Will the Greek Referendum Bring the Troika Back to the Bargaining Table? (2/2)
Dimitri Lascaris and Leo Panitch discuss the possible consequences of a ‘no’ vote in the July 5th referendum on the bailout conditions offered by international creditors
JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
Big news coming out of Greece over the weekend. The Greek prime minister announced that the country will be holding a referendum vote on whether to accept the bailout measures offered by international creditors. If the majority of Greeks vote no, that could mean that Greece would potentially leave the Euro and go back to its previous currency, the drachma. The referendum vote is scheduled for July 5, and in light of all this news Greek banks are closed for a week.
Now joining us to give us their take on the issue are our two guests. Joining us from London, Ontario is Dimitri Lascaris. Dimitri is a partner with the Canadian law firm of Siskinds where he heads the firm’s securities class actions practice. He’s also a board member for The Real News.
Also joining us is Leo Panitch. Leo is a research professor of political science at York University in Toronto, and he’s the author of the book The Making of Global Capitalism: The Political Economy of American Empire.
Thank you both for joining us.
LEO PANITCH, PROF. OF POLITICAL SCIENCE, YORK UNIVERSITY: Morning, Jessica.
DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER, CANADA: Thank you.
DESVARIEUX: So Dimitri, I’ll start off with you. Can you just lay out for us specific conditions of this bailout, and who is really being bailed out?
LASCARIS: Well the moneys that would be advanced under this bailout would be used primarily if not exclusively to pay Greece’s creditors, which are the IMF, primarily the IMF, the ECB, the European Central Bank, and the other member states of the Eurozone. So this would constitute in effect, if the Greek government accepted it, a continuation of the game of extend and pretend, which is what the Eurozone and the Greek government have been playing for several years, now.
In terms of the main points of the deal that was put on the table by the Troika and the last offer that was put on the table by Greece, they surprisingly are in agreement on what is probably the most fundamental issue, and that is the primary surplus. That’s the budgetary result before interest payments on the debt. And the Greek government was prepared to agree to a 1 percent primary budget surplus this year, 2 percent next year, 3 percent in 2017, and 3.5 percent from 2018-2022. those would require very harsh forms of austerity to be imposed on the populace.
But they couldn’t come to an agreement because the method by which the Greek government proposed to get to those primary surpluses was not deemed to be credible by the IMF, the ECB and the EC. Specifically some of the things the Greek government wanted to do to which they objected was the Greek government wanted to raise the corporate tax rate from 26 percent to 29 percent. They wanted it only to go up to 28 percent. The Greek government wanted to impose a one-time tax on corporations, I believe it was about 12 percent of net income. The Troika objected to that. And the Greek government wanted not to decrease pension expenditure as much as the Troika wanted, and also did not want to raise VAT, consumption taxes to the degree the Troika wanted.
And the interesting part of all this is that the justification given by the Troika for rejecting the Greek government’s approach is that it would hurt the economy. And they wanted to shift the burden from corporations onto consumers and pensioners, because they thought too much burden on corporations would hurt the economy. Which is kind of, to be completely blunt about it, laughable. Because the austerity program has destroyed the economy. If they were so concerned about the preservation of the economy they wouldn’t have imposed that program on Greece to begin with.
DESVARIEUX: Well, let’s talk about some of the reaction of this referendum vote. We have Chancellor Angela Merkel from Germany coming out saying if the Greek people decide to vote no on this bailout deal that essentially that could mean that Greece will no longer be in the Eurozone.
Leo, can you talk about some real consequences for the majority of Greek people? If they decide to vote no on this referendum, what is that going to mean for them?
PANITCH: Well, first thing you have to understand is that the premise of Syriza, the Syriza government all along, and Varoufakis said this in his speech on the weekend to the European leaders, was that there is no basis under European treaties and European law for Merkel to actually do what she says she would do if the outcome of the referendum went the way that the Syriza government wants it to go, that is, a no vote. There is no basis in law, or under European treaties to exclude somebody from the Euro peremptorily. There is a procedure for kicking people out of the European Union or exiting the European Union, but that’s different from the Eurozone.
So in that sense, they are not putting this forward as leaving the Euro. And were they to win this, and I think they will win it with the no vote, I’m almost sure they will, they will expect this to lead to further bargaining.
That said, of course, people will see this as, you know, it wouldn’t be the first time that governments didn’t adhere to the international treaties they signed. When especially, as Dimitri just said, when who they’re defending are the interests of capitalists inside Greece and outside Greece. And if it comes to it they’ll break treaties. Nevertheless, that is not what the government’s proposing, and it may not–it won’t be easy to happen. I think that’s important to understand.
I think that the greater concern is not in our out. One poll done last week showed that 40 percent of Greeks now want to be out of the Euro. Others have a lower figure than that. I don’t think that’s it. I think it’s just that the banking system will seize up. And if it were me or you, and nothing to do with whether you support the government or not support the government, you need to be able to survive this week. You would have been trying to take some money out of the ATM this weekend.
DESVARIEUX: Well, I’m going to actually pose that question to you guys. How would you vote, Dimitri? Would you vote no for this referendum?
LASCARIS: I would vote no, and I would vote no with the hope, not the expectation, that the Troika would come back to the table and come to their senses, and that would mean substantially relaxing the austerity demands that they’ve put to the Greek government. And primarily offering real debt relief, because it’s widely acknowledge that Greece’s debt is unsustainable, and it’s eventually going to default. And in the interim the Greek people are going to suffer greatly the more they try to service this debt. So that would be my hope.
I think the reality is that those concessions will not be forthcoming, and they’re going to cut Greece adrift, hopefully offer it some humanitarian aid so that it can get through the banking crisis, and leave it to its own devices. I think that’s most likely to be the outcome. But if the choice is between that and continuing the suffocating austerity program, I would unhesitatingly vote no.
DESVARIEUX: Leo, just really quickly, your take. Would you vote no?
PANITCH: Of course. And it’s a matter of solidarity with people who are in this chaos of contemporary capitalism trying to offer an alternative way out.
That said, I think beyond this, I think even a arrangement whereby some of the debt would be forgiven or postponed is not enough to get Greece out of the depression that it’s in, that it’s been thrown into through this European crisis. There has to be some means of kickstarting investment. And with the struggle around, this is partly about whether they’re going to be bribing capitalists to invest in Greece, which they’re not keen to do, or whether you’re going to find some means of doing that through democratic economic planning.
DESVARIEUX: Okay. Let’s pause the conversation here. In part two we’ll talk about if they were to vote no what is that going to look like, what are some real consequences for the Greek people. But Leo and Dimitri, thank you both for joining us.
LASCARIS: Thank you.
PANITCH: [Inaud.] Jessica.
DESVARIEUX: And thank you for joining us on The Real News Network.
JESSICA DESVARIEUX, PRODUCER, TRNN: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore. We’re continuing our conversation with Leo Panitch and Dimitri Lascaris over the referendum vote that’s supposed to be held July 5 over the bailout package that was presented to Greece.
So I’m going to start off with you, Leo. If the majority of Greeks vote no on this bailout proposal, that could mean that they’re out of the Eurozone, according to Chancellor Angela Merkel. But is Syriza prepared to make this transition to using another currency, the drachma?
LEO PANITCH, PROF. OF POLITICAL SCIENCE, YORK UNIVERSITY: Well, it’s not going to be on the tomorrow that they’ll be out of the Eurozone. I think the question is whether the banks are solvent, and whether the European Central Bank does anything to keep them solvent, regardless of the outcome of the referendum.
I would imagine now that there are plans afoot to figure out what to do. You know, people speak in terms of a parallel currency, which would be denominated in terms of Euros. I’m sure that there are plans like that. But this isn’t something that you can introduce immediately. This will take, have to take a form if the banking system is not functional of figuring out how to pay the Greek government’s debts, what it owes in wages, what it owes in benefits to pension recipients, et cetera. So all of that is up in the air. And none of that is by any means clear.
At the moment I want to stress that their position is that they’re in the Euro and there’s no way to kick them out of the Euro. And they will come back after a no vote with that position. And no one’s clear that that will end things. I think that the Europeans will probably respond in a way that will not realize their course, the position they’re taking is this threat. But I don’t know that that will be immediately implemented.
DESVARIEUX: Dimitri, how is this issue being framed in the Greek press?
DIMITRI LASCARIS, SECURITIES CLASS ACTIONS LAWYER, CANADA: Well, one has to recall that the Greek press is dominated by the oligarchy. They own the vast majority of the newspapers. The oligarchy has a vested interest in keeping Greece in the Eurozone, in no small part because many members of the oligarchy have debts denominated in Euros, and if Greece switches to the drachma and devaluates they will be hard-pressed to service those debts, and there may be failures in the business community. There almost certainly will be.
So they, you know, the newspapers they control, not surprisingly, are characterizing this as a vote on remaining within the Eurozone and predict an [Greek ocalypse], if you’ll excuse me–I can’t even pronounce that word. An apocalypse from an economic perspective for the Greek people if in fact they vote no and precipitate an exit from the Eurozone.
One newspaper which is very sympathetic to the governing party Syriza, the [Avgi], has bucked the trend and has come out very forcefully in favor of a no vote. In terms of where the public currently stands, I haven’t seen any, I think, really authoritative polls. There was one done by a right-wing newspaper called Protothema which claimed that 57 percent of respondents were going to vote yes. And then there was one done by a left-wing newspaper, but one that’s not particularly sympathetic to the governing party, which found that 47 percent of respondents would vote yes.
I think not a lot of weight can be attached to those polls. And the situation is very fluid, and of course the imposition of capital controls is going to have a, I think a potentially decisive effect on the way people will vote, ultimately.
DESVARIEUX: But markets are certainly reacting to this vote, this announcement of this referendum vote. I want to ask you, Leo, how are Americans dealing with this? I’m talking about the American leadership, the American elite, the bankers of America. How are they approaching this Greek financial crisis?
PANITCH: Well, Obama and the Treasury Secretary Jack Lew were on the horn to Merkel, and [incompr.] other people in the European Union over the weekend saying look, you’ve got to concentrate your minds to get a deal here. I think they’re very concerned of the geopolitical fallout of Greece being kicked out of Europe, out of the capitalist world, if you like. I think they’re also concerned about the fallout in terms of the international financial system.
They’re above all concern, perhaps, about the example that capital controls set. We on the left should be very in favor of capital controls. Not only capital controls of flows in and out of the country, but capital controls over what’s invested, how it’s invested, where it’s invested and what kind of production goes on.
DESVARIEUX: Leo, can you just give our viewers an example of capital controls, for those that don’t understand it?
PANITCH: Well, essentially they usually are thought of in terms of–I lived under them. They were very common in the whole post-war era. When you want to take money out of the country, you can’t do it without getting a license over a certain amount of money, and that’s usually relatively low. And that applies to people who are trading, importing and exporting, that’s people who are going on vacation, et cetera.
But beyond that–and of course the whole principle of what we understand by globalization, the whole principle of what all of the international agreements around free trade, et cetera, are fundamentally about are about the free movement of capital. And therefore, what is at issue here and why the American state has been so central to globalization, is so concerned, is whether an example will be set whereby democratically elected governments will be able to assert control over the economy.
DESVARIEUX: Okay. Leo Panitch and Dimitri Lascaris, we’ll certainly be keeping track of this vote, and we’ll certainly have you guys back on later on in the week. Thank you both for joining us.
LASCARIS: Thank you.
PANITCH: Happy to talk to you, Jessica.
DESVARIEUX: 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.