Louis Proyect: The Unrepentant Marxist

July 15, 2015

Greece: the scissors trap

Filed under: Greece — louisproyect @ 6:11 pm

(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.


  1. I do not understand why Greek banks closed. What was the justification for this? The Greek government was having trouble paying its debts not Greek citizens with positive balances in their checking accounts.

    Comment by Curt Kastens — July 15, 2015 @ 9:24 pm

  2. They were trying to prevent a run on the banks. FDR declared a “bank holiday” in 1932 for that purpose. Also, you can see this dramatized in Frank Capra’s “It’s a Wonderful Life”.

    Comment by louisproyect — July 15, 2015 @ 9:29 pm

  3. Thank you,

    Comment by Curt Kastens — July 15, 2015 @ 10:33 pm

  4. Banks were closed because they are broke, and only surviving with ‘free’ money from the ECB , who gets probably worthless collateral in return. Once the ECB cut off the money it was a form of terrorism as Yanis said. The banks are Greece’s main weakness now, since they are more or less in primary surplus.

    Yanis did have a solid plan but it was rejected by Syriza’s inner sanctum 4-2 as he recounted. It meant seizing the Bank of Athens were there is probably plenty of cash money in the vaults. And then implementing parallel currencies.

    In short time Greece will have de facto parallel currencies anyway because cash Euro’s will be worth more than Euro’s locked in a bank account. So people will trade with each other based on that. As for difficulty, California issued a parallel currency IOU a few years ago. It’s not that hard.

    Comment by purple — July 16, 2015 @ 12:01 am

  5. EMU brutality has destroyed the trust of the European left


    Comment by Richard Estes — July 16, 2015 @ 2:37 am

  6. Minor clashes during protests in Athens prior to the vote raise a troubling prospect, will Tsipras and Syriza find themselves calling the police upon protesters that attempt to prevent implementation?

    Comment by Richard Estes — July 16, 2015 @ 2:41 am

  7. I still feel that all this talk of how hard it would be, as far as infrastructure is concerned, to be a giant cop-out. While it certainly would be difficult, the switch was done before and the country survived. Plus in both the short-term and medium-term it would at least put a section of the Greek people back to work to make the transition happen.

    They should have been preparing for Grexit, starting with a dual currency or tax credit swap, from the start. As Richard Seymour puts it, “Syriza’s negotiating stance crumbled by late February. Without any of the allies or interlocutors they expected, they accepted the position of the creditors, and claimed victory. Between opposing austerity, and demonstrating their euro commitment, they opted for the latter. Henceforth, with the fiscal stranglehold still in place, the government had nothing to negotiate with, no threat to make.” While the referendum wasn’t a vote to leave the Eurozone, in the technical sense, I feel it did show that the Greek people wanted some other solution than just capitulation to the creditors. I’m not a Global Research pro-Putin guy, he’s just as much a capitalist thug and bad guy as the West is,but maybe they could have gotten some sort of better deal from the New Development Bank to help with a transition out of the Euro. In the end the creditors’ have got what they wanted, a cowed and discredited Syriza. Now the creditors can say to the threats to the Euro project, such as Podemos, that there will be no compromise or way out.

    Comment by Sargasso — July 16, 2015 @ 5:21 am

  8. While it certainly would be difficult, the switch was done before and the country survived.

    That’s right but took some number of years.

    Comment by louisproyect — July 16, 2015 @ 1:49 pm

  9. The banks closed because in the very final analysis every penny in your bank account belongs not to you but, well, let us call it the “keeping the system going emergency reserve fund”.

    So the banks closed in order that this reserve fund was not drained away to nothing.

    Comment by Simon Provertier — July 16, 2015 @ 4:00 pm

  10. Diana Brownstone- Counterpunch, Weekend Ediction: Sure Resonates with me. Sorry I do not do twitter.

    Comment by Curt Kastens — July 17, 2015 @ 3:23 pm

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