(This was posted on FB by Jeff Richards. It overlaps with my article on the drachma conversion issues.)
Greece: The scissors trap.
The story of why Greek Prime Minister Alexis Tsipras changed his mind in the July 2015 negotiations with the European Union will, I am sure, be revealed by memoirs and investigative reporting in the future. At present any political assessment must be provisional. I am not one of those on the radical left (and the radical right in the case of Nigel Farage) who are now letting off a lot of steam with cries of ‘treachery’ or ‘betrayal’ etc. etc. etc.
Former Finance minister in the Syriza government Yanis Varoufakis, in a wide ranging interview with Phillip Adams on the radio programme Late Night Live alluded to one of the reasons why Tsipras recommitted himself to negotiations with the EU. Grexit would have required a new currency, a new Drachma. The task of creating a new currency is a very big organisational undertaking. Adams reminded the listener the vast logistical operation that was required to implement a new currency in Iraq following the invasion of that country by the Bush and Blair administrations.
Varoufakis said in the interview that the new Syriza government did have plans to opt for a new currency and they had assigned a special committee to look into the matter. That committee consisted of five members, whereas Varoufakis said that they would need to have a minimum of 500 personnel to take the process of a new currency to the next level. The reason why the finance ministry (which Varoufakis was leading at the time) did not take it to this next stage was the fear that setting up such a government department would harm the negotiations with the EU ministers. So the Greek government was caught in a trap, on the one hand trying to negotiate with intransigent ministers and hoping to exploit internal divisions within the EU -between Germany and France- and on the other hand not trying to do anything that might harm the negotiations with the EU (like being seen to be creating a new currency).
Greece exiting the European Currency Union (which is not the same as the European Union) is not an impossibly difficult task. It is however, a major logistical operation that would require the full mobilisation of the resources of the state, and the backing of the citizenry to implement. Syriza have alway indicated that it was their intention to try to negotiate and remain in the Euro with improved conditions. Plan B would have been to create a new currency. Syriza were simply unprepared for plan B, and were left with no option but to swallow the poison and hope they will survive without the country descending into a nazi revival. In many ways, it is an understandable why Syriza were caught unprepared. The relative newness in government, the enormity of the problems they were faced with, the urgent need to focus on meeting the needs of those left destitute by the policies of previous right wing governments. Most speculatively, I wondered if the lack of party cadres with limited experience in managing governments and state bureaucracies also played a role in the ‘turnaround’ by Tsipras.