What should Greece do? Part 2

In my last post I looked at political problems of Greece’s national debt and the argument against Greece paying the debt. Now I will address the implications of Greece leaving the Euro.

From the interviews with many Syriza supporters in Theopi Skarlatos and Paul Mason’s film #ThisIsACoup, I got the impression that this is what Syriza’s supporters want them to do. They feel that Greece has been humiliated by its creditors and they want Syriza to stand up for Greece. Whenever Syriza make a deal to with Greece’s creditors, Syriza supporters say they feel betrayed by the party they voted for.

The reason why Greece cannot default on its debt is because its economy would collapse. As has been said before, the majority of the Greek national debt is propping up Greek banks. If Greece defaults on its debt it would have to leave the Euro, and if it left the Euro then the EU would stop lending to Greek banks. This will cause them to collapse. In today’s finance based neo-liberal economy no country can survive the collapse of its banking sector, people would lose all their savings and their homes. So defaulting on its debts would mean economic armageddon for the Greek people. Understandably this is something Syriza want to avoid.

One of the points that Theopi Skarlatos and Paul Mason’s film makes is that Syriza’s mistake was playing for time. They argue for an extension on Greece’s debt while they renegotiate their position. During this time Greek banks have become more dependent on EU lending. Syriza could have got out of the debt if they had defaulted earlier, perhaps as soon as they had taken power, but by the time the negotiations were concluded it was clear that defaulting on Greece’s debt was not an option.

Another reason for Greece to not default on its debt is that it would take around 12 months for Greece to set up a new national currency to replace the Euro. If Greece started to lay plans to leave the Euro in 12 months time, it would be discovered and would mean announcing that Greece planned to default on its debts. This would create a panic, all assets would be removed from Greece by investors and creditors and the economy would collapse sooner. Leaving the Euro and/or defaulting on its debt would ruin the Greek economy and is not an option.

If paying the debt, or defaulting, are not options then a compromise will have to be reached. A compromise where Greece pays some of its debt but not all of it. After watching the film I think this is the solution that Syriza want and is the most sensible.

The only problem with this approach is that the EU does not want to compromise. Throughout the film the EU refuse to allow any amount of Greece’s crippling debt to be written off. After Syriza’s first debt extension, the EU demands that Greece pass a law saying the EU could veto any future Greek laws, which only increases their power over Greece. Later Syriza wanted to give free food to the poor and the old, but the EU used their power veto this. Clearly the EU were only interested in putting as much pressure onto Greece as possible so that they would pay the debt back. However, as discussed above this debt was illegal and practically cannot be paid back.

In the absence of a compromise, and faced with two impossible options, the negotiations between Syriza and Greece’s creditors do not lead to a resolution. The film shows Greek Prime Minister and Syriza leader Alexis Tsipras looking increasingly tired as he tries to find a way out of this impossible bind, even resorting to calling a referendum and a snap election to give the Greek people as much say as possible in the future of their country.

The film ends after the second general election victory for Syriza in September 2015. Since then there has been no clear solution to the problem of Greece’s debt. The film ends with the gloomy implication that if Syriza fail to resolve the problem in a way that is satisfactory to the Greek people then we do not know where the anger that drove Syriza to power will go next. If it becomes support for neo-Nazi party Golden Dawn, then the implications for the whole of Europe are terrifying.

From watching this film I initially thought that Greece should default on its debt because it was crippling its economy and the EU had no interest in compromising. After thinking about issues and listening to the Q&A with Theopi Skarlatos and Paul Mason, I realised that this was not possible. A compromise between the EU and Syriza is the only viable resolution to this situation, which has grown worse with the arrival of hundreds of thousands of migrants and the possibility of a Nazi takeover in Greece. Surely the EU does not want to see a Nazi government in control of so many vulnerable immigrants, so they will have to compromise with Syriza. The Greek national debt is still a live issue and we need to remember the possibility of a fascist regime with a million non-White immigrants is a real possibility and should be avoided at all costs.

Syriza are up against forces much more powerful than themselves and they are hampered by the fact that their own supporters are not always in favour of what they do - although so far their electoral support remains strong. I have a lot of respect for Alexis Tsipras and the other leaders of Syriza who are faced with such a mammoth task. I believe they do have the best interests of the Greek people at heart and are trying to work towards a realistic and workable compromise. Hopefully they can succeed, because I am very frightened of the implications if they fail.