The Coercion of Greece

Written on February 21st, 2015 in politics Comments Off

Published on ZNet (first on Counterpunch), by Mark Weisbrot, Feb 20, 2015.

The Economist’s February 6 cover displayed the Venus de Milo statue pointing a revolver, with the headline “Go ahead, Angela, make my day.” In the editors’ upside-down world, Greece is threatening Europe, or at least Germany. Really?

On Monday, February 16, European officials “handed Athens an ultimatum: Agree by Friday to continue with a bailout program or risk the funding that the country needs to avoid a default,” the New York Times reported.

Then there is Wolfgang Schäuble, Germany’s finance minister and die-hard supporter of the failed austerity policies that brought Greece six years of depression. On February 11, according to the Financial Times, he “hinted darkly that a Greek plan to leave the bailout at the end of the month could draw a harsh reaction from financial markets.”

“I wouldn’t know how financial markets will handle it, without a programme — but maybe he [Greek Prime Minister Alexis Tsipras] knows better.”

Schäuble knows very well that it is not “the markets” who will decide how much capital flows out of the Greek banking system if it fails to renew the troika program that expires on February 28. He knows that it is the actions of the European Central Bank (ECB) that will determine how the markets will react. His transparent threat is like that of a gangster shaking down a store owner, pretending not to know who is responsible for the vandalism that happens to afflict businesses who don’t make their payments to the mob … //

… Greece would appear to be much better situated for an economic recovery outside the eurozone than Argentina was after its devaluation and default. Argentina got no outside help; on the contrary, multilateral institutions drained money from the economy in 2002. Greece might not need any outside help, since it is running a current account surplus. But if it did, according to press reports, Russia (with $380 billion in reserves) and China (with $3.9 trillion) have offered assistance. The amounts of money that Greece might need to borrow would be trivial for China, and pretty small for Russia too.

So European coercion would come into play in the event of an exit too. The European authorities could try to block trade credits (this was another threat to Argentina) and otherwise injure the Greek financial system. They could try to pressure China and other countries not to provide loans. But it is unlikely that they would succeed in isolating Greece, and it is not clear that they could get political support in Europe for this kind of vindictiveness.

For now, at least, the coercion does not seem to be intimidating the Greeks. Finance Minister Yanis Varoufakis made it clear on Monday that ultimatums would not be accepted. Tsipras’ approval rating is running at 75 percent, including 42 percent of those who voted for the then-ruling party in the January election. This is a triumph of democracy for Greece, and for Europe.

(full text).

(Mark Weisbrot is co-director of the Center for Economic and Policy Research CEPR in Washington, D.C. He is also president of Just Foreign Policy).

Update: Greece wins eurozone bailout deal with strict conditions, on The Economic Tiimes of India, by AFP, Feb 21, 2015.

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