Syriza and false dawns

I have just returned from a gathering at Friends House in Euston, for a talk by Alexis Tsipras. Tsipras is the head of SYRIZA, and by virtue of that party’s success in the Greek elections of 2012, Leader of the Opposition. He spoke vividly about the crisis in Greece: Between 2008 and 2012, GDP declined by a shocking 20%, and there is no end in sight as Greece enters its sixth year of recession. Official unemployment now stands at 26%, up from 24.8% the previous quarter and 20.7% this time last year. For the young it is even worse: 57.8% of those between 15 and 24 are unemployed. And in both instances, women suffer more than men: 29.7% of women are unemployed against 23.3% of men, and 65% of all women under 25. With funding for public hospitals cut by 40% many are going without drugs, and food banks and homelessness have proliferated across the country. The minimum wage has been cut by 22% (and 32% for the young) and real wages have, according to some estimates, fallen by an unbelievable 25%. And yet, in spite of all this, the Greek national debt has continued to dramatically rise.

This is a crisis of staggering proportions. For point of comparison, unemployment in the US during the Great Depression peaked at 25%; in Germany, it only took 30% to propel Hitler to power. We rightly look back at that time as an era of shocking suffering and incredible political incompetence. Well, it seems that history does indeed repeat itself, for we are witnessing the same thing all over again – though traces of tragedy far outweigh the elements of farce.

And quite apart from the grim economic realities, our times also find echo in the disturbing rise of the fascist party Golden Dawn, whose leader has openly described himself as a ‘racist’, and who are now polling as high as 12%.

It is against this backdrop that Alexis Tsipras was speaking, and indeed against which the importance of Syriza has grown. In 2009, their vote share stood at 4.6%. When parliamentary elections were held in May 2012, they quadrupled their number of seats and received 16% of the vote. When the mainstream parties failed to form a government (the social democratic and former governing party PASOK having been almost wiped out), new elections were held in June, at which Syriza received 27% – just under 3% less than the conservative New Democracy party, who now lead the government in Athens.

The success of Syriza therefore marks a sadly rare turn to the left in times of economic crisis, and despite some reports that the police are particularly supportive of Golden Dawn, wider Greek society has thus far avoided the descent into scapegoating that all too often accompanies economic crises. It was suggested at the talk that this may have something to do with the heroic role played by the Greek left against the Nazis, and later against the military junta that ruled from 1968-74.

Though Tsipras was disappointingly vague on detail, he did offer a compelling understanding of the true nature of austerity. The Greek government is presently in a desperate scramble to sell off anything it can find, including beaches, ports, and the water supply. There is even talk that museums and historical sites could be put up for sale. ‘All that is solid melts into air…’ This is a historic moment: the first time that the shock therapy so frequently meted out by the West to the poor of the world is turned on the West itself. And as Slavoj Zizek brilliantly points out, “Greece is not an exception. It is one of the main testing grounds for a new socio-economic model of potentially unlimited application: a depoliticised technocracy in which bankers and other experts are allowed to demolish democracy.” And if this sounds melodramatic, you probably do not know that Germany proposed only last year to appoint a ‘budget commissioner’ with the power to overrule the elected Greek Parliament.

The aim is simple, and though cloaked in beneficient rhetoric, it occasionally erupts to the fore as in the German suggestion above. The aim is to demolish all alternatives to neoliberalism and all barriers to the accumulation of profit. Whether the European political class genuinely believe this will lead to recovery, or whether they are simply using the fog of crisis as a cover, is immaterial. The end result is the same. The living standards and bargaining power of the working people of Greece (and Portugal, and Ireland, and Spain, and on and on and on) will be broken; those spheres of public life separated from the endless pursuit of profit will be eradicated; and the power of business and finance will reign supreme and unchallenged across the continent. Tsipras understood all this, and articulated it well; certainly far better than some.

But there is a problem. We’ve been here before. Francois Hollande was elected French President in May 2012 on a broadly anti-austerity platform. By November, he was implementing spending cuts. The right were quick to crow that this proves the truth of their facile mantra, excavated from Thatcher’s acidic mouth, that ‘There Is No Alternative‘. Of course it proves no such thing. Or at least, not in the way they think it does.

I intended to ask Tsipras a question, but wasn’t picked. A girl in the audience thankfully asked something similar however, in just three words: Euro or drachma? The answer Tsipras gave shows a grave misunderstanding of the problem facing Greece, and does not bode well for the success of any future Syriza government.

His answer to the question – should Greece keep the euro, or return to its old currency the drachma – was (paraphrasing): ‘It does not matter whether we have the euro. Look at Britain. You have no euro, does that mean no austerity?’ At this, some people in the audience laughed – haha, what a clever point. No. It is a stupid point, for reasons I will make clear in a moment. Tsipras then continued ‘But that does not mean we will waste our bargaining power. Greece is just one part of a long chain in the eurozone.’

Quite apart from the contradiction in the latter part of the answer – how can membership of the euro simultaneously ‘not matter’ and be a powerful bargaining chip? – the main problem for Greece is precisely its membership of the euro. For all the talk of the Greek debt crisis, or the Spanish debt crisis, or the Irish debt crisis, none of these countries are the most indebted in the world. That honour, in fact, belongs to Japan. You’d expect, then, for the Japanese debt crisis to be all over the news too. Yet it is nowhere to be found. For over fifteen years, pundits have been predicting an imminent sovereign debt crisis – which would manifest in rocketing bond yields, as has been observed in Greece:

Historical Data Chart

In fact, this has been the result:

Yes, you are reading that right. The axis on the first chart (Greek 10-year bond yields) reaches 50. The axis on the Japanese chart reaches 2. What the hell is going on here? Greek debt is at 170% of GDP, and the rate of interest the Greek government must offer lenders rockets accordingly. The Japanese debt is 220% of GDP, and not only does nothing bad happen, it actually gets cheaper for the government to borrow. For over ten years Japanese debt has got bigger and bigger and 10-year bond yields have barely budged. Two-year bond yields are effectively zero. Those who have followed the drama over the downgrades of the United States by S&P in 2011 and the United Kingdom earlier this year will recognise a familiar pattern.

For good measure, let’s compare some more. Here’s Portugal…

Historical Data Chart

…and Ireland…

Historical Data Chart

…and Italy…

Historical Data Chart

…and Spain.

Historical Data Chart

Now here’s Britain…

Historical Data Chart

…and here’s the United States…

Historical Data Chart

Well isn’t that just odd. One the one hand you’ve got Portugal, Ireland, Italy, Greece and Spain – the so-called ‘PIIGS’. The price of their debt shot dramatically up. And on the other hand, you have Japan, the UK and the US, who have all been censured by the international credit ratings agencies, and all of whom have experienced the precise opposite of the PIIGS. The causation cannot lie in the size of the national debts – the national debt of the UK for example is larger than that of Spain. Nor can it be the nationality of the bondholders – while it is true that almost all Japanese debt is held domestically, the same is not the case for the UK. Nor can the cause lie in commitment to austerity, as Messers Cameron and Osborne like to pretend – the United States and Japan have made no concerted effort to cut spending, whereas Greece and Spain are the paragons of austerity. So what could possibly be the difference? Greece, Ireland and Spain on the one hand…Britain, Japan and America on the other…Hmm…

The difference is shockingly simple. Greece, Portugal, Ireland, Italy and Spain are all in the eurozone. That is, they do not control their own currencies. Unlike Britain or, for that matter, most other countries in the world, the countries of the eurozone have surrendered that power to the European Central Bank. That means there is a very real possibility that Greece or Spain or even France could literally run out of money. Unless the ECB is prepared to step in (which, under Mario Draghi, it has become more willing to do – hence the declining yields), those who have leant money to the eurozone countries are at real risk of losing it, especially if the governments of those countries give in to popular pressure and default on their debt. In contrast, there is no such risk for those holding British or American or Japanese bonds. It is impossible for those countries to be forced into bankruptcy. The only thing in question for those bondholders is the value of the money they get back, and that depends on all manner of factors (not least of which is the growth of the national economy). And in a time of general economic crisis, sitting your money in literally riskless bonds is a far safer bet than investing in companies that may well make a loss. This, incidentally, is a sure-fire test of stupidity. If you ever hear a British or American politician compare their country to Greece or the eurozone – and it happens disturbingly often, from Cameron and Obama down – you can be sure that person does not have the slightest clue what they are talking about, and ignore them accordingly.

So to return to Alexis Tsipras by way of Francois Hollande. In the happy event of a Syriza election victory, three things could happen. First: the German and European rulers could recognise they are fighting a losing battle and radically reverse their position in favour of a Marshall Plan-style reconstruction, and allow German wages and inflation to rise. This is what Tsipras articulated as his aim. Second: Syriza could argue for the above, fail to achieve it, and end up forced by the spectre of bankruptcy into continuing austerity measures. Third: Syriza could argue for the above, fail to achieve it, and leave the eurozone. This would allow Greece to adjust more naturally by devaluing the new drachma against the euro. It would not be painless, but it would be far less so than the austerity programme thus far.

The problem for Syriza therefore lies in this. The first option – a complete turnaround not just in Euro-German policy, but in over fifty years of German political culture – is incredibly unlikely. It is not unthinkable if the cost would be the collapse of the eurozone, but it is very hard to imagine. In the event of a Syriza victory, the expectation then must be one of immediate failure on its main objective: Frankfurt and Brussels will not be willing to reverse course. Yet if Syriza is still trapped in the view that the currency doesn’t matter – a surprisingly conservative conception of the neutrality of money – the third option will never seriously occur to them. Which leaves only option two, and all the economic suffering and political darkness that would come from such a disappointment of people’s hopes.

In sum, Syriza represent an important movement in the fight against austerity. They understand the political agenda behind the economic policy, and they show that a radical critique can find voice in a parliamentary democracy. But until they understand fully the role of the euro – as presently constituted, a neoliberal weapon extraordinaire – and act accordingly, they will remain doomed to repeat the failings of France. If the only alternative to Golden Dawn is a false dawn from Syriza, the future of Europe looks very dark indeed.