At 1 a.m. Athens time on Wednesday, after five tumultuous years in which Greece’s unemployment rate ballooned, homelessness grew and the suicide rate skyrocketed, the country’s Syriza government defaulted on a 1.7 billion euro payment due to the International Monetary Fund (IMF). In doing so, it became the first country in the so-called “developed” world to short the IMF on a payment.
As billion dollar defaults go, this was actually a rather mild one. It was not a full repudiation of the debt, not an exclamation that Greece would never pay, but rather that it won’t because it simply can’t. Still, it is quite significant that this is the first time in the history of the IMF that a developed country has fallen into arrears on a payment.
Unable to secure debt relief in IMF negotiations, and faced only with proposals from the Troika (International Monetary Fund, European Commission, and European Central Bank) that would continue to slash pensions, privatize more of the public sector and raise taxes on products that affect the poorest like packaged foods, all while preserving the oligarchs that live in excess outside the parameters of taxes and law, Prime Minister Alexis Tsipras played the only hand he had left: he called for a referendum on the deal to take place on July 5.
On Wednesday evening Athens time, with rumors swirling that Tsipras would cancel the referendum and was prepared to deal, the prime minister delivered an address to the Greek people. He dispelled the suggestion that his government would blink and insisted that the referendum would go forward as planned and urged Greeks to vote “no.” The question of whether or not to accept current proposals by the creditors, he said, should be posed to the people.
He lambasted the characterization of the referendum by some as undemocratic, claiming that he was shocked that “a democratic Europe [would] not to give space and time [for a referendum.] It is a disgrace that we have these scenes of shame, because they closed the banks precisely because we wanted to give the people the vote.” The pressure from the Eurozone and the closing of banks, Tsipras argued, are an attempt to “blackmail” the people to give in to the creditors’ demands, which would only worsen conditions for an already immiserated Greek people.
Trying to dispel fears that a vote against the creditors’ proposals signals an immediate exit from the Eurozone, Tsipras maintained that the referendum is a vote on the specific deal, not on Greece’s place in the currency union, and reinforced his position that Greece can negotiate for better terms and remain in in the Eurozone. With banks closed for a third day, his speech also aimed to calm fears of a “bail-in” (in which depositors’ accounts are heavily taxed) and to reassure pensioners that he would not surrender their pensions to the creditors.
The financial media is propagating irresponsible comparisons between Greece and other countries to have gone down this path. In comparing Greece’s default to that of countries like Sudan, Somalia, and Zimbabwe, the fear mongering is in full effect. The message is crude yet clear: stick with the plan or else you’ll end up a third world country. The racist implications shouldn’t be ignored either; pundits could easily bring up Argentina as well, as some have, but many seem to prefer to play on ignorance to the specifics of these defaults and the stereotypes that portray African nations as dangerous, anarchic failures.
In the case of Greece, the road to failure has been far more European. As sociologist Walden Bello explained back in 2010, Greece’s economic crisis is the product of frenzied capitalism. German and French banks, eager to make a profit from lending, poured money into a shaky Greek economy. The American investment bank Goldman Sachs helped Greek financial authorities utilize derivatives to make the immense debt seemingly disappear, building a house of cards that would topple when Goldman would itself “bet on the possibility that Greece would default,” which helped lead to a crisis for Greece and massive profits for the bank.
The rescue plan further compounded Greece’s problems, Jerome Roos, a Ph.D. researcher in international political economy at the European University Institute, has long argued. The IMF has been complicit in the “the decimation of the Greek economy.” In a recent piece, he points out that even IMF officials, including former chief Dominique Strauss-Kahn, have concluded that efforts to shield German and French banks from taking considerable hits took precedence over formulating a sustainable plan — in effect crippling Greece further.
As I’ve written before, Syriza’s electoral mandate has always been twofold: first, to keep Greece in the currency union; second, to end the long suffering caused by the imposed austerity. This is why a referendum is Tsipras’s only way forward. A “yes” vote by the Greek people will register as full capitulation and shackle Greece to the Troika’s austerity plan. A “no” vote will reject the deal and give his government the popular support to resist and negotiate from a new perspective — even if the costs would be a flattened Greek economy that catapults the nation out of the currency union.
In calling for the vote, Tsipras reminded the people of the mandate they awarded to his government back in January. But he also reminded the world that decisions of profound consequence to the great majority of people belong in the hands of the people – not unelected IMF technocrats.
The stakes are undeniably high, as the total amount of Greece’s debt is in excess of 320 billion euros. In addition to its impact on the people of Greece, a loss of that magnitude would send shockwaves through the creditor nations of northern Europe.
If the Greek people vote “yes,” as both the center-right politicians and the oligarchs prefer, they will be voting for the familiar — for the assurances of what they think they know, an austerity program the likes of which will only deepen the social suffering. However, if the people vote “no,” as those on the Left and even American Nobel-Prize-winning economist Paul Krugman have argued for, they will have pushed Syriza into unchartered terrain, but will also grant the party the opportunity to address the country’s humanitarian catastrophe through a program of its own.
On July 5, the Greek people should vote “no.” If they do, Syriza must not be immobilized by the fear of the unknown. The party must break with the notion that it can negotiate Greece out of austerity within the framework of the Eurozone and within the logic of paying an unsustainable debt. It must secure the livelihood of the people, not the coffers of the banks that would squeeze the very last drop of blood from an already drained populace.
Tsipras has intimated, as he’s done in the past, that he would be willing to come to terms with creditors, namely the European Commission, if certain amendments to the agreement would be made. Key to his agreement, he insists, is a framework that would protect the Greek islands from tax increases and aim to protect already diminished Greek pensions. These steps are honorable, but timid and insufficient in the face of the social crisis.
In his Wednesday speech, Tsipras articulated that a “no” vote would give his government the mandate to punish corruption and address the humanitarian crisis while seeking a better deal. He also dispelled rumors of any secret plan to exit the Eurozone. It’s time for Tsipras and the rest of Syriza to admit that these positions are incongruous. The party’s biggest mistake thus far has been in trying to reason with an unreasonable system, to change the heart of a heartless machine.
Tsipras should stand firm by his call for a referendum; the people must remain mobilized and vote “no,” otherwise they face perpetual austerity and misery at the hands of unelected creditors. Perhaps, once they are armed with a “no” vote and faced with the irrational demands of the Troika, Syriza will have the courage and mandate to lead Greece out of the Eurozone.