Reform Within the Euro-Zone is a Delusion for Greece
It’s unclear whether Greece can survive beyond March, or whether it can even avoid a default within the next several weeks, says Dmitri Lascaris
SHARMINI PERIES, EXEC. PRODUCER, TRNN: This is The Real News Network. I’m Sharmini Peries, coming to you from Baltimore. Also, welcome to this edition of the Dimitri Lascaris report.
As you know, Dimitri is a partner with the Canadian law firm Siskinds, where he heads the firm’s securities class actions practice. As you may know, Dimitri also reported for The Real News during the elections in Greece just last month.
Thank you so much for joining us.
DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER IN CANADA: Always a pleasure to be here, Sharmini.
PERIES: So, Dimitri, our friend Costas Lapavitsas, professor at SOAS, now MP for SYRIZA in Greece, has been writing in The Guardian, and in the last op-ed he authored he said, “To beat austerity, Greece must break free from the euro”. “We are deluded to think we can achieve real change within the common currency. Syriza should be radical”, he says. What do you think of what he had to say?
LASCARIS: He has every reason to be frustrated and skeptical about the ability of Greece to achieve a resolution of the humanitarian crisis within the Eurozone. He has been, I think, for some time, and well before the election in January, a proponent of an exit by Greece from the Eurozone. Following his election to the Parliament in January of this year, I think he adopted–he appears to have adopted a sort of weight-and-see approach. And what he saw and what we all saw was a wall, and absolute brick wall of resistance from the other member states of the Eurozone to any significant alleviation of the austerity policies within Greece and any meaningful endeavor to address the clear humanitarian crisis there, and to cope with the brutal reality that the stated justification for the austerity policies, which was to enhance Greece’s ability to service its debts, has turned out to be a hoax, a cruel hoax, because in fact Greece’s ability to service its debts has been fatally undermined as a result of the austerity policies. So he was cognizant of all that. Any honest observer of the situation was cognizant of all that. But as a sitting member of the party, I think his approach was to sit back and see whether or not the government could make any headway. And as I say, they encountered a brick wall of resistance.
And disappointingly, from those quarters, the fiercest resistance came not only from Germany, but from those quarters where one might have expected the greatest level of support, namely, the so-called socialist government in France and the governments of Spain and Portugal, which have suffered greatly as a result of the austerity policies as well, though although not quite to the same degree as Greece.
And so his op-ed in The Guardian, I think, was sort of an overflowing of his frustration with the situation, and finally he felt in good conscience he had to state what was obviously the case, that there isn’t going to be meaningful reform in the current political environment from within in the Eurozone, and Greece now needed to prepare for an exit. And as you indicated, he characterizes in a rather unflattering way, but with complete justification, the notion that that can be accomplished, reform from within, as a delusion. It is a delusion. And I think the only reasonable prospect that there is going to be reform from within is if a state that has a much more economically significant position within the Eurozone, principally Spain, were to be governed by a party of progressive inclinations, like Podemos. And that could happen later this year. But anything short of Podemos actually seizing full control of the government, rather than having to operate within an unstable coalition, anything short of that is not going to really represent any reasonable prospect of reforming the Eurozone.
PERIES: Now, waiting for Podemos is really not the answer. Greece may have some immediate and urgent matters that they have to deal with by way of paying the current debt.
LASCARIS: That’s absolutely true. Waiting for Podemos is a very dangerous game for Greece at this stage, not only because it might not happen–Podemos might not secure control, complete control of the government in the elections scheduled to occur later this year in Spain–but because Greece has some very significant debt service obligations to satisfy before those elections happen. They have to pay 1.5 billion euros to the IMF this month, a 300 million euro payment that is due this Friday. They have something in the range of 7 billion euros of payments to make on bonds in the summertime. They have 4.5 billion euros of short-term debt to pay before the summer.
And what has happened since the government has come to power is that there has been deposit flight from the Greek banks. They currently have deposit levels that are lower than they have been at any time during the last decade, actually more than a decade. There’s been a collapse in tax revenue. And Costas Lapavitsas is of the view that that’s due partly to the fact that these brutal taxes that have been imposed pursuant to the austerity regime, people are not paying them, the Greeks are not paying them to the same degree as they were previously, in expectation that this government, a more humane government, is going to offer them some tax relief.
So the bottom line is you have a government that’s very squeezed from a financial perspective, a bank executive that’s hanging by a thread, and very significant debt service obligations in the near term, the very short term. And it’s unclear whether Greece can even survive beyond March, whether it can avoid a default, even, within the next several weeks.
So the bottom line is that Greece needs to prepare for a default. That has to be at minimum a plan B if not a plan A.
PERIES: Now, while all this is going on, it appears that the Greek people and their support for SYRIZA and the government has been emboldened. Tell us more about that.
LASCARIS: Well, that’s true, and it’s quite striking that that’s happening in the face of the relentless criticism that SYRIZA is facing from outside of Greece. The most recent poll, which I think came out over the last couple of days, shows that SYRIZA enjoys the support of 41.3 percent of voters. You may recall that in the election it garnered a little more than 36 percent of the popular vote. New Democracy, which I think was in the range of 26 or 27 percent in the election has plummeted to 19 percent or so. SYRIZA’s coalition partner, Independent Greeks, is more or less at the same level that it was at the election. There hasn’t been a dramatic change in that regard.
So the electorate as a whole seems to be quite supportive of the government, increasingly so, despite the difficulties and despite what I think can fairly be characterized as somewhat contradictory messages out of the government and what could fairly be characterized as some very significant concessions on the part of the government in the Eurogroup deal that was struck several days ago.
My sense is that the electorate is of the view that they have a well-intentioned government, a very competent government, but an inexperienced government facing very difficult circumstances, in fact confronted by what is naked blackmail by the ECB and the other two institutions that make up the troika–the IMF and the European Commission. And I think there are particularly–the electorate is particularly reacting well to the fact that this government, whatever difficulties it’s confronting, is willing to speak the truth and is willing to defend the dignity of the voters of Greece and to make it absolutely crystal clear that austerity is a failed policy, that it is counterproductive, even from the narrow perspective of what is necessary to enable Greece to pay its debts. And the mere fact that they’re willing to do that much, that they’re willing to speak the truth, which the prior government was not–the prior government was prepared to dissemble about the real situation–I think that, in and of itself, has garnered a great deal of goodwill from the Greek electorate.
PERIES: So, Dimitri, while SYRIZA should and must prepare for the possibility of a default, some of the divisions, I mean, those who opposed negotiating with the troika and with the finance ministers last week, are they with the government still?
LASCARIS: Well, there certainly are indications of dissent. I think the last time we spoke about the situation in Greece, I mentioned that the minister of infrastructure was reported to have been livid about the fact that the government was going to proceed or apparently going to proceed with the privatization of the power grid operator, although he had stated several weeks earlier that they were not going to do that. There’s also a mine in the north of Greece, a gold mine, which has had very significantly detrimental environmental impacts, and will continue to have detrimental environmental impacts, operated by company, a Canadian company, called El Dorado gold. The government initially stated quite clearly that it was not going to allow that mine to proceed to production. Then there appeared to be a flip-flop on that count, and the government indicated, their spokesman within the government, they were going to allow that to go forward. However, the most recent news about that particular gold mine is that the project hasn’t been canceled, but that the permit for the key facility of the mine to operate is under review. And this has elicited a very strong a negative reaction from this Canadian goldmining company, El Dorado Gold, whose stock price has plummeted.
So there are signs of dissent, certainly, at high levels within the government, but so far there’s not been an open revolt. Under the circumstances, it’s not at all surprising that one would see dissent. These are very stressful circumstances within which an experienced group of politicians is having to operate.
PERIES: And it appears healthy debate is going on by way of Costas Lapavitsas’ comments.
LASCARIS: That’s true. And I’ve seen no indication that the government has tried to prevent Costas from expressing his view candidly, which is, I think, a healthy sign. Right now, perhaps what Greece needs the most and the best it can hope for is to have a healthy debate and try to find the most productive way to navigate through these very difficult circumstances.
PERIES: Dimitri, as always, thank you so much for joining us today.
LASCARIS: Thank you, Sharmini.
PERIES: And thank you for joining us on The Real News Network.
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