What does “left-wing” and “anti-austerity” mean in Greece if they can’t print or borrow money?

by philg

The New York Times has a story about how a party they characterize as “left-wing” and “anti-austerity” has won an election in Greece. Given that the country does not have its own currency, what can such a party do as a practical matter? If they can’t print money because other nations control the Euro and they can’t borrow because investors won’t lend more, what can these new leaders do?

18 thoughts on “What does “left-wing” and “anti-austerity” mean in Greece if they can’t print or borrow money?”

  2. I was wondering that myself, and then I read JAD’s analysis, which I fear is spot on. Allow me to quote http://blog.jim.com/war/hard-left-wins-in-greece/

    ”
    The interesting question is not whether Greece leaves the Euro, or the Euro leaves Greece, but how many of the opposition will be arrested before the next election.

    The victory of the hard left was made possible by arresting the hard right and forbidding them from campaigning.

    Which had the effect of discouraging anyone from disagreeing with the hard left

    Greek politics is already dominated by police intimidation and the direct use of state power to punish dissent. Election of a hard left party is likely to increase the use of police intimidation and the direct use of state power to punish dissent.

    The left, which is to say the state, talks about the side of history. History tells us that if you use state power to suppress your opponents on the right, by and by your opponents on the left will use state power to suppress you.
    “

  3. Default on all debts and get the country out of the euro, either directly or by making impossible demands of the other euro countries. Then start printing new drachmas. That’s the expectation anyway.

  4. Raise taxes. Cut spending. Increase the asking (begging) for financial subsidies from other countries,

  5. “Mr Tsipras promised to write off half of Greece’s debt”, according to the BBC. Whether this is practical is another matter, but this is what he has promised.

  6. All they can do is default on their debt. Most likely the consequences would be even more painful than the current austerity measures. Greece would be kicked out of the euro zone. They might try to reintroduce the drachma, but no one would want it, so they will end up like Zimbabwe and give up the futile pretense of monetary sovereignty (Zimbabwe uses the U.S. dollar, but obviously has no control over the Fed, Greece will keep using the euro, just without a seat at the ECB any more). The banking sector will collapse as everyone tries to move their euros to German banks (most will already have done so). They will then have to make savage cuts to government spending to match actual tax receipts, or actually crack down on tax evasion (good luck with that).

    Some people are looking at Argentina’s recent experience and thinking it won’t be so bad, but I suspect the Greek government is even more dysfunctional. Iceland is not a good example because it’s debt was privately incurred by bankrupt banks like Icesave, not the Iceland government itself (although the British and Dutch tried really hard to get the government to accept responsibility for the private debt because its regulators were asleep at the switch, using questionable tactics like anti-terror laws to impound Icelandic accounts).

  7. They’ve changed their tune away from “we’ll leave the EU if they’re not nice to us”. It looks like all they can promise is harder bargaining with the EU. Realistically, I don’t see that they have much leverage to effect any better terms so it will just look like “we tried real hard” to the electorate. The only real difference from before will be that they are in power now.

  8. It could renegotiate the bailout terms, enforce stricter collection of taxes, default on debts and eventually leave the Euro and control its own currency.

  10. I was wondering that myself, and then I read JAD’s analysis, which I fear is spot on. Allow me to quote http://blog.jim.com/war/hard-left-wins-in-greece/
    ”The interesting question is not whether Greece leaves the Euro, or the Euro leaves Greece, but how many of the opposition will be arrested before the next election. The victory of the hard left was made possible by arresting the hard right and forbidding them from campaigning. Which had the effect of discouraging anyone from disagreeing with the hard left.”

    What a load of crap.

    First, let’s dispense with the euphemisms: Golden Dawn is not just a “hard right party”– it’s a neo-Nazi party that goes into Greek hospitals, and threatens to physically throw out Syrian-born and Turkish patients.
    http://www.newrepublic.com/article/119536/greek-neo-nazi-group-golden-dawn-may-succeed-elections

    Second, the “hard left” did not arrest Golden Dawn leaders– the center-right New Democracy arrested him for belonging to a “criminal organization” following the murder of a rap musician by members of Golden Dawn. Perhaps they shouldn’t have been (I wouldn’t), but let’s be fulsome about the circumstances. Germany, France and other European countries would’ve done the same.

    Third, if anything, the arrests galvanized the Golden Dawn Party, which finished in 3rd place.

    http://rt.com/news/226207-golden-dawn-greece-election/

    “The left, which is to say the state, talks about the side of history. History tells us that if you use state power to suppress your opponents on the right, by and by your opponents on the left will use state power to suppress you.”

    Fourth, “the left” has not been doing the jailing in Greece’s sordid modern history. The Black Colonels were a right-wing military junta that jailed all of its political opponents from “the left” with the support of U.S. Administrations.

    I dislike the Greek left, but let’s not quote as fact, made-up facts and history.

  11. The Greek’s problems have little to do with the conventional left-right framework. Rather it is because they are very high in what Argentines call “viveza criolla” or “viveza” for short. Places that have a low “viveza” quotient (Germany, Scandinavia) believe in values like hard work and honesty. High viveza places (Argentina, Greece, etc.) live by the motto “never give a sucker an even break”. So poor Greeks dream of getting no-show government jobs with good salaries and rich Greeks dream about ways of cheating on the taxes. The prototypical modern Greek hero is the outlaw bandit in the mountains, living outside of the laws of the Turkish occupiers.

  12. I don’t blame the Greeks. The Greek economy is tiny, and a renegotiation of the Greek public debt wouldn’t hurt the economy of the EU much, if at all. But they’re not going to get better terms as long as they roll over and play nice.

    Syriza is willing to drive a hard bargain. Whatever their position on the political spectrum, I can imagine the Greeks prefer that to endless slaving just so their politicians can pretend to be responsible statesmen.

  14. Folks: Agreed that the Greeks can default and exit the euro, but their debt to foreign investors is not a huge percentage of their total obligations (see http://www.forbes.com/sites/jeffreydorfman/2014/07/12/forget-debt-as-a-percent-of-gdp-its-really-much-worse/ for an analysis). So I still don’t see what this new party can do. They can’t do a Piketty-style wealth tax, can they, if all of the real money has already been moved to Germany and Switzerland?

    Can the Greeks simply will themselves to being as rich as the Germans?

  15. Ian Welsh has been all over this. Basically Greece does alot of black market/ grey market stuff. They have a large merchant fleet. If you haven’t noticed, despite or because of the best efforts of US national security policy, the number of pariah states has been growing, so Greece can do things such as import food from Argentina and oil from Russia, and use its merchant fleet to help both evade creditors and sanctions.

  16. They can talk their way to other people’s money. They migth get enough sympahty from similarly thinking people elsewere (and rationalize it with “the rich should pay for that”).

  17. This sounds like a fantasy. The merchant fleet is privately owned (and like most private entities in Greece, they do their best to evade paying taxes to the Greek government (or any government)).

    It’s quite possible that their merchant fleet will be involved in shady dealings between pariah states but that isn’t going to help the Greek government pay its bills and give everyone big raises the way Syriza has promised. Even if they made some money off of this, their problems are orders of magnitude bigger than what they could raise from black marketeering. Especially not inside the Euro zone.

    Their best bet would be to pull out of the Euro and then Syriza could print trillions of drachmas and say – “see here what I big raise I gave you , look at the huge numbers on your paycheck.” Argentina once tried binding itself to a hard currency (the US dollar) but they lacked the discipline to pull it off so they went back to being a soft currency nation and they are happy now. I predict the same for Greece. Everyone will be happier that way, except the lenders who will get screwed. Why anyone in his right mind would ever lend to places like this beats me.

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