By Diego Borja Cornejo*
The Greek Prime Minister, Alexis Tsipras, has called a referendum so that it will be up to the Greek people to decide if the austerity demanded by the Eurogroup is to continue.
Tsipras took this decision after several months of negotiating with a European Union, a European Central Bank and an International Monetary Fund which have, in recent months, rejected time and time again the Greek proposal to reach a compromise that is acceptable to a government that won the elections on a platform to limit austerity.
The Greek parliament has approved the call for a referendum and given the Prime Minister its backing and now Tsipras has turned to the Greek people so that they can decide if continuing austerity, which has been a noose strangling both the population’s welfare and economic growth, is an option they can accept.
The leaders of “democratic” Europe wasted no time in furiously criticising his decision. In a blatant contradiction, across Europe the governing establishment, whether conservative, liberal and “socialist”, spoke in the name of “democracy and responsibility” and launched an attack on Tsipras’s essentially democratic action of appealing to the people.
Europe’s democracy is being played out in Greece. The top bureaucrats at the institutions, with a stubbornness that can only come from clearly seeing themselves as guardians of power and financial capital, are not budging one inch in their demands regarding the tried-and-tested austerity, which has been a social and economic disaster for Greece. As stated in the Preliminary Report by the Greek Debt Truth Committee, set up by the speaker of the Greek parliament, Zoe Konstantopoulou, the austerity policies have had a dramatic impact on investment. Gross capital formation fell by 65% in 2014 compared with 2008 and labour productivity by 7%. The capital capacity utilisation rate dropped from 75.5% in the period between 2006 and 2010 to 67.7% in 2014.
Gross Domestic Product has fallen by 27% in the last 5 years. Workers’ real salaries were 17.2% lower in 2014 compared with 2009. The wage share in income fell from 60.1% in 2010 to 55.1% in 2013. Between 2008 and 2013, unemployment rose from 7.3% to 27.9%. Youth unemployment reached the scary figure of 64.9% in May 2013. Currently, 23.1% of the population live below the poverty line and 63.3% have become poorer as a result of the austerity policies. In 2013, 34% of children were at risk of poverty or social exclusion. The poorest 10% of the population lost 56.6% of their income. Pensions for retired workers fell by 40% on average, with the result that 45% of pensioners now live below the poverty line.
Nobel economics prize winner Paul Krugman clearly stated that “what we have heard about Greek profligacy and irresponsibility is false. Yes, the Greek government was spending beyond its means in the late 2000s. But since then it has repeatedly slashed spending and raised taxes.” All this would have been enough to meet the rigid IMF demand to run a large fiscal surplus. However, this simply has not happened because austerity was dragging down revenues at the same time as it was dragging down the economy.
It is obvious that austerity is not an option for Greece and it is, therefore, becoming increasingly clear that what is actually happening in these negotiations has little to do with the economy and the debt but a great deal to do with power and politics.
The pressure being placed on Greece by the Eurogroup and the institutions is looking more like a war on the Syriza government. To wage this war, they are using all the weapons they have at their disposal, such as the ECB’s decision not to increase emergency credit to Greek banks through the ELA mechanism. This decision runs counter to the very nature of the ECB as its statutes explicitly state that its job is to contribute to the financial stability of the EU member states. Alongside the propaganda of fear, which is trying to position the idea that there is no life outside the euro into the consciousness of European citizens, it is this ECB decision which has contributed to the massive wave of deposit withdrawals by bank account holders in Greece in recent days. And onto this fire of fear, which has already become ingrained in the public consciousness, the media powers are pouring fuel by reporting news stories like those saying that on Saturday 27 June alone, more than 500 million euros were withdrawn from the Greek financial system. And that is on top of the capital flight being led by the big money holders.
Despite the same old story coming out of the European establishment about the Greek government’s lack of responsibility, the authorities, in a show of considerable pragmatism and responsibility, imposed capital controls in Greece on Sunday 28 June.
The media channels in Europe immediately started to talk about a Greek “bank freeze”. However, unlike the freezing of bank accounts in Ecuador in 1999 and in Argentina in 2001, the Greek measure is not geared to protecting the bankers’ wealth but rather to avoiding a bank run, which was already being celebrated by certain conservative voices in Europe. Moreover, this measure allows a daily withdrawal of 60 euros per individual bank account, the unrestricted use of credit cards and any electronic payments within Greece. What it does restrict is the capital flight via foreign transfers, which would have led to a bank run and a monetary crisis had this measure not been taken.
Moreover, this is a measure that has been put in place on a temporary basis until 6 July, one day after the decision that the Greek people will be making in the 5 July Referendum.
However, the fears caused by people not being able to access, even temporarily, the money they have in the banks are being amplified by the voices in the media, who are trying to show that it is all due to the incompetence of the Syriza “populists”. Spain’s conservative Prime Minister, Mariano Rajoy, has pointed out in his various TV addresses to Spanish viewers that “here you have the evidence for the proposals of people like Podemos and Syriza”. Rajoy did not hesitate to convey what lies at the heart of the Eurogroup’s “stubbornness” that Greece should keep austerity in place, namely the desire to punish Syriza and its voters and to intimidate those, like Podemos in Spain, who might think that there are any democratic political alternatives in Europe. To this end, the establishment is doing all that it can to drive Greek voters towards suicide, which is what a yes to austerity vote would be.
“A yes vote would mean depression almost without end,” the Nobel economics prize winner Joseph Stiglitz said. By contrast, a no vote “would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands. Greeks might gain the opportunity to shape a future that, although perhaps not as prosperous as the past, is far more hopeful than the unconscionable torture of the present,” the economist added, almost poetically.
The Preliminary Report by the Greek Debt Truth Committee has shown quite clearly the illegal, illegitimate and odious nature of Greek debt. It has shown that the debt was essentially used to transfer the high-risk Greek debt from the banks – with most of the debt being held by French and German banks – over to the public institutions, i.e. the European Financial Stability Facility and the European Central Bank. It has shown that the Greek Budget only received 10% of the loans received between 2010 and 2015 whilst the remaining funds were used for buybacks and capitalisations, which benefited the private creditors from 2010 and 2012. It has highlighted the fact that the IMF “misjudgements” in its predictions and calculations were convenient and opportune for these transactions, which benefited financial capital at the expense of millions of citizens. It has revealed the illegality of several of the mechanisms used, as not only did they violate Greek laws and regulations but also those of the European Union and other participant countries.
There is enough support to ensure that that Tsipras’s brave decision to call for the people to decide the future of the negotiations in a referendum is being backed up by legal action. Such a move could see those very authorities, which are currently driving Greeks to suicide by calling for a yes vote and threatening that “otherwise they’ll be thrown out of the euro”, being put in the dock at the European Courts, where they would be confronted by their own regulations.
These are crucial days for Europe. When the Spanish people went to war to fight for democracy and freedom between 1936 and 1939, western democracies turned a blind eye and the price that Europe then paid was Nazism and fascism, with the war and oppression that followed. Times are different now but history is condensed today into events in Greece. The battle for social justice and democracy that is being waged there is the battle for an integrated Europe that is based on these premises and not on the neoliberal doctrine and the interests of financial capital.
* Ecuadorian economist, Masters in Economics from Leuven University (Belgium), Ex-Finance Minister, Ex-Minister for Economic Policy, Ex-President of the Central Bank of Ecuador, Ex-Economic Secretary at ALBA, Montecristi Constituent Assembly member, President of the Citizen Power Movement. Member of the Greek debt truth committee, established by Hellenic Parliament Speaker, Zoe Konstantopoulou, on 7 April 2015.
 The troika continues to demand that Greece achieve a primary fiscal surplus (excluding debt interest payments) of 3.5% of GDP by 2018.