It’s hard to imagine a situation where this most recent 86 billion euro ($94.1 billion) Greek bailout will succeed where the first 110 billion euro ($120.4 billion) Greek bailout in 2010 failed.
Or where the second 130 billion euro ($142.2 billion) Greek bailout in 2012 also failed.
We’ve all seen the havoc this debt crisis has wrought on the Greek economy. Five years and 240 billion euros in loans ($262.6 billion) later, Greece’s unemployment rate is hovering near 26%. Greece’s labor force has shrunk by 975,300 workers, or 22%.
Now the Greek economic crisis is only matched in the devastation it has brought to Greek society by the damage of a Greek political crisis – one that’s not as well-known and is, at the same time, widely misunderstood.
“The political system is dead,” Katerina Moutsatsou, a Greek activist and filmmaker with the Underground Network, told Money Morning.
The first indication Greek politics were crumbling came with the rise of Syriza in summer 2012. Greek elections at that time helped preserve the bailout and austerity regime both governing and impoverishing Greece, as the New Democracy party retained parliamentary power.
But it also helped raise the profile of the radical left-wing Syriza. This was the anti-bailout, anti-austerity, Euro-skeptic party that struck a chord with an increasingly populist Greek electorate growing tired of bailouts authored by foreign European financial institutions. These are the very bailouts that entailed labor-crushing austerity measures over the following years.
The 2012 Greek elections didn’t just set Syriza’s future in motion. It severely weakened the Panhellenic Socialist Movement (PASOK), one piece of the two-party fiefdom governing Greece since the end of the 1974 military junta, largely controlled by two families – the Karamanlides and the Papandreous.
New Democracy was the other piece tossed aside when the 2015 Greek elections brought Syriza to power.
But for billing itself as a “radical left-wing” government looking to challenge the Greek establishment and stand up for the Greek people, little has changed.
The Failure of Syriza and the Greek Political Crisis
New Democracy lost its grip on power near the end of 2015 when then-prime minister Antonis Samaras failed to fulfill promises of weaning Greece off of foreign bailout money. It became clear that further New Democracy leadership would mean further austerity.
Syriza, touting an end to austerity, was the best alternative. But with the most recent Greek bailout and the Syriza capitulation, Moutsatsou pointed out a troubling reality in Greek politics.
“Everything Syriza did was totally predictable,” Moutsatsou said.
There was a time early on, prior to the 2012 elections, that Syriza was a reflection of the Greek populace. They were willing to do anything to end austerity, even if that meant exiting the euro – a “Grexit.”
But these are “easy things to say when you’re not in government,” Moutsatsou said.
The 012 election empowered Syriza and brought them into the fold of Greek politics.
“Once they became the main opposition party, everything changed,” Moutsatsou added.
This was evidenced first by Syriza’s choice of finance minister, Yanis Varoufakis. He was initially opposed to Greece’s entry into the Eurozone in 2001, but also revealed that he felt a Grexit would be a disaster.
He aired these concerns as a private citizen in 2013, when he did a tour for his book, “The Global Minotaur: America, the True Origins of Financial Crisis and the Future of the World Economy.”
“When you don’t have a currency, you can’t devalue it. All you can do is, you can announce, ‘In eight months, we’re going to have a currency and, by the way, we’re going to devalue it,'”
Varoufakis said in a discussion.
“Can you imagine a preemptive announcement of devaluation eight months before it happens? This is a recipe for having all wealth liquidated and leave the country.”
And when Prime Minister Alexis Tsipras began the Greek debt talks, he misframed the mandate on which he was elected. He abandoned any vestiges of rhetoric suggesting an end to austerity at all costs and adopted rhetoric of ending austerity but staying in the euro.
Never mind that such a feat is impossible.
The euro isn’t backed by gold or pegged to another currency. Its strength as a viable reserve currency, and perhaps challenge to dollar hegemony, is predicated on the notion that a diverse collection of European states can adhere to the German model of strict budget discipline and current account surpluses.
The logic of this is entirely flawed from the outset. How can a pool of countries that largely trade amongst themselves possibly all achieve trade surpluses at once?
The bottom line is that Syriza naively thought it had the ability to challenge European Monetary Union precepts — precepts that have been in the works for decades and have largely been authored by the disciplinarian hand of a German economic school of thought.
Everything had to be on the table. Even Grexit.
But what was more unsettling for Moutsatsou was not just that Syriza took it off the table. They didn’t even entertain the debate. Anyone supporting Grexit was suddenly lumped together with the even more radical Golden Dawn party and labeled a distraction.
“For a so-called ‘radical’ government, not allowing debate was criminal,” Moutsatsou said.
Syriza used dubious polls as political cover for their misguided policy. The Greek public wanted an end to austerity, Syriza said, but wanted to stay in the euro. After all, 75.6% of Greeks wanted that, according to a Greek Public Opinion poll.
“All polls inside Greece are commissioned by parties,” Moutsatsou said. “The polls are rigged.”
The truth of Greek public sentiment is better reflected by polls untouched by Greek political handlers furthering Syriza propaganda.
A Bridging Europe poll in June reported that 63% of Greeks do not fear a Grexit. Moutsatsou observed just walking the streets of Greece that even millennials seemed to long for the days of the drachma – despite knowing only the euro for most of their life.
“Everybody talks about it on the streets,” Moutsatsou said. “Everyone has become extremely political.”
And even so, there’s reason to believe a Grexit wouldn’t necessarily lead to the crushing devaluation Varoufakis spoke of. From September 2014 to May 2015, deposits have fallen from 178.8 billion euros ($195.6 billion) to 138.6 billion euros ($151.6 billion) – an almost 30% drop.
“The Greek depositors have been taking their money out of the banks, putting them into euro notes, and the businesses have been taking their money and putting it abroad,”
Michael Hudson, distinguished research professor of economics at the University of Missouri-Kansas City, told Money Morning.
“If they go to the drachma, all this foreign exchange is going to come back into the drachma, so the balance-of-payments will be in surplus. As long as a country has a balance-of-payments surplus, there’s no need at all for devaluation.”
And what was perhaps the most telling signal that the Greek public was not on board with the Syriza “mandate” was the most recent “no” vote in a public referendum.
Tspiras decided to let the public weigh in on whether Greece should go back to European financial authorities, hat in hand, for more bailout money.
What Will Happen to Greece Now?
So, what’s next for Greece?
“I really don’t see anything good coming out of this, unfortunately,” Moutsatsou said.
Greece will continue to spiral downward until labor has been effectively wiped out.
Moutsatsou said in Greece, “there is no economy.”
All its productive capacity is going toward paying off unpayable, onerous loans and not real growth.
The austerity attached to the bailout will reinforce Greece’s role as a European debt colony. And the 50 billion euro ($54.7 billion) privatization efforts will make Greek’s public assets ripe for plunder.
They already sold half the Greek port of Pireaus to China in 2010 for 500 million euros ($547.1 million). Russia made an attempt to grab at the gas resources in 2012. And the privatization efforts won’t end at just these economic engines – resorts, beaches, and historical sites will all be on the table.
The emigration of labor and the “corporatization” of Greece is the likely future.
“Twenty percent of Greece labor has emigrated,” Hudson said. “[Europe insists] that 40% have to emigrate, wages have to be lowered another 30%, and basically the country has to be emptied out. Essentially they’ve said to Greece, ‘We want your raw materials, your gas – get out of the country.'”
The Bottom Line: The Greek debt crisis has largely been looked on as an economic failing of one of the Eurozone’s weaker members. But that goes without mentioning the political crisis that seemed, at one point, to be clearing up with the election of Syriza.
Whether it was through “stupidity, naiveté, or betrayal,” as Moutsatsou put it,
Syriza traveled that same path that has corrupted Greek politics for decades. And as usual, it’s the Greek public that’s shouldering the burden.
Source: Recent Greek Bailout a Sign of Political Crisis and Syriza Failure – Money Morning
Jim Bach is an Associate Editor at Money Morning. You can follow him on Twitter @JimBach22