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24 July, 2015

Lapavitsas: A plan to exit this disastrous monetary union exists

Key parts from the speech at the Democracy Rising conference recently held in Athens

The Syriza government has just signed up to a new bailout agreement. This bailout agreement is a very bad deal. It's a very bad deal for clear reasons which I will enumerate.

First of all, the agreement is recessionary. It's going to make the Greek economy go into recession. Because tax increments alone annually come to 2 percent of GDP. This tax imposition is mostly on VAT, indirect tax, imposed on goods consumed by mostly the laboring layers of the population. Taxes have also been increased on enterprises, and they're going to hit small and medium businesses primarily, which are the backbone, still, of the Greek economy. Taxes have also been imposed on agriculture, and they're probably the most severe increase in taxes, doubling the income tax for farmers and imposing a raft of other obligations on them.

So there's no question these measures are recessionary, and they're taken exactly the moment when the Greek economy is teetering over the edge of recession. So it's going to be tipped into recession, for sure.

Second, the deal imposes measures which are clearly unequal. They're going to intensify inequality in this country. Don't let anyone tell you that these measures will not exacerbate inequality in this country. Because of course the bulk of tax revenue will come from indirect taxes which are by definition inequality-inducing. Inequality will increase because the measures will take away 800 million Euros annually from pensions. So they will impose a significant burden on pensioners, who are typically among the poorest layers of the population. Inequality will also increase because, of course, unemployment will again rise this year and next.

The measures and the agreement is also bad because it will do nothing for the national debt. There is no restructuring of the debt. It is a replacement of some of the debt denominated under some category into another. There might be some marginal benefit in terms of interest rates and duration of the debt, but that is marginal. And debt will definitely increase by 20-25 billion to recapitalize the banks. The IMF expects debt to GDP ratio to go up to 200 percent next year, and that is, so that is most likely what is going to happen.

Fourth, the measures will do nothing for development. There is nothing developmental in these measures. The so-called package of 35 billion Euros doesn't exist. These are moneys that already have been alloted to Greece in the various funds of the--there's no new money in this. We don't know when it will accrue and how to Greece. There is no developmental angle to this.

Finally, the deal is quite clearly neocolonial. The government of the left has signed up Greece to a neocolonial agreement.

And it is--it is neocolonial for many reasons. I will mention three. First, the deal proposes the establishment of a privatization fund of 50 billion Euros which will basically sell public property under foreign management. 25 billion of that, the first 25 billion, will go to the banks by the agreement. If there's anything left, and there won't be anything left because they'll never make 50 billion, it might go to repaying the debt and possibly to investment. Essentially, then, this fund will sell what it can of public property to recapitalize the banks. We've just agreed the deal that sells the family silver to recapitalize the failed Greek banks.

We've also agreed to reforms of civil administration managed by the EU. We've also agreed to monitoring, and this monitoring will be very severe and it will last a lot longer than the three years that this deal will last.

To me this deal as it stands represents a disastrous capitulation. This is not Brest-Litovsk. Those of you who think that this is Brest-Litovsk are making a mistake. This is not gaining time to establish Bolshevik power in Moscow and Leningrad. This is not--this is not gaining time. There is no time to be gained. Time works in favor of the enemy in this context, and this is not a tactical maneuver. This is putting the country down a path which has only one exit. And that exit is not in the interest of people's rights.

The real winner of this deal is obvious. It's staring you in the face. The real winner is the Greek oligarchy expressed in the mass media. That's why the mass media are thriving and celebrating [a win].

Sometimes reality is what it appears to be. You don't have to look beyond the surface. If you read the big Greek press and if you listen to the media you know who has won.

Why, then? Why this capitulation? Why have we come to this after all the enthusiasm of six months ago? After all the, the surge of grassroots support in this country and in Europe? Why, why this? The answer is clear to me. And it has to do with the wrong strategy, that was good enough to win elections, to triumph over elections, but it proved disastrous in government. Wrong strategy that has collapsed. That's the reason for it. What is this wrong strategy? It's very simple, expressed openly time and time again. We will achieve radical change in Greece, radical change in Europe, and we will do it within the Eurozone. That was the strategy. Well, that's not possible, period. That's not possible. That's the lesson of the last few months. This is simply not possible.

... the monetary union in which, to which Greece belongs, is not ideological. I mean, it is, but it isn't just ideology. And it isn't just a balance of forces. It is an institutional mechanism. The sooner the Greeks understand this, the better for all of us. It is an institutional mechanism, it is a monetary union that's, it's a hierarchical body that works in the interests of big business and in the interests of a few countries within it. That's what the EMU is. It's a failed monetary union, historically. And the failure is manifest in the case of Greece. Greece has been ruined by the monetary union. And the more it clings on to its membership in the union, the more it destroys its own people and its own society. This is a very long, established thing in the history of monetary unions. It's just that every time people refuse to see it.

That's what the left has failed to recognize in Europe and in Greece. The mechanisms of the European monetary union are a reified class practice. That's what they are. You can't change them because you've got, you've won a vote in Greece. It's impossible to do. You can't change them because you'll get Podemos in Spain. It's not possible to do. Either you break the whole thing or you accept it as it is. And that has been shown to be.

What we need to do is to withdraw our consent to this agreement. To withdraw our consent to this agreement. And to redesign a radical program that is consistent with our values, our aims, and what we've told to the Greek people all this time, all these years. And that radical program is impossible without Euro exit. The only thing that we really need to do is focus on developing a plan for Euro exit that will allow us to implement our program. It is so obvious I'm amazed that people still don't see it after five months of failed negotiations.

Now, do we have the forces for this? We do. We do because the referendum, which said no so powerfully, showed two things. The first thing that it showed is that the Euro is a class issue. It isn't some impersonal form of money. As I said to you, it crystallizes and encapsulates class relations. And people have instinctively understood it. The rich voted yes, the poor voted no in the referendum, period.

The second thing that the referendum showed, and that's a massive change, the first time we've seen this during the last five years is that the youth of Greece have at last spoken. Most of us have been waiting for the youth to say something. Something. And it--that youth that is so European in outlook, so educated, presumably so far away from all these dinosaurs of the extreme left that believe in Marx and all these other people, that youth of Greece that travels on Erasmus programs and goes here and there and everywhere, 80 percent of it said no. And that is the basis for a radical line, for a different line for Syriza today. And if we say yes, and if we maintain the yes, we will lose the youth. I'm sure of it.

You mustn't think that there's been no plan of how to exit this disastrous monetary union and implement a radical strategy. A plan exists. It's just never been used. And never been developed, never been further studied. The plan needs developing and the plan needs political will. Above all what it needs is political will to be implemented.

A plan, in the form of a road map, will contain a few very clear things. First, default on the national debt. The weapon of the poor is default. Greece must default on its debt. There is no other way out. The debt is crushing it. So default on the debt is the first step to achieving a deep write-off of the debt.

Second, nationalization of the banks. Effective nationalization of the banks.

Let me say that I've seen some simulations and some econometrics of what is likely to happen to GDP, to prices, and so on. They're very useful these things, and very interesting to read at times. But on this occasion by definition and cross-section of the case, they're valueless. Why? Because simulation or econometrics essentially assumes--typically simulation more than econometrics essentially assumes that the structural features of the model, whatever it is, are maintained. Otherwise you can't do the simulation. Here by construction we're changing the structure. You understand? By construction we're doing that. It's a regime break. Or to put it differently to you, how can I possibly foresee the effects of someone who will start cultivating again his vineyard? Because that's what's going to happen. So it's going to be a structural change. So any kind of assessment of--numerical assessment of what's likely to happen ahead is not worth very much. So don't believe the people who tell you there is going to be a recession of 25 percent. There's going to be a contraction of GDP of 50 percent. They don't know anything. That's just the number they take out of the hat.

I hope that Syriza will see the point, they will say no. They will not sign up to this agreement. They will go back to its radical principles and radical values. They will make a new offer to Greek society and take it down the road of wisdom.

Full speech and questions by the audience (+video):

1 comment:

  1. One important point not yet mentioned;

    Real democracy does not borrow money. Once the birth pangs of a new ecodrachma, democracy and freedom have subsided, there will be no reason to borrow except to accelerate the successes of real democracy. The dream of accelerating hard won success with debt is wrong headed, the pain of past debts proves pay as you go is the number one rule of freedom.

    The main reason real democracy does not borrow money, ever, is that debt funded projects destroy democracy by avoiding the distributed intelligence of voting taxpayers.