Debate: As the Greek Crisis Nears the End Game would a ‘Grexit’ Help or Hinder?

EPSON scanner imagePublished: 18 June 2015.
Author: Soteris Vlachos.
Intro by: TSN Editor.

The long and torturous negotiations between the Syriza-led Government and the IMF and EU institutions are now drawing to a close. Unless a last-minute compromise emerges, it would appear that the prospect of a deal has broken down and that the next six weeks will see crisis measures forced upon the government of Greece. In this situation there is an intensifying debate among the Greek Left on whether to Exit from the Euro. Below is a contribution to the debate from a Cypriot comrade who is a member of Socialist Expression, a group affiliated to The Socialist Network. It is part of ongoing debate we have been organising on this website – see ‘Debate: What Way Forward for Greece?‘ for earlier material.

The Case Against a ?Grexit?

Exiting the Euro is not the way out for the Greek economy or its people.

In these years of austerity Europe found itself in the worst economic position since the end of the 2nd World War. In Greece this policy has caused an economic catastrophe similar to the one that the crash of 1929 inflicted on the United States.

Exit from the Euro, however, cannot in any way be an answer to the crisis. Instead, it will deprive all possibilities for treatment of the disease.

Increased independence in constructing one?s own economic policy is one of the basic arguments of those supporting Exit from the Euro. But such an argument does not stand on anything that could be called solid ground.

?The two most striking trends characterising the contemporary world economic landscape are globalisation and financialisation.? 1

The real meaning of these trends though, which all admit in words, should be clear: There can be no insulation or protection of any national economy from the daily developments, whims and storms of the world economy. The neoliberal period especially, can be seen as the extreme manifestation of this reality.

  1. With the collapse of Lehmann Brothers in 2008, the collapse of a single bank in the US, the financial system of all countries in the world almost completely froze, and without exception. The situation was saved at the last moment, not through the independent policy reactions of the different countries, but through the largest financial subsidy package in US history.
  2. The crisis in South East Asia in the summer of 1997, the deepest in modern times before 2008, ?marked a structural break in the thinking behind the euro project? – when one Asian currency after another, from the Thai Baht to the South Korean Won, were subjected to massive speculative attacks and forced off their dollar pegs and into free-fall devaluation with catastrophic domestic economic effects ? they realized the importance of currency mass in the new global financial reality.? 2
  3. With the release of Nelson Mandela in 1990 and the African National Congress?ss march to power, the leadership of the ANC was confronted with realities that paralyzed every attempt to implement their program, in the center of which was the nationalization of the banks, of the mining industry and of the monopolistic corporations of the country. ?When the government tried to implement the visions of ?The freedom Charter?, it discovered that real power was in the hands of others … every time a top official of the party implied that ?The freedom Charter? might be applied, the markets reacted with a shock, causing free fall of the rand (the country’s currency)? 3

All national economies are subject to the will of a dozen Euro-American banks and to the effects of any negative developments on the international level.

The size of an economy is important affecting its ability to resist to external pressures of any sort. This is especially so at a time when economies are so interconnected and financial institutions have so much power. It was exactly to create such a large-sized economy that the Eurozone was set up, ?when the French and certain other European governments saw what happened across South East Asia that summer (1997)? 4

Greece, Cyprus and any of the other Eurozone countries, are a huge step forward in regard to their ability to cope with the global economic crisis; a huge step that is determined by the size of the Eurozone. On this scale there is the potential for radical economic changes that could reverse the present economic picture throughout Europe.

The Eurozone?s fragmentation on the other hand would represent a similarly huge step backwards. A step at the head of which the most conservative, right-wing and fascist political formations would place themselves, exactly the forces that are already the most vocal in supporting the independent road for national salvation.

Absolute inadequacy of the capitalist recipes
A return to the national currency, its supporters maintain, would provide, together with policy independence, the ability to compete with other countries by offering cheaper products and services. According to this argument, the exit of Greece from the Euro and its return to its old currency, the Drachma, would enable Greece to devalue its new currency and thereby better compete with other countries such as Portugal – generally the products and services of the weakest European countries, since Greece could never compete with the Germans. An Exit from the Euro would take place in order to improve the Greek economy, reduce unemployment and so on, at the expense of the Portuguese economy, at the expense of Portuguese employment and the already dramatically reduced standard of living there. The only result of such a policy would be a reaction of Portugal along the same lines, something that would exacerbate the economic downfall, the nationalist sentiments and put the possibility of war on to the agenda.

The Troika?s policy of the Memorandum policies and austerity aims at ?increasing competitiveness?. But ?increasing competitiveness? is also the aim of Exiting the Euro. In the first case, by reducing labour costs through wage and benefit cuts. In the second by reducing labour costs through depreciation of the currency?s value, i.e. depreciation of the real value of salaries and allowances. Thus the Memorandum and Exiting the Euro are both capitalist methods designed to achieve similar ends through different routes. And to solve the crisis at a time when there is no such a possibility.

It is exactly the absence of possible solutions under capitalism that is causing the despair of the strategists of capital, the International Monetary Fund and the European Central Bank. They continue to insist on economic formulas which had the potential to provide solutions, in some cases and under certain conditions, in the period before the 2008 crisis, as in the period prior to 1929. Such formulas were unfair to the working class through slashing their living standards, but they could help to reduce unemployment. After 2008 though, just as after 1929, such policies are unable to provide results, since the capitalist economic system has once more exhausted itself – another legacy of the post-1929 period, and of Marxist analysis.

If the Exit from the Euro could provide a solution to the crisis, then someone needs to explain why the crisis is global and concerns all countries, the US and Japan included. Countries that possess their own currencies still, cannot find a way out of the economic mire, despite the fact that they are pursuing all possible expansionary policies. And despite the fact that their debt, especially that of Japan, has risen to extravagant levels, levels higher than those of 2008, which were put forward as the reason for the crisis.

International cooperation
?If countries such as Greece or Portugal or Spain give up the euro and return to their separate national currencies, any hope of a radical change in the economic direction of Europe will be crushed because that change requires international solidarity and that solidarity in turn requires the euro.? 5

It’s exactly such solidarity that is needed today. International solidarity is not a romantic idea for socialist dreamers, but a necessity spelled out by the most concrete fact of our times: that its opposite – national competition, this same competition that originally gave capitalism an enormous advantage over all social systems that preceded it, albeit with enormous social suffering ? such national competition can now only lead to disaster.

To save the economy of Greece is to save the economy of Europe. There is no future for the Greek economy in the middle of a capitalist Europe, even less in the middle of a capitalist Europe after the 2008 crisis. Whatever measures Greece takes, even if it were to nationalise the banking system and all key industries of the economy, Greece would be doomed if it were to move alone.

It is extremely important that the SYRIZA government moves along these lines, at least for the time being. The Syriza leadership has repeatedly made it clear that there is no solution to the crisis outside of the Eurozone. They have repeatedly made it clear that there is no solution for Europe either as long as there is no solution to the Greek crisis. And with these basic acknowledgements at the fore, they keep going on with the negotiations, negotiations that they have handled pretty well from the point of view of winning the sympathy of the European masses. The Greek government has shown that they are not the intransigent ones, that it is the European institutions which are insisting on continuing a program that has failed miserably, a program that has devastated Greek society.

The Break up of Negotiations Was Unavoidable
We did not believe that there was a possibility for an agreement between the institutions of Capitalist Europe and SYRIZA. Capitalist Europe?s plan is to humiliate SYRIZA as an example to all the others. From the perspective of the capitalist elite, they do not have many other options. Even a small reversal of their policies would put into question everything which they argued for so arrogantly in the previous period, insisting that ?there was no alternative?. Even a small reversal in their policies would be a signal to the European masses that ?there is an alternative?, a signal that could call forth an explosion of struggle against the austerity programme.

We are fast approaching the moment of truth. Greece may soon find itself out of the Eurozone as a result of a conscious decision of the capitalist institutions of Europe. But it is one thing to be expelled from Europe after you have defended the basic demands of the people of Greece, demands that many other European working people equally consider important and unquestionable. It is a totally different matter to cultivate the illusion that there is a solution to the crisis outside of the Eurozone. That there is even a remote chance of success on an independent national path.

If Greece is thrown out of the Eurozone, then it will have to intensify its appeal to the European masses to the highest possible degree, with the hope that it won?t be long before the European people come to its rescue, not just for Greece?s sake but for their own too.

This article is part of ongoing debate we have been organising on this website – see ‘Debate: What Way Forward for Greece?‘ for earlier material.
You can contact Soteris directly about this contribution at:


  1. 1. Three Myths Behind the Case for Grexit: A Destructive Analysis, by Photis Lysandrou Associate Professor of Economics, SOAS and Research Professor, City University, London
  2. 2. The same
  3. 3. “The Shock Doctrine?, Naomi Klein, Greek edition, p. 266 p. 282.
  4. 4. Three Myths Behind the Case for Grexit?
  5. 5. The same

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