If the video has no sound, check the volume slider in the bottom left of the video player and drag it to the right
The Real News needs your support. Make a $10 donation by texting realnews to 85944 from your mobile phone. Works in US only
I support The Real News Network because it lets viewers voice their uncensored opinions. - David Pear
Log in and tell us why you support TRNN
Costas Lapavitsas is a professor in economics at the University of London School of Oriental and African Studies. He teaches the political economy of finance, and he's a regular columnist for The Guardian.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.Greece approaches a momentous day: June 17, on Sunday, Greeks will vote, and they may decide to select a party that might lead them out of the eurozone.Now joining us to talk about the Greek elections and the crisis in Europe in general is Costas Lapavitsas. He's a professor of economics at the School of Oriental and African Studies at the University of London. He's a member of Research on Money and Finance. His new book is Crisis in the Eurozone. And he joins us now from Athens. Thanks for joining us, Costas.COSTAS LAPAVITSAS, PROF. ECONOMICS, UNIV. OF LONDON: It's a pleasure.JAY: So what's, first of all, the mood there now, just days before? And Greeks have a very big decision to make.LAPAVITSAS: I would say that the mood is strange. There's a sort of calm before the storm, I would say. There's tension. There is apprehension. But also there is excitement and expectation of significant change ahead. People don't know what the result might be, but there's hope that there will be some momentous change that will transform the situation.JAY: Now, Greece is kind of divided into two camps now. Maybe explain it. And what's sort of the logic of each camp?LAPAVITSAS: Greece is definitely divided into two camps now. What's happened after the election on 6 May, the previous election, was that the left-wing party SYRIZA emerged very powerfully and it began to gather around it all forces that wish to oppose the [incompr.] and structural adjustment program [incompr.] the country two years ago. SYRIZA has gradually become a major party, a camp in itself. It's the anti-stabilization, anti structural adjustment camp.As that has happened, and because it's taken a left-wing outlook, another camp has also formed around the right-wing party [incompr.] And this is the camp that basically wishes to maintain the current policies. It wishes to tweak the current policies a little bit, but it essentially wishes to maintain them, to maintain them. This is the right-wing camp, as I said.So the country's splitting between left and right along those two lines, and it is these two camps that will contest the election.JAY: Now, it's one thing to be against the bailout plan, and another to have a vision for what the transition or a new economy would look like in Greece. Has the left put forward that kind of a vision?LAPAVITSAS: Indeed. It's a very different thing. What is characteristic of the position of the left camp, the SYRIZA camp, is that it promises to do away with the bailout [incompr.] It promised to do [incompr.] things as far as the debt is concerned. But it also says that it will keep the country within the eurozone. It is adamant about this. It keeps repeating it at all times. So it will transform the country, presumably, but do so within eurozone. The program that it puts forth now proposes radical redistribution of income, it proposes control over the banks, proposes a new [incompr.] strategy, but all within the eurozone.In my view, this is not feasible, but this is what this camp is proposing. And that is one of the reasons of its popularity, because we should be [incompr.] aware of the fear that people now have of leaving the eurozone. And the fact that SYRIZA says they will do all these radical things without leaving the eurozone is acceptable to people.JAY: Well, it's kind of not just up to them, though. The rest of the eurozone and the banking elite of Europe has to agree to all this. And if they don't accept the bailout and don't sort of knuckle under to the conditions of the bailout, then it may not be up to them whether they stay in the eurozone or not. Is that not true?LAPAVITSAS: Absolutely true. Whether they stay in the eurozone or not is not up to what the leadership of SYRIZA says or what it fervently believes. It is up to the other players, the leadership of the eurozone. But it is also up to, in a sense, the objective economic circumstances. It is quite likely, for instance, that there would be a bank run soon after the election if SYRIZA begins to take radical measures, the radical measures that it promises, and a bank run, as we all know, can become unstoppable. So Greece might find itself outside the eurozone irrespective of what SYRIZA wishes to do and irrespective even of what the eurozone leadership wishes to do.Having said this, SYRIZA should also expect a very strong reaction from the eurozone immediately after the election if it proceeds to [incompr.] radical measures. On both scores, both, you know, what the banks might do and what the eurozone leadership might do, a Greek exit from the eurozone is quite likely if SYRIZA begins to put its program in practice.JAY: Now, who's got more to lose here? The leaders of the eurozone must be concerned that if Greece does exit, this might lead to the exit of some of the otherâwhat they're calling peripheral countries. It begins a kind of unraveling process of the eurozone. I guess you could argue the threat to leave, on the other hand, the desire to renegotiate might give Greece a little more leverage. And if so, how much leverage does Greece have here? Or would the leaders of the eurozoneâare they just reaching a point that they would not accept such a radical notion inside and would prefer Greece out?LAPAVITSAS: There's definitely a game of chicken being played here, definitely, and consciously so, on the part of SYRIZA as the [incompr.] political side that might makeâform the next government and on the part of the eurozone leadership.Now, the question of who's got more to lose is a moot point, a moot issue, because clearly Greece, if it exited the eurozone and it exited under such unplanned and disorganized conditions, it would be subjected to a major shock. There would be a major shock in terms of monetary circulation, in terms of its banks, in terms of its trade. There'll be significant impact to the economy. It would be a shock to the country. There is no question at all about this, a short-term shock. I believe personally that in the medium term and the long term this, the exit, will be beneficial to Greece. But in the short term it would be a shock.Howeverâand we should be very clear about thisâit will also be a major shock for the eurozone. And I'm saying this because for a while now the leadership of the eurozone has been creating the impression that it has taken all appropriate measures and it is ready for Greek exit and it doesn't really care very much, and if Greece wishes to do this, that, or the other, it may be punished in this way. Well, it is true that the eurozone is far more ready now than it was two years ago. They've used that time to get themselves ready for Greek exit and to erect barriers and to erect protection walls.However, crisis has also become deeper and deeper in the eurozone. And as we know from recent events, the crisis has now reached Spain and it's threatening Italy. This is happening because essentially the banking system of Europe is hanging from a thread right now. Spanish banks are very bad. German banks are very bad. So Greek exit would unleash, I believe, a major shock across Europe right now. It's a major concern, or it ought to be a major concern if the European leadership think that they can punish Greece and get rid of it and teach it a lesson and teach others a lesson, that that could well be the Lehman moment of the European union.JAY: And is there any sign that some of the other countries in crisisâSpain and to some extent Italyâthat they might actually somewhat side with Greece? I saw this interesting interview (we did a piece about it) withâFareed Zakaria interviewed Mario Monti, prime minister of Italy. And he was saying, you know, we need did what they asked us to do. We did the fiscal discipline. We're doing the austerity. And he said, all we've accomplished is we destroyed domestic demand. There's no growth happening here. Is there any possibility that thisâyou might see some change in the alliance of forces here?LAPAVITSAS: None at all, in my view. There's a growing realization across peripheral countries and across the eurozone that the current set of policies is basically nonsense, that it doesn't work, it makes the crisis deeper, it does not stand a chance of working no matter how long you wait for it.That, however, is a different thing, expecting a coalition of forces to emerge, particularly among periphery countries, that would challenge the orthodoxy, the dominant view as that is coming out of Germany and elsewhere. On the contrary, [incompr.] whenever the crisis becomes shorter is greater opposition among peripheral countries. Each peripheral country tries to prove that it's not like the other. It criticizes the others. So in recent days we've seen Spain and Italy blame each other. And both Spain and Italy, and certainly Portugal and Ireland, wish to maintain that they're not like Greece, they are like somebody else. So this has been a characteristic feature of this crisis from the very beginning, and it indicates that really an alliance of peripheral countries, much as we would like to see one, is not a realistic option.JAY: Alright. Let's go back to Greece. SYRIZA's election program and the reforms they're proposing, what's the headlines of that? And how are Greeks responding to it?LAPAVITSAS: SYRIZA wishes to present its program now as a program for reconstruction of the country, a new growth and reconstruction program for Greece. And that's a very laudable thing. If you go through the list of suggestions and proposals, you couldn't possibly disagree very much at all. They would take steps to limit the payments on the debt and they would take steps to restructure the debt. They will lift austerity. It will call a policy of expansion and control over the banking system. They will do things about wages, and redistribution more generally, all very sensible things that clearly the country needs. People are responding positively to these things.However, the issue remains: can it be done within the eurozone? People are not stupid, they understand, and they've got serious doubts as to whether this can be done within the monetary union. SYRIZA asserts they can. To my view, to my mind, this is a weak point. People are not persuaded. If SYRIZA, supposing it wins, comes to power and doesn't deliver these things because it fears exit from the eurozone, then the situation will be very bad in Greece, very bad indeed.JAY: And I suppose the other possibility, if they have the backbone for this, is: if it turns out that Europe is simply uncompromising, then does SYRIZA have a plan B to get out? I mean, are they talking about the possibility of that?LAPAVITSAS: There is reason to believe that SYRIZA is beginning seriously to think about a plan B, because, obviously, they've realized the seriousness of the situation. They've realized that, yes, they might wish to stay within the eurozone, yes, they might say that they will not exit of their own [incompr.] as it were, but they might be forced to do so. And they're beginning to think and they're beginning to look for an alternative way of managing affairs, which would not be very nice, but it can be done. There is evidence that such thinking is becoming more permanent, perhaps, within the leadership of SYRIZA. It's not the dominant line, however, by any stretch of the imagination, but it's important that the realization is beginning to sink in.It's important because, I repeat, if SYRIZA wins, if it becomes the dominant party in Greek politics and does not do what it promises that it will do, if it compromises and compromises badly, then, in my judgment, political, social, and economic development in Greece will be catastrophic in the time to come, because exit and default would not really [incompr.] things, irrespective of what SYRIZA or any other party says. And if SYRIZA is seen to have sold the Greek people down the river, then the political forces that are likely to gain from something like that would be the extreme right, in my judgment. We are likely to see a huge strengthening of the extreme right in case SYRIZA leadership doesn't do what people think it will do.JAY: Alright. Well, then, we'll come back to you next week after the election, and we'll be able to pick up this conversation knowing who won the Greek elections. Thanks for joining us, Costas.LAPAVITSAS: Thank you very much.JAY: And thank you for joining us on The Real News Network.
DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.
Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address.
Please make thoughtful comments with minimal links using only one user name.
If you think your comment has been mistakenly removed please email us at email@example.com