Syriza: the latest disaster for the left

I don’t have much time to offer anything very considered but want to just say how bemused I am at the carryings on of Syriza. The whole sorry business has been horrible to watch with creditors showing no interest in their own self-interest let alone a little enlightenment in their self-interest. But the Syriza Government? I was and remain a huge fan of how coherent and compelling Varoufakis was in articulating his case – of Syriza’s arrival as some kind of circuit breaker that might rescue Europe from itself as it rescued Greece from Europe.

But to negotiate properly, to negotiate as a broke borrower, you have to be able to show how you’re going to make your loan the creditor’s problem – not just your own. That requires a Plan A – in which the creditors and the borrower negotiate some mutually satisfactory settlement and this needs to be done with a Plan B clearly in view in which the creditors lose their shirts – and the borrower recovers.

I’ve always been kind of surprised at Syriza’s commitment to the Euro. Not that it wouldn’t be saying that it would strongly prefer an outcome in which the Euro remains its sole currency, but that that is all contingent on satisfactory negotiation. And to negotiate credibly in that situation one needs a clear Plan B. Perhaps it might make sense to conceal the plan for a while. But here we are at the end game and there’s no Plan B.

The referendum is a bizarre plebiscite on . . . well no-one really knows what it’s about. The Greek people get to vote on whether they will agree to the Troika’s terms. Those terms are not current. They’ve been withdrawn. Now they’ll probably be back on the table if they Greek’s vote ‘Yes’. But if they vote that way – presumably Syriza’s days are numbered – if it doesn’t resign immediately. And if they vote “No”. Well it’s completely unclear what that means other than that the Greek populace are where they were when they elected Syriza which is to say that they don’t want to pay their government’s debts. Well so what? The German populace want them to pay those debts. So where does that get us?

If BHP Billiton owes NAB a billion dollars, it’s not a very compelling result if a plebiscite of its shareholders say they’d rather not repay the loan. So we have Plan A which is that the Europeans offer Greece a deal that they won’t offer them, and Plan A with a tantrum, which is to say that the Greeks come back to the negotiating table saying “you know how we said we really don’t want to repay the loans. Well we really really don’t want to repay the loans. What do you say now?”

And the thing is that this seems of a piece with the left in so many instances – utterly lacking in the courage of what they claim are their convictions.

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Paul Montgomery
Paul Montgomery
6 years ago

Syriza was elected with a dual mandate of getting rid of austerity and staying in the euro. The troika has made it clear that doing both of these things is not possible. Syriza has gone back to the electorate to get them to choose austerity or the drachma. Whatever the result of the vote, Syriza then has a fresh mandate which actually makes sense in the context of what is possible.

It could be argued that this dilemma was entirely predictable, since the troika was never going to stop imposing austerity as it’s run by German conservatives who believe in ordoliberalism which pump-primes Germany’s export economy through a weak euro, so Syriza’s electoral platform was illogical. Fair enough, but at least now they’re letting the electorate decide.

The analogy with NAB and BHP Billiton is false. Parliamentary democracy is not analogous to corporate share ownership, particularly given the suffering of Greeks in the name of keeping the euro together. How can you blame Greeks for voting against a very avoidable great depression with 25% unemployment? Given the bank runs have already started, leaving Europe and allowing their economy to recover through currency devaluation could be the best course of action for them now. They deserve the opportunity to choose, either way.

chris b
chris b
6 years ago

Have you seen James Galbraith’s defence of Syriza?

http://www.politico.com/agenda/story/2015/07/9-myths-about-the-greek-crisis-000131

Factory
Factory
6 years ago

What Paul said.
also:

well no-one really knows what it’s about.

It’s pretty clearly a choice between doing whatever it takes in terms of policies that the troika demands to get credit, or to stop negotiations and default.

I suspect if the referendum goes to a No vote Striza might try some legal shenanigans to default but stay in the Euro, with the default as a fallback.

derrida derider
derrida derider
6 years ago

if the referendum goes to a No vote Striza might try some legal shenanigans to default but stay in the Euro

Actually Syriza is already saying that is exactly what they will do – they contend that there is no legal mechanism by which they can be forced to leave, default or no default.

So long as the Greeks manage to run a primary surplus they don’t need foreign Euros to run their government. The only leverage the Troika has is to bring on a private bank run – nasty, but a shot that they have already fired. Very few people would by now be holding substantial deposits in Greek private banks.

I reckon Syriza indeed had a Plan B and has already moved to it.

Tripitaka
Tripitaka
6 years ago
Reply to  Nicholas Gruen

Nicholas do you see bewilderment in the people? If it is there, I wonder what they are bewildered about?

Putting myself in Greece, I think I’d see the referendum and the chance Syriza are taking as indicating a type of honesty that is unusual in politics and admirable. I would certainly vote for a chance at happiness rather than the slow grind of ‘fearful conservatism’.

Alan
Alan
6 years ago

The troika’s projections about the impact of their program on the greek people have been consistently and drastically wrong. The vast majority of the troika’s outlays have not benefited Greece or even been spent in Greece. I think there is an analogy to security theatre. The troika, and the EU surplus economy leaders it represents, are engaging in debt theatre. Their claims about the benefit of policies justified by debt theatre have been about as accurate as the benefits of the policies justified by security theatre.

The analogy to private debts owed by corporations is absurd and fantasising citizens as mere shareholders approaches the surreal.

Europe finds itself in this position between the euro is poorly designed. No currency union has ever succeeded without a fiscal union. The EU leadership apparently prefer planting their heads in the ground and not engaging with basic economics.

There is an ancient joke that the Brits governed their empire by sheer presence. Apparently the EU leaders think they can crush Syriza, Podemos and the others by sheer sniffiness.

Steve from brisbane
Steve from brisbane
6 years ago

Gee, I’m scoring the thread better than the post so far. But it is all rather confusing…

Paul Montgomery
Paul Montgomery
6 years ago
Reply to  Nicholas Gruen

… which completely repudiates all of your points in the OP, Nicholas.

David Walker
David Walker
6 years ago

Waldman’s saying that the European authorities have treated Greece’s creditors too generously; Nick’s saying Syriza has mucked up its negotiations. Both things can be true, and probably are.

It’s always interesting to see how easily spectators separate into tribes in these situations. But there are few situations where that tendency has been less useful. Very few people have emerged with any credit from Greece’s long loan disaster.

John walker
6 years ago
Reply to  David Walker

What a mess.

Paul Montgomery
Paul Montgomery
6 years ago
Reply to  David Walker

Yet another example of the local flavour of “both sides do it” High Broderism in which Club Troppo seems to specialise, David. Centrism is a rather easy crutch on which to lean on at times like this. Taking a stand would be more courageous – in your case, standing on the side of democracy and with the little people of Greece who have suffered in this long depression, and against the technocrats on the other side of the continent who stuffed things up and caused needless pain by refusing to acknowledge reality.

You are doing nothing to dissuade from the conclusion that this blog sides with the wonk tribe in most things.

paul frijters
paul frijters
6 years ago
Reply to  Nicholas Gruen

don’t get lured in by Waldman’s emotional self-righteousness, Nick. I don’t think his assessment of the Greek crisis as being due to a conspiracy of bankers and their friends is fair. As the commenters to his post make clear, his main claims are simply false. The 2010 bailout was not a bailout of banks, but a huge haircut for private banks from Northern Europe, whilst actually protecting Greek deposits; the last 5 years have not been years of intransigent Germans versus meekly following Greek governments, but rather have been mainly one of unimplemented reforms; mainly, Syriza is not the break with previous Greek politics that I hoped they would be, quite the opposite in fact.

Waldman offers you a conspiracy of the European elites who were supposedly protecting their bankers as the cause of the current crisis. A nice simple morality tale that appeals to the lazy and uninformed. How very Balkan of him (where, fittingly, he wrote his epistle). If the elites of 19 EU countries together with around 10 institutions were organised enough to pull off such a massive conspiracy, we wouldn’t be in this mess!

Between conspiracy and f-up, always choose f-up as the most likely explanation.

paul frijters
paul frijters
6 years ago
Reply to  Nicholas Gruen

????????
Waldman talks about a massive betrayal and how the European elites chose themselves rather than their populations. How much more conspiracy can you get?

I think Krugman is pretty blind to what has really happened and is still happening in Greece too. With 180% of GDP loans and massive further recent loans (via the ELA), I don’t know what more pump-priming one could possibly expect to see in Greece. There has been no austerity in Greece, quite the opposite in fact. The failure is a total blockage of the Greek political and bureaucratic system. One can blame the glut of money being channeled via the wrong people for that (for which the European elites can be blamed, as I already did in 2011!), but not austerity. Krugman is too blinded by his ideology to see anything else but the confirmation of his own theories in Greece. And so is Waldman.

Nicholas Gruen
6 years ago

One other thing I forgot to raise in my original post

A successful yes campaign would be a monumental disaster as explained by Krugman:

One of the great risks if the Greek public votes yes — that is, votes to accept the demands of the creditors, and hence repudiates the Greek government’s position and probably brings the government down — is that it will empower and encourage the architects of European failure. The creditors will have demonstrated their strength, their ability to humiliate anyone who challenges demands for austerity without end. And they will continue to claim that imposing mass unemployment is the only responsible course of action.

And at least from my position as an outsider in one fell swoop Syriza seems to have both maximised the chances of catastrophe whilst minimising the significance of genuine gains should they succeed. Quite an achievement.

Tripitaka
Tripitaka
6 years ago

Nicholas,
apologies for not acknowledging your coherent meaning and I know you are a ‘centrist’ and so non-ideological. There is no shame in using an analogy that makes sense to you, but it seems to me that the way merchant bankers think about the world and people is far too simplistic and not suited to the work of setting out rules that will work for everyone.

I wonder about your idea that certainty is what is needed.

The limits of human knowledge and rationality would suggest that we all should be somewhat uncertain about what to do in any situation. The problem these bewildered people have is how to decide when there is no way of knowing what will emerge from either choice.
There is no knowing this because it has not happened yet; what happens will emerge from the complexity; it isn’t already determined.

The Greek politicians are of course self-interested; why wouldn’t they be? Could it be that the people you have spoken to are looking for base reasons to explain the behavior they just don’t understand because it is outside of their experience?

These politicians are behaving unlike other politicians and yet you search out evidence to support your theory that they are just politicians. Perhaps it isn’t wishful thinking to imagine that their values may be different from the bankers and so not comprehensible to bankers and those who like the way bankers run the world?

No need for the use of terms such as ‘rentier overlords’; unless you think that they did deliberately set out to enslave the world through debt?

Perhaps I was unnecessarily quibbling about the word “bewildered”; it can be used to mean “uncertain about what to do” or “not understand what is going on”. I doubt that anyone who has to vote in the referendum does imagine that they are confused about what is going on. Few people doubt their ability to understand events although those who don’t, really ‘should’.

Barry
Barry
6 years ago

Some are suggesting that Greece will go back to the Drachma. Those that make
that suggestion do not seem to understand just how long that would take.
Unless Greece has secretly had notes printed and coins minted it would take at least a year.
The notes is pretty straight forward but coins are very difficult, all coin mechanisms would have to be modified as they could not use coins that are compatible with Euro coins.
It is a b&*%dy nightmare.

Vern Hughes
6 years ago

Can the current Greek population be held responsible for the “pervasive corruption” of previous governments? In a democracy, the only answer can be ‘yes’. There were Greek citizens who tried over many years to change the Greek culture of living beyond the country’s means. They didn’t succeed, for much the same reasons that Australian critics of our culture of public handouts to private interests don’t succeed either – the opponents of change are too strong and too entrenched. Dissenters are too easily marginalised by those with their snouts in the trough. When this happens, the consequences have to be lived with. Greece’s debts have to be paid at some point. This is tough for the genuine reformers who saw the consequences looming. But the hard lesson must be learnt – debt forgivenesss only rewards the profligate and the irresponsible. That lesson must be reiterated over and over by reformers until it sinks in.

I am and will always be Not Trampis
I am and will always be Not Trampis
6 years ago

There has been no austerity in Greece, how come they now have a primary surplus? how come they have had a depression?
you are getting as mad as Katesy.

You do not introduce austerity to a country cannot pay back.
You get the economy going.
Any person who claims to ‘understand ‘ economics should know that.

The vastly bloated claims to Greece by the Troika on implementing their program has been proved to be wrong.Badly wrong. Insisting on more and keeping the country in recession is sheer madness.

paul frijters
paul frijters
6 years ago

I have just gone to Greece and talked to some of their economists, have you?

The Greek central bank has effectively printed 89 billion Euros worth of money to prop up their own private banks, most of it in the last year, allowed to do by the ECB under the Emergency Liquidity Assistance scheme. In effect, the Greek government and its central bank bank combined have thus spent about twice as much money in Greece as Greek tax collection has gathered. Call that austerity? It is astonishing what the Greeks have gotten away with the last 10 months alone. It is only gullible fools that berate the Germans for ‘imposing austerity’ on the Greeks. The Eurozone is practically hemorrhaging funds to the Greek political elite. Funds that will not come back.

I am and will always be Not Trampis
I am and will always be Not Trampis
6 years ago
Reply to  paul frijters

Paul,

I haven’t had to.
I have examined the figures. You cannot get to a primary surplus without imposing austerity. how did they get there?

Fess up to a stupid comment and move on. your answer wasn’t an answer.

paul frijters
paul frijters
6 years ago

and I have just told you that Greece essentially has had a primary deficit in the last 12 months of close to 100%. It has simply been hiding under the name ‘Emergency loan Assistance’ that has flooded Greece with Euros (some of which will have made its way back in taxes, creating an illusion of a primary surplus). This will in later years be visible as a large glut of Euros all over Europe that have Greek serial numbers.
They have had you fooled, but clearly that is not difficult.

John walker
John walker
6 years ago
Reply to  paul frijters

Paul the Greek Economists that you spoke to, where do they see all this going to?

I am and will always be Not Trampis
I am and will always be Not Trampis
6 years ago

yeah you and the mystery greek economists are the only ones who know. not the troika, not the EU no-one.

If you were right then recession would not be happening, not with a deficit of the proportions you are alluding!

Is this another Washington conference moment.?

I might note when Kruggers or Simon Wren-Lewis or anyone writes a column on this they provide the information.
Shucks only Paul and a select few know.

Paul Montgomery
Paul Montgomery
6 years ago

paul frijters, you sound like a deranged Zero Hedge denizen. Are you next going to recommend buying gold and stocking up on bottled water, dried grits and sawn off shotties?

Nicholas Gruen
6 years ago

Paul (M)

When someone says something that surprises you, especially someone as intelligent and well informed as Paul (F) it might be an opportunity to learn something.

Paul Montgomery
Paul Montgomery
6 years ago
Reply to  Nicholas Gruen

Nicholas, how can I take Paul F at face value when he’s spouting a conspiracy theory supported by no serious economists? An appeal to authority doesn’t work when the stuff he is saying doesn’t pass the smell test. The giveaway is him saying everyone else except him is a fool – that’s the call sign of a crank. I vote Oxi to that.

Barry
Barry
6 years ago

Paul, I think there are so many conspiracy theories about because many just have not realised what is happening and a conspiracy seems the most likely to them.
The interesting thing is that those that usually jump to conspiracies are confused about what is going on also.
It is all described in a very large scale in Joseph Trainter’s book The Collapse of Complex Societies. His description of the Roman Empire collapse had different causes to what we see but it is easy to see the same affects with different resources. We still seem to have the silver to pay the centurions to capture the slaves but other resources are critical today.

I am and will always be Not Trampis
I am and will always be Not Trampis
6 years ago
Reply to  Nicholas Gruen

riddle me this Nick,

how can a loan reduce a budget deficit given it is a financing item?

how come the Troika do not know this and how come this hugely stimulatory fiscal policy did the exact opposite indeed just like Simon or Kruggers said it did?

Barry
Barry
6 years ago

It is because they think it is still possible to generate growth. They believe money is the key to everything but as someone said;

IT’S THE ENERGY STUPID !

John walker
John walker
6 years ago
Reply to  Nicholas Gruen

Is a Greek stimulus possible if all the money quickly goes to ‘deposit boxes in Luxembourg’ ? How would you approach it?

Barry
Barry
6 years ago
Reply to  John walker

John, doesn’t matter about stimulus or austerity it is now irrelevant. Economists are gradually starting to realise now that neither work. Others have been aware of this for a few years and is caused by the approaching era of zero growth.
Once a countries economy and diminishing returns start winding down nothing can change this decline unless a new source of cheap energy and resources become available.

Barry
Barry
6 years ago
Reply to  Barry

John, just came across this article, on this subject. Says it better than I can

http://tinyurl.com/q7xdc43

The author is well known on this subject.

John walker
6 years ago
Reply to  Nicholas Gruen

I feel that Keynes could be ( relatively) optimistic in the mid40s that nobody dreamt of a return to the ‘way we have always done things ‘ because the elites of Europe (including those of the eastern med) were, if not literally dead and buried, were very reduced , and totally discredited. Unfortunately at the moment it feels like many, including the Greeks and the EU, still hanker for the good old days.

paul frijters
paul frijters
6 years ago
Reply to  Nicholas Gruen

yes, the lack of a plan B can be laid at the feet of Varoufakis and Tsipras, as it has severely weakened their negotiating position.

Dont be surprised if the current deal crashes though: this deal counts as a normal procedure, not an emergency procedure, meaning that it will require full unanimity of the other Eurozone countries to go ahead. That is a lot of parliaments and governments. Now, all of the Northern European, Baltic, and Balkan countries who have shown their resentment towards Greek politicians will be looking to each other to see which one will dare to sink the deal (or even just sink the agreement to talk about a deal!). The Fins have been the most outspoken in the past so all eyes on them, I would guess, but even the Fins might be hoping the Greek parliament refuses to pass the deal before Wednesday anyway.

Vern Hughes
6 years ago

Better for Greece to step out of the Eurozone, at least for a temporary period. Five years with a devalued currency provides an opportunity to rebuild. Then re-entry into a Europe in which the rules governing fiscal management will surely be overhauled. The managerial class in Europe want to stick together – in the end it seems the leftism of Tsiparas and Syriza couldn’t resist the pull of his managerial class peers.

paul frijters
paul frijters
6 years ago
Reply to  Vern Hughes

yes, I think an overhaul is likely too. Not sure about the motivations of Tsipras though. With the exit of Varoufakis, all real fight seems to have left the Greek government, even before the summit: the French newspaper the Figaro claimed that the proposals that the Greeks brought to the summit were written by 10 French civil servants, and hence that the show was between different Eurozone factions fighting about future visions of the Eurozone, much as Varoufakis claims incidentally (he says the Germans are trying to impose fiscal discipline on the French and others. Quite possible, I think).