Interviewed by Thomas Fazi for ONEURO: Greece, the EUROZONE and the prospects of a SYRIZA government

Screen Shot 2014-12-15 at 12.46.43 PMThomas Fazi has just interviewed me for ONEURO on Greece and the Eurozone two months before a possible Greek election. To read the interview as published in Italian click here. For the Q&A in its English original…

  • There’s a lot of talk about Greece’s supposed ‘recovery’, a sign of the ‘success’ of austerity. How do you judge this narrative, and how would you describe the real state of the Greek economy? (It would be great if you could mention what you said in Florence, about Greece’s ‘GDP growth’ being non-existent when deflation is taken into consideration)

Greece is and remains in a Great Depression. Seven years of precipitous falls in income, coupled with negative investment, have spawned a humanitarian crisis. In each of these years, the European Commission, the European Central Bank and the International Monetary Fund predicted that recovery was “around the corner”. It was not! Now, on the basis of one quarter of positive real GDP growth, they are celebrating the recession’s ‘end’. But if we look carefully at the numbers, it turns out that, even according to official figures, the recession is continuing. Consider this: real GDP rose by 0.7% at a time that prices, on average, fell by 1.9%. I remind our readers that real GDP equals GDP measured in euros divided by an index of average prices. Given that this index went down by 1.9%, and that the whole ratio (real GDP) only rose by 0.7%, this means that GDP as measured in euros declined! So, the rise in real GDP happened because national income, in euros, went up. It rose because total income, in euros, fell more slowly than prices did. Preposterously, the powers-that-be expect the Greek people to celebrate this as the ‘End of Recession’. They won’t!

  • Regarding the state of the Greek economy: is this simply the unintended result of ‘flawed’, ideologically-driven policies, or should it rather be considered the desired outcome of such policies?

Neither, I think. These policies were the only policies they could come up with which would not require an admission that the Eurozone was badly designed and that the crisis is systemic. They were also the only policies consistent with their prime objective; that is, to shield bankers from expropriation by the European Union or member-states. In short, a proud nation was forced into an internal devaluation that caused great hardship, and made private and public debts unpayable, so as to maintain the lie that the Eurozone design was pristine and, more pertinently, to hide the fact that their number one priority was to shift gargantuan losses from the books of the private banks onto the shoulders of the weakest of taxpayers. Once this strategy was in place, it was embellished with neoliberal ideology…

  • Following the call for early presidential elections, markets have gone into a panic. Do you think their fears of an early general election are justified? If so, what are they so afraid of, in your opinion?

They are justified. What they are afraid is that the twin bubbles that the Berlin, Frankfurt and Brussels so elaborately pumped up over the last year, in the bond and stock markets, so as to pretend that Greece was recovering, would burst. But this is the fate of bubbles: they burst. And the sooner they do the better our chance to facing reality and doing something to make it better for the majority of the people – both in Greece and in the Eurozone at large.

  • Do you think a victory by SYRIZA is a realistically possible option? Or will establishment forces avoid that outcome at all costs?

Both. There is no doubt that the establishment will throw everything they can at SYRIZA, inspiring the maximum amount of terror in the hearts and minds of Greek voters. But, at the same time, it is looking increasingly likely that this campaign of fear will fail to prevent a SYRIZA victory.

  • How do you judge Mr. Juncker’s call to avoid the ‘wrong outcome’ in the elections (i.e., the victory of ‘extreme forces’)? 

It reveals a deep-seated contempt for democracy and a colonial attitude that makes a mockery of the notion of a Union that respects the sovereignty of its member-states. The European Commission is supposed to be answerable to the citizens of member-states. The citizens of member-states are not answerable to the Commission and, by definition, the Commission can have no view on what is a ‘correct’ and what is a ‘wrong’ electoral outcome. Mr Juncker took his office further into disrepute by overstepping the mark and widening spectacularly the democratic deficit typical of the European Union. His intervention was probably one of the most fiercely anti-European moves, to the extent that he managed singlehandedly to de-legitimise the Commission and, by extension, the Union.

  • Could you outline the main points of SYRIZA’s program (for Greece and for the EMU)?

In three short sentences: First, a SYRIZA government will work tirelessly to ensure that Europe has the ‘conversation’ it has so far refused to have about the faulty design of the Eurozone and the fact that the bailouts were toxic both for the Periphery and for core countries like Germany. Secondly, it will strive to render Greece’s social economy viable again through a New Deal for Europe that lifts the veil of depression from the whole Periphery – not just Greece. Thirdly, it will struggle to reform Greece, both its public and private sectors, in a manner that enhances creativity, improves productivity and shapes a better society.


  • Yani, obviously I don’t know what goes on in Schauble’s mind but Berlin’s moves tell the following story.

    1. Berlin does not want Greece to keep borrowing. The best safety valve is then to keep the nominal debt at the 175% debt to GDP ratio but give you the equivalent of a very manageable annual debt service as if the total debt was 1/3rd of the current level. Through artificial interest rates Berlin has done so and there might be some more if Samaras is a good boy. At least at 175% debt to GDP Berlin knows that the markets would be unwilling to extend new credit (ves. rollover replacement of existing debts) to Greece.

    2. To keep telling Germany “please lower the debt (i.e. forgive most of it) because we can’t take it anymore” does not seem very persuasive argument. And it’s not persuasive because the stupid Troika(whose guts I totally hate) did not tell Greece how to restructure but rather told Greece to cut from somewhere and it’s up to Greece where from.

    3. Greece did the easy part which is to increase taxation and cut pensions and benefits but not the difficult part which is to shrink substantially its thoroughly unproductive public sector. Your argument is that whatever Greece(government) did makes Greek people suffer to which Berlin replies but “we never asked you to do it the way you did it”. All Berlin asked was for Greece to balance her budgets and then adopt a margin of safety so that she stops the borrowing dependency.

    4. You say that if Syriza comes to power they will renegotiate for sure. About what? The choices of where and how to cut were all Greece’s. The only thing German was the primary surplus target as a % of GDP. So if you say to Berlin the other guys did it wrong then obviously Berlin will reply that you are free to re-shape it as long as you produce credible cuts elsewhere (don’t expect Berlin to warm up to growth in the economy because that’s something which dovetails into their own internal matters for which they already have concrete positions unlikely to be altered under the pressure of negotiating blackmail).

    5. Can we please see and dissect a Syriza budget? Where will the cuts come from? Could Syriza reduce the public sector to say 30% of the GDP? If not what sort of competitive economy are we planning to have? Show us a credible plan and then you could count on strong support from the voters. Because most are not convinced that Syriza has a plan. Desire, Yes; Plan, No.

    • Very good questions. Without a doubt the budget cuts and tax hikes these past four years have been disproportionally shared among the Greek population and have hit the middle and lower classes the hardest, as well as the active part of the population vs the pensioners and the civil servants. The proportion of the services that the average citizen enjoys from the state paid by his taxes have been brutally cut back instead of the part of the budget concerning state wages, benefits and pensions. To get a measure one only has to look at the latest budget. The amount the state allocates to said services (hospitals, universities, health care benefits, etc..) is close to 10 billion euros, compared to the staggering 45 billion that is allocated to state wages, pensions and social security contributions. Social security allocations are also completely out of whack with contributions towards state owned company funds surpassing the contribution the state pays for healthcare for all the funds put together! Of course it all comes down to the clientist state built by the ruling parties after nearly four decades. It is of course possible that a new mix of policies can be introduced under the same relatively altered budget restrictions after a debt restructuring deal that would be fairer and more productive for the economy. I am not holding my breath though, Syriza has never directly opposed the dismantling of the clientist state and the people that support this among the citizens are part of the very silent proportion of the public. You certainly do not see them parading in the streets asking for a fairer allocation of taxes and benefits and a complete revamping of the state. Unfortunately in this part of the debate one has a choice of a statist part (Syriza) and a two hardcore statist parties (PASOK/ND). It’s lose – lose for everyone that is not a pensioner or a civil servant either way, we are left to our own devices and that’s that.

    • Indeed Taso. Both choices are completely uninspiring. There is somehow an urgency to choose ONLY among bad choices and I fail to understand why do we have to choose either of them. What if both of them are ridiculous which certainly appear to be.

    • Well the answer is easy, because of the characteristics of our current political landscape and the intricacies of the Greece’s electoral system it all comes down to few choices. Greece has operated for decades under a dual-party regime and this regime has shaped the electoral system to its needs. There’s the relatively high parliament entry limit, the shaping of constituencies that skew the one man-one vote principle and the 50 seat bonus. All that put together shape an “oligopolistic” market of parties. That being said and while acknowledging that Syriza’s policies leave a lot to be desired in certain areas its ascendancy is without a doubt a good thing. In fact it would be fat better if they prevailed in 2012. Having led the country to such a state of deterioration the primary ruling parties should have faced a grim verdict from the public. This did not happen in 2012 but it is absolutely necessary. The two ruling parties have driven the country on autopilot for much of its EU and eurozone membership years and have been corrupted to the bone year after year. They need politically to be put to death ASAP. People also tend to forget that Syriza only came to the spotlight during the crisis years, before that politically it was a non-entity so naturally it carries all the baggage of a small fringe party. This is going to change though and already the party has made several commitments towards more balanced policies. I suspect they are going to be taken at their word by the Troika when they come into power. In any case the political landscape needs to change and the election of a new party into government is a necessary condition for that to happen. It will also be a long process, politically Greece and its public are immature to say the least.

    • Taso:

      All of this is nice and good but you forget one thing. Today’s Syriza is basically ex-Pasok. Syriza as a party was commanding 5% of the vote and today due to the most leftist part of PASOK its ranks have increased to 25-30% of the vote.

      So your basic thesis that voting for Suriza means change is false. This is nothing more than a case of wolf in sheep’s clothing.

      What happened in Greece is that part of PASOK split; a small portion stayed with the government due to Venizelos’s ambition to rule and the other part (the biggest) went with Syriza and recast itself as somehow something different.

      Therefore if Syriza comes to power it means that we never left the dual oligopoly of the two main parties. It only means that we have fooled people into label swapping so that the people won’t notice.

      Can you please tell me why Syriza is not 80%+ PASOK? Because it’s impossible to see it any other way. So what you want to happen is the following sequence:

      After Karamanlis losing to Papandreou who then lost to Samaras you now want another change of the guard between basically two choices and you call this change. ND to Pasok to ND to New Pasok. Can’t you see this the same old game?

    • The greatest plight in Greece’s politics is the vendetta between PASOK and ND, the left and the right. Never mind that it is completely irrelevant in our times and it must seem utterly ridiculous to every outsider. Its roots date back in the 40s civil war and one could say even further back in the split between Venizelos and the King during the Balcan wars. I have faced the PASOK/Syriza comparison in endless discussions. Ι wonder how the 80%+ percentage computes? If one takes into consideration the people that moved from PASOK to Syriza officially then this is way wrong, if one considers all of Syriza’s candidates for the European parliament in the last elections then it’s wrong again. The only merit that something like this has is the fact that the majority of the voters that now support Syriza have probably voted for PASOK in previous elections. This is inevitable though, under the dual-party system in Greece PASOK and ND have gathered close to 85% of the votes and we should keep in mind that Greece has an ageing population and also that the right wing voters would rather be set on fire alive than to vote for anything other than ND. Syriza definitely is not the answer to Greece’s political woes that is certain. It is an inevitable choice though for all those that are disgusted with Greece’s establishment. The level of corruption that these two ruling parties have brought to public life I suspect is truly unprecedented. I can understand why people are worried that we would have more of the same and Syriza would only pick up after PASOK. The only solution that I see fit is to absolutely scrutinize its candidates and exclude everyone with previous associations to that party. The CVs of every candidate are very easy to get nowadays so for younger people there are no excuses. People should also not be afraid that a new government no matter its political ideology would go on a spending and hiring spree, Greece will remain cut off from financial markets for a long time and the budget surplus is not exactly rock solid if you know what I mean..

    • Actually Taso, the division goes way back to WWI where the then Venizelos Republicans created an autonomous government in Thessaloniki and fought against the royalists who ended up losing big in the 1922 misguided campaign. The civil war had a lot of participants who were non-communists but simply seeking redress and justice over previous republican issues. Lots of Venizelists in EAM/ELAS completely independent of Moscow.

      The divisions in Greek society were always along the lines of royalist and fascists on one side and progressives on the other. The power structure in Greece (army-church) has always sided with the royalists aka junta et al.

      The civil war had just a bitter end because again communists(i.e. amateurs a la Syriza) pushed towards a pointless struggle after the Yalta agreement. Moscow who supposedly supported the communists didn’t even have the courtesy to inform the Greek camarades that Greece was committed clearly to the West with 90% British influence, later American and morphing into present day Berlin influence.

      As far as the math is concerned, when a party grows from 5% to 25%, then the 20% increased represents 4/5ths or 80% of the total. It could be less but that’s the rough calculation. I will not defend the 80% other than using it as a benchmark.

      The issue with Syriza remains the same today as in the civil war era. Can you trust blind ideology coupled with absence of experience and general amateurism in governance to anything less than a lot of noise but lack of substance? What would Syriza do in power completely isolated and cut off both domestically (with roughly 50% of Greeks against it) and in Europe (roughly 90% against it based on the composition of the current EU Parliament)? What is the mandate? Rage against austerity? Indignados? It takes far more political gravitas than Syriza has to actually accomplish the mission that Syriza claims to want to accomplish.

      IMHO, we can’t wait any longer. We need to defeat the beast of Berlin and Syriza ain’t the party that can get the job done. I really can’t wait for Syriza’s meanderings and antics of learning on the job. I need a highly disciplined political force which would eliminate Berlin as a political marker in Europe once and for all.

    • Dean – Happy Christmas, by the way 🙂 – you put far too much importance on SYRIZA’s inexperience & other supposed lacks. Look around the EU and you will see only the worst quality mediocrities in positions of power in every country and in the EU bureaucracy. David Cameron and Tony Blair had almost no work experience before winning constituencies, then ascending to PM; both are utter nonentities, ‘placemen’. Corruption and complicity does not equal competence and SYRIZA has nothing to fear as to ‘political level’. It may be small and new, but it is not unimpressive. However European politics are subsumed by and in service to other forces, which are steadily eroding democracy in every EU state: the Atlantic Alliance/NATO and the financial sector dictate terms in the EU and the last thing they need or want are principled, patriotic incorruptible politicians of stature. The lone exception – If you can see past the wall of negative propaganda – is Victor Orban in Hungary: he is holding Hungary’s ground / protecting Hungarians’ interests. So the forces playing hardball in Europe are neither European nor democratically elected. Barring Hungary the rest of the EU has rolled over & complied.

      In a free Europe’s interests it is well past time that resistance got underway politically. Given the rotten field, EXACTLY what is needed is a fresh, untainted outsider party to stand up and start the fight. The fact that it is Greek party and Greece has weight: the whole world has watched the Greek / Troika saga and witnessed a country being needlessly destroyed to serve others’ interests. The international spotlight will be on this fight and this means the other side, not just Greece, needs to tread carefully. European resistance originated in Greece (homegrown!) and only lately has been taken up in Spain, Italy. Even after 5 years no other counterforce has appeared in Europe. Wishing for some other party when none exists, or for some other country to rebel, or rescue by outside agency is by now just a form of cowardice. If / when SYRIZA comes to power they will give it their best shot. It may be 1941 all over again – but for me, NOT trying, and settling for the alternative – for ‘collaboration’ and complicity – is out of the question.

    • Happy Holidays Eleni.

      I hope you do not fall under the lies of the Holly Roman Empire and its supposed remedies. Apparently lies started with the Flavian conspiracy of which no one knows even today:

  • Excellent three points at the end (as well as an excellent interview overall). If only Syriza politicians would confine themselves to general objectives of this sort, then there would be no ammunition for Greece’s opponents. As the saying goes, “the Devil is in the details…” At this juncture, it is better to avoid dealing with the forces of darkness.

  • Dear Yani, an eloquent explanation to the questionable GDP numbers. Although one could argue that GDP numbers are just that; numbers which can be obfuscated, that is not only Greek numbers, but similar practices about revisions, inclusion/exclusions of inputs and different ways of calculate.. But let’s leave that for a moment. What I would like to hear from you is what will be done once SYRIZA comes in to power. I wish that your assumptions could have a similar eloquence and depth with regards to the SYRIZA plan. And how uplifting to hear all the promises of SYRIZA as the champion of Greece and Europe “a new deal for Europe” you say. Really, where have you been? How can you have such a simplistic and immature stance with regards to SYRIZA? Let me repeat this, just so that the absurdity can sink in: SYRIZA will push for a new deal for Europe…well, good luck with that. Another false promise thrown at the Greek people (and that’s even before we get in to the parliamentary make up and the restrictions Tsipras will face).

    Now, back to reality. Nobody is happy with the current state of affairs. Nobody is happy with the situation in Greece and also in the rest of Europe. Every person with an ounce of analytical capability realizes that we are all trapped in a dysfunctional system with inept leaders in the highest places (I don’t mean Samaras, but the leaders in Europe). There is a lack of vision, solidarity and execution based on self-interest. I am not saying that the current make-up in Greece are to be held up as beacons of hope but to seeing your over-simplistic arguments about a SYRIZA governments ability to take Greece forward was a real surprise.
    The only thing that will happen (which was echoed in the note above) is that SYRIZA will find themselves at the gates of Berlin, knocking but nobody listening. Our freedom as a nation can only come from within. We need to continue to reform in order to make ourselves competitive on all levels and therefore secure our position and independence. That will take more time as those sort of adjustments do not happen easy, they are not only economical but socionomical with broken institutions (the list is rather long) that needs overhauling and with leaders that actually are willing to do what is best for Greece and not to try to win the next election based on faulty promises. People need to realize that whatever painful adjustments we need to go through (and I am not referring to the TROIKA requirements), we need to do so for the future of our country and children that now are being sacrificed. I have not heard any proper plan from SYRIZA that would outline the direction of the country. we need to stop talking about the terms of our loans and start talking about how to rebuild our country.

    • “How can you have such a simplistic and immature stance with regards to SYRIZA? SYRIZA will push for a new deal for Europe…well, good luck with that.” Thanks for the wishes. I shall need them. So, where do I get the confidence that this is what SYRIZA will do? From Alexis Tsipras, its leader, who is personally invested in this idea. If SYRIZA wins, there is a strong possibility that your qualms will be dispersed. As for your view that the only solution is reform from within, yes, it is true. But only if and only if we first renegotiate a loan agreement that would have made it impossible, even for the industrious Germans, to succeed.

  • This article claims that Greece will have to rollover 22.5 Bil. euro loans (mostly IMF?) by summer 2015. From what we know the IMF loans charge Greece interest higher than 4%, whereas ECB/EC loans below 1%.

    What is Syriza’s strategy about this rollover?

    Isn’t it a good deal for Greece to convert loans at 4%+ to same principal amount loans at below 1%?

    In any event, Syriza needs to present a credible program rather than the vague assumption of somehow triggering renegotiation. Are we talking renegotiation with the IMF? I am still confused as to principal actors in the renegotiation because Troika has as diverse of an agenda as one could possibly have. Is Syriza suggesting the the EU undertake all loans to Greece and IMF exits the Troika structure?

  • Unless the case that “Grexit is preferable to the current EZ policy plan” is made, and in a documented, credible way, the battle will be lost by SYRIZA; once the threat of Grexit is made credible by preparatory actions by the ECB, the electorate will abandon SYRIZA.

    Of course, right now is a very bad time for putting this on the agenda. It should have been the most important item of the agenda, as I have repeatedly urged you, for several years now. But it was suppressed, for reasons I fail to comprehend. In any case, it seems that we will soon know if I was right 🙂

    • You are assuming that the only credible threat capable of causing Germany to shift is Grexit. It is not. The threat of a prolonged impasse within the Eurozone, while a SYRIZA gvt manages to appeal even to a large segment of German voters (on the basis of a sensible narrative of what has been happening in the past 5 years), is the best weapon we have. GREXIT is and ought to be only something that Germany threatens us with – non-credibly.

    • Oh, but I am not arguing that Grexit’s threat should (or could!) be used on Germany.

      I am arguing that Grexit’s threat will forever cause *Greece* to shift, back to the current policies or their mutations, abandoning all thought of negotiation–and evicting a SYRIZA govt. in the process. It happened in ’11, again in ’12, and will happen again (I predict 🙂 in ’15. Furthermore, this can be cured only when and if the (hefty) cost of Grexit is contrasted to the (even heftier) cost of continuing on the current path.

      This is well-understood by the bankruptocrats and drives their strategy of shaping public opinion the way they do, through fear (Grexit) and misinformation (success story).

      So, while I agree with your broad argument, that a prolonged confrontation within the EU/EZ framework is the best weapon Greece (and “our” Europe!) has, I predict that, well before this point is reached, the _Greek_ people will capitulate. I truly hope I am wrong…

    • I sincerely hope you are wrong also, but fear & dread that you are right. For some reason too many Greeks across all sections of society panic at the thought of leaving the euro. I have no idea why. The government & media warn of a return to the 90s – yet, what was so wrong with the 90s? We lived more or less within our means & had our own sovereignty! Yanis himself criticised Bill Mitchell not so long ago on this blog for advocating grexit for Greece’s sake, on the grounds that BM underestimated the cost. I believe that if we are not prepared to grexit – ie go all the way – we shall have an Achilles’ heel in negotiation.

      Still I vote opposition as the only hope for freedom from the German / EU yoke!

  • Obviously the first vote at the Greek Parliament shows that Dimas is not a sustainable candidate. Yesterday LeMonde floated the Damanakis name as the ace in the sleeve of Samaras.

    Any truth to such?

    • I would not be surprised. Having worked with Maria closely I would like to believe that she would not want to be part of this. And that even if she relents, that the 180 MP votes will prove a bridge too far.

  • Maybe i little bit out of place, but I’ve been meaning to ask what is your take on the most significant recent macroeconomic developments in relation to Greece, namely the deep plunge in oil prices and the near certainty of a QE program by the ECB in 2015. In my mind these are the equivalent of significant stimulus package (especially the oil price drop) and could prove to be a game changer for Greece and its chances towards recovery in 2015. Syriza or whoever comes into power will probably operate under a favorable macroeconomic environment in 2015, does this change the dynamics of the negotiation with the EU taking away the pressure on escalating the conflict?

    • THe ECB’s QE will, if it comes, be macroeconomically weak – almost insignificant (as Germany will not allow it to be substantial). As for the benefit of oil prices, we shall see. It is, I fear a double-edged sword – in the sense that, on the one hand it leaves more room for spending but on the other it depresses further price expectations, therefore fuelling deflationary forces.

  • Yanis V

    Would you ever promote EPAM and Dimitris Kazakis? And Greece having its own National Sovereignty instead of kneeling down to the E.U. and Eurozone?

    • No I would not. Isolationism is the other extreme of submission to EU authoritarianism. Moreover, Mr Kazakis’ analysis systematically falls fouls of the facts.

    • I do not see how leaving the E.U and Eurozone would be isolationism. I don’t know how you arrive to that extreme?

      Are you saying we can’t succeed without someone to tell us what and how to do things and what is best for us.?

      As far as I can see submission is what we have now and what we will always have. Even under SYRIZA. Apparently Greece can never have sovereignty then.

      “Mr Kazakis’ analysis systematically falls fouls of the facts.”
      In what way though?

    • You will excuse me if I decline an invitation to deliver a critique of Kazakis. A few years ago I was on a panel with him and had to listen to 45 minutes of him murdering the facts on anything from the Great Depression in the US to the basic principles of political economy.

    • Interesting article, I can understand the IMF part. These people have their own agenda but the Syriza part is beyond me. It is the right of every parliamentary oposition to decide their own policies. If the people that put them there wanted to support the government they would have voted for them in the first place.

  • This must be a spelling mistake this outfit should be called “noeuro” 🙂

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