Costas Lapavitsas: Grexit is the only strategy for Greece

These days, the writings and speeches of Costas Lapavitsas invokes a lot of passion amongst “Greece watchers”. Not least of all, probably, because he is an ardent promoter of a Grexit!

In an intense speech that he gave during the Democracy Rising 2015 conference in Athens recently, Costas said that the Syriza plan to achieve radical change within the Eurozone was impossible to achieve and that a Grexit is the only strategy for Greece.

Many thanks to The RealNewsNetwork for the transcript. The speech was long and after the end of the main part, there were questions and statements from the audience. I have omitted these here for the sake of brevity. You can read the entire transcript on the RealNewsNetwork website. There were also 82 comments made by readers.

Lapavitsas Calls for Exit as the Only Strategy for Greek People

a speech given by Costas Lapavitsas (17 July 2015)

The Syriza government has just signed up to a new bailout agreement. This bailout agreement is a very bad deal. It’s a very bad deal for clear reasons which I will enumerate.

First of all, the agreement is recessionary. It’s going to make the Greek economy go into recession. Because tax increments alone annually come to 2 percent of GDP. This tax imposition is mostly on VAT, indirect tax, imposed on goods consumed by mostly the laboring layers of the population. Taxes have also been increased on enterprises, and they’re going to hit small and medium businesses primarily, which are the backbone, still, of the Greek economy. Taxes have also been imposed on agriculture, and they’re probably the most severe increase in taxes, doubling the income tax for farmers and imposing a raft of other obligations on them.

So there’s no question these measures are recessionary, and they’re taken exactly the moment when the Greek economy is teetering over the edge of recession. So it’s going to be tipped into recession, for sure.

Second, the deal imposes measures which are clearly unequal. They’re going to intensify inequality in this country. Don’t let anyone tell you that these measures will not exacerbate inequality in this country. Because of course the bulk of tax revenue will come from indirect taxes which are by definition inequality-inducing. Inequality will increase because the measures will take away 800 million Euros annually from pensions. So they will impose a significant burden on pensioners, who are typically among the poorest layers of the population. Inequality will also increase because, of course, unemployment will again rise this year and next.

The measures and the agreement is also bad because it will do nothing for the national debt. There is no restructuring of the debt. It is a replacement of some of the debt denominated under some category into another. There might be some marginal benefit in terms of interest rates and duration of the debt, but that is marginal. And debt will definitely increase by 20-25 billion to recapitalize the banks. The IMF expects debt to GDP ratio to go up to 200 percent next year, and that is, so that is most likely what is going to happen.

Fourth, the measures will do nothing for development. There is nothing developmental in these measures. The so-called package of 35 billion Euros doesn’t exist. These are moneys that already have been alloted to Greece in the various funds of the….there’s no new money in this. We don’t know when it will accrue and how to Greece. There is no developmental angle to this.

Finally, the deal is quite clearly neo-colonial. The government of the left has signed up Greece to a neo-colonial agreement.

And it is….it is neo-colonial for many reasons. I will mention three. First, the deal proposes the establishment of a privatization fund of 50 billion Euros which will basically sell public property under foreign management. 25 billion of that, the first 25 billion, will go to the banks by the agreement. If there’s anything left, and there won’t be anything left because they’ll never make 50 billion, it might go to repaying the debt and possibly to investment. Essentially, then, this fund will sell what it can of public property to recapitalize the banks. We’ve just agreed the deal that sells the family silver to recapitalize the failed Greek banks.

We’ve also agreed to reforms of civil administration managed by the EU. We’ve also agreed to monitoring, and this monitoring will be very severe and it will last a lot longer than the three years that this deal will last.

To me this deal as it stands represents a disastrous capitulation. This is not Brest-Litovsk. Those of you who think that this is Brest-Litovsk are making a mistake. This is not gaining time to establish Bolshevik power in Moscow and Leningrad. This is not….this is not gaining time. There is no time to be gained. Time works in favor of the enemy in this context, and this is not a tactical maneuver. This is putting the country down a path which has only one exit. And that exit is not in the interest of people’s rights.

The real winner of this deal is obvious. It’s staring you in the face. The real winner is the Greek oligarchy expressed in the mass media. That’s why the mass media are thriving and celebrating [a win].

Sometimes reality is what it appears to be. You don’t have to look beyond the surface. If you read the big Greek press and if you listen to the media you know who has won.

Why, then? Why this capitulation? Why have we come to this after all the enthusiasm of six months ago? After all the, the surge of grassroots support in this country and in Europe? Why, why this? The answer is clear to me. And it has to do with the wrong strategy, that was good enough to win elections, to triumph over elections, but it proved disastrous in government. Wrong strategy that has collapsed. That’s the reason for it. What is this wrong strategy? It’s very simple, expressed openly time and time again. We will achieve radical change in Greece, radical change in Europe, and we will do it within the Eurozone. That was the strategy. Well, that’s not possible, period. That’s not possible. That’s the lesson of the last few months. This is simply not possible.

And that’s not because of ideology. It isn’t a matter of ideology, neo-liberal ideology or anything else. And it isn’t a matter of the balance of political forces. A number of times I’ve heard of the balance of political forces. And there’s a debate now and there’s an argument bubbling up again, let’s wait for the balance of political forces to change in Europe, if Podemos gets elected, and then things will be new again and different. You’ll wait a long time. A very long time, because things are not going to change that way.

Why? Because the monetary union in which, to which Greece belongs, is not ideological. I mean, it is, but it isn’t just ideology. And it isn’t just a balance of forces. It is an institutional mechanism. The sooner the Greeks understand this, the better for all of us. It is an institutional mechanism, it is a monetary union that’s, it’s a hierarchical body that works in the interests of big business and in the interests of a few countries within it. That’s what the EMU is.

It’s a failed monetary union, historically. And the failure is manifest in the case of Greece. Greece has been ruined by the monetary union. And the more it clings on to its membership in the union, the more it destroys its own people and its own society. This is a very long, established thing in the history of monetary unions. It’s just that every time people refuse to see it.

Allow me a digression on the question of money, since this is an academic audience. And since….and since on this issue lots and lots of people have spoken in Greece, allow me a digression because I’ve spent more than 30 years studying money. Now, money I believe is of course the universal equivalent. It’s the commodity of commodities. I’m quite old-fashioned in that regard.

In its purest and simplest form it’s a thing. It’s a thing. Most people understand gold as money. Sometimes it still is. When it is a thing, it operates blindly and automatically like all things do. And it’s the object of reification. Social relations become embodied in that thing. Blindly, mechanically, society subjects itself to the thing. We’ve known that for a long time. Keynes called it the slavery of the yellow metal.

Of course, modern money is not a thing in that regard. It still is a thing, but not a thing in the form of a produced commodity. The peculiarity of modern money is that it is managed. That is often not understood. It is managed. It remains money, but it is managed. It is managed by institutions, by committees, by mechanisms, by a whole hierarchy of relations, on top of which the [inaud.] sits. What happens in that hierarchy and that framework is a reification. A reification not the same as for gold. What becomes reified in those institutions is the practice. You have a reification of the practice. So ideology and class interest becomes reified in the practice, in the institution itself.

That’s what the left has failed to recognize in Europe and in Greece. The mechanisms of the European monetary union are a reified class practice. That’s what they are. You can’t change them because you’ve got, you’ve won a vote in Greece. It’s impossible to do. You can’t change them because you’ll get Podemos in Spain. It’s not possible to do. Either you break the whole thing or you accept it as it is. And that has been shown to be [inaud].

But the real question here is, now what? All this is analysis. Now what? What do we do? Let me tell you. And here, my own practice stands for proof. The only consistent position in parliament the last couple of days, consistent with two things. First, the electoral mandate Syriza received on the 25th of January. Second, with a referendum that said no very clearly, no to bailouts very clearly beyond that.

The only consistent position in parliament were these expressions of popular will was to say no. No was the consistent answer, not yes. This is not a matter of moral conscience. I respect the moral conscience of everyone. I understand the moral difficulty of every single member of parliament and every single member of Syriza and everybody else in Greece. This isn’t a matter of morality. I’m not suggesting for a minute that no has superior morality to yes. I want to make this clear. It isn’t a matter of morality. It’s a matter of political judgment.

Politics is what matter, and the right political course was to say no. It’s the only course I can maintain that consistency that I mentioned with popular will, with what we’ve said to the people and with what we’re likely to do in the future.

Now, yes is likely to lead to very great problems if it is followed. Very great problems for the reasons that I explained to you when I indicated what the bailout contains. It will not be possible to change Greece domestically while accepting the bailout agreement. It will not be possible to do it because the bailout agreement already contains very severe monitoring mechanisms. These people abroad are not stupid. They know exactly what the score is. And they will impose conditions, regulations, monitoring patterns that will preclude Syriza from making any changes in the direction that a lot of people wish it to make.

The proof of the pudding is in the eating. They are already demanding that much of the legislation that we passed the last five months, much of the legislation that we passed the last five months in the interest of working people is withdrawn. And that’s what we’re going to do. They’re forcing us to do it. And you imagine that you can pass more radical legislation from now on? Which planet do you live on? That’s impossible. It will not be possible.

Now, what do we do, then? What we need to do is to withdraw our consent to this agreement. To withdraw our consent to this agreement. And to redesign a radical program that is consistent with our values, our aims, and what we’ve told to the Greek people all this time, all these years. And that radical program is impossible without Euro exit. The only thing that we really need to do is focus on developing a plan for Euro exit that will allow us to implement our program. It is so obvious I’m amazed that people still don’t see it after five months of failed negotiations.

Now, do we have the forces for this? We do. We do because the referendum, which said no so powerfully, showed two things. The first thing that it showed is that the Euro is a class issue. It isn’t some impersonal form of money. As I said to you, it crystallizes and encapsulates class relations. And people have instinctively understood it. The rich voted yes, the poor voted no in the referendum, period.

The second thing that the referendum showed, and that’s a massive change, the first time we’ve seen this during the last five years is that the youth of Greece have at last spoken. Most of us have been waiting for the youth to say something. Something. And it….that youth that is so European in outlook, so educated, presumably so far away from all these dinosaurs of the extreme left that believe in Marx and all these other people, that youth of Greece that travels on Erasmus programs and goes here and there and everywhere, 80 percent of it said no. And that is the basis for a radical line, for a different line for Syriza today. And if we say yes, and if we maintain the yes, we will lose the youth. I’m sure of it.

I haven’t got much time so I’ll push on very quickly. How do we devise, then, this new position? Is it impossible to do? Well, a plan exists. You mustn’t think that there’s been no plan of how to exit this disastrous monetary union and implement a radical strategy. A plan exists. It’s just never been used. And never been developed, never been further studied. The plan needs developing and the plan needs political will. Above all what it needs is political will to be implemented.

A plan, in the form of a road map, will contain a few very clear things. First, default on the national debt. The weapon of the poor is default. Greece must default on its debt. There is no other way out. The debt is crushing it. So default on the debt is the first step to achieving a deep write-off of the debt.

Second, nationalization of the banks. Effective nationalization of the banks.

When I say nationalization I mean appoint a public commissioner and a group of civil servants, selected civil servants with some technocrats who know what to do and take over the running of the banks and ask all private management to go home. That’s what needs doing. No ifs and buts. And the legal structure must be changed accordingly. It’s very easy to do. The Greek banks at the moment have got majority share ownership, which is public, basically. They need to be turned into [inaud].

The banks must continue on the bank and capital controls. Half the job of exiting this disastrous monetary union has already been done. But properly operating bank and capital controls, not this ramshackle affair that we’ve witnessed the last two weeks. Properly functioning bank and capital controls that would allow working people and small businesses to start functioning again. It’s perfectly possible. Perfect possible. We’ve seen it time and time again.

Next, conversion of all prices. Conversion of all obligations. Conversion of all money stocks at the rate of 1:1 to the new currency. Anything under Greek law can be converted. Those who hold deposits will lose some purchasing power. Not nominal value, but some purchasing power. But they will gain because the purchasing power of what they owe in debt will also decline. So the majority of people will probably gain from this.

Next, organize the supply of product markets. Oil, medicine, and food. Perfectly possible to do with an ordering of hierarchies, so long as you start doing it a little while ahead, not at the last moment. Because obviously if you’re thinking of doing this on Monday morning and the first you thought of it was Sunday night, it’s going to be difficult, yes. I agree.

And finally, decide how to take the pressure in the exchange rate. How to operate the exchange rate. The exchange rate’s probably going to dip and going to rise again. That’s typically what these things do. And it’s going to stabilize to some kind of devalued rate. I’d expect 15-20 percent devaluation, the final position. Decide how to defend that and how to handle it.

What will happen if we take this path? And if we take this path after working it out, technically, but above all preparing the people. Because without the people it’s impossible. Actually, that’s not true. It’s also possible to do without the people. It’s possible to do with tanks in the streets. It’s possible to do that, too. But obviously that’s not the way of the left. The left wants to do it with popular participation, because we want to free the people in that way. We want them to make partners in this.

So what will happen, then, if this path is followed? Let me say that I’ve seen some simulations and some econometrics of what is likely to happen to GDP, to prices, and so on. They’re very useful these things, and very interesting to read at times. But on this occasion by definition and cross-section of the case, they’re valueless. Why? Because simulation or econometrics essentially assumes….typically simulation more than econometrics essentially assumes that the structural features of the model, whatever it is, are maintained. Otherwise you can’t do the simulation. Here by construction we’re changing the structure. You understand? By construction we’re doing that. It’s a regime break.

Or to put it differently to you, how can I possibly foresee the effects of someone who will start cultivating again his vineyard? Because that’s what’s going to happen. So it’s going to be a structural change. So any kind of assessment of….numerical assessment of what’s likely to happen ahead is not worth very much. So don’t believe the people who tell you there is going to be a recession of 25 percent. There’s going to be a contraction of GDP of 50 percent. They don’t know anything. That’s just the number they take out of the hat.

I’ll tell you what I think. The best we can do in these circumstances is come to a reasoned guess on the basis of previous experience and based on the structure of the Greek economy. My guess is that if we follow this path in a prepared way that we’ve been discussing, we’re going to go into recession. That will be difficult. It will probably last several months, at least the downward slope would last several months. I don’t think it will last more than six months judging by monetary experience. In Argentina the downside lasted three months. Then the economy picked up again.

So the contractionary aspect will last several months, then the economy will pick up. Positive rates of growth might take longer to appear because the blow to consumption, the uncertainty, the blow to small and medium businesses is likely to be significant. I’d expect positive rates of growth overall to begin to materialize after about 12-18 months.

Once that period of adjustment is over, I would expect the Greek economy to return to fairly rapid rates of growth in a sustained way. The reason….two reasons for that. First, the re-conquering of the domestic market. Changing the currency this way would allow the Greek productive sector to re-conquer the domestic market, to recreate opportunities and activities, something which we’ve seen time and again whenever you have monetary events of this scale. And with the left government this will be fostered. This will be made to go faster in a more successful way. Partly because exports are also likely to pick up. Partly because there will be a sustained program of public investment to boost also private investment and to lead to growth for years ahead.

Now, that’s what I think. I haven’t got time to go further into it. I want to say two more things. This is no exit from Europe. No one is advocating exiting Europe. The conflation of the Euro, the European monetary union, with Europe….this disembodied good, I guess, bedeviling us for all time, doesn’t exist. Here we’re talking about exiting the monetary union. Greece will remain very much part of Europe and of the European structures as long as the Greek people want it to do so. This is a strategy instead for freeing Greece from the trap of the monetary union, and allowing it to enter a path of sustained growth with social justice that will tip the social balance in favor of the laboring people of this country.

There is no other strategy. I am sorry to say. But to think that there is another strategy is to engage in a wild goose chase. There is no other strategy.

Now, I’m [finished here]. Now, I don’t know if Greece will do that. There is a saying which I’ve come across recently which is very interesting. Apparently it goes back to an Israeli prime minister. And it says that nations take the road to wisdom. The road of wisdom. But only after trying every other road before that. And in the case of Greece I’m afraid that this is what we’ve got in front of us. The road of wisdom is the road of exit with social change. I hope that Syriza will see the point, they will say no. They will not sign up to this agreement. They will go back to its radical principles and radical values. They will make a new offer to Greek society and take it down the road of wisdom.

Thank you.

Then followed a number of questions and statements from the audience. After that, Costas Douzinas, a professor of law at the University of London said the following:

It happens [that] my friend coming from London, Costas, did not come up with some of the usual things we’ve been listening in the last few days about betrayal, about capitulation, about selling out. The kind of things that we built this party and this movement and this government and this hope and expectation that the whole Europe and European people have care in Greece and that is why you are here.

So therefore Costas spoke the language of the economist. And the language of an economist is a language of compassion and calculation. And he told us, and I’m very happy to accept, what would happen if in a controlled process we were to leave the Euro. And then yesterday we were here when the minister for education told us that if we were to leave the Euro there would be no water in the islands. And Costas, my friend, spoke in the past about rationing food and pharmaceuticals and energy.

And what I’m saying is that when we compare those two things, we’re not talking here about high principle. Costas is not more a leftist than I, and I think everyone else on this table is. And I have to insist on that. [So] that’s why I say it and that’s why we’re happy about that. Right.

Okay. But if we are led into a situation where the living standards of the people have already fallen by 40, 45 percent, and they take another hit of another 20 or 25 percent, Costas now says for three months. But of course quite rightly says he cannot be sure. It may be a year. It may be two years. It may be forever. Can a left government that has on it the hope of the Greek people and of the Greek left and of the European left, can it take that risk? And my answer in pure economic and risk theory terms is that it cannot. It could be, it could be perhaps, I would say, the longest suicide note in the history of the left.

Lapavitsas replied:

I’m [inaud] to see that we’ve come to the real point. And we are….I’ll just say one or two things [inaud]. Let me say the [inaud]. As I said, I say this from [inaud] personal experience that no one wants to split Syriza. Certainly no one from the left wants to split Syriza. There is no force that is more Syriza than the Left Platform. Left Platform is Syriza, is the original force that created Syriza. So this is not some kind of interloper. And no one wants to split Syriza, no one wants to see the government fall. This is a vote….This is a government that must….

Can I just….can I just make a….look. Look. No one wants to divide Syriza. No one wants to split it. This is not an argument about making the government fall. This is an argument about whether we will accept bailouts and bailout conditions against which we’ve fought for five years. That’s what has created Syriza. We want the government and Syriza to go back to what made it what it is.

Now, on my seat. I’ve been asked about my seat by the lady over there. And by many others. Let me explain….let me explain a couple of things about my seat.

First of all, I was elected by the people of Imathia. I was the first MP, top of the list. They voted me….I wasn’t voted in by Syrizan institutions. I was voted in by the people because I went and visited every village, every town, every coffee shop in the area, and people voted for me. That’s the first thing to say. Second….I did, I did sign….I did sign a code of conduct. I did. Syriza asked me to sign a code of conduct, and I take it very seriously. No one has asked me to resign yet. No one has asked me to resign. Because presumably, I am breaking the code of conduct.

Why not? Why have I not been asked to resign on the basis of the code of conduct? Because I’ve not broken the code of conduct. The code of conduct says I’ve got to comply with collective decisions. Which collective decision said we’ve got to accept the bailout agreement? None! Who took the decision to sign the bailout agreement? When did the party [organs] meet? Who, when?

When that happens, when that happens, when there’s a collective decision, then yes. I will take it very seriously. I will reconsider. I will feel….I will obliged to follow the code of conduct. Not yet….not until then. It’s not an issue of morality, so don’t force me to start dealing with moral issues. Don’t do that. You’re not going to win. On morality you’re not going to win. I haven’t raised the issue of morality.

So please, don’t let anyone raise the issue of morality [in here]. You’re not going to win, I assure you. It’s a matter of politics. This is a political decision, and I made the political case here, not the moral case.

Now, there’s only one more point that I want to make. Do I know better than others?

Do I know better than everybody else? I was asked a personal question, I will answer in the first name….in the first person. I’m sorry, I can’t answer in the third person. That would have made it the royal we, and I don’t really want to do it.

But anyway. Do I know better? No, I don’t. I don’t know better than others. I’ve got a track record. You can find it for yourselves. But I don’t know better than others. I didn’t predict. I haven’t predicted. I told you what analysis….my analysis says. That’s the best I can do. I presented it to you, you draw your own conclusions.

I am not trying to tell you that I know and the government doesn’t. I’m telling you that my political analysis and my analysis of the economic situation says something else. And I expect bad things to happen if we go down the path of the bailout, and if we don’t better things will happen. That’s the best I can do. It is for activists, it is for voters, it is for the people to decide, and I hope they do it as quickly as possible because the times are indeed political.

Thank you.”

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


About Peter Smith

A "foot-soldier" in the wider Post Capitalism Movement. First task - keep spreading the words of change, hope & inspiration.
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