The Bailout Referendum in Greece Does Not Mean an End to Austerity

The Greek people have spoken, and they have quite unequivocally rejected the terms of the bailout offered by the EU partners. The EU wants to impose even harsher austerity measures than previously on the Greek people. But the Greeks were wise enough to reject further pleas for those failed policies. Many European policymakers have given the hint to the Greek government that a no vote on the referendum would be tantamount to leaving the eurozone and the EU altogether, which is a rumor as it was blackmailing.

It was firstly very wise of the beleaguered Greek government to call for a referendum, because the creditors’ demands were too overwhelming and could not be accepted by a newly elected government that came to power on the promise to end austerity. By letting the Greek people have the referendum, the creditors were in the unfortunate position to have to accept a democratic decision, though some EU leaders like Sigmar Gabriel, the SPD German vice chancellor, have attacked this democratic decision as undermining the trust of the creditors.

A Social Democratic vice chancellor is saying that Democratic decisions can not be taken seriously given the dire financial straits in which  Greece finds itself in. How dare the voters speak out about serious economic issues of which they have little understanding? First, it is questionable whether someone can consider himself a Social Democrat if he so seriously questions the most basic method of democratic legitimation: the referendum. But second, Gabriel is wrong in suggesting that the electorate has no understanding of economic policies. In fact, they are living through it on a daily basis, which a German government minister living on over 14,000 euros a month can not understand well. The Greeks are experiencing with their own senses that austerity, what Yanis Varoufakis, the exiting Greek finance minister, referred to as ‘fiscal waterboarding’, is a complete failure, and that if the EU creditors continue to demand more of it, they will (1) make Greek lives more miserable with more pension, wage and social benefit cuts and indefinite periods of high unemployment, and (2) reduce the likelihood of EU taxpayers, who generously bailed out the German and French banks, to ever get their bailout money back, because it is impossible to repay debt with a shrinking income.

The Germans evidently want to have their cake and eat it too. As Piketty correctly remarked, the Germans have never repaid their debt in full and had it forgiven after World War I and World War II, which contrasts to their current pressure on Greeks to pay up their debts. Second, the Germans have benefited from an export boom thanks to the weak euro currency from the standpoint of the Germans, and now do not want to pay the costs for loaning their southern neighbors all this money.

There is no doubt, therefore, that a reasonable way forward would involve significant debt restructuring. Prime minister Tsipras should use his opportunity- with the strong mandate of his no referendum- to push for debt restructuring with the EU partners, whereby half of the nominal value of the debt are cancelled, while the other half are stretched out into long-term and low-interest loans, say 2% interest at 50 years. For people who claim that these proposals are outlandish and radical, they should consult the fact that the Germans have benefited from a similar debt restructuring in 1953.

The not unjustifiable fear, however, is that the EU creditors will pass over the decision of the referendum, and prolong what the former finance minister Yanis Varoufakis referred to as “extend and pretend”, i.e. the ineffectual policy of letting the Greeks suffer with more unreasonable austerity, while they get more EU bailouts. One could consider these bailouts as a blackmailing strategy to further the stranglehold on the weak economy of Greece.

In none of the discussions were the creditors ever made responsible for exacerbating the debt crisis. As George Monbiot (2015) recently pointed out, Greece is merely the latest victim of the IMF strategy to “dismantle public spending, destroying health, education and all the means by which the wretched of the earth might improve their lives”. John Perkins (2014), a former economic hitman, has quite plainly revealed the strategy of the global oligarchy:

Essentially, my job was to identify countries that had resources that our corporations want, and that could be things like oil – or it could be markets – it could be transportation systems. There’re so many different things. Once we identified these countries, we arranged huge loans to them, but the money would never actually go to the countries; instead it would go to our own corporations to build infrastructure projects in those countries, things like power plants and highways that benefited a few wealthy people as well as our own corporations, but not the majority of people who couldn’t afford to buy into these things, and yet they were left holding a huge debt, very much like what Greece has today, a phenomenal debt.

And once [they were] bound by that debt, we would go back, usually in the form of the IMF – and in the case of Greece today, it’s the IMF and the EU [European Union] – and make tremendous demands on the country: increase taxes, cut back on spending, sell public sector utilities to private companies, things like power companies and water systems, transportation systems, privatize those, and basically become a slave to us, to the corporations, to the IMF, in your case to the EU, and basically, organizations like the World Bank, the IMF, the EU, are tools of the big corporations, what I call the “corporatocracy.”

There is absolutely no democratic accountability for the IMF, nor is there for the EU, which has become a cruel neoliberal “straightjacket” as Wolfgang Streeck (2014) states. The unfortunate thing for Greece is that their vocal finance minister, Yanis Varoufakis, who irked all of the other EU finance ministers for his refusal to follow the self-defeating austerity and “structural reform” mantra of his European colleagues, stepped back from office. After six months of intense scrutiny and pressure against him, he was certainly all too relieved when his boss, premier Tsipras, wanted that he resign. Varoufakis is a natural academic, not a politician. He brings to the table clear ideas about how to overcome the Greek impasse, but he certainly lacked the power and the money to realize any of his goals (like having the debt restructured in the form of growth-linked bonds, or getting infrastructure investment bonds issued by the ECB). If Varoufakis is no longer at the table, while his successor, Euclid Tsakalotos, be equally as insistent? If not, it would be a big blow for the Greeks.

Some people claim that the Greek government has to relent so the ECB and EU will stop the blackmailing and send the needed cash to Greek banks, which will allow it to open up and normalize business relations in Greece. But this logic is flawed, because the Greeks, by resisting austerity, are defending themselves against further inhumane cruelty. Yes, it looks like heads, they lose, tails, they lose again. But if their negotiating person remains hard, then it is the EU partners that will be forced to relent.

The Greek tragedy is complete: those who have the vision lack the power, and those who have the power lack the vision. The banks and the oligarchs standing behind them can continue to celebrate their spectacular investment success, while the population continues to be tormented by senseless austerity measures. But as more and more people wake up to the lies of the EU creditors, and realize that they could be the next Greece, there is going to be continuing electoral upheaval favoring the forces challenging the status quo. If leftist governments have the opportunity to take power in more countries than one, then the days of undivided corporate and oligarchic rule could be over. However, without significant mass mobilization, such a democratic outcome remains unfeasible.

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