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Dimitri Lascaris

Dimitri Lascaris – The Greek Crisis

15. July 2015

Dimitri Lascaris – The Greek Crisis

Dmitri Lascaris, of Siskinds Law Firm, answered questions that acTVIsm Munich put to him about the crisis in Greece. He provides his analysis on the voting results of the Greek referendum, austerity and its effects on the Eurozone.

acTVism Munich (aTV): On the 5th of July, 2015, the Greek people made their decision via referendum whether to accept or reject the proposal that were put forward by the Troika + Berlin. What is your assessment of the outcome?

Dimitri Lascaris (DL): In the week prior to the vote, the leaders of Germany, France, Italy and the EU declared that a no vote would amount to a rejection of the Euro by Greece. Other EU leaders, notably EU parliament president Martin Schulz, warned that a no vote would precipitate a financial apocalypse in Greece. Greece’s political opposition and the country‘s corrupt oligarchy, which dominate Greek media, bombarded the population with hysterical claims of impending doom if the no vote prevailed.

And yet, more than 61% of Greek voters voted “OXI“. In the circumstances, this was a stunning rebuke of austerity. One can only imagine how large the no vote would have been if the Greek people had not been subjected to rampant threats and fear mongering.

It appears that the large margin of victory is primarily attributable to Greek youth, who, in the face of a devastating youth unemployment rate exceeding 50%, massively supported the no campaign.

Despite the strong OXI vote, the Tsipras government has now offered to Greece’s creditors terms of austerity that our even harsher than those the Greek people rejected. If this does not result in an agreement with Greece’s creditors, the disintegration of the monetary union is virtually inevitable.

aTV: Something that rarely appears in German mainstream-press is the details & analysis of the proposals put forward by both sides during the negotiations. tell us exactly what the Greek proposals were and why they were rejected by its so-called “European partners”?

DL: There were many points of disagreement between the Greek government and the Troika, but the principal differences between them were as follows.

First, the Troika refused to offer debt relief even though it is widely acknowledged, even by the IMF, that Greece’s debt is wildly unsustainable. Junker claims that debt relief was on the table when negotiations broke down and a referendum was called, but in fact the only offer from the Troika in regard to debt relief was a vague assurance that debt relief would be discussed at some point in the future. This same assurance was given to a prior Greek government by the Troika in 2012, but no debt relief has been offered since then. In fact, since 2012, Greece’s Debt-to-GDP ratio has deteriorated further, due primarily to the contractionary effects of austerity. Therefore, Greece’s debt today is even less sustainable than it was in 2012.

Second, the Greek government wanted to raise revenue by, among other things, increasing the corporate tax rate from 26% to 29%. It also wanted to impose a one-time, special tax on corporate profits. The Troika insisted that the one-time corporate tax not be imposed at all, and that the corporate tax rate be increased to only 28%. The Troika’s stated rationale for this position was that these corporate tax initiatives would hurt the Greek economy. This is a ludicrous justification, because the Troika’s austerity prescriptions have already devastated the Greek economy.

Third, the Troika insisted on a rapid increase in the Greek retirement age to 67 years, and also insisted on a further reduction in Greek pensions. Since 2010, Greek pensions have been slashed by over 40%. Approximately 45% of Greek pensioners now live in poverty. The Troika’s claim that the Greek pension system is unduly generous is patently false. When adjustments are made for the age of the Greek population, Greece’s pensions are well below the Eurozone average and these low pensions are being paid in a society where other forms of social protection are considerably weaker than they are in the rest of Europe. For example, the health care system in Greece has virtually collapsed. This is particularly hard on impoverished pensioners, who have frequent need of the health care system.

Fourth, the Troika wanted larger increases in Greece’s VAT than the Greek government was prepared to accept, particularly in the Greek islands, where the tourist industry is a major contributor to the Greek economy.

The overall effect of the Troika’s demands was to shift the burden of further austerity away from corporations and the wealthy and onto the shoulders of Greek pensioners and consumers.

aTV: We feel that there are lot of generalizations regarding the Greek people and their culture. The prevailing opinion that a lot of Germans hold, and which the mainstream media in Germany perpetuates, is that Greeks are lazy, corrupt shirkers who refuse to pay their taxes. Do you think this is representative of the Greek culture? Who stands to gain from such a narrative?

DL: OECD figures show that Greek workers work on average about 20% more than German workers. The bigoted narrative of the lazy Greek is therefore demonstrably false.

It is true that there is a high level of corruption and tax evasion in Greece, but this was well known to the European elite when Greece acceded to the Eurozone.

Moreover, Greece does not hold a monopoly on corruption and tax evasion. One of the worst chapters in the history of European corruption involves the major German company, Siemens. Christine Lagarde herself, now managing director of the IMF, has been charged by French authorities in connection with a corruption scandal that erupted during her tenure as France’s finance minister (the European financial press barely talks about this). In 1999, Wolfgang Schauble lied to the German Bundestag about his relationship with convicted arms dealer Karlheinz Schreiber. Schauble later admitted that he had accepted on behalf of the CDU 100,000 Deutche Marks, in cash, from Schreiber. Rodrigo Rato, the former conservative finance minister of Spain and the former managing director of the IMF, has been charged with fraud and money laundering by the Spanish authorities. Mariano Rajoy’s government, an avid supporter of austerity, is itself embroiled in a massive corruption scandal involving an illegal slush fund. The former treasurer of Rajoy‘s party alleged in January of this year that Rajoy himself knew about the slush fund years ago, and from the beginning.

I could go on and on with stories of corruption and tax evasion by politicians and wealthy citizens of European countries other than Greece. This aspect of the Greece narrative is therefore highly hypocritical.

But the worst effect of this false narrative is that it has been used to justify the collective punishment of the Greek people. The tax evaders in Greece are primarily the wealthy, but it is the working class, the poor, and the youth who are the main victims of austerity. Students are not tax evaders because they are studying rather than earning an income. Workers have their taxes deducted at source and therefore have few if any opportunities to engage in tax evasion. The poor, by definition, do not have sufficient income to engage in tax evasion on a significant scale, if at all. Yet no one has suffered more from austerity than these three groups.

Collective punishment constitutes a war crime under the fourth Geneva Convention, and yet that is precisely what the false Greek narrative has achieved.

One aspect of the false narrative that you did not mention is the notion that Germany ‘plays by the rules‘, whereas Greeks do not. As noted by the German economist, Heiner Flassbeck, who is a former state secretary in the German ministry of finance, the Eurozone was established with an inflation target of 2%. Over the next decade, Germany violated the inflation target more than any other Eurozone nation. It did this by suppressing the wages of its workers, which in turn rendered German products cheap relative to those of countries in the Eurozone periphery. This resulted in a massive German trade surplus, which the Merkel government now refuses to recycle through poorer, consuming regions of the Euro zone. This has also precipitated a race to the bottom in European wages. All European workers, including those of Germany, are suffering from the ill-conceived policy of wage suppression.

aTV: Let us take step back and talk about the events that led to the referendum. What do you think of Syriza’s strategy regarding its dealing with the Eurogroup / Troika? Do you think they could have minimized the impacts if they would have handled it differently?

DL: I believe that Syriza’s strategy, if you can call it that, has is a disaster for Greece. From the outset, Syriza insisted that it would meet Greece’s unsustainable debt obligations, and that it would ensure Greece’s continued participation in the Eurozone. This was a fundamental error. Greece’s inability to control its currency has deprived it of the ability to restore competitiveness through a currency devaluation. Instead, past Greek governments have been forced to engage in a vicious internal devaluation in an attempt to restore competitiveness.

Moreover, by taking debt default and Grexit off of the table, the Greek government undermined its negotiating leverage with its creditors.

At the same time, however, the Greek government adopted a tone that was highly inflammatory. If one is not prepared to play hardball with one‘s creditors, then one should not antagonize them with inflammatory language.

In the interim, Syriza’s irrational devotion to the Euro has prevented it from preparing for the extraordinarily complicated and time-consuming task of transitioning to a new currency. A Grexit may be forced upon Greece imminently, and yet the Syriza government is woefully unprepared for this.

If, on the contrary, Syriza elects to avoid a Grexit by capitulating to the demand of its creditors, then it will have inflicted the pain of a bank run and capital controls on the Greek population for no reason.

aTV: What happens next in Greece and talk about the wider implications? Do you think this will open new doors for Greece and other European nations facing the same dilemma?

DL: I think that a disorderly Grexit is the most likely scenario. Attitudes toward Greece have hardened in the European political elite, and I doubt whether Syriza can preserve Greece’s place in the Eurozone much longer. A Grexit is the best long-term option for Greece, but Syriza’s lack of preparation will greatly exacerbate the short-term pain that a Grexit will cause.

Assuming that Greece can overcome that pain, and that it avoids becoming a failed state (a distinct possibility), then the prospects for Greece thereafter should be much better. With a devalued currency and the restoration of monetary and fiscal sovereignty, the Greek economy should grow robustly, as did Argentina’s after it defaulted and abandoned its peg to the U.S. dollar. Also, the Greek government would then be free to pursue social initiatives to assist those who have been most affected by the crisis.

If all of this occurs, it will inspire other peoples of the Euro zone to resist austerity, and perhaps to abandon the Euro.

Whatever happens to Greece in the near term, I expect that the Eurozone in its current form will not survive for much longer. The Eurozone is structurally flawed, and its flaws can only be addressed through much greater political and economic integration. But European leaders merely pay lip service to the notion of greater integration. In reality, there is ,little if any political will for more integration. Therefore, the structural flaws of the Eurozone will inevitably result in its collapse.

aTV: How can European citizens reading this interview support those that are suffering from the ongoing crises? And what do you think are the wider consequences are if ordinary Europeans fail to stand united after witnessing this outcome?

DL: Mass resistance to austerity is, in my opinion, the only possible salvation for Greeks, and for Europe itself. The poor and the working classes of Europe must understand that they have a common enemy, and it is the financial and political elite in Europe, who now makes decisions based upon their own narrow interests, regardless of the negative effects on the population.

The poor and the working classes of Europe must understand, above all, that they are all trapped in a race to the bottom that was instigated years ago by a supposedly social democratic government in Germany. For the time being, however, Europe‘s elite has succeeded in a strategy of divide and conquer. They have turned German, Finnish, Dutch and Slovakian workers against Greek workers. They have caused the working peoples of Europe to view each other as enemies.

Only when there is united resistance to austerity among the poor and the working classes of Europe will the neoliberal monster be defeated.

aTV: Thank you for your time!

DL: You are very welcome!


Edited_Lascaris_DimitriDimitri Lascaris is a Siskinds partner and leader of Siskinds’ Securities Class Actions Group. Before joining Siskinds,  Mr. Lascaris practiced securities law in the New York and Paris offices of a major Wall Street law firm.

In July 2016, Dimitri retired from Siskinds and the practice of law in order to devote himself to activism and journalism. He is now a correspondent and Board member of The Real News Network, and is also Vice-Chairman of the Board of the Unity Project for the Relief of Homelessness.

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