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PAUL JAY: Welcome to The Real News Network. I'm Paul Jay in Baltimore.
Greece approaches a momentous day: June 17, on Sunday, Greeks will vote, and they may
decide to select a party that might lead them out of the eurozone.
Now joining us to talk about the Greek elections and the crisis in Europe in general is Costas
Lapavitsas. He's a professor of economics at the School of Oriental and African Studies
at the University of London. He's a member of Research on Money and Finance. His new
book is Crisis in the Eurozone. And he joins us now from Athens. Thanks for joining us,
Costas.
COSTAS LAPAVITSAS: It's a pleasure.
JAY: So what's, first of all, the mood there now, just days before? And Greeks have a very
big decision to make.
LAPAVITSAS: I would say that the mood is strange. There's a sort of calm before the storm, I
would say. There's tension. There is apprehension. But also there is excitement and expectation
of significant change ahead. People don't know what the result might be, but there's
hope that there will be some momentous change that will transform the situation.
JAY: Now, Greece is kind of divided into two camps now. Maybe explain it. And what's sort
of the logic of each camp?
LAPAVITSAS: Greece is definitely divided into two camps now. What's happened after the election
on 6 May, the previous election, was that the left-wing party SYRIZA emerged very powerfully
and it began to gather around it all forces that wish to oppose the [incompr.] and structural
adjustment program [incompr.] the country two years ago. SYRIZA has gradually become
a major party, a camp in itself. It's the anti-stabilization, anti structural adjustment
camp.
As that has happened, and because it's taken a left-wing outlook, another camp has also
formed around the right-wing party [incompr.] And this is the camp that basically wishes
to maintain the current policies. It wishes to tweak the current policies a little bit,
but it essentially wishes to maintain them, to maintain them. This is the right-wing camp,
as I said.
So the country's splitting between left and right along those two lines, and it is these
two camps that will contest the election.
JAY: Now, it's one thing to be against the bailout plan, and another to have a vision
for what the transition or a new economy would look like in Greece. Has the left put forward
that kind of a vision?
LAPAVITSAS: Indeed. It's a very different thing. What is characteristic of the position
of the left camp, the SYRIZA camp, is that it promises to do away with the bailout [incompr.]
It promised to do [incompr.] things as far as the debt is concerned. But it also says
that it will keep the country within the eurozone. It is adamant about this. It keeps repeating
it at all times. So it will transform the country, presumably, but do so within eurozone.
The program that it puts forth now proposes radical redistribution of income, it proposes
control over the banks, proposes a new [incompr.] strategy, but all within the eurozone.
In my view, this is not feasible, but this is what this camp is proposing. And that is
one of the reasons of its popularity, because we should be [incompr.] aware of the fear
that people now have of leaving the eurozone. And the fact that SYRIZA says they will do
all these radical things without leaving the eurozone is acceptable to people.
JAY: Well, it's kind of not just up to them, though. The rest of the eurozone and the banking
elite of Europe has to agree to all this. And if they don't accept the bailout and don't
sort of knuckle under to the conditions of the bailout, then it may not be up to them
whether they stay in the eurozone or not. Is that not true?
LAPAVITSAS: Absolutely true. Whether they stay in the eurozone or not is not up to what
the leadership of SYRIZA says or what it fervently believes. It is up to the other players, the
leadership of the eurozone. But it is also up to, in a sense, the objective economic
circumstances. It is quite likely, for instance, that there would be a bank run soon after
the election if SYRIZA begins to take radical measures, the radical measures that it promises,
and a bank run, as we all know, can become unstoppable. So Greece might find itself outside
the eurozone irrespective of what SYRIZA wishes to do and irrespective even of what the eurozone
leadership wishes to do.
Having said this, SYRIZA should also expect a very strong reaction from the eurozone immediately
after the election if it proceeds to [incompr.] radical measures. On both scores, both, you
know, what the banks might do and what the eurozone leadership might do, a Greek exit
from the eurozone is quite likely if SYRIZA begins to put its program in practice.
JAY: Now, who's got more to lose here? The leaders of the eurozone must be concerned
that if Greece does exit, this might lead to the exit of some of the other--what they're
calling peripheral countries. It begins a kind of unraveling process of the eurozone.
I guess you could argue the threat to leave, on the other hand, the desire to renegotiate
might give Greece a little more leverage. And if so, how much leverage does Greece have
here? Or would the leaders of the eurozone--are they just reaching a point that they would
not accept such a radical notion inside and would prefer Greece out?
LAPAVITSAS: There's definitely a game of chicken being played here, definitely, and consciously
so, on the part of SYRIZA as the [incompr.] political side that might make--form the next
government and on the part of the eurozone leadership.
Now, the question of who's got more to lose is a moot point, a moot issue, because clearly
Greece, if it exited the eurozone and it exited under such unplanned and disorganized conditions,
it would be subjected to a major shock. There would be a major shock in terms of monetary
circulation, in terms of its banks, in terms of its trade. There'll be significant impact
to the economy. It would be a shock to the country. There is no question at all about
this, a short-term shock. I believe personally that in the medium term and the long term
this, the exit, will be beneficial to Greece. But in the short term it would be a shock.
However--and we should be very clear about this--it will also be a major shock for the
eurozone. And I'm saying this because for a while now the leadership of the eurozone
has been creating the impression that it has taken all appropriate measures and it is ready
for Greek exit and it doesn't really care very much, and if Greece wishes to do this,
that, or the other, it may be punished in this way. Well, it is true that the eurozone
is far more ready now than it was two years ago. They've used that time to get themselves
ready for Greek exit and to erect barriers and to erect protection walls.
However, crisis has also become deeper and deeper in the eurozone. And as we know from
recent events, the crisis has now reached Spain and it's threatening Italy. This is
happening because essentially the banking system of Europe is hanging from a thread
right now. Spanish banks are very bad. German banks are very bad. So Greek exit would unleash,
I believe, a major shock across Europe right now. It's a major concern, or it ought to
be a major concern if the European leadership think that they can punish Greece and get
rid of it and teach it a lesson and teach others a lesson, that that could well be the
Lehman moment of the European union.
JAY: And is there any sign that some of the other countries in crisis--Spain and to some
extent Italy--that they might actually somewhat side with Greece? I saw this interesting interview
(we did a piece about it) with--Fareed Zakaria interviewed Mario Monti, prime minister of
Italy. And he was saying, you know, we need did what they asked us to do. We did the fiscal
discipline. We're doing the austerity. And he said, all we've accomplished is we destroyed
domestic demand. There's no growth happening here. Is there any possibility that this--you
might see some change in the alliance of forces here?
LAPAVITSAS: None at all, in my view. There's a growing realization across peripheral countries
and across the eurozone that the current set of policies is basically nonsense, that it
doesn't work, it makes the crisis deeper, it does not stand a chance of working no matter
how long you wait for it.
That, however, is a different thing, expecting a coalition of forces to emerge, particularly
among periphery countries, that would challenge the orthodoxy, the dominant view as that is
coming out of Germany and elsewhere. On the contrary, [incompr.] whenever the crisis becomes
shorter is greater opposition among peripheral countries. Each peripheral country tries to
prove that it's not like the other. It criticizes the others. So in recent days we've seen Spain
and Italy blame each other. And both Spain and Italy, and certainly Portugal and Ireland,
wish to maintain that they're not like Greece, they are like somebody else. So this has been
a characteristic feature of this crisis from the very beginning, and it indicates that
really an alliance of peripheral countries, much as we would like to see one, is not a
realistic option.
JAY: Alright. Let's go back to Greece. SYRIZA's election program and the reforms they're proposing,
what's the headlines of that? And how are Greeks responding to it?
LAPAVITSAS: SYRIZA wishes to present its program now as a program for reconstruction of the
country, a new growth and reconstruction program for Greece. And that's a very laudable thing.
If you go through the list of suggestions and proposals, you couldn't possibly disagree
very much at all. They would take steps to limit the payments on the debt and they would
take steps to restructure the debt. They will lift austerity. It will call a policy of expansion
and control over the banking system. They will do things about wages, and redistribution
more generally, all very sensible things that clearly the country needs. People are responding
positively to these things.
However, the issue remains: can it be done within the eurozone? People are not stupid,
they understand, and they've got serious doubts as to whether this can be done within the
monetary union. SYRIZA asserts they can. To my view, to my mind, this is a weak point.
People are not persuaded. If SYRIZA, supposing it wins, comes to power and doesn't deliver
these things because it fears exit from the eurozone, then the situation will be very
bad in Greece, very bad indeed.
JAY: And I suppose the other possibility, if they have the backbone for this, is: if
it turns out that Europe is simply uncompromising, then does SYRIZA have a plan B to get out?
I mean, are they talking about the possibility of that?
LAPAVITSAS: There is reason to believe that SYRIZA is beginning seriously to think about
a plan B, because, obviously, they've realized the seriousness of the situation. They've
realized that, yes, they might wish to stay within the eurozone, yes, they might say that
they will not exit of their own [incompr.] as it were, but they might be forced to do
so. And they're beginning to think and they're beginning to look for an alternative way of
managing affairs, which would not be very nice, but it can be done. There is evidence
that such thinking is becoming more permanent, perhaps, within the leadership of SYRIZA.
It's not the dominant line, however, by any stretch of the imagination, but it's important
that the realization is beginning to sink in.
It's important because, I repeat, if SYRIZA wins, if it becomes the dominant party in
Greek politics and does not do what it promises that it will do, if it compromises and compromises
badly, then, in my judgment, political, social, and economic development in Greece will be
catastrophic in the time to come, because exit and default would not really [incompr.]
things, irrespective of what SYRIZA or any other party says. And if SYRIZA is seen to
have sold the Greek people down the river, then the political forces that are likely
to gain from something like that would be the extreme right, in my judgment. We are
likely to see a huge strengthening of the extreme right in case SYRIZA leadership doesn't
do what people think it will do.
JAY: Alright. Well, then, we'll come back to you next week after the election, and we'll
be able to pick up this conversation knowing who won the Greek elections. Thanks for joining
us, Costas.
LAPAVITSAS: Thank you very much.
JAY: And thank you for joining us on The Real News Network.