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One Year Since the Bailout: How Syriza Betrayed Greece

Why Grexit was perfectly possible and how Tsipras and Syriza blocked it.

Alexander Mercouris

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One year ago the Greek people voted in a referendum to reject the draconian proposals the EU demanded as its price for bailing out Greece. 

To everyone’s astonishment, having rejected the EU’s proposals and won the support of the Greek people in the referendum, Greek Prime Minister Alexis Tsipras immediately after the referendum carried out a complete U turn, and accepted on behalf of Greece bailout proposals which were even harsher than those he and the Greek people had previously rejected.

Greece has been saddled with this bailout plan ever since.  It is one the IMF thinks is unworkable and which no big name economist believes in.  Latest information suggests Greece is once again slipping back into recession.

How did this disaster come about?  Exactly a year ago I dissected the negotiations and showed that Tsipras and his Finance Minister Varoufakis (who does not deserve the cult status he has achieved) bear the main responsibility, and that Grexit (ie. Greece’s orderly negotiated withdrawal from the Eurozone) together with a debt restructuring was a fully viable option.  

Here is what I wrote then:    

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Ever since the latest bailout agreement misinformation to justify it has been pouring out of Greece.  Much of this centres on the supposed impracticability of a Grexit and of the “revolutionary” nature of the plans certain individuals hatched to achieve it.  Varoufakis has claimed authorship of some of these plans. Others are attributed to the former Energy Minister and leader of Syriza’s Left Platform, Panagiotis Lafatzanis.

Varoufakis’s plan, which he claims to have presented to Tsipras at the last moment as the referendum results were coming in, was for the Greek government to start handing out electronic IOUs in place of a currency. This would have been accompanied by capital controls, the nationalisation of the banks and the seizure of the government’s revenue office and of the Bank of Greece.  Varoufakis claims that this plan was prepared by the five man group based within the Finance Ministry he set up back in February. Apparently this group carried out its work in total secrecy and – in a bizarre twist – even hacked into the Finance Ministry’s own computers in order to prepare its plans.

Meanwhile the Financial Times has published a lurid account of a semi-secret meeting arranged by Lafatzanis and Syriza’ s Left Platform in an Athens hotel, where there was supposedly wild talk of arresting the governor of the Bank of Greece and of seizing the hoard of euros supposedly stashed away in the Athens mint in order to keep the economy going and to pay for essential imports until a new currency was set up.

No doubt in the desperate situation caused by the Syriza government’s failure to undertake proper and timely preparations for a Grexit all sorts of wild ideas were in circulation.  Not all these ideas were however wild. It is constantly overlooked that because the Greek banks were bailed out by the Greek government in 2008 (a major reason why its debt burden became so catastrophically and insupportably high) they are already 80% state owned. “Nationalising” the banks would not therefore have been an act of revolutionary confiscation or appropriation of private property. It would have simply meant the state taking operational control of the banks by replacing their managements by new managements appointed by and accountable directly to the government.

Implementing extreme steps such as seizing the Bank of Greece and the mint and issuing IOUs would nonetheless have provoked a major crisis in Greece. The economy would have been thrown into turmoil, with much of the population and the business community refusing to accept the IOUs of a bankrupt government as a credible substitute for actual money.  Acting in such a way would also have completely antagonised the EU leaders, who would have been bound to construe such steps as a declaration of economic war.  They would undoubtedly have responded by suspending the Greek government’s participation in the EU’s central institutions on the grounds that it was in breach of the fundamental provisions of Article 2 of the Treaty of the European Union.

Putting all that aside, what no one has explained is why any of these schemes were necessary.

Implicit in Varoufakis’s various “plans” and in the scheme the Financial Times attributes to Lafatzanis is the strange idea that preparing a new currency was something that needed to be done in secret and which would have had to be improvised at the last moment.  Nothing could be further from the truth. Far from the introduction of a new currency being something that would have been resisted across Greece and Europe, we know it would have had the backing of the Bundesbank, of the German Finance Ministry, of Wolfgang Schauble and of the IMF.

According to the British writer Tariq Ali, as long ago as February Schauble was offering Varoufakis 50 billion euros and help with an orderly Grexit. Tariq Ali describes the offer in this way:

“It is now known that Schäuble offered an amicable, organised Grexit and a cheque for 50 billion euros. This was refused on the grounds that it would seem to be a capitulation. This is bizarre logic. It would have preserved Greek sovereignty, and if Syriza had taken charge of the Greek banking system a recovery could have been planned on its terms. The offer was repeated later. ‘How much do you want to leave the Eurozone?’ Schäuble asked Varoufakis just before the referendum. Again Schäuble was snubbed. Of course the Germans made the offer for their own reasons, but a planned Grexit would have been far better for Greece than what has happened.”

No one in Greece is denying this story and in fact I am told it is true (NB: it has since been denied in Greece but I know it to be true – AM).

Even as late as the latest EU summit the option of an orderly Grexit was on the table. Schauble – with Merkel’s (alas temporary) backing – actually proposed it. If the Greeks had agreed to it, it would have happened. The IMF, which has made known its complete lack of belief in the viability of the latest bailout, would have backed it.  Greece would have got its 50 billion euros to help it support the new currency, Schauble and the Germans would have ensured that the ECB provided the necessary liquidity to the banks to keep the banks operating until the new currency was ready, the banks could have been nationalised by mutual agreement – there being as I have said nothing revolutionary about this – capital controls would have been imposed until the new currency was ready (the Germans agreed to this when Cyprus imposed them, so why would they refuse it if sought by Greece?) and control of the Bank of Greece, the mint and the revenue service would have been transferred back to the Greek government as an indispensable element in an orderly and agreed Grexit. Meanwhile the Russians had already said that they were prepared to help with essential imports of energy and (probably) food, if that was needed.

The Financial Times says the process of introducing a new currency would have taken 6-8 months, much less than the 18 months Varoufakis is claiming (NB: he still – wrongly – claims it – AM).  Actually that is far too pessimistic. The former British cabinet minister John Redwood has guesstimated it would take no more than 3 months. In my opinion, given financial help and technical support from the EU and the IMF the whole process could have been carried out from beginning to end in the space of a few weeks (NB: I have since learnt that the Russians offered technical help including printing the bank notes – AM).

Once Greece was out of the Eurozone it could have agreed a formal restructuring of its debt as part of a package negotiated with the IMF (the alternative of a default on the entire debt might have done irreparable damage to relations with the creditor countries). The conditions would doubtless have been tough but they would hardly have amounted to the psychopathic agreement we have now. With Greece outside the eurozone and able to regain competitiveness through a devaluation there would have been a real chance that whatever was agreed would succeed.

However one spins the ball, the reality has to be faced: a Grexit did not happen not because it was difficult to do but because the Syriza government didn’t want it.

All claims to the contrary are fairy tales, whilst the malicious spreading of stories about the various plans that were hatched in the desperate final hours before Greece’s final capitulation is being done purposefully in order to discredit the idea of a Grexit and those who support it.  As for the perennial claim that the Greek people want to cling on to the euro no matter what, since the referendum I no longer believe that claim despite what the opinion polls are alleged to say.

In my opinion far too many people go on giving Tsipras, Varoufakis and Syriza the benefit of the doubt even though the extent of their incompetence and of their double-dealing is becoming simply impossible to deny.

Varoufakis has in fact now admitted that the real Plan B if the negotiations for a debt write-off failed was not a Grexit – his claims to have prepared for one is so much smoke and mirrors – but a resignation of the government and the formation of a “government of national unity” consisting of the old oligarchic pro-EU parties to sign a bailout package in place of Syriza. In Varoufakis’s own words

“We are going to do all it takes to bring home a financially viable agreement. We will compromise but not be compromised. We will step back just as much as is needed to secure an agreement-solution within the Eurozone. However, if we are defeated by the catastrophic policies of the memorandum we shall step down and pass on the power to those who believe in such means; let them enforce those measures while we return to the streets.”

No word here of any plan for a Grexit.

This comment of Varoufakis by the way provides final confirmation for my previous statement – doubted by some – that the Ambrose Evans-Pritchard story is true: Tsipras called the referendum in the expectation of a Yes vote so as to give himself political cover to resign.  That way a “government of national unity” without him and Syriza would be formed.  It would sign-up to the bailout plan.  He would thereby be able to evade responsibility and campaign against it.

In my opinion plotting the resignation of his own government – elected just a few months before to bring an end to austerity – to save his own reputation was an extraordinary act of irresponsibility.  Regardless – because to his surprise and horror the Greek people instead of voting Yes voted No – it is not what Tsipras eventually did.  Instead of resigning he remained in power, obliged (since he remained adamantly opposed to a Grexit) to agree to an even worse deal than the one he had previously rejected.

Instead of admitting that Schauble offered him a dignified way out, Varoufakis is now also busy spreading a fantastic story that Schauble was throughout plotting to expel Greece from the Eurozone so that he could terrorise France to accept the economic medicine he supposedly wants to impose on it. Varoufakis is actually claiming that Schauble told him as much.  Varoufakis’s precise words are:

“Schauble believes that the eurozone is not sustainable as it is. He believes there has to be some fiscal transfers, some degree of political union. He believes that for that political union to work without federation, without the legitimacy that a properly elected federal parliament can render, can bestow upon an executive, it will have to be done in a very disciplinary way.  And he said explicitly to me that a Grexit is going to equip him with sufficient terrorising power in order to impose upon the French, that which Paris has been resisting: a degree of transfer of budget making powers from Paris to Brussels.”

Does anybody seriously believe that if Schauble really has such a plan he would have shared it with Varoufakis of all people?

The reality is that Schauble adamantly opposes a debt write-off for Greece whilst it remains part of the Eurozone not because he wants to terrorise France into submission but because of the disastrous precedent such a write-off might provide to other heavily indebted and bailed out eurozone states like Portugal, Spain, Cyprus and Ireland.  Obviously that is not sinister enough for Varoufakis – who has never shown the slightest understanding of Schauble’s position – which is why he attributes this bizarre plan to him.

Sad to say Varoufakis was already spreading his fable about Schauble’s wicked plan to use Greece in order to terrorise France whilst the negotiations were actually underway – one reason surely why Schauble came to dislike him so much.  It could be that Varoufakis misunderstood something Schauble said to him. However I have to say that it looks to me more like an attempt by Varoufakis to play the French and the Germans off against each other, in much the same way that Tsipras at the same time was trying to play the Russians and the Europeans (and the Americans) off against each other. Needless to say, if that was the ploy then it failed.

In fairness to Tsipras, Varoufakis and Syriza, though their tactics were manipulative and disastrous, their objective was always what they said it was: to keep Greece in the Eurozone whilst securing an end to austerity and a debt write-off.  Most people – including me – assumed that as it became clear this was impossible that they would take Greece out of the Eurozone in order to end austerity and secure the debt write-off.  That was the position Varoufakis eventually decided on when all else failed, though the plan he came up with is testament to his failure to prepare for a Grexit properly, as it was his responsibility as Finance Minister to do. 

In Tsipras’s case however it is now clear he always intended the opposite – to drop the plan to end austerity and get a write-off, so as to keep Greece in the Eurozone irrespective of the cost.

The result is that Greece’s relations with the rest of the EU have been poisoned, the cause of anti-austerity across Europe has been discredited, and the Greek people are left paying a fearsome price.

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America the Punitive

What do Russia, Turkey and Iran have in common?

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Authored by Philip Giraldi via The Strategic Culture Foundation:


There has been a dramatic shift in how the United States government carries out its business internationally. Admittedly, Washington has had a tendency to employ force to get what it has wanted ever since 9/11, but it also sometimes recognized that other countries had legitimate interests and accepted there was a place for diplomacy to resolve issues short of armed conflict. The Bush Administration reluctance to broaden its engagement in the Middle East after it recognized that it had blundered with Iraq followed by Obama’s relaxation of tensions with Cuba and his negotiation of a nuclear agreement with Iran demonstrated that sanity sometimes prevailed in the West Wing.

That willingness to be occasionally accommodating has changed dramatically, with the State Department under Mike Pompeo currently more prone to deliver threats than any suggestions that we all might try to get along. It would be reasonable enough to criticize such behavior because it is intrinsically wrong, but the truly frightening aspect of it would appear to be that it is based on the essentially neoconservative assumption that other countries will always back down when confronted with force majeure and that the use of violence as a tool in international relations is, ultimately, consequence free.

I am particularly disturbed with the consequence free part as it in turn is rooted in the belief that countries that have been threatened or even invaded have no collective memory of what occurred and will not respond vengefully when the situation changes. There have been a number of stunningly mindless acts of aggression over the past several weeks that are particularly troubling as they suggest that they will produce many more problems down the road than solutions.

The most recent is the new sanctioning of Russia over the Skripal poisoning in Salisbury England. For those not following developments, last week Washington abruptly and without any new evidence being presented, imposed additional trade sanctions on Russia in the belief that Moscow ordered and carried out the poisoning of Sergey Skripal and his daughter Yulia on March 4th. The report of the new sanctions was particularly surprising as Yulia Skripal has recently announced that she intends to return to her home in Russia, leading to the conclusion that even one of the alleged victims does not believe the narrative being promoted by the British and American governments.

Though Russian President Vladimir Putin has responded with restraint, avoiding a tit-for-tat, he is reported to be angry about the new move by the US government and now believes it to be an unreliable negotiating partner. Considering the friendly recent exchanges between Putin and Trump, the punishment of Russia has to be viewed as something of a surprise, suggesting that the president of the United States may not be in control of his own foreign policy.

Turkey is also feeling America’s wrath over the continued detention of an American Protestant Pastor Andrew Brunson by Ankara over charges that he was connected to the coup plotters of 2016, which were allegedly directed by Fetullah Gulen, a Muslim religious leader, who now resides in Pennsylvania. Donald Trump has made the detention the centerpiece of his Turkish policy, introducing sanctions and tariffs that have led in part to a collapse of the Turkish lira and a run on the banking system which could easily lead to default and grave damage to European banks that hold a large party of the country’s debt.

And then there is perennial favorite Iran, which was hit with reinstated sanctions last week and is confronting a ban on oil sales scheduled to go into effect on November 4th. The US has said it will sanction any country that buys Iranian oil after that date, though a number of governments including Turkey, India and China appear to be prepared to defy that demand. Several European countries are reportedly preparing mechanisms that will allow them to trade around US restrictions.

What do Russia, Turkey and Iran have in common? All are on the receiving end of punitive action by the United States over allegations of misbehavior that have not been demonstrated. Nobody has shown that Russia poisoned the Skripals, Turkey just might have a case that the Reverend Brunson was in contact with coup plotters, and Iran is in full compliance with the nuclear arms agreement signed in 2015. One has to conclude that the United States has now become the ultimate angry imperial power, lashing out with the only thing that seems to work – its ability to interfere in and control financial markets – to punish nations that do not play by its rules. Given Washington’s diminishing clout worldwide, it is a situation that is unsustainable and which will ultimately only really punish the American people as the United States becomes more isolated and its imperial overreach bankrupts the nation. As America weakens, Russia, Turkey, Iran and all the other countries that have been steamrolled by Washington will likely seek revenge. To avoid that, a dramatic course correction by the US is needed, but, unfortunately, is unlikely to take place.

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NATO Repeats the Great Mistake of the Warsaw Pact

NATO expansion continues to drive the world the closer towards the threat of thermonuclear war.

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Authored by Martin Sieff via The Strategic Culture Foundation:


Through the 1990s, during the terms of US President Bill Clinton, NATO relentlessly and inexorably expanded through Central Europe. Today, the expansion of that alliance eastward – encircling Russia with fiercely Russo-phobic regimes in one tiny country after another and in Ukraine, which is not tiny at all – continues.

This NATO expansion – which the legendary George Kennan presciently warned against in vain – continues to drive the world the closer towards the threat of thermonuclear war. Far from bringing the United States and the Western NATO allies increased security, it strips them of the certainty of the peace and security they would enjoy if they instead sought a sincere, constructive and above all stable relationship with Russia.

It is argued that the addition of the old Warsaw Pact member states of Central Europe to NATO has dramatically strengthened NATO and gravely weakened Russia. This has been a universally-accepted assumption in the United States and throughout the West for the past quarter century. Yet it simply is not true.

In reality, the United States and its Western European allies are now discovering the hard way the same lesson that drained and exhausted the Soviet Union from the creation of the Warsaw Pact in 1955 to its dissolution 36 years later. The tier of Central European nations has always lacked the coherence, the industrial base and the combined economic infrastructure to generate significant industrial, financial or most of all strategic and military power.

In fact the current frustrating experience of NATO, and the long, exhausting tribulations that faced Soviet diplomats and generals for so many decades was entirely consistent with the previous historical record going back at least until 1718.

From 1718 until 1867 – a period of a century and a half – most of Central Europe, including even regions of Poland at the end of the 18th century, were consolidated within the Austro –Hungarian Empire, However even then, the Habsburg multi-national empire was always militarily weak and punched beneath its weight. After Emperor Franz Josef recklessly proclaimed his famous Compromise of 1867, the effectiveness of the imperial army was reduced to almost zero. The autonomous and feckless conduct of the Hungarian aristocracy ensured a level of confusion, division, incompetence and ineptitude that was revealed in the army’s total collapse against both Russia and Serbia in the great battles of 1914 at the start of World War I.

Germany moved in to occupy and consolidate the region in both world wars. But far from making Germany a global giant and enabling it to maintain its domination of Europe, the Central European regions – whether as part of Austro-Hungary during World War I or as independent nation-states allied to the Nazis in World War II – proved miniscule and worthless against the alliances of Russia, the United States, Britain and France that the Germans fought against in both global conflicts.

After the Soviet Union militarily destroyed the genocidal military power of Nazi Germany in World War II, Russia’s Great Patriotic War, the political consolidation of East Germany and Poland were strategically necessary for Russia’s security. But occupying and organizing the rest of the region was not. Far from strengthening the Soviet Union, those nations weakened and distracted it. Today, NATO is repeating the Soviet Mistake and that fatal move is inexorably draining the alliance of all its strength and credibility.

NATO is also repeating the disastrous mistake that France made in 1920-21 when it created a “Little Entente” of Czechoslovakia, Yugoslavia and Romania to supposedly counterbalance the revival of Germany. The plan failed completely.

Today those very same nations – enthusiastically joined by Hungary, Poland and the three little Baltic states – are relentlessly distorting both NATO and the EU. They generate weakness and chaos in the alliances they are in – not unity and strength.

As I have noted before in these columns, the great British historian Lord Correlli Barnett drew the important distinction between militarily powerful nations that are generators and exporters of security and those, either tiny or disorganized, pacifist and weak nations that have to import their security from more powerful states.

One might call such small countries “feeder” or “parasite” states. They siphon off energy and strength from their protector partners. They weaken their alliance partners rather than strengthening them.

The consistent lessons of more than 300 years of Central European history are therefore clear: Leading and organizing the tier of Central European nations in the Warsaw Pact did not strengthen the Soviet Union: Instead, those activities relentlessly weakened it.

Incorporating most of the small nations in Central Europe into any empire or alliance has never been a cause or generator of military or national strength, regardless of the ideology or religious faith involved. At best, it is a barometer of national strength.

When nations such as France, Germany, the Soviet Union or the United States are seen as rising powers in the world, the small countries of Central Europe always hasten to ally themselves accordingly. They therefore adopt and discard Ottoman Islamic imperialism. Austrian Christian imperialism, democracy, Nazism, Communism and again democracy as easily as putting on or off different costumes at a fancy dress ball in Vienna or Budapest.

As Russia rises once again in global standing and national power, supported by its genuinely powerful allies China, India and Pakistan in the Shanghai Cooperation Organization, the nations of Central Europe can be anticipated to reorient their own loyalties accordingly once again.

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Why Russia will NOT fall victim to emerging markets financial crisis (Video)

The Duran – News in Review – Episode 81.

Alex Christoforou

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As the Turkish Lira collapses, sending emerging market economies into turmoil, Russia is being slapped with additional US sanctions dubbed the US Congress ‘bill from hell’.

The full text the newest sanctions bill has been released. The sanctions are deliberately designed to punish Russia’s economy for a Skripal poisoning hoax for which no evidence of Russian state involvement has been presented. The new bill even goes so far as to suggest designating Russia as a state sponsor of terrorism.

The “sanctions bill from hell” officially entitled ‘Defending American Security from Kremlin Aggression Act of 2018’ was introduced by a group of Republican and Democratic senators on the 2nd of August.

According to RT, the bill would place restrictions on US cooperation with Russia’s oil industry, target Russian sovereign debt transactions as well as Russian uranium imports. In addition, the legislation calls for sanctions against “political figures, oligarchs, and other persons that facilitate illicit and corrupt activities, directly or indirectly, on behalf of the President of the Russian Federation, Vladimir Putin.”

The Duran’s Alex Christoforou and Editor-in-Chief Alexander Mercouris explain why, unlike the financial meltdown in Turkey, Russia is well equipped and properly prepared to weather the US sanctions storm… and may, in the end, come out of the latest emerging markets turmoil stronger and more independent from western petrodollar control than ever before.

Remember to Please Subscribe to The Duran’s YouTube Channel.

Via RT

The bill, which was recently published in full on Congress’ official website, also pledges full support for NATO and would require a two-thirds majority vote in the Senate if the United States ever wishes to exit the transatlantic alliance.

The legislation also declares that “the United States will never recognize the illegal annexation of Crimea by the Russian Federation” and that Washington, in conjunction with NATO, should “prioritize efforts to prevent the further consolidation of illegal occupying powers in Crimea.”

The pending ‘Kremlin Aggression Act’ decrees that Congress should also determine whether Russia “meets the criteria for designation as a state sponsor of terrorism.”

The bill also accused Russia of “enabling the brutal regime of Bashar al-Assad in Syria to commit war crimes,” adding that Moscow has shown itself to be “incapable or unwilling” to compel Assad to “stop using chemical weapons against the civilian population in Syria.”

The Act calls for a congressional committee to investigate “alleged war crimes and crimes against humanity attributable to [Russia]” and resolves to “punish the Government of the Russian Federation for, and deter that Government from, any chemical weapons production and use through the imposition of sanctions, diplomatic isolation, and the use of the mechanisms specified in the Chemical Weapons Convention for violations of the Convention.”

The legislation is just the latest addition to a laundry list of sanctions and laws passed in the months following the 2016 presidential election.

Republican hawk Lindsey Graham (South Carolina) and Bob Menendez (D-New Jersey), who both sponsored the bill, said in a joint statement that the legislation is designed to show that the US will “not waver in our rejection of [Russian President Vladimir Putin’s] effort to erode western democracy as a strategic imperative for Russia’s future.” The Russia-obsessed Senator John McCain (R-Arizona) was one of the five co-sponsors of the bill.

Moscow has brushed off the new wave of accusations as a projection of internal US struggle. Some elements in the US government are trying to “keep afloat” the conspiracy that Russia meddled in the US elections, in hopes of derailing constructive relations with Moscow and using the issue “purely for internal American purposes,” Senator Konstantin Kosachev, who chairs the Upper House Committee for International Relations, has said in response to the latest sanctions.

Prime Minister Dmitry Medvedev has warned that the adoption of any US legislation that targets Russian banking operations and currency trade would be considered a declaration of economic war.

“If they introduce something like a ban on banking operations or the use of any currency, we will treat it as a declaration of economic war. And we’ll have to respond to it accordingly – economically, politically, or in any other way, if required,” Medvedev said last week. “Our American friends should make no mistake about it.”

Moscow has vowed to respond to any new sanctions. Russia’s Finance Ministry said it would continue to sell off its holdings of US Treasury securities, while some lawmakers have called for Russia and its allies to stop using the US dollar for mutual payments.

 

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