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Monday, June 18, 2012

In the Wake of the Greek elections: Is there a way out of the Recessionary Spiral?

above: The Symbol of the Rising SYRIZA Left-Coaltion in Greece

In this article Tristan Ewins discusses the aftermath of today's Greek Election. Debate very welcome here - and at our Facebook page. See:

Tristan Ewins; June 18th 2012

There is some interesting analysis of the Egyptian and Greek elections over at radical-left blog 'En Passant'. Here at “ALP Socialist Left Forum” I would like to take a moment to consider the consequences of the election in Greece – and alternative ‘ways forward’ – out of the depressive spiral which is engulfing much of Europe.
(See: )

In Greece, specifically, the Conservative “New Democracy” Party is set to form government – but with only approximately 30 per cent of the total vote. As a consequence of the specifics of the Greek electoral system the largest single party receives a 50-seat boost. This makes it very likely that New Democracy will attempt to ally itself with the pro-austerity PASOK. (Pan-Hellenic Socialist Party)

Nonetheless PASOK has historically supported a more moderate approach to austerity: the consequence of which must mean that any new coalition government between New Democracy and PASOK will see bailout conditions re-negotiated to “slow the cuts [and] introduce more generous unemployment benefit.” (See: )

But in any case - it would be ‘the same poison’ of recessionary austerity - even if a milder variety.

At ‘En Passant’ John Passant further reports that while “left-wing radical group SYRIZA came second with just under 27%”, PASOK received “a little over 12%.” Meanwhile, “the Democratic left, a moderate split from SYRIZA on just over 6% and the KKE, the Greek Communist Party [managed] about 4.5%.”

The fascist, so-called ‘Golden Dawn’ party was thankfully contained on just under 7% of the vote: but it is nonetheless a significant precedent and could bode ill for the future.

The division of the Left in Greece has therefore been crucial for the Conservative victory. Had SYRIZA maintained internal unity it clearly would have emerged as the largest party in the Greek parliament rather than ‘New Democracy’. While the Left broadly defined was a hair’s breadth from securing a majority of votes, the additional 50 seats that would have been delivered to SYRIZA in the event of maintained internal cohesion would have been enough to deliver a clear Left victory. The Greek Left needs to think upon this should continued instability create another opportunity for a Left majority in the near future.

According to one website, SYRIZA leader Alexis Tsipras “called Samaras to congratulate him but later rejected any notion of dealing with New Democracy or PASOK.” Tsipras stated:

“We shall be present in any developments from the position of the main opposition,” he said, stressing that that “everyone must know that the measures of austerity and the selling off of state property will not be able to move forward because they lack popular legitimacy.”

The refusal of SYRIZA to deal with PASOK leaves PASOK in a potentially fatal union with New Democracy. Without very substantial re-negotiation continued austerity in Greece will see ongoing unemployment, poverty and even homelessness. The privatisation agenda, meanwhile, is blatantly Ideological. By maintaining its distance from the austerity policies of a PASOK/New Democracy government, SYRIZA is likely to rise as the main beneficiary at the next Greek election; more decisively displacing a relatively marginal PASOK. This is exactly why PASOK is refusing to agree at this point to a coalition without the inclusion of a very reticent SYRIZA.

One online news source has reported that:

“The results should bring a sigh of relief to Greece’s lenders, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) who provided Greece with an initial bailout two years ago of $152 billion and approved a second in February for $173 billion more, but said it depended on Greece continuing with more reforms, including privatization and another $15 billion in cuts.”

Rejecting the assumptions of this reporting, however, what is the answer for Greece?

As John Passant notes at En Passant:

“Unemployment Is running at over 22% and for the young it is approaching 50%. Growth fell last year by up to 7% and is predicted to fall again this year by around the same or slightly less.”

Firstly – as these figures demonstrate, a recessionary spiral is NOT the answer. Greece – as well as other affected countries such as Spain and Italy – need a plan for socially and economically sustainable debt repayment over the long term. Though this author does not claim to be an authority, it seems rational that if privately-financed bonds cannot provide Greece and other countries with fair repayment rates and schedules, then Europe as a whole needs to step in collectively at a public sector-financial level. As recognised above the IMF, European Union and European Central Bank are already providing a bailout. But this bailout has been offered under the wrong (ie: recessionary) terms.

Greece is currently caught between the toll of an eroding credit rating – with spiralling debt-repayment levels enforcing a macabre ‘discipline’ – and the real economic and human cost of austerity and enforced recession.

As an alternative, Greece’s effective credit rating needs to be fully restored in return for ‘locking into’ a European ‘economic contract’ aimed at restructuring the Greek economy, and repaying debts in the most efficient and sustainable manner possible – under conditions of full employment.

Only Europe-wide planning and co-ordination, now, can provide for such a process of restructure – mobilising the capital and the skills necessary to forge new and sustainable export markets – maximising that potential for debt-repayment under conditions of full employment. This applies as much for Spain and Italy as it does Greece.

The alternative is recessionary austerity: again with the consequence of homelessness, deskilling, poverty – in short, social and economic disintegration.

The SYRIZA anti-austerity platform can be found here and makes interesting reading:
(See: )

From 1929 until the dawn of the Second World War the world suffered a Depression the consequences of which radicalised a generation, and with the experience of war-time economies entrenched a Keynesian orthodoxy, providing the basis of the Post-war boom. With SYRIZA refusing to join a unity government the battle in Greece is far from over. Do we really have to learn all the old lessons over again – with the associated toll in human misery?

Debate Very Welcome!


  1. The social justice case for an alternative to present austerity in Greece and elsewhere must be made and campaigned for.

    But in the absence of a political movement capable of imposing significant pain on the ruling elites that determine policy across Europe, such an alternative will not be implemented.

    Why not?

    Firstly, because in capitalist terms austerity is absolutely rational.

    Restoring profitability, partly by reducing unit-labour costs, requires devaluing unprofitable forms of labour and capital. Keynesian policies typically serve only to artificially sustain companies whose real cost structures are not competitive. A key lesson from Europe in the late-1970s and early-1980s is that Keynesianism, as a route to restoring profitability, does not work.

    Secondly, there is the political imperative to impose painful austerity.

    The primary aim of the Euro project has been to promote neoliberal restructuring across the most uncompetitive regions of Europe. Before the current crisis it was hoped that this restructuring would proceed incrementally. Those places that could not or would not compete with German unit-labour costs would slowly decline - with devalued labour and capital shifting between localities and industries in search of new opportunities for employment and profit.

    The Euro project always intended pain - but it would be gradual and not on a scale to threaten major political crises.

    But then the GFC hit. In this context the logics of austerity that the Euro was grounded in suddenly became accelerated and intensified.

    What is being imposed now on Greece was always intended - except it is now taking place at a pace that is shaking the state and the political class to its foundations.

    But the Euro elites cannot let Greece of the hook - they must apply the logic they have been following for the past 15 years. If they don't then the lack of discipline will spread across Europe and the single currency, along with the neoliberal restructuring it is intended to secure, will collapse. And the core capitalist states will be back to having their unit-labour advantages undermined by competitive devaluations among the periphery nations.

    This is not to argue they will succeed. But it is to argue that, short of the real threat of deep political turmoil, they are very unlikely to change course. I'm afraid that making appeals on the basis of alleviating human misery are neither here nor there.

  2. Mike; Though would you agree it's (at least theoretically) possible to intervene to maintain full employment, and side-step private financial markets and provide Greece with a fair credit rating in return for restructuring and sustainable debt repayment?

    I understand practically all around the world falling profit levels have been driving restructuring for decades. (including in Australia in the 1980s for instance) The debt crisis and debt repayments - as well as accompanying restructuring - are inevitably going to hurt one way or another; But I think they would hurt less with intervention to provide a fair credit rating and conditions of full employment.

    There is a deeper problem is with capitalism - with overproduction, and the periodic destruction of capital at regular intervals because of this; and because of competitive pressures. Even with all that's going on most people aren't reflecting that 'there may be something at fault with capitalism itself', here. But a hybrid economy, returning to strategic natural public monopolies (energy, water, communications, other infrastructure) could help I believe.

    Also I think if the elites if you talk of are going to press for wage restraint to restore profit levels - then the organised working class needs to demand something in return - proportionate to any sacrifice made. (For example, democratic collective capital share - think of Meidner, for instance)

    But that would be a real fight.

  3. yet again we see the upper classes make the debt, and force the poorest to pay for it all...

  4. Hi Tristan, I suppose my view would be that 'in theory' full employment is always possible - but historically it is rarely attained for a sustained period of time (the 1950s and 1960s being somewhat atypical and, I suspect, not primarily a result of Keynesian policies).

    I don't see how full employment could be generated in Greece. The main determinant of employment levels is private investment - and the conditions for profitability are weak. The state is not in a position to substitute itself for such investment - short of a new Marshall Plan.

    I don't think calls for 'instant socialism' are credible at present. They hugely overestimate the size, resilience and coherence of support for the far left. This may change.

    I suspect the fastest and most effective way for Greece to return to growth will be to leave the Euro. But the costs and risks of doing so are enormous.

    Perhaps the most important outcome of the crisis will be political - it will hopefully force the left (broadly defined) to re-think its largely uncritical embrace of the European project and of 'progressive competitiveness' as an economic model for left politics. Perhaps it will compel the left to begin to think strategically and long-term about what needs to be done to socialise the economy.

  5. There are a few points in response (Again I'm no expert, but this is how I see it);

    First Greece has a contracting home market putting into question the capacity of that market to provide full employment 'on its own steam'. But skilling up and investing for export markets can create jobs. Secondly, because of jittery finance markets and unfavourable credit ratings, public credit - raised at a Europe-wide level- may be the only way open of investing in new jobs in Greece (and other countries), reducing unemployment. Thirdly, the emphasis needs to be on export jobs - improving Greece's terms of trade - and hence its capacity to sustainably repay its debt.

    It's true of course that capitalist economies have historically relied on private finance for most economic activity; but the circumstances are so exceptional that they may drive a change in the paradigm. Theoretically it is possible. Again: the alternative is more unemployment, deskilling, poverty, homelessness - and a REDUCED capacity to actually repay the debt which is the problem.

    Re: Full employment - the Swedes managed to sustain full employment for quite a while with interventionist labour market policies. Indeed they created a high wage, high participation economy. And even if unemployment ultimately settled at around 5 per cent in the affected countries, surely this is better than unemployment of over 20 per cent.

    Hoping you're right that the crisis provides for a broader rethink on economic paradigms, including socialism. I don't see my solution as 'instant socialism' - though certainly it would be radical compared with recent experience. But drastic circumstances warrant drastic - but well-thought-out - measures.

    I'm thinking about reading Paul Krugman - who apparently is also saying that the public sector needs to step in where the private sector has stalled with a crash in confidence.

  6. Though admittedly even the world market is finite; and with the rise of more and more 'competitors' markets will become more and more crowded. This might also prompt a rethink on economic fundamentals in coming decades. Though productivity growth driven by technology may provide for periodic expansions in that world market.

  7. As someone who was active on the British left before coming to Australia I keep an eye on debates there. The response of the Labour Party left, and most trade unions, is to argue that austerity is irrational and will not work.

    I suspect these arguments will be played-out here if/when austerity comes.

    I understand the political logic behind such arguments: it is hard to mobilise against policies if you accept they have a certain logic and may work at some point.

    But it seems to me the left should be making a different argument. Austerity is rational from a capitalist perspective and may work in terms of restoring profitability and a higher level of employment. However, it is irrational in terms of meeting our collective social and human needs.

    This is hardly a novel argument. Versions of it have been circulating on the left for well over 100 years. But if now is not a good time to make it when is?

    Of course, there is a problem with making the argument. Most of the left (as far as I know) have no idea how a socialist economy would operate. Most arguments for socialism are little more than slogans that have no credibility as practical policy.

    So one lesson from the current crisis, in which socialist ideas have gained little or no support, is that the left needs to start thinking again about what socialism means in practice and about how it can be made appealing to working people.

    An endless series of slogans, demands and references to 1917 (which is all most of the left are capable of) are irrelevant to present circumstances. The socialist critique of capitalism is fine as far as it goes - but we need a positive and credible alternative. At present we do not have that. Until we do then crisis will follow crisis and the left will be nowhere to be seen.