A Program for Greece? A response to Christian Odendahl

03/12/2014 by

hopeless greeceAs a general election is looming larger on the Greek horizon, commentary on a prospective SYRIZA administration is becoming more frequent. In this piece Christian Odendahl proposes ‘A Program for Greece’. The ‘Program’ is sympathetic to the view that Greece was manhandled by a bailout loan that gave it little chance of recovery and makes several proposals as to how Europe should reform its own reform efforts. As for the Greeks, Christian embraces the idea of a national unity government that will allow for these reformed reforms to be agreed by a coalition of the current government and SYRIZA, giving Alexis Tsipras’ time to ‘mature’ before possibly taking over the countries reins. Below you will find my response.

Dear Christian,

I have now read your piece. While I agree with much of what you say, I would argue that it fails to focus on the main issue – which most certainly has nothing to do with reforms (even though Greece needs reforms terribly badly).

The main issue, as I see it, is this:

  • The Greek state fell into an insolvency black hole in early 2010.
  • Europe responded by imposing the largest loan in human history upon this most insolvent of states on condition that one third of nominal GDP is ‘haircut’ – while also insisting that none of the unsustainable debts are haircut (I remind you the PSI came much later – when it was too little too late).

It takes minimal economic nous to see that this was the greatest blunder in the history of economic policy. You simply do not lend to the insolvent before you restructure her debts. And you certainly do not lend the largest sums ever while at the same time imposing the harshest austerity ever, that is bound to reduce the incomes from which old and new debts must be repaid.

Put simply, if you do this to a flimsy state (like Greece’s) it quickly turns into a failed, unreformable state – which is what happened. More precisely, the bailout loans have succeeded in creating, and then perpetuating, a triple insolvency: an unsustainable public debt; a deeply bankrupt banking sector (despite the countless billions that the insolvent taxpayers have borrowed on the bankers’ behalf); a private sector where everyone owes to everyone and no one can pay.

This sorry situation engenders the continuing depression that ensures:

(a) negative net investment levels both private and public (who in the right mind will invest in productive capacity under this cloud of triple insolvency?);

(b) bailout loans being usurped by an unholy cleptocratic alliance of bankrupt bankers, politicians who are too scared to be seen in public, and corrupt media (all of which are funded from the bailout funds).

On Boutaris’ proposal for a national unity government

Yannis is a dear man and I have no doubt that his proposal is meant well. Be that as it may, his suggestion is unhelpful and should be rejected. Put simply, democracy should operate, especially in times of crisis, like a court does: two sides (prosecutor and defender), representing grossly different views (guilty or innocent) clashing (within the limitations and rule of law) so that the jury can reach a verdict  on the balance of arguments presented to the court. Similarly, the Greek electorate must choose, ever so quickly, between two verdicts:

(A)  The hitherto established view that the Bailout-Memorandum-Reform Package was in the right direction (despite many errors along the way), and

(B)  My view (which is also SYRIZA’s view) that this package was part of the problem, not of the solution (perpetuating ad infinitum the triple insolvency, with detrimental effects for the whole of Europe)

From this perspective, it is my considered opinion that SYRIZA’s duty to Greece, but also to the rest of Europe, is to do “whatever it takes” to bring down this government (representing the worst cleptocracy ever). Not because ‘power is sweet’ (I can assure you that the prospect of power, to me at least, is nightmarish) but because Greece and Europe need the shock of a government that tells, for once, the truth: There is no recovery, and there can be no recovery, as long as the triple insolvency is deeply entrenched and the country is gripped in a debt-deflationary cycle.

Lastly, let me suggest to you that ‘reforms’ have taken a meaning similar to that of ‘democracy’ in post-invasion Iraq: the local, long-suffering population take it as a shorthand for deeper cuts in social security, pensions, health care, hope. Just like in Iraq, ‘democracy’ came to mean ‘invasion’ and US multinationals usurping the oil…


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