:

    It is utter tragedy and, in my view also, incompetence at a crucial moment in European history that the Eurogroup has allowed this to spiral into a ‘dirty exit’ … because a dirty exit is exactly what we will get, I fear, once the dynamic of capital controls and street-protest take hold of this situation. Greek Democracy, even in its corrupt and failing shape, is still very young and does not go back into classical Athenian antiquity … neither is this Sparta.

  6. Socrates says:

    Greeks will always accept the Euro. Greek government will pay with Greek olives.

  7. anon says:

    very interesting as always, cant remember my history (as usual) but doesn’t sometimes one opposition group often allow a smaller ‘rival’ to do the work, wear itself out in the process and then try to make its move?

    the finance ministers particularly their ‘leader’ appear quite officious, the sort of characters one comes across sometimes generally a lower level of authority but who can be hard to deal with?

    I think the Greeks have exercised enormous restraint in all this, and the Germans might remember that (I think) that they were let off half the money given to them after they tried to destroy Europe to rebuild their nation, (and rightly so)

    so they might be advised to remember this when their speak to the Greeks and perhaps consider writing off some of the money they owe as well?

  8. Jim Bennett says:

    Once again, one of the most insightful articles around on this issue. I’d love to have Paul Mason around for tea with Scottish journalist, Iain McQuirter. Both wonderful, knowledgeable political analysts.
    Keep up the good work!

  9. pongodhall says:

    Please see that Greece is poor, has a very low income.
    I would say they are not difficult, unco-operative etc.
    I would say there is not the budget to accommodate this so if you wish payments make them tiny and for a long, long period and, do not pile the interest on. As you have with Ireland.
    Be realistic as they have to be.

  10. Margaret Hart says:

    ‘The normal receptors for information do not work in Greece. The press and TV are owned by billionaires. Not unusual, but in Greeece there’s no regulation, so the incessant talk channels – which pay no tax, and no licence fees for the airwaves – will simply churn out a bleach-blond version of what their bosses want to hear’

    Doesn’t really sound any different from the UK tbh. I stopped listening to the MSM a long time ago. Its nothing but propaganda by the laptop loyal presstitutes with very, very few exceptions

  11. Paul says:

    Thanks again Paul for the best insight available on what the real issues are. Top journalism!

  12. Alan says:

    The article as past articles appears loath to discuss any criticism of the IMF, ECB or EU. A number of independent commentators have questioned the legitimacy of the Troikas demands, can they all be misinformed? Reading the articles by this editorial leaves one with the impression that only enforced austerity at any cost will suffice. Can so many ‘informed professionals’ be so lacking in solutions? Either the articles are misinforming the readership or the Troika is not as it professes.

  13. Drew Campbell says:

    Watching this space, Paul – the most authoritative space on the entire Greek tragedy.

    Thanks for helping to keep us informed.

  14. Jef Keighley says:

    Iceland yesterday. Greece today. The path to equity is not paved with Euros. It is paved with the blood, sweat and tears of a people prepared to stand up to economic tyranny and say “Enough”!

  15. Stephen says:

    One political question arises for me. Who owes past national debt?
    The corrupt government that created it and in part pocketed it, or the people who gained little from the money. As it is governments do not even stand by their pledges/mandates but if they were legally connected to their mismanagment I imagine governance would suddenly be a whole lot more inclusive.

  16. Isabella McC says:

    ” When they say “We want Europe” what they mean is: we want Europe to go on ignoring corruption, tax evasion and oligarchy on a grand scale, and to go on crashing our economy at the expense of the poor. We want, in effect, says the Yes campaign, the Europe that caused the problem.”

    This IS the problem the left throughout Europe has with the EU; the left which is by and large pro EU. How long will the left continue to support the EU though if austerity to keep the status quo is the only option the EU will allow?

    The British EU referendum might not be as straightforward as we think.

  17. Joe NoBloggs says:

    Thanks Paul, always interesting to get your angle on events. So much of our media is filled up with the EU’s bias rhetoric that it’s hard to get a handle on the objective truth in these matters.

  18. Bigstar says:

    Can Greece still avoid Grexit?

  19. Bigstar says:

    Greece is suffering. They want us to suffer with them. This way no-one can point fingers at the politicians later and start the usual blame game, for all have made the decision together.

  20. Wil Gibson says:

    why do you and other constantly make reference to Greece’s leftwing government but I don’t hear similar references to Rightwing Tory or Rightwing German governments. Is the inference rightwing is normal, leftwing abnormal.
    Also I read that one of the reasons why Greek debt is so high was that it was forced by the trioka to bankroll the private sector debts. This this true and it is normal policy of international lenders

  21. Laurence says:

    The ever informative and concise mr Mason makes an important point about the corruption in the bloated EU. Having previously been pro EU for reasons both humanitarian and peaceful. It now appears to be on it’s last legs. If Greece leaves then Spain, Portugal next? also it will pose a real possibility of the UK voting out, then it is finished. We are in the dying days of a European Empire. (Constantinople in the 6th Century anyone) the new world is that of Central Asia, China and South America.

  22. Andrew Dundas says:

    Nobody knows what the outcome of this week will bring Greece. Probably, it’ll bring lower family incomes and the opportunity to become more competitive.

    Wherever the real faults lies, this rite of passage will also make the Euro more cohesive and stronger. It will also create and widen differentials in the interest rates on Government Bonds to reflect their perceived credit risks.

  23. Danton McGrugger says:

    I’ll tell you what will happen. The Greeks will narrowly vote yes and Tsipras et al will say ok “I hear you” whereupon the elite in the E.U. (fast becoming a misnomer) and the ECB etc will remove them and shoehorn in (a la Italy) another puppet government that will implement some of the more draconian austerity demands. Not forgetting to help the rich Greek elite on the way. The new government will point out that things were starting to get better, just before the Syriza leftie-loonies got their hands on the democratic reins of power, and they’ll tell the poor schmucks of Grecoland to tighten their belts and eat more sh1t (whilst all the while stuffing more freshly printed Euros into their already bulging swiss bank accounts) things “may” start to get better but the play aint over till the fat Greek sings. I can see big trouble ahead (next year) and maybe even violent revolution, but if you’re looking for villains turn your gaze to the north, towards Berlin and Brussels.

  24. william says:

    I believe the Greek people will vote “oxi”. In an excellent article by the Nobel winning economist Joseph Stieglitz; he offers two scenarios. Vote yes, and face ten, even twenty years of crippling austerity; or, vote no and face hardship on a shorter time scale,and a return to the drachma. Its a no brainer! We now see that the EU is an organisation run by the wealthy, on behalf of the wealthy! And are terrified of a left wing influence! In fact they have betrayed their “so called” democratic principles, and this is the start of the end, of their neoliberal hold. Spain are due in November to hold elections, and Greece are blazing a trail! Next will be Italy,a “domino effect” to quote from history. Is it the end of the EU? Who knows? But it is the fight back of democracy! And a return (hopefully) to its founding principles.

  25. william says:

    The propaganda of fear, or “project fear”, will not work on the Greek people either!Five years of austerity has inured them to that fallacy! Its “fight or flight”; and the people have made their choice.

  26. Tony Walker says:

    The stakes are heightening and the contradictions are sharpening. So what’s the outcome going to be Paul? Yes, I know you said, “anybody who thinks they can predict the outcome is wrong” but I think you’ve answered that un-answerable question yourself with your quote about the left chanting, “EAM, ELAS, Meligalas”.

    I suspect that chant is more than a taunt; that it is more of a realisation of what comes next – real class struggle and the ‘impending’ class war you wrote about last week. I also suspect that the left that used that chant mean to finish the civil war that started after the left expelled the Nazis and their collaborators.

    The only solution now for Syriza is to nationalise the financial, media, energy, food, ports and transport industries and prepare for a fundamental change in the way Greece is governed.

    If Syriza fails to do that and the left does not undertake those actions in its place, the right will do it and the Greek working class will pay the price.

  27. anna123s says:

    Please, Paul, give us your latest.
    Comment on this Euro-blackmail, on this Brussels coup. You seem to have a feel for the situation beyond the journalist’s duty to inform.

  28. Jonny Graham says:

    Is Greece the Wigan Casino of Europe? Once a great place for an all nighter, but not someone you would loan your best vinyl to.

  29. vivian says:

    The euro died long ago.It was the Trojan horse in order to entwine nations through their debt..What euro, it only served one master the German exports the lower it was against the dollar,the better it was. But like anything WHAT GO UP ..EVENTUALLY COMES DOWN…Five years we’ve lived through hell….unemployment,pension cuts wage cuts just to make a few…well when you have nothing else to lose ….you push back….go back in history ..look at the Battle of Britain..did you give up NO…even though at time the odds were against you..well that’s exactly what we are doing now …fighting for our country,children, and the right to LIVE

  30. Tim Salmon says:

    I have written to Channel 4 several times since January to complain about your coverage of Greece’s crisis. You started twittering over-excitedly about Syriza’s election and what it meant as if it heralded the start of some kind of exciting revolutionary new departure for Greece and Europe as a whole. You seem still to be taking its part and sharing its attribution of blame entirely to the EU. You may well be right that austerity is not the best way out of such problems as Krugman and James K Galbraith also claim, but you are missing the essential point, because that is not the root of the problem. That lies in Greece’s history as a province of the Ottoman Turks, a regime in which power was exercised in a despotic and arbitrary way and the only protection against that lay in resorting to those you could trust (i.e. clan and those who were bound to you by networks of favours given and received), sycophancy, distrust of all officialdom and all agencies of the state, deception (truth-telling is not a virtue in Greek culture). The result is what we call corruption, on a scale that affects every aspect of Greek citizen’s life. You do not declare your income or pay tax because the state is not to be trusted. You bind those who might do you damage to you by giving them a lamb at Easter and August 15th, by marrying your daughters to potentially useful connections and, if you are a politician, by baptising as many of your constituents as possible (Mitsotakis in Crete, for example). You pass exams by cheating and no one will condemn you, merely laugh at for being stupid enough to get caught (I was twice investigated by London Univ’s exam security officer for the improper conduct of GCE exams and he told me Nigeria and Greece were the worst offenders about this). You vote not for a political programme but for “our man” who knows that in return he must do something for “us,” whence the vast size of the so-called civil service whose employees have perhaps suffered the most in the current situation: like everyone else ever elected MP, including the previous PM – a school friend of his told me that he proudly went to visit him shortly after his first election in 1981 and found him busy with lists of people to whom he had promised jobs in return for votes, not vacancies that he would fill, but jobs that he would create in order to reward them. And how do you pay the civil service bill in a country where no one pays tax?

    Your talk about ordinary Greeks. How do you distinguish an ordinary one from an un-ordinary one? You talk about cashmere-wearing Rightists…Excuse me! And what do you say about Mr Varoufakis’s sartorial preferences? The trouble about your reporting is that you basically know nothing about Greece and are not able to sift what is being said to you. You mention Kathimerini: if you could read it you would learn a lot more about what kind of a beast Syriza is. In fact you could do worse than speak to Alexis Papachelas, one of its leading editorialists (and a former student of mine). Kathimerini’s reporting of the Greece-EU negotiations paints a very different picture from yours. Today’s edition contains a piece signed by 30 leading Greek economists which you would do well to look at, as well as an Opinion piece in the June 29th FT by Aristides Hatzis of Athens Univ. These people are telling it how it is. You are talking plain bullshit when you talk about anarchists and a “largely nouveau riche” crowd. And you should stay out of the Civil War stuff. EAM was a CP-led outfit. ELAS was not entirely under its control because of its plainly somewhat psychopathic leader Aris Velouchiotis, who devoted more time to eliminating politically rival resistance groups than he did to fighting the Germans. He was disowned by the CP after the Liberation and took his own life to avoid capture but was busy “executing” alleged “collaborators” up to his last moments. I know these places and people who were there at the time. People’s Courts, class enemies, collaborators… and who decided and on what evidence? Meligalas…who knows what did or did not happen exactly? In any event this was a matter of settling scores AFTER the German retreat from Greece. You are merely peddling Syriza propaganda and the people who have been “explaining” these things to you themselves know nothing; they are merely repeating what they have been told. They have never read any accounts of these events. They do not learn this history in school.
    Syriza is not a party; it is a loose association of every conceivable faction of the fantasy Communist Left, romancing about events none of them experiences. Coffee-shop politics is all they know, that and occupying university premises, as an article in today’s Kathimerini also says.
    This is really irresponsible reporting on your part. If you want to know a bit more about the Greek situation, you could look at my blog at timsalmon.org. I first went to Greece in 1958 and have even been as far as Tashkent in my attempts to find out about the Civil War and this romanticised period of the Greek Left’s history. Believe me, you have not even begun.

    1. Stamatis Kavvadias (Σταμάτης Καββαδίας) says:

      Sir,

      You pretend to be so knowledgeable, for events you have not witnessed.

      You pretend that the problems of Greek society and political structure (or lack of) are the explanation of:
      __ European politicians loosing temper;
      __ publicly planning to remove the elected Greek government after 5 months of coming to power;
      __ Eurogroup declaring they are kafenion and can do whatever “they” want (who are “they”???)
      __ Junker being so sab about eurocrat “efforts” going in vain, when there has not been any negotiation on the European side;
      __ all top European officials, irresponsibly interpreting treaties, ahead of a referendum, with no legal reference, demonstrating lack of willingness to eventually do their job, after 5 months of stubbornness with their Russian roulette on the head of Greeks.

      You pretend to understand SYRIZA, when Greeks do not yet understand it, with friends inside its organisation and being the 1st government to hold on its pre-election promises, after decades.

      It is very likely that you are an ideological fun of oligarchy and that is why you find all these things you “know” as obvious as you do. That is just fine, but do not confuse it with facts, or with an understanding of Greece. In any case, as well as you may understand Greece, the facts of European oligarchy’s clash with democracy are indisputable.

      A minority of sober European politicians, as well as the author, have framed the situation clearly: current government (and probably parliamentary) mandates are at odds in Europe at this point and since Europe has chosen a union of independent states, governed like this, it will have to break at this point, or resort to the resourcefulness of financial and monetary technocrats, to exploit the banking system’s elasticity. But, for the latter, German persistence on a hard currency based solely on credit, without an independent lender of last resort, will have to be curbed further.

  31. william says:

    Austerity to last for 15 years! That’s “veritable loon” country! There is no way you can ask a people to “stomach” that! The troika have really messed up this time! The debt will have to be written off! This spells the end for the creditors; and, major uncertainty ( to put it mildly!), for the whole “European project”!

  32. Simon says:

    I was surprised there were no comments on this piece, then I tried to write one myself and realised how hard it is to say anything, the prevailing emotion being one of a dropped jaw and vacant stare. The narrative has collapsed on both sides exposing the ugly underbelly of what really goes on behind the scenes, leaving, perhaps, a chink for democracy to shine through? You could argue a similar thing has happened (albeit in less chaotic circumstance) in the UK with a referendum now on the table.

    My mum said it best ” when I voted to join, I voted in favour of a European common market, and I would still vote for that today, I never voted for what we have now”

    The crats in Brussels will be working hard to patch up that chink in the coming weeks and months I am sure, but it has surely got to the stage now that it is pretty obvious to all, no matter how skilful you are in spinning a narrative, you can’t polish a turd.

    I wish the Greek people well in the coming weeks, I hope they re-discover the joy of shared struggle for something worthwhile, come together as a nation and manage to forge something new and positive from this. What have they got to lose really?

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