“Reflections on Opportunity Lost
Greece and the Syriza Experience
A Review of ‘Looting Greece: A New Financial Imperialism Emerges
By: Jack Rasmus
Clarity Press, 2016, 315 pp., $24.95.
Stylistically, Looting Greece departs sharply from the memoir-like quality of Helena Sheehan’s book. Yet in writing such an analytically clear, historical account of the European and Greek debt crises, Jack Rasmus also has made a valuable contribution.
The book is divided into ten chapters, the first five of which deal with the evolution of the debt crisis prior to the coming to power of the Syriza government in January 2015. Chapters six through nine offer a blow-by-blow account of the failed strategy of Syriza in its dance with the creditors. The last chapter provides a broader overview and comparative analysis of how and why the Troika prevailed. Finally, in an extended conclusion, Rasmus puts forward an argument for financial imperialism as a new and growing form of imperialism.
For Europe, the creation of the European Monetary Union (EMU) and European Central Bank (ECB) in 1999, and the Lisbon Strategy, mark the origin of the current debt crisis. The ECB embarked on a devaluation of the EMU that led to external devaluation, which boosted trade. Simultaneously, internal devaluation occurred through labor market flexibility, that is, reducing labor security, wages, and benefit costs. Germany was the first to engage in neoliberal policies, with internal labor market changes known as Hartz reforms undertaken by a Social Democratic government; these kept German wages stagnant for nearly a decade and created a base for the production of cheap exports. With the German Bundesbank essentially dictating policy to the ECB, and cheap money and cheap goods flowing into the European periphery, the structures of the European economies were transformed. And so long as the money flowed back to the European central economies, primarily Germany, it was a virtuous circle for European capital. However, with onset of the 2008 economic crisis, this dynamic changed:
In addition to bank-provided money capital, German private foreign direct investment into Greece also rose from 1.4 billion euros in 2005 to more than 10 billion by 2008. As the money and capital to Greece was recycled back to Germany and the northern core economies in the form of exports, Germany got business profits, economic growth, and its money capital returned to it. In addition, as financial intermediaries in the recycling of money capital, both core and Greek banks got interest payments from the Greek loans and Greek bonds, Greeks got German and core export goods for a few years, but loaded up on credit and debt in the process for what appears will remain an interminable period of debt repayments well into the future (63-64).
When the banking and financial systems froze up in the aftermath of 2008, the cycle and flow of credit and money stopped between the European core and periphery. And when the peripheral (Spanish, Portuguese, Greek, and other) economies started to slow down, German exports and investment began to shift overseas. This further slowed the flow of credit. As Greece had been running an internal trade deficit with Germany, the initial impact of the credit crunch in Greece was that private banks became loaded with debt, monies that had been borrowed to facilitate imports from Germany.
Rasmus does a good job of showing that this trade deficit was caused neither by higher wages to the Greek working class nor by escalation in Greek consumer spending. Rather the debt was driven up by European Union and ECB policy, in the interest of European capital.
Looting Greece then takes the reader, in exacting if painful detail, through the distinct though compounding circumstances that led to each of the three austerity memoranda.
The first memorandum provided that a total of 110 billion euros was “lent” to the Greek government, 91 percent of which went to bailing out the banks that had been left with bad loans following the 2008 crash. The initial austerity measures demanded by the Troika were premised on unrealistic economic projections of growth but caused very real cuts in wages, pensions, and social security. And the result was a shifting of the massive debt load, mainly from the private banks onto the Greek government.
Then the second memorandum, argues Rasmus, “was primarily to refinance, pay off, and reduce Greek debt held by … private investors” (99), many of whom had already taken advantage of the bond markets to ramp up interest rates paid on Greek debt. Looting Greece does a great job in explaining the ways in which both the rules adopted by the ECB and the neoliberal ideology of “the German Hypothesis” (91), which drove their adoption, played a role in the cycle of debt and austerity that led to a humanitarian catastrophe in Greece.
Chapters five through nine offer an account of the rise of Syriza and a blow-by-blow telling of their approach to the problem of debt and austerity and the process of negotiations once the party came to power in January 2015. Rasmus’ account of the “institutional taming” of the Syriza government is painful to relive, but offers strong support for his argument that in the run up to the third Greek debt restructuring deal of 2015, Syriza and Tsipras would discover there was no option to return to social democracy and social democratic policies without austerity. The choice was either to leave the euro and the neoliberal regime, or remain caretakers for that regime on the system’s periphery, condemned to some degree of perpetual indebtedness, austerity, and long-run negative economic growth (118).
The last chapter provides an explicit assessment of the relative strategies of Syriza and the Troika and the structural/institutional straitjacket within which Syriza was attempting to negotiate. It also unequivocally answers yes to the likelihood of a fourth memorandum, given the logic of indebtedness and austerity and the current strategic course of the Greek government:
To have succeeded in negotiations with the Troika, Syriza would have had to achieve one or more of the following: expand the space for fiscal spending on its domestic economy, end the dominance and control of the ECB by the German coalition, restore Greece’s central bank independence from the ECB, or end the control of its own Greek private banking system from northern Europe core banks. None of these objectives could have been achieved by Syriza alone. Syriza’s grand error, however, was to think that it could rally the remnants of European social democracy to its side and support and together achieve these goals (228-29).
An extended conclusion to Looting Greece is entitled “A New Financial Imperialism Emerges.” In part, Rasmus argues that the views found in Lenin, Bukharin, and Hilferding, that finance capital is subordinate to industrial capital, need to be revised. The space devoted to this argument, however, is limited. While he argues that Greece has become a state dominated by the supra-national imperialist state of the Troika, given the degree to which sections of the Greek left have historically argued for Greece as a neo-colony, or one for which national oppression is primary, the full implications are not untangled by Rasmus.