Greece Says They Will Meet IMF’s April 9 Deadline for Payment
Dimitri Lascaris and Leo Panitch analyze Syriza's reform proposals and compromises and discuss roadblocks posed by maintenance of European austerity
Dimitri Lascaris and Leo Panitch analyze Syriza's reform proposals and compromises and discuss roadblocks posed by maintenance of European austerity
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to the Real News Network, I’m Paul Jay.
On April 9th, Greece owes the International Monetary Fund around 450 million Euros. That’s about $489 million. Well, in the last couple of days we’ve heard quotes from a senior official in the Greek government saying that, “We’d rather default on the IMF than default on the Greek people,” suggesting there isn’t the money to pay the bill. The interior minister said more or less the same thing.
Well, today being Friday, the vice minister of finance of Greece says that’s true. There is the money to pay, and Greece will make the payment. A lot of contradictory information coming out about all of this.
Now joining us to talk about the current situation and standoff between Greece and the IMF and the Troika of power in Europe, first of all from London, Ontario is Dimitri Lascaris. Dimitri is partner with the Canadian law firm Siskinds, where he heads the firm’s securities class actions practice. He’s also reported from Greece for the Real News Network, and he’s also a board member of the Real News.
Also joining us from Toronto is Leo Panitch. Leo is the Canada research chair in comparative political economy, and a distinguished research professor of political science at York University in Toronto. He’s also the author of the book The Making of Global Capitalism: The Political Economy of American Empire
Thank you both for joining us.
DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER IN CANADA: Hi Paul.
JAY: So Dimitri, could you start us off, what do we know about this loan payment and what does it tell us about the current state of relations between the Syriza Greek government and the Troka of financial power in Europe?
LASCARIS: Well, it first of all just drives home the point that the government is being drip-fed small amounts of money by the ECB, the government of Greece, in order to keep it on a tight leash. And so long as it is determined to avoid default, it is going to remain in a position of dependency which IMF, the ECB and the EC appear to be using rather ruthlessly to force capitulation out of the government.
So far it’s unclear to what extent that strategy has been effective, the strategy of trying to force Syriza to capitulate, and we’d get into that in more detail in a moment. But so long as, as I say, Greece remains determined to continue to service this debt in full, the situation isn’t going to go away.
The 450 million Euro payment that’s due on April 9th is just the first in a series of payments due for the balance of the year. There are billions of Euros of payments to the IMF and EC governments that are going to have to be made in the months ahead. So even if they survive this near-term funding crunch, there are bigger ones on the horizon.
JAY: Leo, there seems to be some dispute or confusion as well about just what Syriza, the government has proposed to Europe, about the reform package they’re willing to accept, and so on. What do we know about it?
LEO PANITCH, PROF. POLITICAL ECONOMY, YORK UNIV.: Well, what they have said is very interesting, is that they’re going to put emphasis on raising revenue from the wealthy, above all those who are engaged in transferring money out of Greece. And insofar as they’re going to meet the budget deficit targets, that they’re primarily going to concentrate on getting the money from there.
In a sense, they have stuck their finger up at the Troika by explicitly saying, far from cutting pensions, that they would increase them. And they say that very explicitly in the reform package that they put forward.
Now I think we need to see how significant this is. It’s important that it’s the IMF because we need to go back here to the third world debt crisis of the 1980s, and remember that from then on, countries that were in debt have been subject to these appalling structural adjustment programs, which involve taking away social expenditure, squeezing the working class, squeezing the poor, in order to protect the wealthy and property. Both domestic property holders, domestic capitalists, and international ones.
At the same time, allowing them to continue to squeeze these governments by opening up capital markets and letting them get out of the country with their wealth.
So what the government here is trying to do is enormously difficult, but is enormously courageous. So I think we need to see this in the context, then, of the extent to which joining the European Union, just like Canada joining NAFTA, was about reinforcing what the IMF was doing vis-a-vis third world countries from the 1980s on.
And the European Union is precisely a structural adjustment straitjacket. What the Greeks have stood up to so far, and we’ll have to see whether they continue to do so, will have to make a break. But what they’ve done with this, even this package of reforms, is in that sense, quite remarkable in standing up to that kind of pressure that goes back now over 30 years.
JAY: Right. Dimitri, in terms of standing up, some of the things in the reform proposal, some of the targets the government has agreed to hit, are not that dissimilar than what the reform package was agreed to by the previous government. I mean, what do you make of the reform package?
LASCARIS: The headline numbers of this package appear to be largely consistent with the agreement of the prior regime, but when you dig down into the detail, you find out some interesting things.
The proposal uses the baseline scenario, primary budget surplus this year of 1.2% of GDP. Now, what I mean by baseline scenario is that’s what they project would happen if there were no fiscal reforms, further fiscal reforms, adopted by the government. And recall that a primary budget surplus requires the government really to restrain spending and increase revenue sources, something which, you know, in an economically rational world, this government wouldn’t even be dreaming of doing, because the economy has been suffering from a punishing depression for a number of years, and deficit spending is what is really called for.
But putting that aside, they estimate that the fiscal reform package that they’ve put forward is going to add on top of 1.2% GDP primary fiscal surplus somewhere between an additional 1.9% and — 2.8%, I should say. So they think that the primary budget surplus could be as high as 3.9% of GDP this year. The target is 3%.
At the low end of their estimates, they think that the primary budget surplus is going to be 3.1%, so they’re estimating that whatever happens, they’re going to exceed, not meet but actually exceed, the 3% target.
So on the surface that’s, from my perspective, bad. Because –
JAY: But Leo’s point is that if they do make that up through increased revenues like collecting taxes, which have been so poorly collected in the past and such, then that’s not so bad.
LASCARIS: I think that’s a fair point. And this is why I was saying at the outset that you have to dig down into these proposals and see exactly how they plan to generate that. So some of the things they’re going to do … they’re going to intensify audits on bank transfers. They’re going to combat illegal trade on oil, tobacco and alcohol. They’re going to impose a luxury tax. They’re going to streamline the income tax code. They’re going to beef up inspections of independent businesses suspected of tax evasion.
These appear to be measures, revenue-generating measures, which are going to be targeted at the wealthy rather than the poor, who have borne the brunt of tax increases to an enormous degree. Have borne the brunt of tax increases imposed under the austerity program thus far.
So I think Leo’s point is a fair one, that when you look at the detail of the proposal, even though the overall result is not one that they should be shooting for, namely, a primary budget surplus, they’re doing it in a way that is I think as humane as they can in the current circumstances.
PANITCH: One needs to understand that ever since the Mitterrand government, which was elected on the most radical program since 1945, the program commune in the beginning of the ’80s. Ever since they were forced to make their U-turn, I mean, either they had to leave Europe, or to give up on their radical Keynesian program during the recession of the early ’80s.
This 3% budget limit for a deficit, which was insisted on by a German social democratic government in the early ’80s, has become the standard for the European Union. That’s how fiscal discipline has been imposed. This is even before the process of European monetary union got going, even before the Euro was adopted, and it’s been consistent.
So what the Greeks are trying to do is stay within that notional framework, which I have to say, the French and the Germans themselves when it suits them don’t hold on to, while trying to do things within the budget that are more progressive, of the kind that Dimitri’s talking about.
But there’s another dimension to what Syriza has called the torture of structural adjustment, and it is above all, when people talk about reform, they mean structural reform of the economy. And when they’re talking about structural reform of the economy, they mean weakening labor int eh labor market. Making it more flexible. Making it more competitive. So that capital can make more profits and be more competitive.
And the remarkable thing about this document they just issued is that it talks about raising the minimum wage, it talks about reinstating collective bargaining and puts that forward as though that will help with productivity and so on. But it doesn’t use these buzzwords of flexibility and competitiveness. This will upset the powers that be that govern global capitalism enormously.
JAY: Perhaps upset enough not to accept the proposals. Dimitri, another big issue, and the conditionality that the previous government agreed to, Syriza government got elected based on that they would not agree to the various conditions. One of the big one was privatization. Where are they at now on that?
PANITCH: They’ve given more ground on that.
LASCARIS: The document, as I read it, commits them to not undoing privatizations that were previously effected. And by the way, the amounts of revenue that were generated by those privatizations was negligible, and vastly below the privatization targets. It was a few billion Euros, I believe.
They’re saying they’re not going to undo those. They’re saying in this document that the ones that are in process will proceed. Now, whether that, that doesn’t necessarily mean that they’re going to exceed, the government will cede to terms it deems to be unfavorable in the privatizations that were in process. It may have flexibility under the rather loose language of this proposal to insist upon superior terms, and the prior government might have insisted upon.
But nevertheless they’re saying that those will proceed, and I think that includes most notably the port in Piraeus, a major holding of the state. So in that regard, it doesn’t appear to –
JAY: But the port, the port is, the port is still on the table for privatization.
.PANITCH: Well, half of it is privatized, and in fact most of it was privatized a long time ago.
LASCARIS: That’s right.
PANITCH: This is about privatizing its management very largely. And they’re not only walking a tightrope here with the Europeans, but also with the Chinese.
So again, what’s significant about this is that the section of the document on privatization begins by saying exactly what Dimitri said, that the privatizations have generated very little money, that they’ve involved shenanigans that never should have been engaged in in terms of the looseness of the contract. They say that they will go ahead with the ones that were in process, but then establish more conditions, including job guarantees, and wage guarantees.
Now, that again gives them significant room to maneuver. Of course, the Europeans realize that, and we’ll have to see whether they therefore think what they put forward about these going ahead will be good enough.
But I must say, the workers of the Piraeus port this week have already signaled, and I think they’re very militant workers, have signaled that they’re very upset about even discussions going ahead with the Chinese with regard to continuing the remainder, the management portion of the privatization of the port.
So you know, there’s pressure from the other side, from the base, as well, which they will have to face.
JAY: Yeah, there’s even talk of a strike, wasn’t there?
PANITCH: Yeah, there is. Yeah.
JAY: Dimitri, Leo raised the point about the issue of a higher minimum wage, not lowering pensions. Of course, Germany, the European financial powers, they have yet to agree with this. And seems to me the whole point of this drama, the showdown, is that Germany is going to show Greece and Europe that Syriza cannot create any sense of optimism in the European left, that there’s going to be some major changes here.
Which means, I don’t even see how they do agree. Even if it’s not even that much money on the issue of pensions and ages, because that’s kind of the whole raison d’etre of the thing, is to lower ages, and lower the social safety net.
LASCARIS: Yeah. In fact, I think Leo may have left out one thing which could prove to be the greatest irritant of all to the German government, and that is for, I understand the proposal includes a proposal to raise pensions for the poorest members of the workforce, not just to refrain from lowering them.
And you know, and there’s a lot of bombastic talk and has been over the years in the austerity bloc in the Eurozone about the wealthier countries paying the pensions of poor countries. Greece has a relatively large pension obligation for a country of its size. So what’s lost in the discussion is that’s largely due to an aging population, rather than rich pensions, per se.
But you’re right, Paul. At the end of the day, it’s hard to see how the German government, the Finnish government, the almost fanatical Rajoy government in Spain — fanatical in terms of its preference for austerity — are going to stomach any of these relatively humane measures, given their larger objective of ensuring that this doesn’t start a cascade of departures from the austerity regime and doesn’t start a cascade of requests for debt relief.
JAY: Also, not only that, but I think it maybe is important, give such encouragement in the electoral, big elections to come. Podemos, it would greatly strengthen Podemos’ election prospects in Spain. The more left-socialist in Portugal. It could have a really domino effect, electorally if Greece, Syriza is successful, even in a small way, I would think.
LASCARIS: Absolutely. The Spanish economy is the fourth largest economy in the Eurozone. And if it were being governed by a party like Podemos, the German government would have a great deal of difficulty forcing it to capitulate to the same degree it can force the government of a much smaller economy, that of Greece, for example, to capitulate.
What’s interesting about the way the game is being played at the same time, and what we haven’t talked about, is that the same time as these proposals are being considered by the Eurogroup and the Troika, there are apparently members of the, senior members of the government have gone to Ambrose Evans Pritchard at the Telegraph, and have reported to him — and this was set forth in an article that Evans Pritchard published yesterday late last night — that Greece is drawing up plans for a return to the Drachma, the nationalization of the banking system, the imposition of capital controls.
Whether this is being done, because there are factions within Syriza that are rebelling against the constraints of the Eurozone, or whether this is a coordinate strategy to couple a rather humane proposal, a relatively humane proposal, with threats of an exit, that’s not clear. But these threats are now coming out of the government.
I think that’s a change. They’ve been refraining from making threats of that nature in the past. So at the end of the day, that is, I think, the only thing that might possibly bring the Troika to heel here, and get them to accede to something along the lines of what’s being proposed.
JAY: Leo, it seems like the Drachma proposal might even be like a dual, a dual-currency system, if I’m understanding it correctly, that internally they might use the Drachma but there wouldn’t actually be a formal exit from the Euro. Although they might be forced to.
PANITCH: There actually was a story on April 1st, I don’t know if it was an April Fool’s joke or not, that Varoufakis had talked about using Bitcoin as the Greek currency. And I sent that on to some Greek friends of mine asking if there was evidence in the Greek press that it was the case or was an April Fool’s joke. I haven’t had a reply.
But this is something they obviously have had in their back pockets all along. I was told back in 2012 that there was a plan B by economists who were close to Syriza. I didn’t know how deep they had actually put much planning into this.
But the IMF has had a plan since 2012 for bringing back the Drachma. That’s one of the things the IMF does. It needs to manage this type of withdrawal, because of all the contracts that would have to be reconstructed in the international arena. Financial contracts, trade contracts, et cetera. So the plan is not just there on the Greek side. It’s there on the international capitalist side.
Those kinds of noises reflect the class struggle. I mean, what we’re seeing here, it’s not just the Piraeus workers going on strike that’s the class struggle. We’re seeing a class struggle being played out at the level of the state in Europe. And even more broadly, insofar as the IMF’s involved. It isn’t just the example, as you were saying, in Europe that’s important here, it’s the example worldwide.
So ti’s very significant, very, very interesting, very important.
I do want to say one other thing in relation to this, and that the most important thing that may be going on is that the European central bank is not allowing the Greek central bank to issue treasury bonds. Which only Greek banks will buy now. And insofar as to not allowing the Greek central bank to issue treasury bonds, then they can’t roll over the treasury bond debt that comes due much more rapidly than any other debt. Because it’s short-term. This is the way in which they are drip-feeding.
Noises were made by the head of the German Bundesbank of a tough kind in the last few days, and that’s a signal to the European Central Bank to keep doing this. And people may have noticed that one member of Merkel’s government, a member of the Bundestag, has left that party. That caucus. Because he thinks that they’re being too easy on the Greeks.
All of this is playing out as the class struggle. Inside Germany, inside Greece, and at Europe generally. And you know, we’ll have to see how it plays out, but there’s enormous implications here.
JAY: All right. Thank you both for joining us.
LASCARIS: Thank you, Paul.
JAY: And thank you for joining us on the Real News Network.
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