How to say ‘no’ in Greek

Life with a known devil is often preferable to a future of unknowns. With their banks shuttered and an economy on the verge of seizure, Greek voters on July 5 turned that wisdom on its head. Whatever uncertainties the future held, the punishing economic austerity endured for five years was no option.

The leftwing coalition Syriza won January’s general elections in Greece with the promise of ending years of austere living. It was a precarious triumph fashioned out of the hostility against the established left and right, which had both meekly submitted to the diktat of the banks since the magnitude of Greek debt was revealed in 2009.

Since taking office, Prime Minister Alexis Tsipras and his finance minister Yanis Varoufakis bargained hard with the troika — the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Commission (EC) — tasked with bringing order to Greece’s accounts. Their point was simple. For all its drama and pretended magnanimity, the bailout dangled since 2010 had done little for the cause of economic recovery. It kept banks in the pink, but the consequences of unending austerity were reaching a political tipping point, potentially endangering democracy itself.

Creditors evidently thought compromise rather futile. As deadlock loomed, the Greek government played its final card: a referendum that would put the proposed deal to the test of public opinion. As creditors fumed and warned that all offers were off the table, Greek officials — in what was either political naïveté or artful affectation — underlined that the referendum would be part of the negotiations, rather than a substitute for it.

Global high finance never keeps a place at the table for the articulation of democratic voices. Socialist George Papandreou had as Prime Minister in October 2011, mooted the idea of a referendum on the adjustment packages being forced on Greece. He was forced into a humiliating retreat after public rebukes from Germany and France.

As a senior adviser to the PM in January 2010, Varoufakis argued that debt default on a moderate scale was the best course till Greece thought through all options. He was shouted down for spreading ‘treasonous’ ideas.

All the years since should be counted as time wasted. On June 30, the Greek government declared it would not meet a loan repayment of $1.7 billion that was due to the IMF. Just days later, a referendum turned in a ‘no’ vote on austerity, all the more resounding for being delayed four years.

What else changed in these years? For one thing, the consequences of austerity were no longer a future prospect but a lived reality for the Greek people. Nobel laureate economist Paul Krugman did a few simple calculations and concluded that the “attempt to reduce debt by slashing spending actually raises the ratio of debt to GDP, not just in the short run, but indefinitely”. Any likelihood of austerity reducing the debt ratio would be “in the very long run — think decades, not years”.

Fellow economics laureate Joseph Stiglitz turned in a more forthright and robust judgment: the troika bore ‘criminal responsibility’ for forcing Greece into a course of action that was condemned to failure.

Meanwhile, the benign patrician among economics laureates, Amartya Sen, spoke of expanding economic horizons through growth as the best remedy, rather than persisting with the despair of austerity.

Double standards are evident in the imposition of austerity in Greece while purse strings are loosened for other countries in the continent. In January, the ECB announced a policy of ‘quantitative easing’ (QE), putting more money into European bank treasuries, to stimulate credit and growth. After years when it has fallen behind, Europe has evidently bought into the magic of QE, which has served the US rather well since its 2008 meltdown.

Reserve Bank of India chief Raghuram Rajan, who earned fame for predicting the credit meltdown way back in 2004, is clearly unimpressed. The rapid spread of QE, he said recently, was like producing growth out of nowhere, “shifting growth from each other, rather than creating growth”. It was the manner of beggar thy neighbour policy that the world last saw during the Great Depression of the 1930s.

In his acclaimed 2010 book Fault Lines , Rajan argued that the credit binge of the first decade of the century was a deliberate political strategy to evade the consequences of widening inequality. If decent wages were unattainable for the vast majority caught in the iron grip of neoliberal economics, working people were enjoined to ‘eat credit’ to improve living standards. A strategy that worked its remorseless logic through the sub-prime mortgage boom in the US, fetching up with disastrous consequences in 2008.

Conspicuously escaping accountability through all this have been the banks which promoted the myth of credit as engine of endless growth. And the reasons are not far to seek. Growth in the world economy hinges increasingly on the wealth effect created through asset price inflation. From stocks to property to commodities, the bubble economy has, by rapid turns, afflicted every market. After every bubble bust, those driving the speculation run away with the spoils, while those on the downside are left to pick up the pieces.

After the rebellion of the ‘occupy movements’ which followed the 2008 financial meltdown, the Greek referendum is another effort to turn back the disastrous tide. The sovereign masters of finance, though, seem not to be listening.

Sukumar Muralidharanis an independent writer, researcher based in Gurgaon, Shimla

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