Greece Says NO to Permanent Austerity

Greek voters refuse to bow to impossible demands from creditors. More than 60% of Greek voters say NO. Alexis Tsipras: "The Greek people made a historic and brave choice. Their response will alter the existing dialogue in Europe."

Yanis Varoufakis, Paul Krugman, Paul Taylor/Andreas Rinke Yanis Varoufakis, New York Times, Huffington Post
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Supporters of the No vote react after the first results of the referendum at Syntagma square in Athens, Sunday, July 5, 2015.,AP Photo/Petros Giannakouris

Our NO is a Majestic, Big YES to a Democratic, Rational Europe!
Ending Greece's Bleeding
Greek 'No' Vote Finds Chilly Reception In Europe

Our NO is a Majestic, Big YES to a Democratic, Rational Europe!
Yanis Varoufakis
yanisvaroufakis.eu
July 6, 2015
http://yanisvaroufakis.eu/2015/07/06/our-no-is-a-majestic-big-yes-to-a-democratic-rational-europe/

On the 25th of January, dignity was restored to the people of Greece.

In the five months that intervened since then, we became the first government that dared raise its voice, speaking on behalf of the people, saying NO to the damaging irrationality of our extend-and-pretend ‘Bailout Program’.

We

  • spread the word that the Greek ‘bailouts’ were exercises whose purpose was intentionally to transfer private losses onto the shoulders of the weakest Greeks, before being transferred to other European taxpayers
  • articulated, for the first time in the Eurogroup, an economic argument to which there was no credible response
  • put forward moderate, technically feasible proposals that would remove the need for further ‘bailouts’
  • confined the troika to its Brussels’ lair
  • internationalised Greece’s humanitarian crisis and its roots in intentionally recessionary policies
  • spread hope beyond Greece’s borders that democracy can breathe within a monetary union hitherto dominated by fear.

Ending interminable, self-defeating, austerity and restructuring Greece’s public debt were our two targets. But these two were also our creditors’ targets. From the moment our election seemed likely, last December, the powers-that-be started a bank run and planned, eventually, to shut Greece’s banks down. Their purpose?

  • To humiliate our government by forcing us to succumb to stringent austerity, and
  • To drag us into an agreement that offers no firm commitment to a sensible, well-defined debt restructure.

The ultimatum of 25th June was the means by which these aims would be achieved. The people of Greece today returned this ultimatum to its senders; despite the fear mongering that the domestic oligarchic media transmitted night and day into their homes.

Today’s referendum delivered a resounding call for a mutually beneficial agreement between Greece and our European partners. We shall respond to the Greek voters’ call with a positive approach to:

  • The IMF, which only recently released a helpful report confirming that Greek public debt was unsustainable
  • The ECB, the Governing Council of which, over the past week, refused to countenance some of the more aggressive voices within
  • The European Commission, whose leadership kept throwing bridges over the chasm separating Greece from some of our partners.

Our NO is a majestic, big YES to a democratic Europe.

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It is a NO to the dystopic vision of a Eurozone that functions like an iron cage for its peoples.

It is a loud YES to the vision of a Eurozone offering the prospect of social justice with shared prosperity for all Europeans.

Ending Greece's Bleeding
Paul Krugman
New York Times
July 5, 2015
http://www.nytimes.com/2015/07/06/opinion/paul-krugman-ending-greeces-bleeding.html

Europe dodged a bullet on Sunday. Confounding many predictions, Greek voters strongly supported their government’s rejection of creditor demands. And even the most ardent supporters of European union should be breathing a sigh of relief.

Of course, that’s not the way the creditors would have you see it. Their story, echoed by many in the business press, is that the failure of their attempt to bully Greece into acquiescence was a triumph of irrationality and irresponsibility over sound technocratic advice.

But the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.

What’s more, they weren’t. The truth is that Europe’s self-styled technocrats are like medieval doctors who insisted on bleeding their patients — and when their treatment made the patients sicker, demanded even more bleeding. A “yes” vote in Greece would have condemned the country to years more of suffering under policies that haven’t worked and in fact, given the arithmetic, can’t work: austerity probably shrinks the economy faster than it reduces debt, so that all the suffering serves no purpose. The landslide victory of the “no” side offers at least a chance for an escape from this trap.

But how can such an escape be managed? Is there any way for Greece to remain in the euro? And is this desirable in any case?

The most immediate question involves Greek banks. In advance of the referendum, the European Central Bank cut off their access to additional funds, helping to precipitate panic and force the government to impose a bank holiday and capital controls. The central bank now faces an awkward choice: if it resumes normal financing it will as much as admit that the previous freeze was political, but if it doesn’t it will effectively force Greece into introducing a new currency.
Specifically, if the money doesn’t start flowing from Frankfurt (the headquarters of the central bank), Greece will have no choice but to start paying wages and pensions with i.o.u.s, which will de facto be a parallel currency — and which might soon turn into the new drachma.
Suppose, on the other hand, that the central bank does resume normal lending, and the banking crisis eases. That still leaves the question of how to restore economic growth.
In the failed negotiations that led up to Sunday’s referendum, the central sticking point was Greece’s demand for permanent debt relief, to remove the cloud hanging over its economy. The troika — the institutions representing creditor interests — refused, even though we now know that one member of the troika, the International Monetary Fund, had concluded independently that Greece’s debt cannot be paid. But will they reconsider now that the attempt to drive the governing leftist coalition from office has failed?
I have no idea — and in any case there is now a strong argument that Greek exit from the euro is the best of bad options.
Of course, Greece no longer has its own currency, and many analysts used to claim that adopting the euro was an irreversible move — after all, any hint of euro exit would set off devastating bank runs and a financial crisis. But at this point that financial crisis has already happened, so that the biggest costs of euro exit have been paid. Why, then, not go for the benefits?
Would Greek exit from the euro work as well as Iceland’s highly successful devaluation in 2008-09, or Argentina’s abandonment of its one-peso-one-dollar policy in 2001-02? Maybe not — but consider the alternatives. Unless Greece receives really major debt relief, and possibly even then, leaving the euro offers the only plausible escape route from its endless economic nightmare.
And let’s be clear: if Greece ends up leaving the euro, it won’t mean that the Greeks are bad Europeans. Greece’s debt problem reflected irresponsible lending as well as irresponsible borrowing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s common currency, it’s because that common currency offers no respite for countries in trouble. The important thing now is to do whatever it takes to end the bleeding.

Greek 'No' Vote Finds Chilly Reception In Europe
Paul Taylor and Andreas Rinke
Huffington Post / Reuters
July 5, 2015
http://www.huffingtonpost.com/2015/07/05/europe-reaction-greece-referendum_n_7732060.html

BRUSSELS/BERLIN, July 5 (Reuters) - France and Germany called for an emergency summit of euro zone leaders to discuss Greece's stunning referendum vote on Sunday to reject bailout terms, as calls mounted in Berlin to cut Athens loose from Europe's common currency.

German Chancellor Angela Merkel's deputy said Athens had wrecked any hope of compromise with its euro zone partners by overwhelmingly rejecting further austerity.

Merkel and French President Francois Hollande conferred by telephone and will meet in Paris on Monday afternoon to seek a joint response. Responding to their call, European Council President Donald Tusk announced that euro zone leaders would meet in Brussels on Tuesday evening (1600 GMT).

German Vice-Chancellor Sigmar Gabriel, leader of Merkel's center-left Social Democratic junior coalition partner, said it was hard to conceive of fresh negotiations on lending more billions to Athens after Greeks voted against more austerity.

Leftist Prime Minister Alexis Tsipras had "torn down the last bridges on which Greece and Europe could have moved towards a compromise," Gabriel told the Tagesspiegel daily.

His comments reflected a mounting public demand in the most powerful EU country, which is also Greece's biggest creditor, to eject Athens from the 19-nation currency area, of which membership was intended to be irreversible.

It was not clear whether Merkel, who has repeatedly said she wants to keep Greece in the euro zone, would shift to a similarly hard line.

But senior lawmakers in her conservative bloc also spoke firmly: "Now one has to ask the question whether Greece would not be better off outside the euro zone," Hans Michelbach, a member of the Bavarian Christian Social Union, told Reuters. "Unfortunately, Greece has chosen a path of isolation."

The vote sharpened differences between Greece's few remaining sympathizers in the euro zone - mostly in Italy and France - and hardline countries led by Germany that are fed up with pouring loans into Greece.

Italy's foreign minister, Paolo Gentiloni, said the euro zone should resume efforts to reach a deal with Athens.

"Now it is right to start trying for an agreement again," he tweeted. "But there is no escape from the Greek labyrinth with a weak Europe that isn't growing."

SILENCE FROM BRUSSELS

The euro fell sharply in early Asia-Pacific trading on Monday, losing about 1.4 percent against the U.S. dollar, as analysts for Citi, Barclays and other banks said a Greek exit was now their "base case" or most likely outcome.

There was a thunderous silence from top EU policymakers in Brussels and Frankfurt who conferred by telephone but avoided public appearances to comment on an outcome that was a stunning setback for EU governments but delighted Eurosceptic populists.

The European Commission said in a brief statement that it "takes note of and respects" the referendum result.

Jeroen Dijsselbloem, chairman of the Eurogroup of finance ministers of the currency bloc, said in a letter to his Dutch Labor Party members before the vote: "Although the government in Athens would like people to think otherwise, it is about the question of whether Greece stays in the euro zone or not."

European Parliament President Martin Schulz said the EU should start preparing a humanitarian aid program for Greece.

The 60-40 margin of defeat for the terms of a cash-for-reform deal, which the leftist Greek government rejected a week ago, shocked EU officials who had been heartened by opinion polls showing the 'Yes' camp gaining ground as bank closures and the rationing of cash withdrawals began to bite.

It was a personal blow for European Commission President Jean-Claude Juncker, one of the architects of the euro, who worked for months to try to broker a debt deal with Tsipras despite misgivings in Berlin.

Deputy finance ministers and senior officials of the Eurogroup Working Group will hold a conference call on Monday to take stock of the situation, another euro zone official said.

Any future negotiation would run up against the hardening of opinion in Germany.

The head of Germany's savings bank association said Greece had broken with the rules of the euro zone and should leave the currency bloc. The head of the German exporters' body said he could not see how Greece could stay in the euro zone now.

Hardline German Finance Minister Wolfgang Schaeuble, denounced in 'No' campaign posters as a blood-sucker, has leaned towards making an example of Greece and pushing it towards the exit, sources familiar with his thinking say.

In a weekend newspaper interview, Schaeuble said Athens might consider leaving the currency area temporarily.

Eurosceptics around the EU were jubilant at the rejection of what French far right National Front leader Marine Le Pen called "the European Union oligarchy."

"It is 'No' vote of freedom, of rebellion against European 'diktats' of those who want to impose the single currency at any price, through the most inhuman and counter-productive austerity," she said in a statement.

In Britain, anti-EU UK Independence Party leader Nigel Farage commended Greek voters for "calling the EU's bluff."

"EU project is now dying. It's fantastic to see the courage of the Greek people in the face of political and economic bullying from Brussels," he said.

Eurosceptics in the Netherlands and Italy joined the chorus of glee at the EU's discomfiture. In Spain, leader of the new far-left Podemos party, Pablo Iglesias, who is close to Tsipras, tweeted: "Today in Greece, democracy has won." (Additional reporting by John O'Donnell in Frankfurt, Madeline Chambers and Gernot Heller in Berlin, Leila Abboud in Paris, Isla Binnie in Rome, Toby Sterling in Amsterdam; Writing by Paul Taylor; Editing by Peter Graff and Ken Wills)