Capital Control May Become Necessary in Greece

Avoiding capital flight appears to have support among the people, says Nantina Vgontzas, PhD student at New York University


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

The SYRIZA government in Greece has had a very tough time ever since they came to power on January 25 of this year. Since then, governing has only been getting tougher. After three-week negotiations, Greece has signed an agreement under much duress, getting a loan extension from the E.U. But at what cost? And what is happening within Greece? How are the Greek people feeling about it? How is SYRIZA as a party reacting to all of this is the topic of our next discussion with Nantina Vgontas. Nantina is a sociology PhD student at New York University and involved in the AKNY Greece Solidarity Movement in New York.

Thank you so much for joining us, Nantina.


PERIES: So, Nantina, tell us what is actually going on in Greece within the SYRIZA party in terms of this negotiation.

VGONTAS: Yeah. So the news of the past two weeks since the deal was signed has been this growing internal battle within the party. You know, when the deal was signed on Friday the 20th, the leadership of the party was expecting, or at least had declared its intention, to pass the deal through Parliament in the following week. They held a meeting with their parliamentary team that following Wednesday in what was supposed to be a three-hour meeting. But that actually ended up being an 11 hour meeting, at the end of which Tsipras held kind of an internal vote to see how people felt about the deal. And one-third of the MPs in attendance ended up rejecting it. And it wasn’t just the usual suspects, you know, the institutionalized left wing, known as the Left Platform, but also people who are really clearly associated with the dominant faction. For instance, one of their chief economists, John Milios, even the head of Parliament, Zoi Konstantopoulou, these are key figures in Greek politics at this point who are taking a stand against the deal, because what the deal affords the Greek government, as the leadership has rightly pointed out, is some time so that they can get some antipoverty measures off the ground, so that they can start addressing tax evasion.

But the logic that doing these kind of measures will give them a better bargaining position against the E.U. is something that’s increasingly being called into question.

PERIES: So it’s been called into question for very good reason. While they got an extension on the loan, along with it comes all kinds of payments that are coming due as of this Friday and by the end of the month, and later on this summer, which is large amounts of money, I mean, $1.5 billion to the IMF, 300,000 euros coming due before the end of the month in terms of payments to the E.U., which really prevents SYRIZA and the Greek government from being able to do what they promise to the people.

Now, how is this being received by the people? Earlier, in a conversation with you off-camera, you were referring to some polls. Can you tell us more about that?

VGONTAS: Yeah, sure. So I should point out that we haven’t seen people expressing their opinions on the streets yet. We haven’t seen an uptick in popular mobilizations. And some could say that that would show that people are happy with what’s going on. But in fact, for me, that’s cause for concern. It shows that perhaps this deal, which shows that you can’t get a lot by trying to negotiate within the E.U., might serve as a kind of demobilizing measure.

But let’s look at the facts. So there was a poll that was conducted for a big media group in Greece just a few days ago, and it showed that 70 percent of those who are polled either thought the deal was definitely or probably better than the previous memoranda, though 40 percent as well also noted that it seemed to be an extension, more or less, of the previous memoranda.

I think what’s even more interesting is to look at how people responded to, whether the party should try to pursue a more confrontational approach at the negotiations. And there was actually one figure that stood out to me in particular: 45 percent of the people polled said that they would support a tougher approach at the negotiations even if that meant imposing capital controls.

We should remember that on that Friday, the 20th, one of the big things that was pointed to as placing pressure on the government to make its compromise was that billions of dollars were being taken out of Greek banks, and they would have to resort to measures of imposing capital controls, not allowing people to take money out quickly, perhaps even nationalizing the banks. And it seems to be that there’s growing support for that. There’s even support for, as pointed out by another figure–you know, 40 percent of the people polled said that they would support a tougher approach, even if that meant exitin the Eurozone. And I think this is something that obviously the leadership is grappling with [incompr.] not just something that’s expressed in the polls, but within its own party.

In addition to that meeting that was held last Wednesday, there was then a central committee meeting of SYRIZA, and this was the first one held since they were elected to the power. And an amendment was proposed by the Left Platform rejecting the deal, largely, and 40 percent of the central committee supported that measure. So we’re starting to see again a revisit of the strategic debates within SYRIZA, which is: can they reverse austerity within the Eurozone, or are they going to have to start pulling out the Grexit threat more seriously?

PERIES: And the reference you made to the capital controls and that it is actually supported by, say, a majority of the people, is that because it has had no–in the past it really has had no effect on the government itself in terms of what it’s able to do and not do? And capital controls would largely affect the higher echelons of the class elite in Greece, and therefore not affecting the ordinary people much.

VGONTAS: I think you’ve hit the nail exactly on its head. So I recently wrote an article saying that we should think about SYRIZA’s good euro strategy as something that doesn’t only take into concern the concerns of voters, of ordinary people, but also of investors. And when I’m talking about investors, I mean the domestic elite within Greece. I think they’re still wary of an exit strategy, or, of course, a strategy of imposing capital controls, you know, [incompr.] capital controls. As you said, this is something that would make it very difficult for them to start transferring their money to Swiss banks, to the Cayman Islands, and things like that.

PERIES: And I understand quite a bit has happened. One of the things that the Greek government is faced with now is, in addition to having to pay back these loans, apparently this is the lowest amount of deposits that are in the bank in the last ten years. So already it’s in a very difficult situation. And why has this happened?

VGONTAS: Well, right. Because people were anticipating SYRIZA’s victory since early December, when it seems that they were going to move into elections. It’s not just the 4 billion that were lost two weeks ago; it’s the 20 billion that were lost over the course of two months. And, again, I think people are afraid of SYRIZA taking more drastic measures like imposing capital controls or even exiting the Eurozone.

But also they’re not willing yet to deal with a government that’s going to actually pursue tax reforms. Tax collection has been a problem in Greece since the postwar period. And SYRIZA, one of the key things what that it was elected to do was to bring justice to that. So I think–.

PERIES: And one of the proposed measures is really taxing assets, including what’s in the bank account. Yes?

VGONTAS: Yes, exactly. And I think the party is playing a fine line here with how they’re trying to court capital, basically, right? Because they feel that they need to have support not just from the ordinary people, but from the people who will be investing [incompr.] And so, on the one hand they say that they’re going to tax them, they’re going to tax their assets. But I think one of the key things of remaining in the Eurozone is something to assure the worries of these larger investors.

You know, there have been numerous statements of support by key capitalists in Greece since SYRIZA rose to power. You know, [incompr.] who’s an owner of these big energy plants, the president of the Hellenic British Chamber of Commerce, people like that have said, you know, we welcome, or at least we tolerate, a SYRIZA government because it’s going to finally bring stable investment conditions in our country. So I think they would even be willing to deal with the tax measures if it would finally bring some kind of a political stability that would then increase business confidence in the country. And I think that’s something that’s going to have to be reckoned with as the party starts considering perhaps more radical measures.

PERIES: And what do you think those radical measures are?

VGONTAS: Yeah. So like I said, one of them would have to be when the next round of talks occurs or supervision–you know, in April the institutions–or the troika, it was formally called, you know, the IMF and the ECB, they’re going to review SYRIZA’s budget, basically. And at that point the European Central Bank might be playing some games again. Already today they said that they’re not going to loan money to Greece until they see that they’re complying with the bailout measures. So as those pressures are going to increase again, we’re going to see if the government is going to blink like they did on February 20 or if they’re going to resort to imposing capital controls, nationalizing the banks, and then, lastly, the most radical–not in the ideal ideological sense, but in terms of its economic repercussions, exiting the Eurozone. And, of course, that would have to be accompanied by [incompr.] measures, like controlled evaluation, which would raise import prices, which is one of the reasons that people are weary of it. But at the same time, it would also make Greek exports more competitive. So, like, they’re going to have to retool that kind of logic. But like I said, they’re going to have to retool their overall approach to not just the creditors, but also the domestic elite in Greece.

PERIES: Nantina, can you explain what exiting the euro would mean for a layperson? Because it means reviving the drachma.

VGONTAS: Right. And so that would allow the government to print its own money. So it wouldn’t have to continue down this deflationary spiral that it’s had to continue to within the Eurozone.

But at the same time, like I said, it would make imports much more expensive, and also, in this time of turmoil, perhaps there would be a lot of market speculation. The economy would probably not do well in the short-term. So people wouldn’t have a lot of cash in general. So they won’t have a lot of cash, the imports would be expensive. But like I said, the immediate benefits would be that Greek exports would become more competitive, so you’d start to see kind of an uptick in the economy in that sense. You know, at this point, people aren’t looking to invest in Greece. Greek capital on its own is seeking to leave.

Now, one of the things that I’ve been saying is that not all of Greek capital can leave, not everyone can take their money out of the country, and or at least their businesses. There’s a significant chunk of capital in Greece that’s dependent on airwaves, you know, the contracts that it gets from the government, from media, that’s dependent on real estate, that’s it dependent on stadiums. You know, you have these big-time oligarchs who have these oil businesses, but at the same time they also profit a lot from the football games and things like that. So there’s that section of capital.

And my logic is that in the short term, even if you are going to have these kind of conditions of instability, there’s going to be this sizable pool of investment that the government will now have the ability not only to tax, but to push to invest in more productive activities. And this is something that hasn’t been discussed in development economics and the past 30 years. So what I’m really proposing is that the government start transitioning to a different growth model, or at least discussing this with the people.

I think one thing that SYRIZA did really well was to constantly never capitulate, in that it was going to reverse austerity. It said it very clearly. It said that the debt had to be renegotiated. But I think at the same time it didn’t offer a plan, one, for these more radical measures that might be needed to be taken in the negotiations, but two, if it comes to the point where it might the exiting Eurozone, what’s the plan for the country to again have growth? What would be a different, an alternative model to neoliberalism?

PERIES: Nantina Vgontas, thank you so much for joining us today and spelling out all that the Greek people face in relation to the economy. Thank you so much.

VGONTAS: Thanks for having me.

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


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