Grexit signs: Drachma, how we’ve missed you!

June 28, 2015
A drop of water is seen on a Greek twenty-Drachma coin depicting ancient Athenian politician and general Pericles in this picture illustration taken in Athens

A drop of water is seen on a Greek 20-drachma coin depicting ancient Athenian politician and general Pericles in this picture illustration taken in Athens March 22, 2015. REUTERS/Yannis Behrakis

There is no excuse for Greece. Since it joined the European Union in 1981, successive governments of left and right have treated the EU like a witless sugar daddy. They trusted their fellow members to be hopelessly infatuated with this sun-drenched cradle of democracy that the wallet would always open, the numerous peccadilloes always winked at and the answer always yes. The civil service was packed with political clients, newspapers with tiny circulations were kept going through state advertising — as long as they supported the government in power — and workers in the public sector could retire at 50 on reasonably good pensions, sometimes even earlier.

It is no more than justice that harder-faced politicians from northern Europe are now telling Greek Prime Minister Alexis Tsipras that the show cannot go on. Other profligate states — Ireland, Italy, Portugal and Spain — have taken the medicine and are emerging from the worst of the austerity fever wards. Citizens of the former communist states to the east — who have not all attained the median living standards of Greece even now — are against more gifts to Greeks.

Such is the mood facing Tsipras and his comrades in Syriza, the main governing party. His one card,  that the EU will do anything to keep Greece in, now threatens to be trumped by a euro zone bloc that says, “You want what we won’t give: so go (and have a nice sun-drenched day).”

The Greek government now gives every sign of desperation. It’s plan to delay repayment of 1.6 billion euros until a July 5 referendum on the terms shifts the responsibility back to the Greek public — who elected Syriza to get a better deal. The EU finance ministers on Saturday rejected giving a stay of execution, and the European Central Bank will now find it very difficult to continue financing the insolvent Greek banks whose resources are being drained by frightened clients. The ECB’s rules prohibit throwing good money after bad.

And there is a hard limit on how much the EU can give. Give Greece too much and those in the south who have swallowed the medicine of austerity, and those in the east who are struggling to reshape their economies to make them ready for the euro, will revolt. That would be a far larger problem than Greece. Either Tsipras sells to his party and country conditions which he has described for months as intolerable, or it’s forward to the past currency. Drachma, how we’ve missed you!

But there’s another current running, with which Tsipras is more in tune. As another last last meeting failed in Brussels this weekend, so very rich people convened a quite separate meeting  in London to discuss how capitalism can be made responsible. The attendees include representatives from banks and other institutions which control around $28 trillion, one third of the world’s investable assets. The idea was conceived by Alan Mendoza of the UK’s Henry Jackson Society, picked up by Lynn de Rothschild, wife of Sir Evelyn de Rothschild and CEO of the holding company  E L Rothschild. The co-chair of the Inclusive Capitalism task force, McKinsey managing director Dominic Barton, explained that “there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results.”

In the United States, Massachusetts Senator Elizabeth Warren, who isn’t seeking the Democratic nomination and Vermont Senator Bernie Sanders, who is, are drawing huge crowds and getting much air time to denounce, as Sanders put it, the “greed of the billionaire class.” At 73, he’s got six years on former Secretary of State Hillary Clinton: but he stormed across New Hampshire last weekend with his populist message, and he’s only a few points behind Clinton in polls asking who’s best for the nomination.

In the most successful capitalist states, the disquiet with capitalism is growing even as the effects of the 2008 crash are moderating and growth returning. Both a reviving far left, and a revived far right, are pointing at high unemployment figures especially among the young; low wages; and above all, gross inequalities. The social contract of which McKinsey’s Dominic Barton speaks is, for these groups and their followers, already ruptured: they are encouraged by the far left/right parties in the view that they are capitalism’s forgotten people, a growing army of workless, wealth-less, insecure and with no other choice but to protest.

At Europe’s borders, the very, very poor, utterly insecure and truly forgotten (till now) migrants do anything — brave arrest, beatings and drowning — to get into Europe. The EU, which has liked to present itself as a caring and sharing institution, is now impelled by a pitiless public to find ways to keep them out. Fences, border checks and mass arrests are everywhere. Kindly non-governmental organizations that offer help to the thousands of migrants in Italy and Greece are cursed by citizens who see them as encouraging the inward flood. There are more than 20 million refugees in the world. Some 43,000 left their homes every day last year, and the wars, persecutions and hunger for a better life that made them do so haven’t abated. The EU leaders have agreed on a deal to take some 60,000 of the migrants: but it’s voluntary, there are no quotas for each nation, and time and political calculation may whittle that number down.

The quaking noises from Western capitalism and the gathering force of the parties on the extremes shine a different light on Greece’s government. For Syriza, the determination not to cut pensions, not to provoke more job losses and to increase taxes on companies and the wealthier citizens are measures designed to cut against the prevailing  consensus that higher taxes can only deter companies from investing and creating more jobs, and that “over generous” welfare and pension payments must be reined in. For Tsipras and his party and supporters, the defiance of the EU and the International Monetary Fund is a blow against a capitalism which has already failed.

The socialism in which Syriza believes and seeks to foster, and the support it still has in Greece, has collided against an EU which stands or falls by the health of the capitalist system. That neither Syriza, nor anyone else, has thought of a way to make real socialism work is, for the moment, beside the point for increasing numbers of Europeans. The concerned capitalists in London this weekend had better come up with measures which really are inclusive: otherwise their concern could turn to fear, and the specter of socialism again stalk Europe.


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This ‘author’ writes:
“The civil service was packed with political clients, newspapers with tiny circulations were kept going through state advertising — as long as they supported the government in power — and workers in the public sector could retire at 50 on reasonably good pensions, sometimes even earlier.”
That’s true.
Let’s see how is in Great Britain.
“The civil service was packed with political clients, newspapers were kept going by money from Soviet Union communists an KGB-officers (such as “The Independent”) and BBC swims on through people’s money and state advertising — as long as they supported the government in power — and workers in the public sector could retire at 50 on reasonably good pensions, sometimes even earlier.”
The premier has been recruited by KGB in the 80s. And this author has been member of Communist parties of England and Ireland. May be now he is a conservative. And tomorrow when the Martians come he’ll put antennas on his head.
What a wonderful world!

Posted by Ifandiev | Report as abusive

Not a bad article but please stop calling a state spending a bit less of other people’s money “austerity”. And what prevails in the over regulated miasma of fudge and euphemism that is the modern First World is only ‘capitalism’ in a fairly tenuous sense.

Posted by evilhippo | Report as abusive

What has destroyed Greece is clientism and a blank check from the eurozone, not capitalism.

Posted by Zaichik | Report as abusive

the greek drama will no more end than the iraq civil war will stop. some countries just dont change.

the greeks will vote YES 60% because they are too scared of leaving and then the next 5 years will be exactly like the past 5.

the Keynesians are right in that the bailouts will never work to solve greece’s problems. and they are wrong to demand/think the other 18 parliaments will ever vote to finance a Greek stimulus.

Posted by yobro_yobro88 | Report as abusive

I disagree Mr.Lloyd; Greece did not look at the EU as a “Sugar Daddy” rather the EU looked at Greece as a young woman they could seduce into their servitude with money. The loans extended to Greece were used to beef up defense (due to Turkish aggression) and pay off loans to the EU! Only 8% actually reached the Greek civilian.
This is not a “Greece Fire Sale”! That’s how the Germans conduct business worldwide. They invest in so called “partnerships” except their idea of a partnership is not a 50/50 split in gains as well as losses. Their idea is to leverage hard assets by helping their overseas partners grow out of business. Once the “partnership” faces difficulties because of their “expansion” they pull back and ask for their money with interest . If the other side cannot pay them back , they revert to what they know how to do best-alienate, segregate, divide and conquer. They do not like Tsipras. “Socialism” is out of style and not part of the Bundesbank agenda. The future of Europe is all about “privatization” with Brussels holding all their smaller members by their “privates”. In adversity there is always opportunity . Let us all hope Tsipras is really not a wolf in sheep’s clothing and not subjugate Greece to the Aryan aspirations of Frau Merkel.

Posted by JeanLouis | Report as abusive

It is happening all over the world reckless government even some wanna be dictators are given loans and are even encouraged to blow the money on ridiculous project. Most of the money goes back to the lenders as the borrowers buy goods from the lenders. The result is hugely indebted country where despair and depopulation will take place.

Posted by Macedonian | Report as abusive