In the New York Times a couple of days ago Yanis Varoufakis made the point that Greece was crushed, and he will not be standing in the election. It is not even certain that Syriza will win in the 20th September election, and if they do, they will be a lot weaker than before.
The economic programme that Greece will have to implement is the memorandum. Greece will have to recapitalize its banks, and they will need a restructuring of their debts. but at the moment it has agreed to take on more debt. That is part of the 3 year bail-out deal.
None of this will get Greece decisively out of the rot it is in.
The following is what I posted in a reply on the New York Times comments page, and it will be what Greece will have to do next time around. That is if Greece decides that it will not want to follow the programme which it was forced to accept.
We all learned that even the most sensible alternative plan would not have been accepted. The agenda on the other side was to crush Syriza and continue austerity. No good faith on part of the Troika at all.
My advice to Mr Varoufakis for the next time around (not this election, but the one after that), as the problem will not go away:
1) concentrate on things you have control over, your own country
2) declare your central bank independent, but keep the Euro (Montenegro solution) as your national currency, backed by full foreign currency controls
3) declare moratorium on all debt to troika from the beginning
4) Introduce supplementary currency to give basic small income (to ensure universal acceptance) and allow employer of last resort program,
5) get rid of the troika trolls from your country and never let them in again
6) start re-negotiating debt repayments after a 12 months moratorium
Forget about changing the EU in good faith negotiations, although last attempt in first half of the year was worth a try. But we know all know it is impossible, and that means the end of democracy.
In essence I think Syriza did the right thing, they tried to get some concessions, they tried to present alternatives, they tried to get some debt relief, but nothing was accepted.
Should they also have pursued a Plan B? Although there are plenty of Plan Bs proposed on my blog here, it would have been difficult. The reason was of course time pressure.
It will have been difficult enough to agree a Plan A, which Varoufakis is talking about in the New York Times article, to work on details on alternatives was impossible.
And no party can follow a different path to the one proposed to the electors, which is why we now see an election in Greece.
So next time a radical party should present a credible Plan B based on the above advice, and try to get elected, based on that plan B. There are of course critics to the parallel currency approach, and they are summarized in this superb insight from one of the advisors to Varoufakis. They did not think an alternative currency could work, as it would have been seen to be the precursor of Euro exit. Jeffrey Sachs was of the same opinion. I believe the advisers are wrong on some of the technical aspects. (My detailed arguments can be seen here,)
But in detail, for a policy to succeed, it will depend how a party can “sell” the new policy, such as a parallel currency. You will need to say it is a positive policy to support the Euro. And the parallel currency has to be clever, a comparison of various proposals here. But that works best if made clear as part of an election strategy. However, if if you have your back to the wall as the Greek government had, and are surrounded by powerful troika enemies, an introduction might well fail.
So any radical proposals as set out above will need to be owned and supported by a main-stream Greek party, perhaps Syriza, perhaps someone else, in future.
Until that time, there does not seem to be any point having any more radical thoughts on Greece. The radical action moves to the UK, with People’s Quantitative Easing, for example, if Jeremy Corbyn becomes the new Labour and opposition leader.
Thanks to the people who looked into this blog because they were interested in Greece, from Greece especially (hopefully they found it useful), thanks for the comments, and as soon as new developments happen, Greece will feature again.
For people who are interested, what my proposals in this blog were about so far, as far as Greece is concerned, a little index
- My forecast of agreement – the memorandum now a bit stricter than I had forecast and has yet to feature any debt restructuring
- Proposal to repay Greek debt, if Europe agrees to buy more goods and services from Greece
- Humiliation will not lead to repayment, economic growth will
- Grexit and devaluation spells disaster not deliverance.
- Four factors which inhibit investment in Greece
- Bring in parallel currency, the G-Euro, to counter liquidity squeeze on banks
- Twin deficits, budget AND current account, were reason for problem
- The case for debt relief
- IMF’s case for debt relief, and the case for Greece borrowing from Greek banks
- Why was Varoufakis sure that an agreement could come after NO vote against memorandum? (My guess was wrong, though)
- How to negotiate conditional debt relief
- How a parallel currency, the G-Euro could work in detail in Greece, reducing unemployment, and adding to growth
- IMF’s chief economist woeful TINA description of Greece
- Three ways to “Grexit”
- Grexit, while keeping the Euro, the Montenegro solution Greece’s ultimate ace
- 25bn for banks, nothing for the Greek State (it repays 6bn in interest) are the real numbers behind this 3rd bail-out “Greece needs 86bn” deal
- Three German solutions to bank re-structuring
- Easy plan to Grexit with new currency 1:1 with Euro
- Best post: Analytical comparison of various parallel currency proposals for Greece
- Great ideas and no pay: economics of blogging
- Discussion of parallel currency in FT by Varoufakis
- The use of blogs for development of policy proposals
- What if all of £240bn Troika loan to Greece was funded by Greek banks
- This post