The Greek referendum contagion

The objective of the eurozone’s masters was not the search for a reasonable compromise but the punishment of a province that had dared to rebel against the empire.

After five months of negotiations, the prevailing opinion among the political commentators was that the Greek government and the European institutions would have found find a compromise at eleventh hour. A fairly reasonable  forecast. With a flaw: paradoxically, it was  too reasonable. He did not take into account the objective of the eurozone’s masters: which was not the search for a reasonable compromise but the punishment of a province that had dared to rebel against the empire. It required an exemplary lesson: hit one to educate hundred.

The Tsipras government's decision to hold a referendum on July 5th is a choice that moves the conflict to a new level( Tsipras letter ), eventually a democratic one, disengaged from the dark technocracy of Brussels and the arrogance of Wolfgang Schäuble. What the Greek people has been called to decide , through the referendum? Let's briefly recap the essential features of the failed negotiation ( Greece's Proposals )

AlexisTsipras has inherited an astronomic public debt of 320 billion euro. To whom have gone the loans of the European institutions and the International Monetary Fund? The conservative press tries to endorse the idea of ​​a Levantine people, used to live a free ride, above their means. It’s simply false. No single euro went to the Greek people. Branco Milanovic, former chief-economist of the World Bank’s Department of Economic Research, has written: "The whole operation of the Greek rescue was a rescue of German and French banks."

Having been placed these loans on charge of the budget, they caused an explosive growth of the public debt relative to GDP, and gave room to the imposition of the European awful austerity program. Its disastrous economic and social outcomes are sadly evident. “After five years, two bail-outs and a debt haircut – The Economist  has written - Greece’s economy is 25% smaller than at its peak in 2008, unemployment stands at 26% and the public debt is nearly 180% of GDP...(Now) Alexis Tsipras, the prime minister, is being urged to sign up to austerity measures prescribed by outsiders, just like the governments that he denounced with such vigour from the opposition benches”(The ties that bind, June 27th 2015) .

Among the authoritarian requests of the European institutions to the Greek government there is the commitment to gradually increase the primary surplus to 3.5 percent by 2018. A crazy burden for a country that would badly need massive public investment to boost its agonizing growth. To achieve this target there is no other solution than on the one hand, further cut social spending and investment; on the other, raise taxes. How implement these goals?

As we know, the pensions are the most corrosive issue on the expenditure side. It must be kept in mind that since 2010 the public expenditure for the pensions has already been cut by 45 percent. And that 75 percent of pensions is below or near the poverty line. In this framework the imposition of further cuts is an unfair and unworkable choice for any decent government.

Anyway, the Greek government has not pulled back. It has proposed a gradual savings in pension expenditure: on the one hand, creating strong disincentives to early retirement; on the other, through the progressive increase of statutory retirement age at at 67 years in 2025 - a retirement age scheduled in Germany for 2027.

At the same time, the budget revenues would be increased: a) unifying the value added tax (VAT) at a standard  23 percent rate  for all goods with exemption of food, electricity, water and hotels  while a super-reduced  rate of 6 percent  should be applied to pharmaceuticals, books and theater - a clause, the latter one, bound to arouse the irony of a technocracy unaware of Euripides and Aristophanes.

On the other side, the Greek government had proposed increasing the budget revenues through: a) an increase of 3.9 per cent of social security contributions paid by employers, currently at the lowest level in Europe;
b) raising the corporate tax rate from 26 to 28 percent; c) introducing one off corporate tax of 12 percent on corporate profits over 500.000 euro All proposals considered by the European institutions (in effect, the old Troika) a blasphemy.

Brussels has rejected the Greek proposals on the following allegation : the primary surplus should be achieved only cutting expenditures and increasing the added value tax, without increasing the social security contribution paid by the enterprises, neither introducing one off tax on corporate profit. And with regard to VAT, limiting the reduced 13 per cent rate to basic  (?!) food. Substantially continually demanding new detailed changes on taxation and pensions, and not less important on the labor market deregulation with a provocative attitude, clearly intended to make impossible any acceptable outcome of the negotiation.

Now the word passes to the sovereign people. If the referendum will mark YES vote in regard to the proposals of the European authorities, the majority that supports the Tsipras government will broken, and the European authorities will demand to deal only with a new government, possibly led by a technocrat, as was the case of Mario Monti in Italy supported by a new majority that should include the same parties that have crippled the country.

What instead can we expect from a winning NO vote? Tsipras government will ask to reopen the negotiation from a strengthened position. Then the eurozone authorities will have to choose: either an acceptable compromise for Greece or to enforce its exit from the euro. A not painless choice, indeed. In the first case it will be demonstrated that a member state can challenge the European austerity policy, and erase its most unreasonable aspects. Then the opposition forces in the different euro countries would take breath and wonder why the governments of Spain , France or Italy keep on their submission to eurozone austerity policies. It would be a contagious  NO vote.

To avoid such a destabilizing prospect, the eurozone’s hawks, led by Wolfgang Schäuble. will seek to impose either a patent defeat to Greek government or its exit from the euro. In any case the outcome should be perceived as an exemplary punishment, mired to discourage any other attempt at rebellion. But the paradox is that the more interested to Greece remaining in the eurozone should be the main eurozone countries that directly, or through the Central Bank, are the owners of most of the Greek debt.

But if everyone loses from this stupid war, why not sort out a reciprocally beneficial compromise? Alas, the question is wrong, if placed in terms of an ordinary logic of convenience. Joseph Stiglitz, analyzing the argument, not incidentally writes: "It is not about money. but to force Greece to accept the unacceptable - not only austerity measures, but a set of regressive policies and punitive. "

Yet, the Greek referendum will represent, even beyond its outcome, a "contagious” event. Many other countries will be tempted by this old weapon of democracy to be used against the dark authoritarian technocracy in Brussels, supported by Germany. Luciano Cafagna, outstanding historian of the ancient world has written: "The referendum is an instrument of popular sovereignty that was used in ancient times. Its critics will stay along with the oligarchs ". Where could we place the Italian government? So far, indubitably, with the oligarchs.

Yet the Greek referendum is bound to open new scenarios. Not only in Greece but throughout the eurozone, and it will open a new path to the leftwing opposition in a number of countries for many years adversely affected by the silly policies of the euroarea.