Greek Myths – and Realities

 tsipraswin.jpg, Lorenzo Gaudenzi/flickr

By Bill Barclay

Everybody “knows” that Greece has too much debt, that is unsustainable and thus a “responsible” government must reduce spending and pay off the debt. And, because Greece is facing some maturity dates in the near future, Syriza won’t be able to implement its program of restarting the economy.

But what “everybody knows” about Greek debt isn’t true. It is important to grasp this, both in terms of the arguments we must win with conservatives over the next few months and to see/support, if possible, a path for Syriza’s economic policies. And, if what “everybody knows” about Greek debt isn’t true, then the demand of Greek sovereign debt holders for immediate payoff, no renegotiation of the memorandum, etc. should be rejected. 

Let’s start with the debt question, since much turns on this. There are two closely related myths about Greek debt. First, is the simple – and simple minded - argument that Greek debt is out of control and its reduction should be the first task of any “responsible” government. Now, it is true that Greek debt/GDP ratio is high, running up sharply from about 100% of GDP before the crisis to 175% today. However, most of the increase in the debt/GDP ratio has occurred, not because the government had been issuing more debt, but because the catastrophic austerity policies of the previous Greek governments (of course urged, imposed and abetted by the “Troika” - the European Commission, the European Central Bank, and the International Monetary Fund) resulted in a GDP plunge of about 25% from the financial panic through 2014. Thus, even a constant level of debt outstanding (and Greece has reduced somewhat the level of debt) will result in an increased debt/GDP ratio. The Greek government has not been issuing more debt but has rather imposed six years of negative GDP growth on the people – who finally said, “enough.”
This first myth leads to another that is closely linked: that this high debt/GDP ratio imposes a huge cost on the Greek economy because of interest payments, draining resources and undermining investor confidence. The reality is quite different, however. While Greece had to devote 7.4% of its GDP to interest payments in 2011 and over 5% in 2012, today these payments are only 4.3% of GDP, below that of Portugal and Italy and only slightly above that of Ireland. Even that paragon of economic virtue, Germany, has at times faced interest payments to GDP of 3% or higher while Belgium successfully navigated a period of interest payments to GDP of over 5%. (The 2012 debt restructuring did assist in this favorable trend.)    
If the debt/GDP ratio has been driven up by the very austerity policies that were going to restart economic growth, and if the interest rate burden is not excessive (and is actually trending down), why are Greece’s creditors seeking yet more austerity?   It is important to note here that, as a result of the 2012 debt restructuring, the vast bulk of Greek sovereign debt (over 80%) is held by “public” institutions such as the European Central Bank. These entities could and should be responsible to popular interests rather than simply the demands of the financial markets.
So, in the upcoming negotiations, these primarily EU public entities face a choice. They can serve their creditor classes and ruling elites, attempting to force continued austerity, or they can act on that old admonition of financial markets that “a rolling loan carries no loss” and stretch out the debt. It would, of course, be even better if there could be a haircut on the debt. What about, say, forgiving half as was done for Germany after WWII? (German debt/GDP ratio reached more than 6:1 during the war.) 
This economically rational and politically just decision would allow Syriza the opportunity to implement their economic proposals: kick-starting the economy by public investment, reversing key aspects of the memorandums by returning the minimum wage to pre-2010 levels, and restoring at least some of the provisions necessary for social survival such as reconnecting electricity, getting the health care system back functioning, etc.
And how would this program impact the debt/GDP ratio and interest payments questions?  Positively. Just as the GDP plunge drove the huge increase in debt/GDP ratio, so GDP growth will reduce that ratio. And that will mean a declining interest rate to GDP drain as well. If Syriza’s program generates economic growth rates higher than the today very low interest rates Greece faces on outstanding sovereign debt – and, in an economy with the level of unused resources such as Greece this is a very likely outcome – the debt/GDP ratio will fall and interest payments will be less of a drag on GDP – and the austerians will again be proved wrong. Of course, this good outcome for the Greek people could be enhanced by external European-wide financing to support Syriza’s program, but that, while rational, is probably too much to expect.

 BilBarclayDustin-2.png Bill Barclay is co-chair of Chicago DSA and a founding member of the Chicago Political Economy Group.

Individually signed posts do not necessarily reflect the views of DSA as an organization or its leadership. Democratic Left blog post submission guidelines can be found here.

What Is DSA? Training Call

May 30, 2017
· 60 rsvps

If you're a new DSAer, have been on a new member call, but still have questions about DSA's core values/strategy/core work and how to express these ideas in an accessible way to the media, as well as to friends, family and others who might be interested in joining DSA, this call is for you. 

We will talk through the basics of DSA's political orientation and strategy for moving toward democratic socialism, and also have call participants practice discussing these issues with each other. By the end of the call you should feel much more comfortable thinking about and expressing what DSA does and what makes our organization/strategy unique. 8 pm ET; 7 pm CT; 6 pm MT; 5 pm PT. 70 minutes.

Film Discussion: Rosa [Luxemburg]

May 31, 2017
· 95 rsvps

Join DSA member Jason Schulman to discuss the film Rosa, directed by feminist filmmaker Margarethe von Trotta. View it here at no cost before the discussion. Marxist theorist and economist Rosa Luxemburg (1871-1919) played a key role in German socialist politics. Jason edited Rosa Luxemburg: Her Life and Legacy and has a chapter in Rosa Remix. 9 ET/8 CT/7 MT/6 PT.

Film Discussion: The Free State of Jones

June 11, 2017
· 27 rsvps

Join Victoria Bynum, Distinguished Professor Emeritus of History, Texas State University, San Marcos, to discuss The Free State of Jones. STX Entertainment bought the film rights to Bynum's book of the same title. She also served as a consultant and appears in a cameo scene. What was the Free State of Jones? During the Civil War, an armed band of deserters led by Newt Knight, a non-slaveholding white farmer, took to the swamps of southeastern Mississippi and battled against the Confederacy in an uprising popularly known as “The Free State of Jones.” Joining Newt in this rebellion was Rachel, a slave. From their relationship, there developed a controversial mixed-race community that endured long after the Civil War had ended. View the film here for $6 before the discussion. 8 ET/7 CT/6 MT/5 PT.

Introduction to Democratic Socialism

June 13, 2017
· 14 rsvps

Join Bill Barclay, Chicago DSA co-chair, and Peg Strobel, National Political Committee and Feminist Working Group co-chair, on this webinar for an overview of what we in Democratic Socialists of America mean when we talk about "socialism," "capitalism" and the goals of the socialist movement. 9:30 PM ET; 8:30 PM CT; 7:30 PM MT; 6:30 PM PT.

  1. This webinar is free for any DSA member in good standing.
  2. You need a computer with good internet access.
  3. Your computer must have headphones (preferred) or speakers; you can speak thru a mic or use chat to "speak".
  4. If you have questions, contact Bill Barclay,
  5. If you have technical questions, contact Tony Schmitt,, 608-355-6568.

Film Discussion: Pride

September 10, 2017
· 7 rsvps

Join DSA members Eric Brasure and Brendan Hamill to discuss the British film Pride (2014). It’s 1984, British coal miners are on strike, and a group of gays and lesbians in London bring the queer community together to support the miners in their fight. Based on the true story of Lesbians and Gays Support the Miners. The film is available for rent on YouTube, Amazon, and iTunes. 8 ET/7 CT/6 MT/5 PT.

Film Discussion: Union Maids

September 24, 2017
· 5 rsvps


Join DSA member and labor historian Susan Hirsch in discussing Union Maids (1976). Nominated for an Academy Award, this documentary follows three Chicago labor organizers (Kate Hyndman, Stella Nowicki, and Sylvia Woods) active beginning in the 1930s. The filmmakers were members of the New American Movement (a precursor of DSA), and the late Vicki Starr (aka Stella Nowicki) was a longtime member of Chicago DSA and the Chicago Women's Liberation Union. It’s available free on YouTube, though sound quality is poor. 8ET/7CT/6MT/5PT.