Syriza, Greece and Europe

Syriza threatens a European Storm-but only if the Depression Continues

Recently the Greek people voted for a new party which goes by the name of Syriza which is in effect an anti-austerity party that seems to lean-ostensibly- to the left. Although this would seem a return to right left politics on the surface, the truth is most people in Greece today are no longer taken in by the ideologies of the past, having seen that most of them usually come to grief and corruption. Rather this was a rebellion, a reaction against the expectation that common, ordinary people must be saddled with huge debts which they themselves had little to nothing to do with. The Greek people simply said “no more” to their own two major parties, Pasoc and  New Democracy, and chose instead a third party, a newer party that offered them a way out of what many Greeks perceive as an injustice heaved on them by a sanctimonious European economic system whose main interest is furthering the profits of a few at the expense of the many.

Credit Bubble Economy

The reality for Greece is that the present Credit Bubble economy which thrives on pushing debt all over the place and claims that it is economically effective is that it simply did not work for them. The system which Greece has in place is one suited to their primary industry, at least locally, which is the tourist industry. Though Greek business thrives on the world stage in the form of cargo shipping, this large powerful industry pays little to no taxes in Greece itself. For this reason the Greeks are left with an industry that must in some way be easy going, and to some degree “distributive” for if that were not the case strife would soon make Greece an inhospitable place and thus cause more damage than good-both to their way of life but especially to the all important tourist industry on which the locals are highly dependent.

Still for all that, the simple bottom line was that the Credit Bubble System managed to do little other than to make the average Greek suffer economically, offering little more than debt without much economic effect. We cannot say that this same system has succeeded anywhere else either. The truth is almost all nations from Japan, to Germany, to the United States to China, to Brazil are now facing gigantic debts that are not likely going to be paid back without terrible struggle and suffering in the future. But for Greece the effects were almost immediate since she does not have the large industry which can buffer her people-albeit temporarily- from the cruel pangs of debt repayment and the economic stagnation that of necessity must follow. Moreover, she, unlike Japan, Britain, China,  and the United States cannot “print” her way out of the difficulties, and the bond  market will not cooperate with Greece, as it does in Germany for example.

The Greek people saw little lasting benefit from the “compromise” of Greece’s New Democratic party and Europe’s “Troika” which in the end resulted in the Greek people owing some 240 billion dollars, a debt that ballooned during negotiations. Though the lax credit which at first resulted from this repayment “agreement” did seem to have very temporary effects, now the ordinary people of that nation are facing even more stagnation and more hardship. And the reason is quite obvious to anyone who understands the European economy.

The recent trouble with Russia and the Ukraine, and the sanctions imposed on Russia have resulted in a terrible condition for many of the nations which heavily depended on Russian Energy money. The simple truth is that economically at least, Russia and Europe go together like peas and carrots. Russia provides huge resources to a resource poor, large population European industry, and Europe provides high productivity to an extremely large sparsely populated nation that is Russia. Moreover Russia provides a bridge to the East and the intercontinental trade which results gives Europe a very favorable economic outcome.  The net result of the sanctions against Russia has resulted in a depressed European economy, an outcome that could have easily been foreseen and should have been avoided.

For the Greeks the Ukrainian event has been a catastrophe in that the contraction of the European economy more severely afflicts the weaker members than it does other nations with more fat around the bellies, i.e. Germany, and the Northern European nations.  Greece was attempting to “recover” from a serious credit event only to run into a contracting European, and Global economy. Add to that a constant negative assessment by the bond merchants and Greece was back to 13 percent yield for her debt-which was clearly not sustainable.

But what is true of Greece is to a very large extent true of large nations like Spain and Italy and even France. Though they have at present a good “status” in bond market evaluations, their own debt is quite large, and their productivity is not increasing. The short circuit caused by the Russian sanctions and global slowdown can only make the situation worse as time goes on. The unemployment rate of Europe is quite high in general, but is likely to become even worse as oil prices have fallen and economic velocity stagnates.

For many who are struggling in Europe, the situation is starting to look hopeless. Little remains for the Greek people but to continue on a dark path with little chance of good income, and high taxation even when that income comes in at all. The result is a general malaise and disenchantment with the present economic philosophy.

This is the chief reason for the rebellion in Greece, and is  probably  going to be the reason for ensuing political rebellions around the rest of Europe if something is not quickly settled.

What Syriza will have to do

The local realities of political and economic life and being a member of the European Union will dictate much of what goes on at the bargaining table when Syriza gets down to business with Europe’s credit masters. There are really few choices which will  not be catastrophic for both Europe and Greece other than to find a way for both to move along as far as is possible. In reality the only thing Greece can really hope to get is more credit availability if it intends to survive in the Union. However, that credit will have to come with an understanding that the Greek people are not the only ones responsible for it. This is really the only possible outcome here for Europe and Greece as we know them.  Greece will not survive without Europe economically, but there’s as good a chance that Europe cannot really survive without Greece. A breakup of one of the southern members, even if small, will have devastating ideological consequences for Europe, and quite possibly for NATO. At a time when Russia feels very threatened, this is not a risk anyone will want to take.

So any expectations should revolve around compromise and an increase in effective credit availability for Greece and her people. The objective is more likely to be a way for the Greek people to live as other people in Europe live, as well as possible, and for as long as possible. It is unlikely that Syriza or the Greek people are in for existential trials and tribulations, at least if there is any other practical alternative. However, care should be taken by European negotiators. The suggestion that some must have an easy time with the present Credit Bubble economy, while others must suffer is not an idea that will lead to anything but extreme destabilization in Europe. The Europeans, though converted to modern day consumerism and the mind numbing consequences, are still very much aware of their history and its implications. Europe has a thousand year old history, and in that history most story lines begin and end with the saga of the haves, and have nots. Indeed this is a story line very much at the crux of the problem in Greece itself- which is generally a resource poor nation with a highly developed individual axiology.  But if the threat of contagion exists, it is not only an economic threat, but a much more serious philosophical and spiritual threat that can lead to outright rebellion by other groups in Europe. Again Russia remains a potential agonist in these ideological potentials.

Syriza’s Real Allies

Indeed, the real power that Syriza will have is public opinion, or the clear threat of spreading its disenchanted views all across Europe. Essentially this party has run on the notion that the Credit Bubble economy has indeed failed, and its failure has left millions if not billions of people in economic disarray that may well get much worse. This view is as good as any physical weapon can ever be. Europeans get around, and they are open to ideas, arguments and counter arguments. Indeed Germany, which is often pointed to as the chief nay sayer in any Greek bailouts, happens also to be the seat of a genuine anti credit bubble ideology. The Austrian economic theory resides in the central bank of Germany if anywhere. The fear of high inflation and little production is one that all Germans seem to share and if anything, Syriza stands for a repudiation of Inflation economics, at least as promulgated by the Federal Reserve of the United States. Credit, Debt, and Inflation have failed to do anything of value for the world’s economy, and now, after years of endless credit, and debt, the world’s economy, as well Europe’s own economies are teeter tottering on collapse. That is enough of a repudiation of any theory in that in reality, it just hasn’t worked even after years of implementation that has resulted in gigantic debt loads worldwide. The last thing the Europeans need is for that sentiment to start taking on a new life, and it is very likely to take flight in both Spain, and Italy, and perhaps France itself.

The Europeans would like to stop a surge in doubters at this point since when we look at the recent moves by the Central Bank under Mario Draghi we see a looming Quantitative Easing in the works which would be designed to continue the credit bubble economics of the United States in Europe. This would be the wrong time to have an organized political party, or nation spreading their anti bubble economics to whoever will listen.

Indeed, if we look carefully, the central bank credit policies have failed miserably as a matter of fact. Of this there is no question. A theory is only as good as reality says it is. Ideal solutions are fine and dandy, and can be intellectually entertaining, but when nature says that aint so, it just aint. So is the case with open credit policies we are now experiencing. They have not worked. They may have kept a few people more comfortable than they should have been, but someone has had to pay. The problem with that is the people being asked to pay will not want to unless they really can afford to. The theory of endless credit expansion is dead in the water. Like all theories, if they fail the Apollonian principle of prediction, they are  either useless at best, or destructive at worst. The credit bubble economy has failed. It has not proven its case, and at this point the only real solution is to bury it slowly and carefully with as little strife as possible. This is the main argument that Syriza is going to carry into any negotiations with Europe.

Germany and Northern Europe

It should be understood that Germany and Northern Europe did in fact benefit from the situation in the South. Large markets made it possible for Germany and other heavily industrialized nations to sell their goods there, and the fact that most of this was on credit did not really come into the calculation. Yet, these markets are not far away and out of sight or mind, they are in Europe itself and any problems there, will soon spill over to the rest of Europe. For this reason there is not much to argue here, only to attempt to repair. There is really no other way out, than the positive road where all can live with as much hope as is possible while a once promising system of economics is slowly dismantled and replaced by a better strategy. Anyone who doubts that the credit expansion is in mortal jeopardy, should look at the price of oil, and various wars that are now looming. The time has in fact come for a reset, the only question is how catastrophic is this reset going to be?

It is almost a certainty that neither Germany, nor Greece, nor the rest of Europe will be interested in further exploring the social limitations and consequences of the present failed economic theories. Rather they will both be interested in keeping as much stability and comfort as possible.

What can be Expected

For these reasons it is most likely that Greece, and Europe will seek an optimum solution, and at this time the only available solution is most probably going to involve a free flow of credit that somehow produces a desired effect-even if limited by the general climate. But then again this is the name of the game just about everywhere else in the global economy which is at this time trying to sustain itself as long as possible without a catastrophic collapse. In the end, it’s going to be a compromised solution at best.

Though it should be noted that the Greek people themselves are not really interested so much in ideology at this exact moment either, but in a better outcome for their own lives as is natural to expect of any group of people. Certainly the one thing the Europeans would not want is for the Greek people to become ideologically inclined and with visceral motives. That would not have a stabilizing effect.

In the end, if any “spiritual” or “ideological” war is waged, it will probably be tempered by necessity and results. At present the Greek economy is not being aided at all by the credit economy in which we all live. For as long as that remains true, there will be a motive for “ideological” change. In all probability the European central government, such as it is in a European Federated Economic Union will try its best to accommodate while seeing practical results and this is probably what Syriza is going to want as well, at least for now. For now this is as much as we should expect. However, the climate really is worsening.