Greece Rejects the Troika. What’s Next? by Michael Hudson + Greece: It all seems so clear – and so complicated by Siv O’Neall

OXI in Brussles

Image by Maxime De Ruyck via Flickr

by Michael Hudson
Writer, Dandelion Salad, July 6, 2015
July 8, 2015

Just after 7 PM Greek time on Sunday, I was told that the “No” vote (Gk. Oxi) was winning approximately 60/40. The “opinion polls” showing a dead heat evidently were wrong. Bookies across Europe are reported to be losing their shirts for betting that the financial right wing could fool most Greeks into voting against their self-interest. The margin of victory shows that Greek voters were immune to media misrepresentation during the week-long run-up as to whether to accept the troika’s demand for austerity to be conducted on anti-labor lines.

It should not have been so great a surprise. Voting age for the referendum was lowered to 18 years, and included army members. Faced with an unemployment rate of over 50 percent, Greek youth understandably wanted no more euro-austerity.

The Troika’s demand was for austerity to be deepened solely by taxing labor and reducing pensions. Its policy makers had vetoed Syriza’s proposed taxes on the wealthy and steps to stop their tax avoidance. The IMF for its part vetoed cutbacks in Greek military spending (far above the 2% of GDP demanded by NATO), despite even the European Central Bank (ECB) and German Chancellor Merkel agreeing to this.

European Commission President Jean-Claude Juncker threatened to expel Greece from Europe, despite no law permitting this to occur. Let us see now whether he still tries to carry out his bluff, which has been echoed by right-wing leaders throughout Europe.

His retaliatory actions from an ostensibly non-political, non-elected office are not alone. The eurozone class war in support of finance against labor and industry is now open and in earnest. Instead of doing what a central bank is supposed to do – provide liquidity (and paper currency) to banks, ECB head Mario “Whatever it takes” Draghi forced them to shut down even their ATM machines for lack of cash. Evidently this was intended to frighten Greek voters to think that this would be their country’s future if they voted No.

It is an old strategy. Andrew Jackson expressed his vindictiveness toward the Second Bank of the United States by shutting it down. When it refused to appoint his corrupt political cronies, he deposited the U.S. Treasury’s money in his “pet banks.” The drain of money plunged the economy into depression. The Southern slave states welcomed deflation, because they sought low prices for their cotton exports, and also opposed northern industry with its protectionist policies and anti-slave politics.

What Greece needs is a domestic central bank – or failing that, a national Treasury – empowered to create the money to monetize government spending on economic recovery. Mr. Draghi has shown the ECB not to be “technocratic,” but a cabal of right-wing operatives working to bring down the Syriza government, in a way quite willing to empower the far-right Golden Dawn party in its stead. In light of his refusal to carry out the duties of a central bank and act as lender of last resort when Greek banks run out of cash, Mr. Varoufakis has said that: “If necessary, we will issue parallel liquidity and California-style IOU’s, in an electronic form. We should have done it a week ago.”

U.S. popular media echoed the European right by trying to frighten Greeks and their sympathizers into believing that the vote is whether or not to remain part of Europe – as if Britain does not have its own currency while remaining part of the European Union. However, the vote does throw into question just what it means to be what pro-austerity advocates call “committed to the European project.” Eurozone officials are unanimous that it means a commitment to financial war against labor – to austerity and yet further economic shrinkage; to faster privatization selloffs (but not to Russians if they offer higher prices, as Gazprom did) and hence higher prices for hitherto public utilities; to no rejection of past insider privatization deals to higher value-added taxes on consumers; and to lower pensions for labor.

This prospect was at the center of a meeting at the European Parliament in Brussels on July 2 – Peripheral debts: Causes, consequences and solutions, sponsored by the European United Left/Nordic Green Left, GUE/NGL. (My speech begins at about 27 minutes.)

There was of course unanimous support for a “No” vote to the anti-labor, pro-creditor demands by the IMF, European Central Bank and European Council. But there also was concern that the Syriza leaders did not begin immediately upon their January election victory to educate voters on what actually is at issue: why remaining subject to the junk-economics dictates by the IMF and ECB will make the economy subject to chronic debt deflation. Instead of spending the past six months educating the public over what is at issue with the Troika, Syriza focused on playing political rope-a-dope to demonstrate how firmly the ECB and EC were committed to austerity.

The left-wing Syriza members with whom I met during the last two weeks in Athens, Delphi and Brussels felt that more should have been done to educate the Greek public as to how impossible it is for Greece to pay the debts with which the Troika had loaded it down, with abject surrender by its pro-bank Pasok/New Democracy coalition that had ruled Greece for a generation. (New Democracy leader Samaras resigned after the vote was in last night.)

One factor that may have incensed Greeks to vote “No” was the revelation that an internal IMF Debt Sustainability Analysis – which Lagarde had sought to suppress – had endorsed what Syriza’s leader Alexis Tsipras has been saying all along: Greece needs a debt writedown. Its official debt is unpayable, and never should have been forced upon it in the first place – under conditions where the Troika removed the elected prime minister from office to put in their own technocrat (Lucas Papademos, who had worked with Goldman Sachs to falsify the government’s 2001 balance sheet to enable it to meet the eurozone’s entry conditions).

It was revealed last week that IMF head Christine Lagarde has overruled her staff and board to defend specifically French interests. As in 2010-11 under Dominique Strauss-Kahn, French banks are major holders of Greek bonds (including via their ownership of Greek banks). Strauss-Kahn notoriously overrode his staff when they urged the IMF not to capitulate to ECB demands to pay French, German and other private bondholders with Troika bailout loans for which they made Greek taxpayers liable.

Two weeks ago the Greek Parliament released a report by its Debt Truth Commission explaining why Greece’s debt to the IMF, ECB and European Council was legally “odious.” It was imposed on Greece by Ms. Merkel and other pro-bank leaders that Greece not hold the referendum that Pasok Prime Minister Papandreou had proposed on the bailout of French and German banks at Greek expense.

That was the root of today’s problems. It also was the occasion on which European finance and democracy become antithetical, prompting the late Frankfurt Allgemeine Zeitung editor Frank Schirrmacher to write his famous editorial, “Democracy is Junk.”

The Troika have refused to write down a single euro of unpayably high debt. They pretended that debt relief is an issue for later. That is what enabled Tsipras to depict his nation as being victimized by the eurozone’s vicious class war. The Syriza position has been “We’d like to pay. But there simply is no money – as the IMF’s own calculations have clearly and explicitly shown.”

Last Tuesday, Tsipras explained to Greek voters that the Troika had put nothing in writing about debt writedowns. This pierced the haze of media-induced panic. His seeming willingness to surrender simply dared the Troika to back up their promises in writing. He certainly was not going to make the tragic mistake that Russian leader Gorbachev made when he believed the verbal NATO promises that it would not move into the post-Soviet countries of Central Europe and the Baltics.

The Troika’s position was and is: “Impose austerity now. We’ll talk about debt writedowns later. But first, you must sell off what remains of your public domain. You must lower wages by another 20%, and force another 20% of your population to emigrate. Only then, when we’re sure that we can’t get another euro out of you anyway, then we may be willing to talk about writing down some of your debt. But not until we have stripped you of anything left to pay in any case!”

Tsipras and finance minister Varoufakis have been widely criticized in the U.S. media for seeming to capitulate to Troika demand. The reality is that they have been civil and polite, even taking a conciliatory stance if only to show how totalitarian and unyielding the Troika has been.

That contrast between reason and totalitarian “free market” austerity is what convinced the Greeks to vote No.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) and Trade, Development and Foreign Debt: A History of Theories of Polarization v. Convergence in the World Economy. His book summarizing his economic theories, The Bubble and Beyond, is now available. His latest book is Finance Capitalism and Its Discontents. His upcoming book is titled Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy. He can be reached via his website,


Greece: It all seems so clear – and so complicated

by Siv O’Neall
Writer, Dandelion Salad
Lyon, France
July 6, 2015

It was five years ago and Greece was on the verge of going bankrupt. Goldman Sachs and other vultures grasped the opportunity to fraudulently make an exceptional amount of money. False rumors were spread, the Greek financial circles were lulled to sleep, thinking (if they ever did!) that nothing really bad could happen to them since Goldman Sachs was backing them up. Speculators were attracted like crows to a newly plowed field.

And Greek financial corruption goes on as if there would never be any accounting. Everybody is asleep, except the banking vultures who are out for big game.

The super-rich in Greece don’t bother paying the taxes that the little people have to pay. They are finding loopholes of all kinds and they are also transferring their huge fortunes to Swiss banks where they are safe – for the moment at least. There is no doubt that the Greek running of its financial department was totally unfit for any country anywhere.

But now the Troika comes running. Hey, there is profit to be made. More robbing to be done. IMF, ECB (the European Central Bank) and the European Commission, which together make up the Troika are sharpening their claws. But alas, Greece is incapable of paying back the high interest that’s demanded, and all hell breaks loose.

The medicine applied by the Troika for the past five or six years has been austerity austerity and more austerity. The neoliberal mantra is to starve and kill the beast that’s in critical danger of going under – while the financial elite rakes in the gains from the country in its death throws.

So austerity was the way Greece would become solvent again. So they said. What went wrong? Well, something did, probably the basic medicine was the wrong one from the very beginning. The Greek economy has contracted by 25% since the IMF medicine was first applied five years ago. Workers are not being paid. Healthcare is in tatters. Conditions in the biggest hospitals are appalling. You would think you were in a developing country. Massive budget cuts are making not just hospitals buckling under the strain of austerity. The shelves  in pharmacies are empty. Schools receive ever shrinking funds and school children go hungry since there are no more school lunches.

One out of four Greeks is now unemployed and 60 % of young people are jobless. What a terrific success. Retired people and the young are the worst hit – and of course the ones who were already poor. Who cares?

“As the country struggles to return to growth and international creditors demand tough austerity measures, unemployed parents fight a daily battle to buy food, leaving school kids picking through trash cans and asking playmates for leftovers, the New York Times reported. It has even gotten as far as kids stealing food and a high-schooler recently fainting from hunger.

…with unemployment in Greece recently rising to a record 27% and the economy shrinking more than 20% since 2008, malnutrition problems have become an increasing issue in the country. Last year, about 10% of elementary- and high school kids suffered from “food insecurity”, sending Greece to the level of some African countries, according to the paper.” (The price of austerity – Greek school kids going hungry)

But the two multibillion-euro bailouts were they not supposed to help the Greeks weather the storm? Didn’t all those billions help the Greek people? Of course not. That money went to the foreign banks. It was never intended to go anywhere else. From the very beginning of the Greek crisis, the bailouts have only been intended for the foreign creditors.

The Troika have absolutely no concern for human lives – they are just out to squeeze more blood money out of the poor Greeks. And the very rich Greeks have either fled the country (along with masses of the best educated intellectual elite), or they have moved their millions or billions out of the country, mostly to Swiss banks, which will remain blind at least until 2018. They will then be legally bound to remove the secrecy concerning money crossing their borders.

One positive thing is on the horizon though. The new Greek government, Syriza, is suggesting a limited form of tax amnesty for the capitalists who are willing to bring their fortunes back to Greece. They would be required to pay only a flat tax of 21% to induce them to bring their money back to Greek banks in a legal way.

We obviously don’t yet know what is going to happen as far as further bail-out money is concerned, but the Greek population yesterday, July 5, in the big Referendum, gave a resounding No to further loans from the Troika. Negotiations will follow, and we don’t know if either side is going to give in. It seems absolutely clear to anyone with half a brain that Greece would clearly deserve a massive debt relief. If not, it’s my hope that they will stand strong and clearly announce that a default is the only way out of this conundrum. Iceland could get away with it, Argentina could, why couldn’t Greece?

Whether they will stay in the European Union and whether they will keep the euro as their currency are the next two big questions.

We, the progressives in Europe, are so fed up with the total lack of democracy and transparency in this Big-Corporation run EU that we would rather see it fall apart. It was created to be a vassal to the Empire and its ruling Corporatocracy, and it has managed to bring austerity and increased economic inequality to most European countries. We are all suffering, retirees and the young the most, and the southern countries are the worst off of all. We all see the Greek No to further slaving under the money lending tyrants as a sign that we too can stand up and say NO.

from the archives:

“Guerrilla Warfare Against a Hegemonic Power”: The Challenge and Promise of Greece by Ellen Brown + Hudson: Capitalism & Government Debt at Odds

Resisting Financial Conquest by Michael Hudson + US Hedge Funds Get Bailed Out if Greeks Pass Bailout Referendum

Michael Hudson: QE Intentions All Too Obvious + Kleptocrats who run Ukraine economy will grab IMF cash & run

Michael Hudson: Inequality = Privatization of the Earth

Syriza Party Wins Elections in Greece + Trojan Hearse: Greek Elections and the Euro Leper Colony by Greg Palast

see also:

Between Berlin and a Hard Place: Greece and the German Strategy to Dominate Europe by Andrew Gavin Marshall

Greece says no to austerity and yes to solidarity

The EU mob seeks revenge against Greece

8 thoughts on “Greece Rejects the Troika. What’s Next? by Michael Hudson + Greece: It all seems so clear – and so complicated by Siv O’Neall

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  6. European Parliament needs to get a grip and change its conservative tune I’d say. The Strasbourg geese seem to be voting for fois gras & have their feet nailed to the fraudsters’ “bench.” This TTIP is getting too close for comfort now with the 436/232 non-binding affirmative, but the devil remains in the detail.

    British MEP’s voted 2:1 against, so it’s confused and perplexing, only time will tell. 38 Degrees have been running a strong campaign to expose this global “free trade” coup.

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  8. If Germany’s WW2 debt could be almost entirely be written off – why can’t Greece get the same help? Of course, back in 1953, it was more important to get Germany back on it’s feet to serve as bulwark against Communism. This type of bulwark is no longer needed, so Greece is being dismantled the same way Yugoslavia was. The Brussels’ megalomaniacs are blackmailing – pure and simple. The EU has needed this shake-up for quite some time already.

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