Photo: © Petros Diveris, Athens, June 2012Yesterday I posted a comment on Facebook saying half jokingly that it's about time we (the Greeks) pulled out of the euro and defaulted on our debt, so that Merkel is finally bearing some of the costs. I didn't say this lightly for many reasons, not least because I knew that a lot of my friends and family would find this statement appalling. The developments in Greece move of course faster than my changing, and quite frankly unimportant, opinions, as the recently-elected government have now announced a referendum for, or against, the demands of the so called "troika". This will be presented by many as a referendum on reverting to the drachma or staying with the euro, which is of course a false dilemma. The question isn't "euro or drachma?" but "democracy or not?" If a return to the drachma is the price demanded in order to save democracy, then I know what I would vote. As a quick background I'd like to remind my limited readership that I am a European, of Greek descent, born in Germany to a pair of people who in the past would have described themselves as reformist lefties. As such, I have always been supportive of the European project and the inevitable calls for the modernisation (or what the troika calls today 'reforms') of the Greek economy and, ultimately, society. I believe that by now most of you are familiar with the tiring story of Greece having gone bankrupt in all but name in early 2010, the consequent transformation of German and French bank debt exposure into Greek public tax liabilities , and the ongoing saga of Greece being on a liquidity drip ever since. The drip was of course conditional, as it came from a trio consisting of the IMF, the EC and the ECB, nastily dubbed the "troika". The trio demanded reforms and it was based on the perceived pace of reforms that money was pumped into the country. On the surface of it, for the four years before the ascent of Syriza, reforms were happening and all was tickety boo. But that wasn't quite the case: the IMF itself has publicly acknowledged that not only the type of reforms demanded, but the pace of them and the calculations behind them were wrong. As I said at the beginning of this text, my statement about pulling out of the euro is highly controversial and it will quite possibly cost me a few Facebook friends, if not relatives; but no sane person either in Greece or abroad can ever possibly disagree with the IMF's own admission: that the calculations were wrong, that the result is an economy that has shrunk by 25%, that one in two young Greeks are out of the labour market for good, and the consequent increase of the debt to GDP ratio to 170%. No sane person, "for euro" or "for the drachma" can ever challenge these numbers. In that respect, putting the issue as "for the euro" or "out of the euro" is a false dilemma. What we can debate is what needs doing. Based on the experience of the past four years, we only know one thing for certain: that we should not do more of the same. It is a matter of fact that the Greek economy is a quite closed one: it's hard to start or get into a business there and the environment for business may also be quite negative, as has often been said. That a large number of people have systematically avoided paying their tax is also indisputable, as is the fact that Greece is an ageing society. (This was compounded by the crisis as, according to some, up to four hundred thousand young skilled Greeks with degrees and even PhDs have since left the country.) But none of these issues was addressed by the troika's demands that involved shrinking the state, demolishing labour laws and selling off, at knock-down prices, anything that is worth a penny in Greece. Climbing on the trio's horse, previous Greek governments tried to sell off forests, islands and the Greek shore. A Goldmine changed hands for less than 10 million euros, a goldmine whose new owners expect up to $22 billion in profit, none of which will be taxed in Greece. The demands even included such absurdities as changing the opening hours of pharmacies and designating five-day-old milk as fresh. That's when Syriza came in. And what they proposed was what Greece ultimately needs to recover: A return to growth on the one hand and the expansion of the tax base and taxable activities on the other. No matter what the "European" faction are claiming today, none of that had ever been on the agenda (perhaps with the notable exception of the tax system improvements proposed by D. Spinellis). Whether Syriza has any hope of altering the tragic turn of events has always been a thorny question, but what is certain is that elections cannot change the electorate. Regardless of the strong opinions "for the euro", the programmes presented by Varoufakis were much more credible than any "indignant European" would ever dare to admit. Even conservative writers such as Ambrose Evans-Pritchard of the Telegraph have admitted just that . The working papers Syriza presented were consistently dismissed by the neoclassical dogmatists at the core of the so-called "union", despite the fact that the majority of economists on the planet agreed with them. When I say the majority, I mean people from Krugman and Galbraith and Soros and Strauss-Kahn (he's not an economist but he was the boss of the IMF) , to the IMF's very own Mr. Blanchard. I never dreamed that I would ever suggest that "we pull out of the euro". But I also never dreamed that we would get to a point where the currency is all that matters, more than democracy, the economy and, above all, society. The latest demands presented by the troika were invariably designed to finish off the Greek economy. The demands relating to the pharmaceuticals and the taxation of the shipping industry were more about large European multinationals breaking into these markets than propping up the economy. The tax regime relating to shipping, which the gang of three wanted changing, is the same as that which pertains in most shipping nations of the world, based, in fact, on the Greek model. It is not inconceivable that Germany and others feel that now is the right time to break into that last remaining of key Greek industries - shipping - the sacred and most ancient of all Greek cows. No matter what the "euro supporters" say, there is also a widespread suspicion that the gang of three wanted to humiliate Greece and make an example of it. The talk will of course be that Tsipras and his government are cowards who cannot make a decision against the will of the people who voted them in. The wise "Europeans" will point out that Tsipras made promises it would have been impossible to keep: an end to austerity, for example, and no further reductions of pensions or another VAT rise. This belief is firmly based on the current orthodoxy that the neo-classical policies dictated by unelected technocrats somewhere between Brussels and Frankfurt are somehow God-given and the only ones applicable. If you listen to Merkel or our very own Osborne you could be forgiven for thinking that a debt-free world economy is somehow achievable; but this is a fallacy which flies in the face of the very notion of money and the ways in which is created. The Greek "Europeans" will insist that the capitulation of the democratic institutions to the markets is somehow the most European of all virtues. They will point to the queues at the cash points as proof of their point, as if it wasn't to be expected all along, following the latest demands by the three and the consequent Greek response. The Greek Europeans will also, in a very Greek way, insist that Greece is a special case, a bizarre form of exceptionalism based on negatives that sees Greece as an unusually profligate and corrupt state. But this is exceptionalism nonetheless, and it is missing the point of how Greece is being made an example for the rest of Europe. Although in many ways I am a long way from events in Greece and live in the relatively stable UK, it means I do have the distance to read a wide array of papers and magazines published in many European countries and North America and discuss with other economists, and from this it emerges that the consensus is that Greece simply cannot repay its current debt, and will be in even less of a position to do so if the barrage of new measures were to come into force, shrinking the GDP even further. Furthermore, an ever-increasing number of people think that austerity is essentially a class war and that these policies, contrary to what Merkel and Osborne say, are designed only to facilitate the transfer of more and more public wealth to the private sector, to the 0.1% of humanity. The current world debt is estimated to be over 40 trillion dollars . Exactly to whom, may I ask, the Martians? The question I would like to ask the Greek euro-supporters is whether they believe that a continuation of the same recessionary policies as hitherto will somehow lift the Greek economy. If not, if they are only designed to keep the country on a drip, maintaining the status quo for the ever-shrinking class of the privileged and impoverishing everyone else, what of future generations? What kind of generation is ours which feels justified to pass such levels of debt that amount to slavery, to the next generations? In Greece people every so often used to murmur that "all we need is another junta" . Today this slogan has morphed into "in Europe with the euro at all costs", as if Greece can somehow modernise by the external forces imposed by the the ECB, the EC and the IMF. All attempts at an enforced modernisation of Greece have failed because they were enforced. Change can only come from within and, as I said earlier, we cannot change the electorate, not at times of peace. If Greece cannot perform within the eurozone, or Greeks cannot take more austerity and Berlin cannot consider writing off some of the Greek debt, then something else has to happen. We all know that the current "European" policies have only made matters worse. The people of Syriza know this, and are trying a different tack. They were elected to do so, and the referendum they have just announced is consistent with the basic principle of democracy: that the people should decide on matters that are going to effect the future course of their lives and the society in which they live. It is for this reason, if not any other, that we should give them our wholehearted support. For democracy.