Syriza: “A grain of sand in the machinery”

11 February 2015 by Eric Toussaint , Benito Pérez


Eric Toussaint interviewed par Benito Perez (of the daily Le Courrier, Geneva)

Eric Toussaint • Specialist in public debt, former economic adviser of progressive South American governments, analyses Syriza’s first days at the head of the Greek government for Le Courrier.

Eric Toussaint is visibly exhausted at the end of a difficult week. But his mind is clear and his enthusiasm is intact: Syriza’s victory in the Greek legislative election has opened one of those parentheses within which History accelerates and is written as we watch. A political scientist who is experienced in economic matters, founder and spokesman of the Committee for the Abolition of Third World Debt (CADTM), Toussaint is a key observer of the battle now going on between Greece and its creditors—mainly the governments of Northern Europe. That is evident from the interest that was shown in his presentations Saturday, in Geneva, during a day of discussions on the economy organized by Le Courrier. A former adviser to the government of Ecuador and the president of Paraguay (Fernando Lugo), the Belgian native has also been approached by Syriza. Pending his possible involvement, Eric Toussaint is speaking out freely and observing the Greek experiment with a benevolent but critical eye.

What is your assessment of the first steps taken by the Syriza government in the economic area?

Eric Toussaint: The first measures they’ve taken have been to end a series of policies that were unjust, unpopular and damaging for the country. Very concretely, the government has granted free electricity to the 300,000 households that were without power; returned the legal minimum wage to its former level (751 euros), re-hired 3,500 employees who had been fired; dissolved the entity created by the Troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

to manage privatisations; cancelled the sale of the ports of Piraeus and Thessaloniki, etc. In short, the government has shown that it will fulfil the mandate entrusted to it by Greece’s people. We can only be pleased with that.

Is the make-up of the government, with the appointment of Yanis Varoufakis to the key post of Finance Minister, in line with that attitude?

Personally, I’m disappointed that all ten of the “super-ministers” are men, even if several women do hold important vice-ministerial positions. On the economic level, while Varoufakis is in the spotlight, the key man is [vice- Prime Minister] Yannis Dragasakis, who belongs to the more moderate wing of Syriza. The government is the result of a very delicate balancing act. For my part, I would like to point to the very important inclusion of Giorgos Katrougalos, who is in charge of administrative reform; he’s the one who just announced the re-hiring of the employees who had been fired. He is a jurist and is one of the originators in 2011, along with ourselves, of the Initiative for a citizen audit of Greece’s debt!

The appointment of Panos Kammenos to Defense and Syriza’s alliance with his right-wing AN.EL party, however, will make it more difficult to keep other campaign promises, including making the Church pay its share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. and reducing the size of the army, which is a sacred cow...

Yes. Those two concessions are cause for concern. For a year and a half, Alexis Tsipras has made a series of positive statements about the Church, on its role in binding up the social wounds caused by austerity. To the point where he’s forgotten to point out that the Church, which owns large amounts of real estate, needs to contribute more to the public finances.

As for the presence of Kammenos at Defense, that is of course a message to the army that Syriza won’t touch it. However Greece’s military budget, proportionally, is one of the largest in the European Union. And in fact Germany and France, who are the main suppliers to the Greek army, have made certain that the successive governments in Greece have limited their austerity efforts in that area. Having said that, Kammenos has been surrounded by a “safety rail” in the form of the vice-minister, Costas Ysichos, a Greek-Argentine and a former member of the Montoneros guerillas, who is on the left within Syriza.

I would also point out that despite the presence of a party with racist tendencies in its coalition, the government immediately announced that he will grant Greek citizenship to children of migrants who were born or grew up in the country. Of course, it should be voted by the Parliament. That’s important in the context of Greece, since the preceding government had played on xenophobia. That’s Syriza’s way of showing that the alliance with AN.EL is limited to economic issues and that it won’t make migrants pay the price.

On the central issue of the debt, some Syriza members argue for a moratorium on repayments, which would be indexed to growth.

If that’s the case, it means that the Greek position has already evolved, probably due the very strong and very negative reactions of various key personalities in the Eurozone, since the farthest any of them have gone is to suggest the possibility of rescheduling repayments… Suspension of payment and an audit of the debt are among the weapons Syriza has publicly discussed using, but only as a secondary strategy. The Syriza government’s primary strategy is to call for a negotiation and an international conference to discuss all the debts. It also includes putting the debate at the heart of the European institutions, rejecting the Troika (the Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

, the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
, and the EU) as illegitimate.

So the battle lines seem to be drawn. Is that simply posturing in order to raise the stakes, or is any dialogue really impossible?

I tend to lean towards the latter. Syriza proposes two fundamental things: First, maintain budgetary balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. —something few European governments can boast of doing—but redistribute the costs differently, lightening the burden on victims of the crisis while increasing it for those who have benefited from it. Second: Negotiate a reduction of the debt. However, for the European leaders, the debt is the instrument used to impose the very neoliberal structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

measures that Syriza has decided to end. Therefore no compromise seems possible. Possibly, if Syriza had said, “We’ll continue following neoliberal model, but you lighten the debt,” the EU might have accepted. But in fact, Europe cannot allow Tsipras to keep his word. He’s probably been told, “Look at Hollande; that’s what he did in your position. So do like he and everyone else have done and get with the program.”…

The important thing that’s happened this week is that Syriza has already dropped a grain of sand into the machinery, and that’s decisive.

 Syriza’s weapon: suspend repayments

What weapons do each camp have to use in this inevitable standoff?

The figures illustrate the challenge we face in 2015. Greece must repay 21 billion euros in several payments, with the main deadlines in March and July-August. The agreement between the former government and the Troika was that the Troika would lend Greece the money necessary for meeting the repayments provided that it continue the privatisations and the rest of the austerity plan.

In such a situation, Syriza’s weapon is simple: suspend payment. Then, as I see it, the Greek government should create an audit commission to determine which debts are legitimate and must be repaid. The audit can provide legal arguments to support a suspension of repayment, or possibly a repudiation of illegal debts—that is, debts that were contracted without respecting the internal order of the country or international treaties.

I found an EU regulatory provision adopted in 2013 that requires all countries under structural adjustment to audit their debt in order to explain why it has risen so high and to reveal any possible irregularities. [1]

How can a debt that was contracted voluntarily by a democratic government be illegitimate?

Mainly due to the fact that these loans were granted under unjust terms. Greece was forced to conduct policies that amounted to social counter-reform and which violated certain rights, along with a policy of austerity that has destroyed the economy and made repayment impossible. It can also be demonstrated that the government acted illegally for the benefit of private interests, which would make the transaction null and void. An audit of Greece’s debt is easy to conduct—80% of it is in the hands of the Troika and goes back no farther than 2010.

As you say, the majority of Greece’s debts have been in European public hands since then. Isn’t it unjust to make European taxpayers pay?

The legislatures of these countries agreed to the loans under deceitful pretexts. We were told, “Greece must be saved”; “Help the poor Greek retired people” when in reality the French, German, and Belgian governments had been appealed to by their banks, who were worried that Greece would no longer be able to repay their high-risk, very high-rate loans. Merkel’s and Sarkozy’s goal was to allow their banks to wriggle out without taking any damages, while taking the opportunity to impose anti-labour measures and privatisations. In reality, the goal was not to save the Greek retirees’ pensions, but to reduce them! Consequently, since the operation served to save the creditor banks, the governments should pay the cost of cancelling the debts via a tax on those institutions.

In reality, the amounts at stake are not that significant for the EU. The absence of reaction by the international stock exchanges proves that there is no systemic risk. The current impasse is more an ideological question. For the EU, the risk is of creating the precedent of a country remaining within the Union without applying the neoliberal policies. Scuttling Syriza would be a message sent to the Cypriot, Portuguese, Irish and Spanish voters— in particular the latter, who might be tempted to vote Podemos in a few months.

Concretely, suspending repayment of the debt would mean a halt to the European payments and the explosion of interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation.
on the capital markets for Greece. Would the Greek government lack funds?

No. Nothing indicates that the budget would no longer be balanced, and that means that Greece does not need to borrow funds—which in any case would only be used for debt repayments. As for the share of financing Greece has obtained on the financial markets, it’s minimal. And anyway, the rates have already exploded in the past week, even though the suspension hasn’t take place.

What weapons can the EU use to strangle Greece?

The Greek banks are in very bad shape. These banks receive loans from the European Central Bank ECB
European Central Bank
The European Central Bank is a European institution based in Frankfurt, founded in 1998, to which the countries of the Eurozone have transferred their monetary powers. Its official role is to ensure price stability by combating inflation within that Zone. Its three decision-making organs (the Executive Board, the Governing Council and the General Council) are composed of governors of the central banks of the member states and/or recognized specialists. According to its statutes, it is politically ‘independent’ but it is directly influenced by the world of finance.
(ECB) to provide them with cash. I feel that the ECB could block these loans at the risk of seeing the Greek banking system collapse. Faced with that possibility, Greece will have to act quickly, expropriate the owners of the institutions, and turn them into public services. But that would require a radicalisation of Syriza’s program.

Can the Greek government hope for any real international support?

From social movements, yes! Over the past weeks, we’ve seen many movements get involved that had never before called for a vote for a political party! That support, in particular in the major EU countries, can be very significant. If major German trade unions like DGB and Verdi openly support Syriza and tell the SPD-CDU government “Keep your hands off Greece,” that could weigh in the balance. As for the governments, outside the EU, it’s also possible that certain ones would support Greece for opportunistic reasons—I’m thinking of Russia, for example. If Russia were to lend Greece a few billion at very low rates without attaching conditions, that could help. Of course, I would prefer that other governments do it. Ten years ago, Hugo Chávez would have surely taken the initiative. But today Venezuela doesn’t have the financial capacity.

 “All that just to regulate capitalism a little?!”

Economists are intensely discussing one question: Is the break being recommended by Syriza possible or not without Greece’s exiting the euro? What is your opinion on that?

Well, we’ll see! Syriza has a very good saying: “No sacrifices for the euro,” because it just isn’t worth it. Syriza will only take the initiative of leaving the Eurozone if it is forced to, because a majority of Greeks are still attached to the single currency. And also, leaving the euro would only be advantageous if nationalisation of the banks and strict oversight of movements of capital were put in place, which explains why the less radical wing of Syriza is reticent. More generally, such a decision would exacerbate the conflict with Europe.

For the government, the advantage would be being able to contract debt with its national bank in a new national currency. Provided, of course, that the population would maintain its trust in this “new drachma.” We could also imagine a redistributive monetary reform, with differentiated exchange rates depending on the size of transactions, in order to provide an advantage to the poorer citizens. That has already been done—for example in Belgium, just after the Second World War—and is also a way of fighting inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. (see text box “Redistributive Monetary Reform”).

On the other hand, devaluating in order to make Greek exports more attractive would put the purchasing power of the Greek people at risk. And it would remain within the same mindset of competitiveness.

The Eurozone countries have no interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. in expelling Greece.

No, except perhaps as a kind of political punishment. To teach them what it costs to revolt… But no legal mechanism exists for doing it!

In the current context, the measures the Syriza government is taking are courageous, but they still mostly amount to a return to an earlier situation that was not really very progressive. There has also been a call for a European New Deal. Ultimately, what is Syriza’s political project?

Frankly, I’m asking myself the same question. But given the calendar, we’ll know in the next few months. Up to now, the option was to move back a bit towards a social state. We’re still far from having gone back to the earlier situation! Beyond Syriza, my concern is that the radical Left in Europe no longer seems to see an alternative form of power outside the framework of regulated capitalism. Admittedly, the balance of power is not good, and restoring social rights is already progress. But look at the sacrifices that have been made! Capitalism has shown so clearly where it’s leading us that there is the possibility of a real chance of an emancipatory or socialist project—call it whatever you want—if it puts an end to social injustice, and provided that the population participates directly in the political and economic choices made by the society. I would find it regrettable if all the suffering, all these efforts that have been made, lead to nothing more than a slightly regulated capitalism. Obviously, these transformations need to be brought about with the assent of the population, at a pace that is acceptable to the people. Syriza was elected to restore a degree of social justice, and not to conduct a program of emancipation. But for the population to follow along, you have to be able to present them with a project, an outlook. And that’s where there’s a real lack of reflection and concrete action.

Text box [2] : Redistributive monetary reform

A redistribution of wealth can also be accomplished via an appropriate monetary reform. Without going into detail here, this could be modelled on the monetary reform carried out after the Second World War by the Belgian government, or, in another part of the world and at another point in time, by the Nicaraguan authorities in 1985. It is aimed at taxing the revenues of those who have enriched themselves at the expense of others. The principle is simple: At the time of a currency change, automatic parity between the old and new currency (one former euro in exchange for one new drachma, for example) would be guaranteed only up to a certain ceiling.
Above that ceiling, the excess amounts must be placed in an escrow account and their origin justified and authenticated. In principle, any amount above the ceiling is exchanged at a less favourable rate (for example: two former euros in exchange for one new drachma); should the funds prove to be of criminal origin, they can be seized. Such a monetary reform would allow a share of the wealth to be distributed in a way that is more socially equitable. Another goal of such a reform is to reduce the supply of money in circulation so as to fight inflationary tendencies. In order for it to be effective, strict oversight over movements of capital and foreign exchange operations must be put in place.
Here is an example (of course the rate scales given here can be modified a great deal following a serious study of the distribution of cash savings among households and the adoption of strict criteria):

1€ would be exchanged for 1 new drachma up to 200,000 €
1€ = 0.7 new drachma between 200,000 and 250,000 €
1€ = 0.6 new drachma between 250,000 and 350,000 €
1€ = 0.5 new drachma between 350,000 and 500,000 €
1€ = 0.4 new drachma between 500,000 and 600,000 €
1€ = 0.2 new drachma above 600,000 €
1€ = 0.1 new drachma above one million euros

If a household has 200,000 € in cash, it receives 200,000 new drachmas
If it has 250,000 €, it receives 200,000 + 35,000 = 235,000 new drachmas (n.d.)
If it has 350,000 €, it receives 200,000 + 35,000 + 60,000 = 295,000 n.d.
If it has 500,000 €, it receives 200,000 + 35,000 + 60,000 + 75,000 = 370,000 n.d.
If it has 600,000 €, it receives 200,000 + 35,000 + 60,000 + 75,000 + 40,000 = 370,000 n.d.
If it has one million €, it receives 415,000 + 80,000 = 495,000 new drachmas
If it has two million €, it receives 415,000 + 80,000 + 100,000 = 595,000 n.d.


Translated by Snake Arbusto


[2This text box written by Eric Toussaint was added subsequent to the interview published by the daily Le Courrier

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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