Crunch-time for the eurozone?
Nearly five years after it started, the global economic and financial crisis shows no signs of resolving itself. On the contrary, in Europe it is taking a more virulent form, as the eurozone inches towards some kind of moment of truth. The slow motion catastrophe in Europe threatens to kill off the chronically weak recovery in the US. This is part of a global levelling down process, as the Chinese economy, which has since 2009 provided the main motor of revival, itself runs out of steam. The Financial Times reported in mid-June:
The FT/Brookings Tiger index [which is supposed to track the global economic recovery] showed world growth stalling after an initial rapid recovery from the 2008-09 economic crisis. Growth in the US was slowing, much of Europe is in recession, China’s growth outlook has weakened, the reform processes in India have stalled and other large emerging economies have slowed dramatically.
Prof [Eswar] Prasad [of Brookings] said: “The engines of world growth are running out of steam while the trailing wagons are going off the rails. Emerging market economies are facing sharp slowdowns in growth while many advanced economies slip into recession”.1
One can analyse what’s happening at three levels. The first and most immediate centres on Greece. Here politics is in command: will the popular revolt against the parties supporting the Memorandum of Understanding between the Greek state and its people’s tormentors (the troika of the European Central Bank [ECB], the European Commission and the International Monetary Fund [IMF]) precipitate Greece into jumping or being pushed out of the eurozone? Most commentators agree the success of New Democracy, the main party of the Greek right, in squeaking narrowly ahead of Syriza (the Coalition of the Radical Left) in the general election of 17 June has merely bought a little time. The economist Nouriel Roubini tweeted that night: “In 6-12 months ND-Pasok gov will fall as economy will fall into a depression. Then new elections will lead Syriza to win & Grexit to occur”.2
Much more on the politics below; the economics of the Greek agony is mainly about the impact of a “Grexit” and whether it would spread contagion to other vulnerable members of the eurozone: at present Spain is most in the firing line. This takes us to the second level of analysis. The eurozone crisis is the specific European form taken by the bursting of the financial bubble that gripped advanced capitalism in the middle of the last decade. What this involved was a great surge in bank lending, which financed a series of speculative booms, often centred on the property market. A recent analysis by the Financial Times’s Alphaville blog called “The Rise and Fall of European Banking” cites a Citibank study showing how European banks led the surge in cross-border lending (largely in this case within the European Union itself) in the last decade:
Global bank assets increased c160 percent from 2002 to 2008. Over this period, EU banks’ global assets increased c190 percent, with France leading the way (+250 percent). Several EU bank systems’ global assets, including France, the UK, Sweden, Greece, Ireland, Denmark and Netherlands, increased over 200 percent over this period.3
But this process has, since the 2008 crash, gone into reverse. To quote Citibank again: “Europe ex UK is the exception to the post 2009 international bounce back theme. Naturally more exposed to the second leg of the global financial crisis—the euro sovereign and banking crisis—European ex UK banks have reduced their overseas exposures in the past year, three and five years.” While US, British and Japanese banks have held on to their shares of global banking assets, those in continental Europe have seen their share fall.
This retreat reflects both the losses that these banks made when the bubble of the mid-2000s unravelled and also the losses they fear they may still make on their loans to the so-called “peripheral” eurozone economies. As we have repeatedly argued, the “rescues” of Greece, southern Ireland and Portugal have been all about saving the northern European banks that had lent so heavily to both public and private borrowers in these countries. The mechanism that has forced these countries into the arms of the troika has been financial markets forcing up the interest rates on government debt—swollen by the Great Recession and the costs of the initial bank bailouts—to unsustainable levels.4
But—as we have also argued—the price of the “rescues”, austerity programmes designed to slash public spending, has forced already weak economies into a vicious downward spiral in which contracting output makes it harder to meet the debt reduction targets demanded by the troika. One effect has been further to weaken shaky banking systems. For example, a combination of economic and political fears has promoted what Alphaville call a “bank jog” in Greece, with a steady drain of deposits being withdrawn amounting by early June to a 35 percent fall in the ratio of bank deposits to Greek gross domestic product.5
The ECB has been plugging the gap through its programme of emergency liquidity assistance to the Greek banks, estimated at €60 billion in mid-May. But such measures increase the losses that the rest of the European Union would make if Greece did fully default on its debt. The Marxist economist Michael Roberts offers the following estimate of these losses:
Adding up what the Greek government owes to other EU governments from the two bailouts, what the central bank debts are to the Eurosystem and how much the ECB has already lent to Greek banks and holds in Greek government debt, we find that the eurozone is exposed to around €500 billion of potential losses, or near 5 percent of eurozone GDP…
Germany and France alone are exposed to around €150 billion each. And this is just exposure to sovereign debt. If the Greek private sector should also default on its loans, French and German banks will take a sizeable hit (French banks have about €25 billion lent to Greek companies). When you add all this in, the total exposure is closer to €750 billion.6
If the default of tiny Greece could have such an impact, what about Spain, the markets’ most recent target? The Spanish economy is nearly twice as large as those of Greece, Ireland and Portugal combined. Some €97 billion left Spain in the first three months of 2012, amounting to about a tenth of national income.7 Much more directly than in Greece, the collapse in confidence centred on the banks, deeply implicated in the economically and ecologically destructive property bubble of the preceding decade.8
The fumbling right wing government of Mariano Rajoy, elected on an austerity ticket in November but desperate to avoid the full-scale troika treatment, tried to get the ECB to fund the rescue of Bankia, a conglomerate of seven failed cajas (regional savings banks) headed by an ex managing director of the IMF, Rodrigo Rato, through the back door.
When this didn’t work, with markets pushing up interest rates on Spanish government debt to unbearable levels, Rajoy had no choice but to appeal for an EU bailout. The terms offered the Spanish state on 10 June were more favourable than those given its predecessors. Rather than being tied to an IMF programme, the €100 billion loan will go to the government body responsible for restructuring the Spanish banks. But German finance minister Wolfgang Schäuble has said that a team of troika inspectors will be checking Spain’s books, so it remains to be seen whether the differences with earlier “rescues” are more than cosmetic.9
But it only took a few hours for the yields on Spanish government debt to start rising again to unsustainable levels, with Italian bonds soon suffering a similar fate. The Royal Bank of Scotland estimates that €134-180 billion is needed to recapitalise the Spanish banks, €155 billion to refinance sovereign bonds that fall due at the end of 2014, and €121 billion to cover budget deficits till then.10 The €100 billion bailout fund, probably from the new European Stability Mechanism, will cover only a fraction of this enormous bill. On a broader front, quite apart from the escalating crisis in Greece, there are too many unexploded bombs in the European financial system. One particularly toxic factor is offered by the long-term financing operation through which the ECB pumped around €1 trillion into the banking system. Banks used quite a lot of this money to buy their governments’ bonds: Spanish banks, for example, have taken €83 billion of Spain’s sovereign debt since December. This bought a bit of time but could act as what has been called a “doom loop”, in which weak banks and governments drag each other down.11
Hopes of an eventual return to stability are based on the German government agreeing to a European banking union that would put the combined financial power of the eurozone behind any vulnerable national banking system. There have been signs of a slight softening in German policy, particularly in response to the overwhelming rejection of austerity in the elections in France and Greece. In early May first Schäuble backed higher wage increases and then the Bundesbank said higher inflation would be acceptable as part of a process of expanding the German domestic market and thereby making it easier for other eurozone economies to expand by exporting.12 The somewhat less harsh packaging of the Spanish bailout might be another straw in the wind.
But these seem like relatively marginal adjustments. There is no sign of any willingness in Berlin and Frankfurt to offer more than cosmetic sweeteners to soften the savage austerity programme imposed on Greece. Chancellor Angela Merkel’s strategy remains to use the pressures created by the eurozone crisis to force other member states into a fiscal union that would generalise and perpetuate the austerity regime that has been imposed on Greece, Ireland and Portugal as an emergency response to this crisis. Any steps towards a banking union will have to wait upon acceptance of this regime. Even discussion of palliatives such as allowing the eurozone bailout funds to buy Spanish and Italian government debt has proceeded at a paralysingly slow pace.
When meeting David Cameron in early June, Merkel said, “We need more Europe. We don’t only need monetary union, we also need a so-called fiscal union. And most of all we need a political union—which means we need to gradually cede powers to Europe and give Europe control”.13 In fact, what she has in mind is nothing resembling a democratic political union based on the constituent power of the European people. Instead economic sovereignty is to be surrendered to a “Europe” consisting of unaccountable bodies such as the ECB and the European Council, in which the German state increasingly has the dominant say.
But the more immediate problem is that the banking crisis may overwhelm the deliberately paced game plan being pursued by Merkel and Schäuble. So far they have successfully relied on other European governments blinking first. But the situation is slipping out of the hands of the identikit mediocrities composing the European political elite in the neoliberal era. On the one hand, the financial markets may talk themselves into an uncontrollable panic, like the one that engulfed them after the collapse of Lehman Brothers in September 2008. Merkel herself has admitted, “We are certainly in a race with the markets”.14 On the other hand, the peoples of Europe—ignored so far in the deliberations of the troika and the Berlin cabinet—are threatening to upset all the calculations made at the top.
Before we turn to the latter, potentially decisive factor, a word about the third dimension of the crisis, which concerns its fundamental causes. Elsewhere in this issue Joseph Choonara demonstrates the central role played by the inability of the advanced capitalist economies to overcome the sharp fall in the rate of profit that they suffered during the 1960s. But pointing to problems of profitability as an ultimate cause of the crisis does not, as caricatural critiques of this interpretation sometimes suggest, require ignoring the destabilising role of financial markets. Marx himself in volume three of Capital closely connects the tendency of the rate of profit to fall with the fluctuations of financial markets, whose bubbles serve to allow the process of capital accumulation temporarily to overcome its limits. He writes: “The so-called plethora of capital is always basically reducible to a plethora of that capital for which the fall in the profit rate is not outweighed by its mass”—in other words, falling profitability creates a situation where there is too much capital relative to the mass of surplus value extracted from workers.15
The idea that crises represent a plethora of capital was developed by the so-called banking school of British political economists, early 19th century critics of the quantity theory of money that still forms a core assumption of neoliberal ideology. One of them, John Fullarton, argued that the origins of crises lie in the fact that “the amount of capital seeking productive investment accumulates in ordinary times with a rapidity greatly out of proportion to the increase of the means of advantageously employing it”. Hence the excess capital is splurged on increasingly speculative investment, leading to bubbles, panics and busts. He concludes, in a passage quoted by Marx:
From more recent events, indeed, one might almost be tempted to expect, that a periodical destruction of capital has become a necessary condition of any market rate of interest at all. And, considered in that point of view, these awful visitations, to which we are accustomed to look forward with so much disquiet and apprehension and which we are so anxious to avert, may be nothing more than the natural and necessary corrective of an overgrown and bloated opulence, the vis medicatrix [medical power] by which our social system, as at present constituted, is enabled to relieve itself from time to time of an ever-recurring plethora which menaces its existence, and to regain a sound and wholesome state.16
Fullarton’s diagnosis resembles the analysis developed by FA von Hayek during the Great Depression, which he argued was a result of overinvestment made possible by easy credit.17 Hayek’s contemporary followers criticise the bank bailouts and fiscal stimuli because they have prevented the purge of unprofitable capital needed to restore the system to health. In other words, state intervention has prevented the large-scale destruction of capital that would overcome the problems of overaccumulation and profitability that produced the crisis in the first place. Indeed, capitalists aren’t investing the extra profits they were able to squeeze out of workers at the height of the slump in 2008-9, thereby adding to these problems. In March, the Financial Times’s Lex column reported: “Four years after the financial crisis, companies globally are awash with cash: $1.7 trillion among US companies, €2 trillion in the eurozone, and £750 billion in the UK”.18
The trouble with leaving the system to correct itself through the destruction of capital is, as Keynes pointed out during the 1930s, that the result can be, as it was then, deep and protracted slump. Paul Krugman has taken up Keynes’s banner, arguing that the US and the EU are caught in a new depression that austerity is making worse.19 His criticisms of the “austerians” are highly effective, but Krugman presents overcoming the crisis as something as simple as flicking a light switch, through higher government borrowing and spending to stimulate effective demand. This ignores the much deeper problems in the accumulation process, and, in particular, as Roberts points out, that of profitability: “Even though
corporate profits have recovered in the US from their trough in mid-2009, the rate of profit is still below the most recent peak of 2005 and the
‘neoliberal’ peak of 1997. So corporations continue to hoard their cash and business investment growth is too weak to restore jobs and incomes to pre-crisis levels”.20
Capitalism therefore remains caught in a structural dilemma: the large-scale destruction of capital threatens a much deeper slump, but without it the crisis of profitability will continue. The ineffective posturing of the Western economic and political elites is ultimately an expression of this dilemma. In the eurozone, currently the most dangerous arena of the crisis, there is absolutely no sign of any resolution.
The second coming of the European radical left
One reason why the eurozone crisis threatens to become unmanageable has nothing directly to do with these structural contradictions. Quite simply, austerity is producing an increasingly powerful political backlash. This became visible in the late spring and early summer of 2012 in a succession of political upheavals. Most obvious were the victory of the Socialist Party (PS) in the French presidential and legislative elections, and the spectacular advances scored by Syriza in the Greek parliamentary elections of May and June 2012. But there have been other significant political events—for example, the collapse of the coalition government in the Netherlands, leading to fresh elections in September.
The same pattern appears in all these cases: the centre is squeezed and there is polarisation further to the right and left. The most spectacular case of the centre being squeezed is provided by Greece, where the main parties of Greek capitalism for the past generation—New Democracy (ND) and Pasok (the Panhellenic Socialist Movement)—were punished for their role in implementing the Memorandum by being reduced to a third of the popular vote on the election of 6 May. Their combined vote rose to about 42 percent in the follow-up poll on 17 June, still a minority of the electorate, while that of the radical left was a stunning 32 percent. Syriza’s score of nearly 27 percent is unparalleled since the Italian Communist Party was at the height of its power in the 1970s.
Thus we see here also the polarisation under way: the backlash against austerity is favouring parties of the radical left and the extreme right—the Front de Gauche and the Front National (FN) in France, Syriza and Chrysi Avgi (Golden Dawn) in Greece, the Socialist Party and Geert Wilders’s PVV Party for Freedom in the Netherlands. Elsewhere in this journal, Jim Wolfreys analyses the French elections. He emphasises how Nicolas Sarkozy’s populist racist policies have helped to create a much wider terrain on which the FN under Marine Le Pen’s leadership can operate. Particularly in the light of the FN’s high scores in the presidential and legislative elections, this is a threatening development. The picture is pretty ugly elsewhere as well. Chrysi Avgi, an openly Nazi paramilitary organisation, succeeded by exploiting state racism and popular disgust with the Memorandum parties, to win 7 percent of the vote in both elections, in a country where a tenth of the population died under the German occupation in 1941-4. Wilders pulled the rug from under the Dutch coalition in order to win broader support for his own distinctive brand of authoritarian neoliberal Islamophobia.21
Unfortunately the growth of the far right is a familiar feature of the European political scene. Indeed, this encourages a stereotypical conception in which history mechanically repeats itself, with economic depression favouring the triumph of fascism. Of course, in reality the 1930s saw immense class battles, particularly in 1934-6: it was their defeat, particularly thanks to the Popular Front policies of the Communist International, that made the continent-wide triumph of fascism possible.
Similarly, what we see in Europe is a process of social and political polarisation, in which crisis and austerity promote collective resistance and political radicalisation as well as the growth of the fascist and populist right. The re-emergence of the radical left is indeed the new feature in the situation, and therefore it requires particularly concentrated attention. Re-emergence: Between the late 1990s and the mid-2000s, a number of formations of the radical left emerged in Europe to challenge the social liberalism of mainstream social democracy. But, as the movements against neoliberal globalisation and the war on terrorism began to recede around 2005, so many of these formations suffered setbacks, quite often self-inflicted.22
Now they seem to be enjoying a second wind. The process isn’t a uniform one. Die Linke, which in recent years has probably been the most high-profile party of the radical left in Europe, suffered a serious setback in the North Rhine Westphalia state elections at the end of May, when it lost all its seats. Rifondazione Comunista has been reduced to a marginal force in Italy since its disastrous participation in the centre-left government of 2004-6. Two other of the older formations, the Left Bloc in Portugal and the Red Green Alliance in Denmark, are still very much players, though the Left Bloc saw its parliamentary representation halved in last year’s general election. And, in Britain, George Galloway’s astonishing by-election victory in Bradford West at the end of March brought Respect back into the game with a bang.
The new front-runners—the Front de Gauche and Syriza—conform to the general pattern. They are both coalitions whose constituent forces are rooted in the complex histories of their countries’ lefts. The Front de Gauche unites the French Communist Party (PCF) with Jean-Luc Mélenchon’s Parti de Gauche, a left wing breakaway from the PS, and an assortment of far-left groupuscules and social movement activists. Syriza’s dominant force is Synaspismos, a party that brings together most of the different elements of the Eurocommunist tradition in Greece, but its allies comprise a variety of far-left organisations of Maoist and Trotskyist provenance.
Is it possible to generalise about the politics of these formations? I have already tried to do so:
Over-simplifying a little, it is essentially some version or other of left reformism… It’s not surprising that left reformist parties are making the running against austerity. They are filling a space left by the rightward shift of mainstream social democracy. Parties like Labour and the French Socialists are now called “social liberal” because of their embrace of neoliberalism.
Figures such as Mélenchon, the Syriza leader Alex Tsipras, and, in this country, George Galloway are able to reach out to traditional social-democratic voters by articulating their anger in a familiar reformist language. Ed Miliband and François Hollande are trying to recalibrate their parties’ messages to relate to this anger, but their unwillingness to break with social liberalism leaves a big space to their left.23
This characterisation has come in for some criticism for failing to capture the novelty of these formations and the role played by the revolutionary left in them. Underlying these objections may be a deeper failure to understand the nature of reformism. It has become quite common on the far left to identify reformism with the mainstream social democratic parties and to argue that the latter’s capitulation to neoliberalism represents their transformation into straightforwardly bourgeois formations without any connection to the workers’ movement. This is a
In the first place, reformism can’t be equated with a specific set of political parties. It arises from a structural tendency for workers’ struggles to limit themselves to fighting for improvements within the existing system. This tendency then gives rise to the trade union bureaucracy, in other words, to a specific layer of full-time officials whose function is to negotiate the terms of workers’ more or less grudging accommodation with capitalism; their influence within the labour movement reinforces the tendency for the economic class struggle to be self-limiting. Social democratic parties emerged as the political expression of the trade union bureaucracy. But the underlying tendency can exist in the absence of such parties: the fact that the Democrats are as much an openly capitalist party as the Republicans doesn’t mean that there is no reformism in the US, and, predictably enough, its privileged site is the labour bureaucracy, as the experiences of Occupy Wall Street (see Jen Roesch’s article elsewhere in this issue) and the defeats in Wisconsin show.
Secondly, the social-liberal parties have yet to break with their moorings in the workers’ movement. These links may have weakened as the PS, New Labour and the like have made themselves at home in a bourgeois political sphere increasingly dominated by corporate media and finance, but they still exist, allowing these parties to tack leftwards to rebuild their popular base. Hence the ability of the corrupt and apparently moribund PS to defeat Sarkozy and win a presidential and legislative majority for the first time since 1988; hence also the victory of the German Social Democratic Party (SPD), which a couple of years ago was under heavy pressure from Die Linke, in alliance with the Greens in the North Rhine Westphalia elections.
But, as noted above, social democratic revivals don’t have to squeeze the radical left. And the development of social liberalism is crucial to the new parties’ ability to appeal to working class voters disgruntled by their old parties’ betrayal of their traditions. In many cases the radical left leaders are perfectly explicit about what they are doing. Galloway inflicted a thumping defeat on the Labour Party under Ed Miliband by campaigning as “Real Labour”. Oskar Lafontaine, the most dynamic figure in Die Linke, has been perfectly open that his project is to reconstruct German social democracy on a more left wing basis, with the aim of eventually forcing the SPD into coalition on Die Linke’s terms. Mélenchon has explicitly modelled his own strategy of that of Die Linke. This means that he is much less willing to contemplate participating in a PS-led coalition than the PCF, whose parliamentary and municipal representation is heavily dependent on Socialist Party support. But this is because Mélenchon is playing a longer game than the venal apparatchiks of French Communism are now capable of—and not because he has renounced reformism.
But the new radical left parties aren’t mechanically repeating the pattern through which classical social democracy developed. They don’t have the luxury of the gradual, organic accumulation of forces enjoyed by Labour or the SPD in the late 19th and early 20th centuries. Their relationship with the trade union bureaucracy varies considerably. And organised revolutionaries are often able to find a space to operate, sometimes even to help found the new formations. This reflects a fluid situation in which reformist politicians sometimes find it in their interest to ally with the far left. Thus Lafontaine, sometime SPD chair and German finance minister, has on occasion openly given his support to the biggest far-left tendency in Die Linke, marx21.
This situation naturally poses the question of how the revolutionary left relates to the radical left parties. This has provoked the most debate in the case of Greece. Syriza is simply one strand in what is, in relative terms, the largest radical left in Europe. The other two main strands are represented by the Communist Party of Greece (KKE), historically the most powerful organised force in the workers’ movement, and Antarsya (the Front of the Anti-Capitalist Left), a coalition of far-left groups of which the most significant are the New Left Current (NAR) and the Socialist Workers Party (SEK), the Greek sister organisation of the British SWP. Antarsya’s decision to stand in the 17 June elections, after a low score of 1.2 percent on 6 May, which was predictably squeezed down to 0.33 percent five weeks later, provoked a hubbub of condemnation, This has been particularly intense in those parts of the blogosphere inhabited by armchair strategists whose confidence in pronouncing about Greece seems in inverse relation to their proximity to the country.
These storms in an internet teacup are a minor expression of a much larger and more generous and internationalist impulse to express solidarity with the Greek people and the struggle against austerity. We can see this impulse, for example, in a statement of support for Syriza by four poststructuralist philosophers, Étienne Balibar, Wendy Brown, Judith Butler and Gayatri Spivak.24 Probably in many cases such sentiments are connected with a sense that, after years of crisis in which the radical left appeared to be a marginal force, now the situation is turning. Syriza and Tsipras are thus not merely the main vehicle for popular rejection of the parties of the Memorandum; they have become invested with the hopes of the left internationally. This is a heavy burden to carry.
Properly to assess what can be expected of Syriza requires attention to the specificities of recent Greek history. Nowhere else in western Europe have social and political struggles been as sustained for so long and at such a level of intensity as they have been in Greece—starting with the resistance to the German Occupation, continuing through the Civil War of 1946-9 and the mass movements against the monarchy in the late 1950s and 1960s and the military dictatorship of 1967-74, and into the republic established in 1974.25
Greek capitalism achieved relative stability during the 1980s, underpinned by entry into the European Community, but punctuated by frequent explosions of worker and student militancy. Hence the dominant political force for the past 30 years has been Pasok, led till his death in 1996 by Andreas Papandreou, a figure invested with the prestige of the struggle against the dictatorship, whose radical rhetoric masked much more conservative policies. His governments nevertheless delivered substantial reforms that served to accommodate a highly combative workers’ movement. This social compromise was facilitated by the accumulation of foreign debt—long before Greek capitalism joined the euro in 2001, it was kept afloat by recycled petrodollars and Eurodollar loans.
Pasok was thereby able to dominate the trade union bureaucracy, but its position was always contested by strong forces further to its left. The KKE has deeply shaped the broader radical left, both because of its strong base among industrial workers and school students in particular, and through its broader influence. It is a profoundly Stalinist organisation whose illegality till the fall of the dictatorship bound it closely to Moscow. As with other Communist parties, the identification with the Soviet Union as the apparent antithesis of Western capitalism and its role in the resistance to the Nazis and to the colonels allowed the KKE to attract many of the best working class militants. Elsewhere, the post war years saw a gradual weakening of the links with Moscow that allowed these parties increasingly to evolve into versions of
In the case of the KKE, this process was delayed by post-war repression, and then partially blocked by the rise of Pasok. This didn’t stop the KKE developing powerful opportunist tendencies—it even served in an “ecumenical” government with ND, the Greek Tories, in 1989-90. But the form this has typically taken is a rhetorical ultra-maximalism masking a deeply cautious practice whose aim is to conserve the KKE’s industrial and electoral base. Sectarian denunciations of the rest of the left have served to legitimise this practice.
Its main elements stemming from pro-European sections of the KKE, Synaspismos and its electoral alliance Syriza has been much less consistent in its political stances. Its much shallower social base has given Synaspismos much greater room for manoeuvre, and its far-left partners in Syriza allow it to project a very radical image when it suits, though these organisations have little influence on the determination of policy. Recent splits in Synaspismos to the left and the right—the departure respectively of the former Synapismos chair Alekos Alavanos and of what is now the Democratic Left (Dimar), led by Fotis Kouvelis—may have produced a greater degree of internal stability, but it is probable that the very plasticity of Syriza helped its vote to jump from 4.6 percent in October 2009 to 16.78 percent on 6 May 2012 and an astonishing 26.89 percent on
17 June. In other words, its political ambiguity allows people to read into Syriza what they want to believe. This interpretation is supported by the fact that for a while before the May general election, it was Dimar that was riding high in the polls.
But the political earthquake that the two Greek elections represent is determined by more fundamental factors. First, Greece is suffering an economic depression fully on the scale of the 1930s, causing immense human suffering. Second is, as we have noted, the massive popular rejection of the old parties: Pasok, in government either alone or in coalition since 2009, has suffered particularly badly (ND, though also hit, has benefited from the efforts of its leader, Antonis Samaras, to unite the fragmenting right against the threat of Syriza). Last but not least are the intense class battles that Greece has experienced ever since the youth revolt of December 2008—17 general strikes in the past two years, generating a radicalisation in the struggle as workplaces have been occupied and bitter local disputes fought out.27
All this has pushed Syriza to the forefront of Greek politics. It was narrowly pipped at the post by ND on 17 June, but no one expects the coalition Samaras will form to have an easy life. What will Syriza do if it eventually succeeds in forming the government of the left for which it is campaigning? One can begin to answer this by looking at its programme. As presented by Syriza’s main economic spokesman, Yiannis Dragasakis (formerly a leading figure in the KKE and a junior minister in the ecumenical government of 1989-90), it embraces a series of reforms—for example, rejection of the Memorandum, freezing spending cuts, tying servicing of the debt to economic growth, recapitalising the banks under “public administration and social control”, reform of the tax system and a clampdown on the black economy that has allowed the Greek rich to export vast amounts of capital.28
The general thrust of this programme is to challenge the logic of austerity. But it contains a fundamental contradiction. Dragasakis writes:
It is not our choice to exit the euro, but neither can we consent to the continuation of policies that offer no guarantee for the survival of our society and our country. Syriza proposes to the Greek people, and also to the people of Europe, the only pragmatic option that consists of a new, honest and binding agreement with the institutions and the people of Europe, one that will allow us to achieve three goals.
The first is to relieve the people who are suffering, the victims of this crisis. The second is stabilisation and recovery. And the third is the implementation of a programme of radical reforms and transformations, through which an effective reintegration of our country to the European future and to the international division of labour.29
So the changes Syriza is seeking are to be negotiated with the EU. This is true, in particular, in the case of the crucial issue of the debt, where Dragasakis proposes:
writing off a large portion of the accumulated debt, with provisions for servicing of the remaining debt to be linked to the rate of development, and suspensions of payments on the interest until the economy rebounds. This adjustment will be pursued within the framework of a common European solution for the public debt of all EU countries, and in the event that this does not prove feasible, on the basis of bilateral negotiations.30
Tsipras himself has struck a similar note, assuring the readers of the Financial Times a few days before the election of 17 June: “I will keep Greece in the euro”.31 The problem with this is obvious: not only does the eurozone have neoliberalism hard-wired into its structure (particularly through the limits on government borrowing and the power of the ECB), but the dominant forces within it, far from relenting in the case of Greece, are determined to institutionalise austerity on a permanent and Europe-wide basis. As a leading figure in Antarsya, Panagiotis Sotiris, points out,
The result is that the left promises saving society and breaking with austerity without dealing with the very mechanisms that led to the current social devastation. Such a position does indeed seem realist: a change of policies within the contours of the current situation. However, how realist is it to suppose that loan funds and solvency injections that have been offered under the condition of extreme austerity and “structural adjustment” will continue to be available if the austerity policies are abandoned?32
Writing before the June election, Costas Lapavitsas predicted:
Syriza will have a clear choice [after 17 June]. It could abandon its pre-election stance and participate in a government that accepted troika policies. This would be catastrophic for Syriza politically but also for the country. Default and exit would not be avoided in the end, and the political beneficiary could well be the fascist right.
Or Syriza could refuse to participate in a compromise government and take whatever political actions necessary to support its programme. If that were to happen, there would be rising tension with the core countries of the EU, and Greece could soon be out of the monetary union. Greece would have to take its lumps, but Europe would also come face-to-face with the folly of a monetary union that is threatening the stability of the entire continent.33
Stathis Kouvelakis, who along with Lapavitsas has argued powerfully that defeating austerity will require Greece to leave the eurozone, sees Syriza
engaging in a protracted battle which would almost certainly lead to results that go beyond the current objectives put forward by Syriza.
This would conform I think to a quite familiar pattern in history of processes of social and political change, where the dynamic of the situation, boosted of course by the pressure of popular mobilisation, pushes actors (or at least some of them) beyond their initial intentions. This is what scares most the dominant forces in Greece and in Europe and explains their hysterical campaign against Syriza and the perspective opened up by its possible coming to power.34
The thought seems to be that the very logic of the struggle would drive a Syriza government in the right direction. But history has taught us that this logic expresses itself through the play of political forces and that there is absolutely nothing inevitable about this play working out the right way from a revolutionary perspective. So, to the extent that Syriza in government were to implement measures against austerity this would need very powerful pressure from below both to keep it on track and to defend it from the furious reaction these measures would provoke, as Kouvelakis correctly implies, from Greek and European capital. But struggles—particularly with such high stakes—don’t just happen: they depend on the conscious agency of organised political actors.
What conclusions follow from this analysis? First, the revival of the radical left is a welcome development that begins to offer in the bourgeois political arena an alternative not only to the austerity demanded by the mainstream parties but also the populist and fascist right. But, secondly, the radical left parties do not represent a development that is somehow off the register of the politics of the workers’ movement as it has developed over the past two centuries. They may not recapitulate the history or structures of the traditional social democratic parties, but they also haven’t transcended the opposition between reform and revolution. They represent a particular kind of left reformism, shaped by the development of social liberalism, the weakening of the working class movement, and sometimes the influence the far left can have within them.
Thirdly, because these formations belong to a variant of left reformism, their political trajectory is unlikely simply to reflect the parallelogram of social and political forces. The more successful they become, the greater the pressure on them to act, as Sotiris notes, “realistically”, ie as responsible managers of capitalism. Therefore when Tsipras writes in the Financial Times that “Syriza is the only political movement in Greece today that can deliver economic, social and political stability for our country”, this can’t be explained away just as spin: it reflects the logic of assuming the government of a capitalist state.35 Of course, the polarisation of classes can reach a point where a reformist government finds itself directly confronting capital, as Popular Unity under Salvador Allende found itself doing in Chile in the early 1970s. But this example—and in particular the way in which Popular Unity sought to restrain the self-organisation of workers and the rank and file of the military in the months before the coup of September 1973—underlines how foolish it would be to assume that Syriza will get it right on the night.36
Fourthly, it is therefore necessary for revolutionary socialists, who understand the necessity of a decisive confrontation between the workers’ movement and capital, to organise independently. This is not the same as a politics of abstract sectarian denunciation of the reformists’ inevitable betrayals. It is simply a recognition of the harsh realities of class struggle to insist that revolutionaries must organise to help counter the immense power that capital can bring to bear on reformist parties and governments. It is crucial, however, that they do so in a way that doesn’t isolate them from the movements that have begun to develop around the radical left parties. On the contrary, revolutionaries must strongly identify with these movements and work for their success.
What this means in mundane organisational practice inevitably varies tremendously, according to local conditions, depending crucially on the state of the class struggle, the nature of the radical left formations, and the strength and social implantation of the far-left. Sometimes this can mean that revolutionaries can be an organic part of these formations: the activists of marx21 in Germany helped found Die Linke and play a role in its leadership. Sometimes this type of approach doesn’t work out too well, as it proved in the case of the SWP and Respect in Britain. The challenge in this kind of case is not to give up but to find a new way of working productively together. Sometimes, as this suggests, it makes more sense for revolutionaries to organise independently. In France, the leverage they might have had has been hugely reduced by the paralysis and partial disintegration of the Nouveau Parti Anticapitaliste, a situation that is at least in part of a result of the party’s failure when it was strongest, at the time of its launch in 2009, actively to engage with the Front de Gauche, and to force Mélenchon and the PCF to respond to its unity initiatives, rather than let itself be outmanoeuvred and eventually marginalised.37
What about Greece? The organisations forming Antarsya bring together activists who play a significant role in both the workers’ and the students’ movements. Their coming together has greatly increased their ability to influence the explosive social struggles that have developed in the past few years. The judgement of these organisations is that affiliating instead to Syriza would greatly restrict their capacity for independent action. Participating in elections is an opportunity to present a more coherent alternative programme than that offered by Tsipras and Dragasakis—a programme (which in fact closely resembles that put forward by Kouvelakis and Lapavitsas, who now support Syriza) centring on a default from below, nationalising the banks, and leaving the eurozone.38 But this political differentiation goes along with practising the politics of the united front, Antarsya militants fighting side by side with those of Syriza and the KKE (which, though electorally squeezed, remains a very powerful force on the ground). This is a coherent and realistic approach. It may, of course, prove wrong. Revolutionaries, being human, make plenty of mistakes. But the dogmatic certainty with which it is denounced in many quarters is, to be frank, ridiculous.
The intensity of the debates around Greece nevertheless underline that we have entered a new phase in the crisis. Till the past few months the situation has been dominated by the slow, remorseless working out of the economic logic of financial crisis and depression. Now, with the reaction developing around both the far right and radical left, the politics of the crisis is opening up. This carries great dangers, but it also raises great hopes, as we can see most clearly in Greece. Situations are developing where the anti-capitalist left can have a real influence on events. The choices they make matter, which is why it is important to be clear about what they involve.
Egypt: the revolution in danger
The Arab revolutions have reached a dangerous stage. This is clear in Syria, as Jonathan Maunder shows elsewhere in this issue. But it is also true in Egypt. We go to press days after the final round of the Egyptian presidential election, which Mohamed Morsi of the Muslim Brotherhood’s Freedom and Justice Party claims to have won. It is now clear that the ruling Supreme Council of the Armed Forces (SCAF) is mounting what is widely described as a “soft coup”. This began when it ensured that Ahmed Shafiq, Hosni Mubarak’s last prime minister, stood effectively as its presidential candidate. But it was dramatically reinforced on 14 June, when the Constitutional Court dissolved the parliament elected in November and December last year. SCAF followed this up three days later with a “constitutional declaration” taking back the powers to make laws and control the budget that it conceded to parliament in January and assuming the right to veto a new constitution.
The first round of the presidential elections at the end of May revealed both the strengths and weaknesses of the Egyptian revolutionary movement. The strengths: A tremendous campaign by Hamdeen Sabbahi, leader of the left-Nasserist Karama party, which powerfully articulated the demands of the revolutionaries and the workers’ movement, narrowly failed to push him ahead of Shafiq and into the second round runoff with the front-runner, Morsi.
Sabbahi came first in Cairo and Alexandria. His performance, combined with that of the liberal Islamist Abdel-Moneim Abul-Fotouh, led Hani Shukrallah to conclude: “For the first time in our history, we can with a fair degree of confidence say that while a quarter of us want the Brotherhood and another quarter want restoration, nearly half of us want the revolution realised; not at all a bad place from which to start putting that revolutionary house in order”.39 The massive street mobilisations that followed the mild treatment of Mubarak and his officials in their trial for the repression directed at the rising of 25 January 2011 were another sign of the enduring power of the revolution.
The weaknesses: The revolutionary vote was split between Sabbahi and Abul-Fotouh. Moreover, there was no presence helping to drive Sabbahi’s campaign from the organised secular left. Not only was this a badly missed opportunity in itself, but it reflected a very powerful propensity of the broader revolutionary movement to boycott elections. The urge to boycott is motivated by justified anger at the continuing repression mounted by SCAF and at the Brotherhood’s eagerness to work with Egypt’s military rulers. But it also reinforces the dangerous gap that has been opened by a revolutionary movement that mobilises primarily through street protests and the much larger numbers of workers, urban poor and peasants (the revolution has hardly reached the Egyptian countryside) who may at best offer the young activists their passive sympathy. Undoubtedly SCAF has noted and is exploiting this confusion.
The second round of the presidential elections saw yet another boycott, this time led by Sabbahi. But the implied logic, that there is no difference between Shafiq and Morsi, is badly flawed. Shafiq is the open candidate of counter-revolution. The Brotherhood, by contrast, is a bourgeois party with deep social roots built up in opposition to Mubarak, which hoped the revolution would lift it into the role of manager of Egyptian capitalism. But it is now in SCAF’s firing line: the dissolution of parliament directly targets the Brotherhood, which ineffectually dominated the People’s Assembly. If Morsi does indeed become president, hedged in by a military reasserting its dominance, and with the pressures for austerity measures becoming stronger, these contradictions will probably become severe.
Putting the “revolutionary house in order” therefore requires a revolutionary left that combines a principled opposition to SCAF with the understanding that building a road to the majority of the working class means working with everyone threatened by the counter-revolution.
1: Giles, 2012.
3: Pollack, 2012.
4: See Callinicos, 2010a, Georgiou, 2010, and the analysis developed by the Research into Money and Finance group, now collected in Lapavitsas and others, 2012.
5: Cotterill, 2012, and Keohane, 2012.
6: Roberts, 2012a.
7: Jones, Jenkins and Johnson, 2012.
8: For an excellent analysis of the Spanish bubble, see López and Rodriguez, 2011.
9: Wiesmann, 2012b.
10: Mallet, 2012.
11: Jenkins, 2012.
12: Atkins, 2012.
13: Wiesmann, 2012a.
14: Peel, Mallet and Wigglesworth, 2012.
15: Marx, 1981, p359.
16: Fullarton, 1844, pp162,165; second passage quoted in Marx, 1973, pp849-850. See, on the banking school, Itoh and Lapavitsas, 1999, chapter 1.
17: Hayek, 1935.
18: Lex, 2012.
19: Krugman, 2012.
20: Roberts, 2012b.
21: Van der Zwan, 2011.
22: Callinicos, 2008.
23: Callinicos, 2012b.
25: Mazower, 1993, is an outstanding study of the founding episode in this process, the Occupation and the popular struggles it provoked.
26: See O’Lincoln, 1985, for a lucid case study of this process.
27: Garganas, 2012.
28: Dragasakis, 2012.
29: Dragasakis, 2012.
30: Dragasakis, 2012.
31: Tsipras, 2012.
32: Sotiris, 2012.
33: Lapavitsas, 2012.
34: Kouvelakis, 2012.
35: Tsipras, 2012.
36: Gonzalez, 1984.
37: Callinicos, 2012a.
38: For a defence of this kind of programme, see Callinicos, 2010b.
39: Shukrallah, 2012.
Atkins, Ralph, 2012, “Bundesbank Signals Softening on Inflation”, Financial Times (9 May), www.ft.com/cms/s/0/54fa4006-99ed-11e1-accb-00144feabdc0.html
Callinicos, Alex, 2008, “Where is the Radical Left Going?”, International Socialism 120 (autumn), www.isj.org.uk/?id=484
Callinicos, Alex, 2010a, “The Second Bank Bailout”, International Socialism 119 (summer), www.isj.org.uk/?id=655
Callinicos, Alex, 2010b, “Austerity Politics”, International Socialism 128 (autumn), www.isj.org.uk/?id=678
Callinicos, Alex, 2012a, “France: Anti-Capitalist Politics in Crisis”, International Socialism 134 (spring), www.isj.org.uk/?id=794
Callinicos, Alex, 2012b, “The Politics of Europe’s Rising Left”, Socialist Worker (19 May), www.socialistworker.co.uk/art.php?id=28461
Cotterill, Joseph, 2012, “Plug-Pulling in Athens”, Alphaville blog (16 May), http://ftalphaville.ft.com/blog/2012/05/16/998501/plug-pulling-in-athens/
Dragaskis, Yiannis, 2012, “The Crisis in Greece: The Economic Programme of Syriza-EKM”, Global Research website (12 June), www.globalresearch.ca/index.php?context=va&aid=31378
Fullarton, John, 1844, On the Regulation of Currencies (John Murray).
Garganas, Panos, 2012, “Greece: The Struggle Radicalises”, International Socialism 134 (spring), www.isj.org.uk/?id=793
Georgiou, Christakis, 2010, “The Euro Crisis and the Future of European Integration”, International Socialism 128 (autumn), www.isj.org.uk/?id=682
Giles, Chris, 2012, “Global Recovery Has Stalled Again”, Financial Times (17 June),
Gonzalez, Mike, 1984, “The Coup in Chile and the Left”, International Socialism 22 (winter).
Hayek, FA von, 1935, Prices and Production (RKP).
Itoh, Makoto, and Costas Lapavitsas, 1999, Political Economy of Money and Finance (Macmillan).
Jenkins, Patrick, 2012, “Spain’s Balancing Act to Avert Doom Loop”, Financial Times (11 June), www.ft.com/cms/s/0/26b9135a-b3da-11e1-8fea-00144feabdc0.html
Jones, Claire, Patrick Jenkins and Miles Johnson, 2012, “Spain Reveals €100bn Capital Flight”, Financial Times (31 May), www.ft.com/cms/s/0/25c39204-ab01-11e1-b875-00144feabdc0.html
Keohane, David, 2012, “On the (Marginal) Advantage of the Greek Bank Jog”, ft.com/alphaville (8 June), http://ftalphaville.ft.com/blog/2012/06/08/1034951/on-the-marginal-advantages-of-the-greek-bank-jog/
Kouvelakis, Stathis, 2012, “An Open Letter Regarding the Greek Left”, www.socialistworker.co.uk/art.php?id=28641
Krugman, Paul, 2012, End This Depression Now! (Norton).
Lapavitsas, Costas, 2012, “Costas Lapavitsas Answers Your Questions on Greece and the Eurozone Crisis”, Guardian (13 June), www.guardian.co.uk/world/greek-election-blog-2012/2012/jun/13/costas-lapavitsas-greece-eurozone-crisis
Lapavitsas, Costas, and others, 2012, Crisis in the Eurozone (Verso).
Lex, 2012, “UK Corporate Tax: A Missed Opportunity”, Financial Times (21 March),
López, Isidro, and Emmanuel Rodriguez, 2011, “The Spanish Model”, New Left Review, II/69, www.newleftreview.org/II/69/isidro-lopez-emmanuel-rodriguez-the-spanish-model
Mallet, Victor, 2012, “Rajoy Fights to Avoid ‘Living Dead’ Tag”, Financial Times (10 June), www.ft.com/cms/s/0/211a7a4a-b314-11e1-83a9-00144feabdc0.html
Marx, Karl, 1973, Grundrisse (Penguin), www.marxists.org/archive/marx/works/1857/grundrisse/
Marx, Karl, 1981, Capital, volume 3 (Penguin), www.marxists.org/archive/marx/works/1894-c3/index.htm
Mazower, Mark, 1993, Inside Hitler’s Greece (Yale University Press).
O’Lincoln, Tom, 1985, Into the Mainstream: The Decline of Australian Communism (Stained Wattle Press).
Peel, Quentin, Victor Mallet and Robin Wigglesworth, 2012, “Merkel Stands Firm on Tackling the Crisis”, Financial Times (14 June), www.ft.com/cms/s/0/7d1842e2-b642-11e1-8ad0-00144feabdc0.html
Pollack, Lisa, 2012, “The Rise and Fall of European Banking”, Alphaville blog (7 June), http://ftalphaville.ft.com/blog/2012/06/07/1032941/the-rise-and-fall-of-european-banking/
Roberts, Michael, 2012a, “Greece: Heading for the Exit?”, The Next Recession blog (17 May), http://thenextrecession.wordpress.com/2012/05/17/greece-heading-for-the-exit/
Roberts, Michael, 2012b, “Krugman and Depression Economics”, The Next Recession blog (27 May), http://thenextrecession.wordpress.com/2012/05/27/krugman-and-depression-economics/
Shukrallah, Hani, 2012, “Minerva’s Owl Flies at Dusk: A Quick Reading of Egypt’s Presidential Vote”, Ahram Online (1 June), http://english.ahram.org.eg/News/43096.aspx
Sotiris, Panagiotis, 2012, “Greece: The Impossibility of Realism”, www.thepressproject.net/detailsen.php?id=21258
Tsipras, Alex, “I Will Keep Greece in the Eurozone”, Financial Times (12 June), www.ft.com/cms/s/0/4c44a296-b3b3-11e1-a3db-00144feabdc0.html
Van der Zwan, Maina, 2011, “Geert Wilders and the Rise of the New Radical Right”, International Socialism 131 (summer), www.isj.org.uk/?id=743
Wiesmann, Gerrit, 2012a, “Merkel Insists on Two-Speed Europe”, Financial Times (7 June), www.ft.com/cms/s/0/725ec0bc-b091-11e1-8b36-00144feabdc0.html
Wiesmann, Gerrit, 2012b, “Troika to Supervise Spanish Loan”, Financial Times (11 June), www.ft.com/cms/s/0/5c1d283a-b3e2-11e1-8fea-00144feabdc0.html