Updated: 16/05/2024
Greece’s referendum of 5th July will stay in history as a unique moment when a small European nation rose up against debt-bondage.
The story began on the 25th of January when with SYRIZA’s election, dignity was restored to the people of Greece.
In the five months that intervened since then, we became the first government that dared raise its voice, speaking on behalf of the people, saying NO to the damaging irrationality of our extend-and-pretend ‘Bailout Program’. We:
- spread the word that the Greek ‘bailouts’ were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers
- articulated, for the first time in the Eurogroup, an economic argument to which there was no credible response
- put forward moderate, technically feasible proposals that would remove the need for further ‘bailouts’
- confined the troika to its Brussels’ lair
- internationalised Greece’s humanitarian crisis and its roots in intentionally recessionary policies
- spread hope beyond Greece’s borders that democracy can breathe within a monetary union hitherto dominated by fear.
Ending interminable, self-defeating, austerity and restructuring Greece’s public debt were our two targets. But these two were also our creditors’ targets. From the moment our election seemed likely, last December, the powers-that-be started a bank run and planned, eventually, to shut Greece’s banks down.
Their purpose? To humiliate our government by forcing us to succumb to stringent austerity, and to drag us into an agreement that offers no firm commitment to a sensible, well-defined debt restructure.
Yes to social justice, shared European prosperity
The ultimatum of 25th June, which triggered the referendum, was the means by which these aims would be achieved. The people of Greece today returned this ultimatum to its senders, despite the fear mongering that the domestic oligarchic media transmitted night and day into their homes.
Today’s referendum result delivered a resounding call for a mutually beneficial agreement between Greece and our European partners. We shall respond to the Greek voters’ call with a positive approach to:
- The IMF, which only recently released a helpful report (see below) confirming that Greek public debt was unsustainable
- The ECB, the Governing Council of which, over the past week, refused to countenance some of the more aggressive voices within
- The European Commission, whose leadership kept throwing bridges over the chasm separating Greece from some of our partners.
It is a NO to the dystopic vision of a Eurozone that functions like an iron cage for its peoples. It is a loud YES to the vision of a Eurozone offering the prospect of social justice with shared prosperity for all Europeans.
Our debt must be relieved – says the IMF!
Debt relief ought to be at the centre of negotiations over a New Deal for Greece. That has been our government’s mantra from 26th of January, our first day on the job.
Exactly five months later, on 26th of June, the IMF has conceded the point (as evidenced by the New York Times) – on the very day Prime Minister Alexis Tsipras called for a referendum so that the Greek people could reject an IMF-led proposal that offered no … debt relief.
The IMF’s latest debt sustainability analysis (DSA) is a fascinating read. For the first time, the IMF recognised that, in its fifth review assessment, there was a low probability that Greece’s public debt would prove sustainable.
Here is an extract from the IMF’s own report confessing that, to portray Greek public debt as sustainable (without substantial debt relief), its researchers had to make the assumption that
” … Greece would go from having the lowest average total factor productivity (TFP) growth in the euro area since it joined the EU in 1981 to having among the highest TFP growth, and that it would go to the highest labor force participation rates and to German employment rates.”
Pigs would, of course, sooner fly! When asked how productivity growth would do the ‘pole vault’ from the euro area’s lowest to the euro area’s highest levels, with employment recovering fully (and in the absence of credit and investment), the IMF’s standard answer is:
“To achieve TFP growth that is similar to what has been achieved in other euro area countries, implementation of structural reforms is therefore critical.”
But Chapter 3 of the IMF’s April 2015 World Economic Outlook report tears this assumption to pieces. Indeed, the IMF’s own research shows that labour market reforms have a negative impact on total factor productivity while product market reform has a neutral one.
IMF – after fifty years of austerity, still an intolerable debt burden
Returning to Greek public debt sustainability, this latest DSA (debt sustainability analysis) by the IMF could not be blunter. In fact, it is even ‘ruder’ to official Europe, that remains in denial of the need for any debt relief, than we – the SYRIZA government – would imagine being.
Without a haircut, the IMF claims, not even fifty years of austerity – i.e. a primary surplus of 2.5% – would suffice to reduce debt to sustainable levels (see graph).
“It is simply not reasonable”, also argues the IMF’s document “to expect the large official sector held debt to migrate back onto the balance sheets of the private sector at rates consistent with debt sustainability.”
Of course it’s not! One wonders why it migrated to the public sector balance sheet in the first place. Could it be that this was accomplished by the failed IMF-driven programs of 2010 and 2012?
Puzzlingly, all this fine research by the good people at the IMF suddenly evaporates when IMF functionaries coalesce with their ECB and the European Commission colleagues in order to impose upon our government their chosen policies.
On 25th June we were presented with their ultimatum that centred upon zero debt relief, gigantic austerity (3.5% in the medium term), and more of the same labour and product markets’ ‘reforms’.
Never before has a veritable institution advocated policies that clashed so mercilessly with its own research. Never before has the IMF agreed, on economic analysis, with a government it sought to devastate.
But even victory has its costs – in this case my own head
Like all struggles for democratic rights, so too this historic rejection of the Eurogroup’s 25th June ultimatum comes with a large price tag attached.
It is, therefore, essential that the great capital bestowed upon our government by the splendid NO vote be invested immediately into a YES to a proper resolution – to an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms.
Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings – an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.
I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.
And I shall wear the creditors’ loathing with pride.
Yanis Varoufakis was the finance minister of Greece, from 26th January 2015 until his forced resignation this morning.
This article is drawn from three articles published on Yanis Varoufakis’s personal blog.
