The Greek election results were, first and foremost, a victory for the center-right New Democracy, whose nearly 40 percent of the vote secured it an absolute majority in parliament. For the time since 2009 — when the center-left PASOK (Panhellenic Socialist Movement) last won an election — a single party will form the government. Throughout most of the crisis, Greece has been run by coalitions, including Syriza’s pact with the right-wing ANEL (Independent Greeks). But New Democracy’s victory has formally brought that period to an end. Political stability has returned to Greece, and the traditional forces of government are back in power.
In practice, this stability began to return in late 2015, when Syriza surrendered to the European Union and signed a bailout agreement with Greece’s lenders. New Democracy’s victory is primarily the result of the four years of austerity Syriza applied at the behest of the lenders, hitting middle-to-low incomes hard and reducing national and popular sovereignty. Syriza’s conservative foreign policy — turning Greece into a committed military and political ally of the United States and Israel in the Eastern Mediterranean — was a further factor in this defeat, particularly as it led Syriza to cut a deal on North Macedonia’s official name that was rejected by broad swathes of Greek public opinion.
However, Syriza’s defeat mostly owed to the economic and social policies it adopted after its capitulation to the EU. Considering that Syriza originally promised a radical challenge to the Greek and European status quo, its evolution has been nothing short of disgraceful. Alexis Tsipras and his party are a lesson in what the European radical left ought to avoid in years to come.
New Democracy will not find it easy to keep its own promises. The rigid economic-policy framework imposed on Greece by its lenders will ensure weak growth, low incomes, and sustained pressure on workers and the middle class. The country might have turned to the right in reaction to Syriza’s policies, but the conditions for long-term social and political stability simply do not exist. Equally, while in opposition Syriza will focus on becoming the alternative party of government and reestablishing a new two-party system, it will also find its task far from easy.
There is, however, a deeper problem. The parties of the radical left have either done very badly or proven untrustworthy. The challenge is to reestablish a Greek radical left connected with working people and articulating a transformative program that truly speaks to society’s problems. In this respect Greece does still have lessons to offer — for it is not so different from the rest of Europe.
“The Greek crisis is no longer headline news, but the Greek people continue to suffer from the relentless austerity imposed for more than eight years. Those who oppose bailout policies are facing escalating repression. Actions opposing the foreclosure of properties are especially targeted. During the last two years, the Syriza government, complying with the dictates of the lenders to Greece, have intensified tremendously the pressure on home owners to help private banks collect on loans. Special legislation was adopted in December 2017 potentially imposing penalties of up to six months of prison for those opposing foreclosures. Furthermore, the government has moved auction procedures away from courtrooms to an electronic platform activated by solicitors within the closed doors of their offices.”
Greece’s financial crisis has come back to the boil as Athens draws up emergency plans to stabilize the banking system, raising concerns that the country may ultimately need a fourth EU rescue to escape its depression trap.
Global risk aversion and contagion from Italy’s parallel banking drama has lifted a lid on the festering legacy of bad debts, and exposed the implausible methods employed by Greek regulators and the EU-led troika to camouflage the problem.
Greek bank shares slumped a further 6pc on Tuesday after five days of falls. They are now down by 60pc since May, chiefly on fears of drastic state intervention to shore up thinning capital buffers. The Athens bourse has lost a third of its value this year.
The sell-off came as risk spreads on Italian 10-year bonds spiked to a four-year high of 335 basis points, entering the danger zone for Italian banks that collectively hold €380bn of the country’s sovereign debt.
Brussels is expected to launch its excessive deficit procedure against Italy on Wednesday for violation of the debt ceiling rules of the Fiscal Compact, doubling down on a fateful clash with the insurgent Lega-Five Star government in Rome.
This could lead to fines against a net contributor to the EU budget, an unenforceable sanction that risks a combustible political showdown. It almost certainly plays into the hands of Lega strongman Matteo Salvini, who aims to stoke up a pan-EU populist revolt before the European elections in May.
The EU is relying on the bond markets to ‘do the job’ of breaking political resistance in Italy. It is a high-stakes gamble that relies on a controlled banking crisis. This could easily slip out of control at a time when eurozone growth is already wilting and EMU money supply figures are flashing pre-recession warnings.
Greece’s fresh drama has crept up on markets almost unawares. Most investors thought the eight-year crisis had been put to rest with the end of the EU’s third rescue programme in August, even though the International Monetary Fund warned that Greece was still fundamentally insolvent without full debt relief. It said the country “could struggle to maintain market access over the long run”.
“Greece is very unstable and will be blown out of the water immediately if anything goes wrong in the global economy or if there a European recession” said Professor Costas Lapavitsas from London University (SOAS).
“The Greek banks are walking dead. Credit has been shrinking every single month and they are not providing the normal function of banks in an economy. They have been burning up their capital and there isn’t a penny for recapitalisation. When the real music starts this will become obvious,”he said.
Prof Lapavitsas said lenders had been allowed to discount the value of deferred tax credits for 20 years and deem this capital in a “smoke and mirrors” operation. They are now close to exhausting even this expedient. “It is not real capital. The Greek state is going to have to step in and provide cash,” he said.
In effect, the ‘bank sovereign doom loop’ that has so long bedevilled the eurozone is still working its curse. The Greek central bank is exploring a variety of options, including the creation of a bad bank or special purpose vehicle (SPIV) to soak up half the bad debts of the four systemic banks, Piraeus, Alpha, Eurobank and National Bank.
Non-performing loans are still €89bn. Bonds issued by the SPIV will in effect require a guarantee from the Greek state. “The whole thing is a con. It is unbelievable that they are doing this. The bottom line is that Greece should not be in the euro,” he said.
North European banks no longer have any significant exposure to Greece. In financial terms, the latest jitters are a local affair. But the political fall-out would be serious if it became clear that the EU authorities had yet again misjudged the gravity of the situation when it declared ‘mission accomplished’ amid much celebration earlier this year.
Critics say the northern creditor powers have refused to accept that austerity overkill from 2010 to 2018 has done so much damage to the Greek economy that nothing short of a massive debt-write off, backed by a New Deal investment blitz, can restore sustainable growth. There will be a political storm if events in Greece once again leave Europe having to pick between the twin poisons of Grexit and another rescue.
For now, investors are more worried about Italy. Andrea Enria, incoming head of the European Central Bank’s supervisory arm (SSM), warned that rising risk spreads are not just eroding the capital buffers of Italian banks but also making it harder for them to roll over their bonds.
Mr Enria said the eurozone banking union itself would “not survive the next crisis” if the region stumbles into a global downturn without first having cleaned up the balance sheets of lenders.
A senior strategist at one Italian bank said lenders have been able to cushion the impact on capital buffers by reshuffling their portfolio of bonds, reducing the share that is subject to mark-to-market rules. “We could live with spreads of 400 for a while,” he said.
The longer the spreads stay high, the more damage they do. Mortgage costs are rising. There is an incipient credit crunch. Big lenders have raised a mere €3.5bn in covered bonds since June and therefore have to curb lending to protect their CET1 core capital. “They are totally shut out of the market,” he said.
Much now depends of the next ECB meeting in December. If the governing council signals that it will roll over the ECB’s €800bn bank lending window (TLTRO) - at least partially - it will be a huge relief.
“We don’t think things can go on for very long as they are now. The mandate of the ECB is to preserve the stability of the European banking system. If we don’t get a new TLTRO on December 3, I am going to be raising my arms and screaming Mama Mia,” he said.
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Article by Ambrose Evans-Pritchard in Telegraph
Costas Lapavitsas and Stathis Kouvelakis reflect on the reasons for SYRIZA's defeat and what it would take for the radical left to once more win power.
The results of the recent European elections were the natural outcome of SYRIZA's disgraceful capitulation in the summer of 2015. SYRIZA did not face the immediate outcry experienced by previous Memorandum Governments. On the contrary, the Third Memorandum was accompanied by social passivity that eventually brought about a turn towards the Right, and indeed a tough neo-liberal version of it, driving the Left in its entirety toward paths that are difficult to tread.
This shift is not a Greek exception. Along the length and breadth of Europe, all variants of the Left are at historically low levels. The major victor is the European Far Right, purporting to be an "anti-systemic" actor, capitalizing on the anger of societies wounded by decades of neoliberalism. The rise of the Far Right demonstrates the loss of the Left’s radicalism, its transformation into a manager of a system that is now systematically and unconditionally unmaking a century’s worth of social gains. The bonds between the Left and the working and popular classes, once its natural base, have been broken.
What is original in the Greek case is that a party of the classical conservative faction, New Democracy, is on the cusp of returning to power. The forthcoming parliamentary elections are certainly not the same as the European elections, but they will also formally signal the close of the cycle opened in the squares in the summer of 2011. It is indeed evident that SYRIZA is unable to articulate a political discourse with elementary persuasiveness. Its electoral message is that it has a program that will produce "growth" alongside "fiscal stability" and "social justice". The government and the prime minister have once more become radicals, prepared to clash with the "conservative circles of Brussels" and the "extreme neo-liberal" leader of ND Mitsotakis.
This is but a reheated meal of a bygone age. What confrontation with Brussels, when they have accepted the abusive surpluses of 3.5% until 2022 and austerity until 2060 in order that the debt is served unhindered? What growth, when taxation is severe, and public investment is continually cut in order to bring even greater surpluses? What confrontation with neoliberalism, when public wealth is systematically privatized and sold off to foreigners? What social justice, when the "Katrougkalos" law has ravaged a meager layer of small businesses in order to support a pension system that has no hopes of surviving in the long run?
The bailout policies applied since 2010 have aimed fundamentally at stabilising the primary balance and the current account of the country. In typical IMF fashion, the task has been pursued through a gigantic contraction of public spending, huge tax increases and a precipitous fall in wages. Disastrously for Greece, there could be no devaluation of the currency as the country’s leadership obstinately kept it in the Eurozone. The source of any growth was supposed to be “reforms”, that is, measures of liberalisation and privatisation.
This “treatment” has achieved a measure of stabilisation through recession, destruction of productive capacity and poverty. As was expected, however, it has left the country with appalling growth prospects. The population is declining and highly skilled youth are leaving to work abroad; investment has completely collapsed, falling to just 12% of GDP – there is a contraction of roughly 30bn of annual investment since the peak of 2007-8; research and technology expenditure is negligible; the efficiency and capability of the public sector, which was never very high, is declining. Last but not least, Greek private banks have failed completely to support demand and continue to act as a brake on growth. Even according to the IMF the long-term growth potential of Greece is just over 1%. On this reckoning, it is unlikely that unemployment will fall below 20% for another 4-5 years. It is apparent that even the partial stabilisation of the primary balance and the current account are extremely flimsy and could be easily undone.
Not to put too fine a point on it, Greece is on the road to long-term irrelevance. Its economic decline has inevitably reduced its national sovereignty, while restricting democracy domestically. One does not need to go far to find evidence: the deal just agreed by the SYRIZA government is a flagrant instance of dependence, a form of neo-colonialism.
Article by Costas Lapavitsas
'Syriza is sinking and losing popular support': Interview in the Catalan website DIRECTA
‘Syriza is sinking and losing popular support’: Interview in the Catalan website DIRECTA
The following is the transcript of my interview for the Catalan website DIRECTA (04/02/2016). Its title is ‘Syriza is sinking and losing popular support’. The interview is in Catalan. A grosso modo english translation follows. ———————————————————————————————– https://directa.cat/actualitat/stavros-mavroudeas-syriza-sesta-enfonsant-perdent-suport-popular Stavros Mavroudeas: “Syriza s’està…
'Syriza is sinking and losing popular support': Interview in the Catalan website DIRECTA
‘Syriza is sinking and losing popular support’: Interview in the Catalan website DIRECTA
The following is the transcript of my interview for the Catalan website DIRECTA (04/02/2016). Its title is ‘Syriza is sinking and losing popular support’.
The interview is in Catalan. A grosso modo english translation follows.
