Greece must default and exit the eurozone
by Vassilis K. Fouskas
The Greek debt has domestic and external sources. High defence spending, tax evasion chiefly by the comprador-cum-financial oligarchy and the ship-owning elites and a large, but inefficient, public sector constitute the main domestic sources of the country's problems. Ship-owners navigate their ships with flags of convenience - so no tax is paid to the Greek state. The comprador financier has his or her company registered in Dubai, a tax heaven - so, again, no income for the Greek state. Defence spending became as high as 4 per cent of gross domestic product, due to an exaggerated threat assumedly posed by Turkey. The external sources pertain to the large current account deficits and recycling of Germany's financial surpluses. Phenomena that are merely the result of the asymmetrical movement and structures of capital and labour within the eurozone. The external origin of the Greek bankruptcy is interesting, although not necessarily more important in the articulation of the overall Greek debt situation.
Historically, and because of its dependent and subaltern position in the imperial economic and political chain, the Greek economy had lacked a robust industrial sector. This has had two significant results. First, the state and the ruling party elites used every method possible - clientelistic practices, patrimonialism and corrupt deals - to bloat the public sector via recruitment and favouritism; in order to secure re-election. Second, Greek industry and companies have always been small and medium size. At times of hardship, such as in the 1950s, Greek Bank governors could devalue the drachma and re-organise the export capacity of the country No such alternative existed after 2001, when Greece joined the eurozone. The country was easily out-competed within the single currency area, since it did not enjoy the advantage of currency devaluation to address imbalances. Greece has today mounted some €350bn of sovereign debt. Other peripheral countries have similar, although not identical problems.
The continent's leaders, especially France and Germany, are trying to solve Europe's debt problem by closing the fiscal gap and introducing a parallel treaty addressing the issue of insolvency by further institutionalising and politicising aspects of European Union governance. Britain stays out in the cold, but that is beside the point. Strengthening the institutional ties of the EU between core members, the periphery's problems remain unresolved, creates a two-tier union with further isolation and austerity on the populations of the periphery - and a relative, medium-term and rather unsustainable prosperity for the core and the future of the euro itself. In other words, the problem of the insolvency of the periphery will remain, with the working classes suffering even more without any end in sight. And, all this, without solving once and for all the problems of the euro, that is a single currency without the backing of a single state.
At the time of writing, official unemployment in Greece is nearly one million, out of a population of 10 million. The countryside is devastated and barter agreements already appeared among the poor and the petite bourgeoisie. The two-party system is disintegrating. Growth is -6.5 per cent, a contraction that mirrors the conditions of civil war in the 1940s. So what is the solution? Emphatically, there is but one solution: immediate default and exit from the eurozone. The more Greece stays in the common currency, the more the unemployment rate will increase and the more the growth rate will decrease. Austerity has already taken the form of a predatory state which, having no money to pay pensions and the salaries of its civil servants, introduces the most exorbitant taxation – all measures imposed by the so-called troika of the European Central Bank, the International Monetary Fund and the EU - in return for supplying the next tranche of pre-agreed loans.
If Greece defaults and exits - it would be in a position to reverse the negative growth rate, nationalise the banks and re-orient them towards productive investment in agriculture and industry; therefore, addressing the unemployment issue. At the same time, new energy alternatives could be targeted - such as solar energy projects, which have the potential of becoming a key export sector for Greece's European partners. It will take some time – a minimum period of five years – for Greece to recover and get to a position where it can stand on its feet and re-enter the euro on its own terms, assuming it still exists. But this is a much better prospect than what is happening now - which is straightforward usury, destroying the savings and lives of Greek people on the altar of saving the banks and the bondholders.
Vassilis K. Fouskas is professor of international relations at Richmond University, in London, and founding editor of the Journal of Balkan and Near Eastern Studies. His forthcoming book The Fall of the US Empire is published in March
If there had not been a global economic crisis all might have been well, in time. But the national markets within the single market showed their different degrees of resilience to the shocks which hit them – and the eurozone became an incipient transfer union – writes our secret columnist
Of course, the Greek media say default in a no-option, and austerity, is the way to go. It is clear who controls Greece, the plans are being executed to the letter. As long as people, still have something to lose, they will keep exploiting it.
Interesting indeed. Perhaps I can add that fiscal union, without political union, would lead to major internal issues of democracy in member states leading, of course, to the rise of dissident parties within member states. This is not a simple matter such as that experienced by the USA, because we are dealing with long established countries with long histories and traditions. Any attempt to weld such a diverse group into one union would have to be very long term indeed, and I would suggest a time table for this, if desired, should be very gradual and not less than 300 years.
Vernon Yarker - Maldon, Essex
Vassilis is merely talking economic common sense in his well-argued, cogent and succinct piece. Greece has no true Greek leadership: that is a core problem. Russia and Argentina saved themselves through their debtor-led defaults in 1998 and 2002 respectively. And their debts were proportionately lower than Greece's. Vassilis could also have mentioned the destruction of the middle class as well as the working class. The beneficiaries are the new criminal class.
Dr. William Mallinson - Ionian University, Corfu, Greece
One of the biggest problems, in Greece, is the fact that 99 per cent of all Greek public office holders - our leaders - have been bought out. From the highest to the lowest levels of government and until they go; Greece will never recover, unfortunately.
John C - Greece
