A few days ago the Greek government submitted a list of proposals
hoping to break the deadlock with the “institutions” – the European
Commission, the International Monetary Fund and the European Central
Bank. The government basically agreed to...
tough primary surpluses: 1% in
2015 and 2% in 2016. To achieve these targets it proposed to raise VAT
on a range of widely consumed goods as well as imposing a host of taxes
on enterprises and families of “high” income. It also proposed
substantial savings on pensions. The measures added up to roughly €8bn
over 2015-16, and would be immediately implemented.
The package is certainly deflationary at a moment when the Greek
economy is again on the threshold of recession. There is little doubt
that it would contribute to output contraction and higher unemployment
in 2015-16, particularly as there is little prospect of being offset by
an investment programme funded by the EU. It is a major retreat by the
government of Syriza.
To general astonishment, the response of the “institutions”, led by the IMF, was to demand even tougher measures
to achieve the same targets. These include more severe increases in
VAT, a lessening of the tax burden on enterprises and greater pension
savings. If these demands are met, the government will not even be able
to claim that it has shifted some of the increased tax burden away from
workers and the poor.
For Greece as a whole, the prospect of a deal achieved on this basis would be simply appalling.
The country would be forced to adopt harsh austerity measures dictated
by the lenders, without any realistic possibility of substantial debt
relief, or of a significant investment programme. The “institutions” are
once again attempting to impose the policies that have failed abysmally
since 2010, causing huge contraction of GDP, vast unemployment and mass
impoverishment. It would be a national disaster accompanied by the
complete humiliation of the Syriza government.
For those who look at the European Union without rose-tinted
glasses, there is no surprise regarding the attitude of the lenders. The
EU and the eurozone in particular are in thrall to austerity, even
institutionalising it through the so-called six-pack and two-pack.
The lenders have inevitably objected to lifting austerity in Greece,
and appear to believe – foolishly – that austerity “works”. Furthermore,
they are keen to inflict a political defeat on a leftwing government
that has dared to challenge the European status quo. Europe has shown a
harsh and cynical face toward Greece, whatever might be the faults of
Greece itself.
The real question is, will the government of Syriza
accede to these extraordinary demands? Will it submit to blackmail?
Syriza won the election in January 2015 with a strategy that promised to
lift austerity and bring radical change to Greece, while remaining
within the eurozone. It believed that its strong democratic mandate
would help it succeed in tough negotiations with the lenders. Reality
has proved to be very different as the lenders have used the framework
of the eurozone to create a liquidity and funding shortage that has
crippled the Greek side. At the same time, both the lenders and the
domestic forces that wish to continue with the policies of austerity –
including, mostly, the rich and the financial elite – have been
scaremongering shamelessly about Grexit. Faced with the power of the
purse, the strategy of Syriza is unravelling.
Greece
and the government of Syriza have now come face-to-face with the
ruthless reality of the eurozone. To keep the country in the monetary
union, the lenders are demanding that it should submit to blackmail and
accept policies that would lead to national decline. Greek society would
face low growth, high unemployment, entrenched poverty and emigration
of its skilled youth, as the experience of the last five years has
shown.
There is an alternative path for Greece, and it would include leaving
the eurozone. Exit would free the country from the trap of the common
currency, allowing it to implement policies that could revive both
economy and society. It would open a feasible path that could offer
fresh hope, even if it entailed significant difficulties of adjustment
during the initial period.
The choice ultimately rests with the Greek people. Despite the
frequently reported polls presumably showing strong support for the
eurozone, the reality on the ground is anger and frustration among
workers, the poor and the ravaged lower-middle class. These are the
social layers that could put the country on a different trajectory of
growth with social justice. In this respect, it is incumbent upon Syriza
to rethink its strategy and offer fresh leadership to the Greek people.
In the coming days a significant intervention by its influential left
wing, the Left Platform, can be expected. Greece needs a rapid public
debate and a reshaping of policy. The country has the strength to
survive and it will.