New Greek Finance Minister a Change in Style, Not Substance

Dimitri Lascaris says the Troika is sending the message to Syriza that despite the vote of the Greek people, the only options are complete capitulation or exit from the Eurozone

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SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to the Real News Network. I’m Sharmini Peries coming to you from Baltimore.

Greek voters delivered a resounding rebuke to austerity on Sunday when over 61 percent voted no to the proposal on the table for more austerity by its lenders. It is testimony to the resilience of the Greek people. And on Monday morning when we woke up, we woke up to the resignation of former finance minister Yanis Varoufakis. And by the afternoon a new Greek finance minister was sworn in, Euclid Tsakolotos.

Here to discuss the latest developments is Dimitri Lascaris. He is a partner with the Canadian law firm Siskinds, where he heads the firm’s securities class actions practice. He has been reporting and analyzing the Greek economy for the Real News Network on a regular basis since the election of Syriza. Dimitri, thank you so much for joining us.

DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER IN CANADA: Good to be back, Sharmini.

PERIES: So Yanis Varoufakis had initially said he would resign if the vote was yes, but the vote was clearly no. So then why did he resign?

LASCARIS: Well, I don’t think any of us is going to know that for some time to come. I mean, there’s several theories that have been circulating. One is on the weekend he had an interview with Ambrose Evans Pritchard of the Telegraph in which he, Minister–or ex-minister Varoufakis raised the possibility of issuing a parallel currency. And some in the European mainstream press have speculated that that was a bridge too far for Prime Minister Tsipras because it suggested potentially the laying of the groundwork for a return to the drachma, which is something that is, has been heresy to the leadership of Syriza until now.

I find it difficult to believe that that is the reason. Other members of the party have come out quite forcefully, including Costas Lapavitsas, for a return to the Euro without any significant consequences. So that seems to be, especially at this particular point in time when Greece has had this historic–.

PERIES: You mean a return to the drachma.

LASCARIS: A return to the drachma, sorry. And especially the moment where Greece is having the, is enjoying a historic oxhi vote, it seems that that transgression, if in fact it was a transgression in the eyes of the prime minister, it seems unlikely that that would have been enough to precipitate a request for his resignation.

The other, of course, the more popular theory is that he has ruffled so many feathers amongst the leaders and the finance ministers of the Eurogroup that it was perceived that he could not possibly be an effective negotiator going forward. I think that’s a more likely explanation.

When I first heard the news of his resignation this morning the thought that came immediately to mind, and I have to confess, this is speculation on my part. Was that as soon as it became clear that the oxhi vote was going to prevail and resoundingly so, the Greek government received an overture in which it was indicated that finally there was going to be a serious discussion about debt relief for Greece, which was a huge sticking point. But that that offer, that olive branch was coupled with the demand that Varoufakis step down.

Again, that’s just speculation on my part. But given the events that have unfolded in the last several hours, I’m finding it very difficult to believe that there was any olive branch at all extended to the Greek government. So it’s difficult to understand exactly why ex-Minister Varoufakis departed at this moment.

PERIES: And Dimitri, what do we know about the new finance minister?

LASCARIS: Well, Euclid Tsakalotos I think shares to a very great extent the views of ex-Minister Varoufakis on the causes of the crisis. I think his view would be, and I’m simplifying it, that structural flaws within the Eurozone are largely responsible for this crisis. That austerity has been a disaster for the country, and is a slow-motion disaster for other countries in the Eurozone that have experienced a somewhat less extremist version of austerity. He is an Oxford-educated academic.

The main difference between the two of them appears to be stylistic, which is, Minister Tsakalotos has a low-key, professorial approach to his interactions with other, his counterparts in the Eurogroup. And is not likely based on his behavior to date–he has been involved in the negotiations, heavily so and increasingly so. He’s described as the brains behind Syriza’s economic policy. But he’s kept a very low profile, and is not prone to make statements which exacerbate tensions between the Eurogroup, finance ministers, and leaders and those of the Greek government. So I think principally, it appears that the difference is one of style rather than substance.

PERIES: So Dimitri, what’s going to happen now the vote is clear and I understand that the IMF is making some overtures towards perhaps a haircut in lending more money to Greek treasury. What do you think of that? And what are the tough negotiations ahead?

LASCARIS: Well, the IMF–Christine Lagarde today stated that the IMF stood ready, it was monitoring the situation closely and stood ready to provide assistance to Greece as necessary. I’m paraphrasing. But that was the gist of the message.

Let’s recall that this message is being communicated in the context of a rupture, a very serious rupture between the IMF and the Eurozone. The Eurozone governments are loathe to give Greece any debt relief despite an almost universal recognition that Greece’s debt is unsustainable. And the IMF has become increasingly vociferous about the need for debt relief. So that is the background in which the statement was made. It’s difficult to see how the IMF could provide emergency assistance to Greece because the only debt on which Greece has technically defaulted to date is its debt to the IMF. It’s not yet defaulted on its debt to the ECB, or to the Eurogroup, the Eurogroup governments.

But that said, following the publication of the vote yesterday in which it became clear that oxhi was the position supported by the vast majority of the Greek population, the ministers, various ministers of the Eurozone government, governments came forward and said that they thought that the result had actually complicated matters. Had not clarified matters, had not facilitated a resolution. Angela Merkel flew to Paris. She met with Francois Hollande, the French president. They didn’t make any meaningful statements after their meeting.

And then the hammer came down on Greece, which is to say that the European Central Bank, which has been providing a lifeline to the Greek banking system, effectively by increasing the discounts that are applied on the collateral that the Greek banks give to the ECB in exchange for emergency loans, effectively what the ECB did this afternoon was it shortened to an unknown degree the amount of time the Greeks banks have before they collapse.

And so this has placed the government, despite its very strong mandate for an anti-austerity resolution, in an extremely difficult position. And I think that the message that’s being sent is that despite the vote of the Greek people the options available to the Greek government are either complete capitulation or an exit from the Eurozone.

PERIES: And what does this mean to the people on the ground? The banks remain closed up to Wednesday so far. And people are having difficulty getting any cash out, and obviously affecting their livelihood in a serious way. What is going to happen on the ground?

LASCARIS: Well if a bank fails, then there isn’t going to be any money being available for withdrawal from that bank. And at that stage, the Greek government–if the banks begin to fail and they can’t even provide the limited funds that they’re permitted to provide to their clients under the capital controls, the options available to the Greek bank, effectively, are nationalizing the banks and beginning to issue a parallel currency, which is almost certainly going to be devalued very significantly in short order. So the value of the holdings of the clients of these banks would fall potentially precipitously if the Greek banking system fails. And this would ultimately be a big step on the road to a full exit by Greece from the Eurozone and all that that entails.

From my perspective, given the reaction, the rather uncharitable and ruthless reaction of the Eurozone to what was a clear mandate, a clear anti-austerity mandate for the Greek government, it is absolutely imperative that the Greek government begin to take steps to prepare for an exit from the Eurozone.

Either that or it’s capitulation, which I think is something that would likely cause immense social unrest, given the level of support for the anti-austerity position of the government that was expressed yesterday.

PERIES: And do you think the leadership of Syriza is prepared for this, and also for dealing with the potential collapse in the banking system in Greece, as well as trying to deal with issuing a new currency?

LASCARIS: Regrettably I have seen no signs that they are adequately prepared for that eventuality. The one or two rays of hope are that, as I said, the IMF has indicated a willingness to provide humanitarian assistance. And to his credit, and I rarely have good things to say about the finance minister of Germany, Wolfgang Schauble, but he has talked in recent days about providing humanitarian assistance to Greece in the event that the worst comes to pass.

I think there will be some level of humanitarian assistance to maintain order and a minimum level of social assistance. Very minimal level of social assistance during the transition to the drachma. I’m hopeful that that’s the case. But I must say that there are few signs that the Greek government has embarked upon the extraordinarily complicated task of effecting a transition from the Euro to a new currency.

PERIES: Dimitri Lascaris, I thank you for joining us. I also want to draw the attention of our audience who’s interested in Greece, we have several new interviews up. One with Heiner Flassbeck, who wrote the book Against the Troika, as well as the Greek Member of Parliament Costas Lapavitsas. Those will all be up on our site. Please watch.

And Dimitri, we look forward to your next report tomorrow.

LASCARIS: Thanks, Sharmini.

PERIES: And thank you for joining us on the Real News Network.

End

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