The Greek people have stood up. By an overwhelming margin, they rejected the harsh, unending, austerity that the “Troika” – the International Monetary Fund, the European Union and the European Central Bank – dictated for them. They stood with the leaders they had elected to demand an arrangement that would offer some hope. The barely disguised effort of Europe’s powers to topple the Syriza government has failed.
Events will move rapidly now. Here are four things to remember in the swirl of meetings, pronouncements and smash-ups.
1. Syriza does not want to leave the Euro or the European Community.
Syriza is an oddity in Europe: an independent insurgent party that is committed to Europe and the Euro. Syriza was elected to alleviate the disaster created by Greece’s major parties and utterly misguided European leadership.
When the financial crisis hit, the Europeans, fearful that a Greek default would unravel the Euro, bailed out the banks (largely German) that irresponsibly lavished cheap credit on dissolute Greek governments. Then the Troika’s functionaries inflicted a deep and harsh depression on the Greeks – savage cuts in spending to create a budget surplus, an economic catastrophe cutting the economy by one-fourth, unemployment at 25 percent with an unimaginable one in two young workers without jobs.
IMF studies admitted that the Troika’s medicine had unexpectedly harsh side effects. Syriza called for a new course, but one committed to the Euro and to Europe.
2. The Troika’s policies will drive Greece out of the Euro unless they are reversed.
In the run-up to the referendum, the European Central Bank cut off liquidity to the Greek banks, forcing their closure. If the ECB doesn’t change course, the Greeks will have to issue some form of IOU as payments. That will eventually turn into an alternative currency.
Europe’s leaders now seem confident that Greece can be tossed out of the Euro without significant side effects. But if Greece is ejected, the Euro will be exposed as a marriage of convenience, not an enduring union. And every weak country in every passing crisis will pay the price.
3. The Troika’s policies are indefensible.
The creditors not only demand further punishment, but insist that they will determine how the punishment is inflicted – and dictate that the punishment will continue with no clue to when it might end. Syriza hoped against hope that its election might lead the Europeans to reconsider their destructive austerity. When that failed, Syriza essentially accepted the austerity but insisted that it would determine who would pay the price, preferring to protect the vulnerable and tax the wealthy. The creditors, particularly the IMF, refused, demanding a continuation of cuts in pensions, wages and a fire sale of state assets.
This is classic shock doctrine, using the crisis to inflict the worst forms of market fundamentalism.
4. This is part of a continued war of the few on the many.
The financial press scorns Greece’s democratically elected government, slurs the Greeks as dissolute and warns that the Greeks are trying to weasel out of their responsibilities. But the old routine no longer mystifies. Once more, irresponsible lenders are bailed out. Once more, irresponsible borrowers are punished. Once more, inequality grows more extreme, the social contract is shredded, banks are saved and people are savaged. Yes, there is class warfare, Warren Buffett once said, and “my class is winning.”
The Greeks are immiserated as an object lesson to other nations. But the true “moral hazard” resides with the banks and speculators who gamble with other people’s money and once more are bailed out when their bets go bad.
Faced with the choice between unending punishment in the Euro and the unknown, the Greeks chose to call Europe’s bluff. Now the Europeans must decide. Will they revive negotiations, refloat the Greek banks, and find what will surely be a convoluted way out? Or will they remain unbending, and force the Greeks into the unknown?
Progressive leaders in the Congress have called on the IMF to be flexible. President Obama should weigh in publicly as well as privately. In the end, the question is whether democracy or bankers will reign in Europe. That is an argument in which we all have a stake.