It is worthwhile to attempt an outline of the day after the rupture, in other words, the loan payment default, the unilateral sovereign debt write-off, and the exit from the Eurozone and the European Union. At this point, it is important to note the huge methodological issue arising from trying to solve a future’s equation using parameters of the present, knowing that they will dramatically change after such a rupture. But it is also important to note that the effect of such a change will be mainly positive. Thus, although the conflict with the capital will deprive society of valuable resources (e.g. the net inflow of €6 billion due to Greece’s dealings with the EU in 2015), it will put a halt to the inconceivable destruction of production forces that is currently underway and tends to become endemic (as shown, among others, by the fact that unemployment is stable at 26% and the idle production capacity has reached 34% in the industry).
There are seven sectors that will be affected already the next day after the rupture and are very significant for the people’s incomes but also for the economy: the currency, the funding of the imports and deficits of the state budget, the banks, the alimentation, the energy, and the medicines.
The exchange rate of the new currency in the first period after the rupture will be based on a fixed one-to-one exchange rate the euro, despite the fact that the exchange rate corresponding to the structure of the Greek economy is lower even than the existing exchange rate of the euro, which is ideally “soft” enough -thanks to the presence of the south European countries in the Eurozone- to allow Germany to export but far too “hard” for the periphery.
The pegging to the euro will be a political decision aiming at preventing the launch of punitive speculative attacks on the new drachma and the repeated chocks to the daily trading practices. Similar practices of pegging to another currency are not followed only by “closed economies”, but also by highly internationalized ones such as Hong Kong. The effect of devaluation on people’s incomes can be counterbalanced by proportional salary increases. The effect on prices can be kept under control, as Greek economists have shown. In other words, there will not be uncontrollable inflation. Besides, such a danger can only be taken as a joke in an economy that suffers from deflation. To tackle deflation within the Eurozone, 60 billion euros are spent each month through the Quantitative Easing Program. Moreover, loans that have been taken in euro will be converted by law into the new currency.
Debt write-off and exit from the euro-EU will improve and not lower the standard of living
In 2014, the trade deficit (excluding shipping and fuel) amounted to €8.13 billion (compared to €16,04bn in 2010). This deficit can be closed by the travel services balance surplus that in 2014 rose to €11.32 billion (€13,39bn of revenues minus €2,07bn of payments). The small presence of vertically integrated tourist activities controlled by multinationals -although their penetration in the tourist sector has been increasing in the last years- allows a government to provide appropriate motivation in order to collect this money. In addition, clearing (non-monetary forms of exchange trade) can make up for the need for foreign currency, while “smart” measures to promote imports like those successfully applied by Argentina (ensuring that every importer will export a specific percentage of the value of their imports) can reduce the need for foreign currency and boost exports.
For the lovers of the Memoranda who claim that they created surpluses, there are no budget deficits to be covered. But for those who believe that giving new life to the dilapidated social structures should be a priority, there is the possibility of printing new money, which should of course be limited. In addition, there is the option of domestic borrowing, which can be used as a means of income redistribution and reinforcing low incomes, showing that not all of forms of debt are reproachable. To some extent, this was also the case when the Greek state was covering its financing needs by publishing treasury bills addressed to savers, even during the ’90s. It is remarkable that in 1998, 80% of state borrowing was internal and 70% of this borrowing was short-term and thus low-risk. The Maastricht Treaty eliminated this possibility in favor of the banks (which, in this way, got rid of competition) and especially the financial giants that took over state lending. The safety net provided by domestic borrowing is made clear in the case of Japan, where although the sovereign debt is extremely high (246,1% of GDP in 2015), its creditworthiness has not been downgraded by the credit rating agencies exactly because borrowing is domestic and can thus be subjected to many silent restructurings. The threat that domestic borrowing poses to the international speculators was also made clear when PSI took place in February 2012, when nothing was done to protect bondholders. The IMF and credit rating agencies wanted to abolish this possibility once and for all. On the contrary, a government that would want to reinstate the market of domestic borrowing should fully compensate the bondholders who suffered losses in 2012 and perhaps also set a ceiling of, let’s say 100.000 euros, in order to hinder very high incomes.
Nationalizing banks will relieve society from the burden of their prolonged death. Despite the 211 billion they have received since 2008 in the form of subsidies and guarantees, banks today are in a much worse state, as reflected in the loans to deposits ratio: from an admirable balance in 2000 (€108,23bn of loans to €109,23bn of deposits or 99%) to an enormous asymmetry in 2009 (€300,32bn of loans to €237,53bn of deposits or 126%), which has become even worse in January 2015 (€214bn of loans to €147bn of deposits or 146%, with the non-performing loans to have climbed up to €78bn) and is further deteriorating due to the bank run caused by the policy of suffocation of the ECB.
As far as food products are concerned, according to a research by the Panhellenic Confederation of Unions of Agricultural Cooperatives (published in 2012) that examines 41 basic rural food products – both plant- and animal-based – for the year 2011, there is sufficiency (production in relation to consumption, with consumption being defined as the amount of production plus imports minus exports) at the hopeful level of 95%. Taking a better look at the figures, however, one can see that the highest sufficiency is observed in not-basic products (edible olives 996%, raisins 275%, sea products 221%, oranges 191% and kiwis 180%) whereas the lowest sufficiency is observed in almost basic products (sugar 14%, beef 29%, lentils 33%, soft grain 33% and pork 36%). It is important to note that the production of sugar is indicative of the damage caused in the rural production by the Common Agricultural Policy and the EU directives, which led to the closure of the factories of the Greek Sugar Industry in favour of German exporters. In this way Greece, moved from being a net exporter to a net importer of sugar. There are similar examples in livestock production as well. The ability of a country to fill this gap if a shift of policy is decided was proved in 2010 when Russia massively bought young milk cows from Western Europe, succeeding in gaining sufficiency within two years.
As far as solid fuels are concerned, the market is characterised by oversupply, with a total installed power of 17.500 MW and a highest demand of 7.000 MW. Same as the food production, if it was not for the EU directives within the framework of the so-called “liberalisation”, much cheaper electricity power could be generated, for example by putting the brakes on the scandalous funding of the private sector of the Renewable Energy Resources, by allowing the expansion of the Public Power Corporation S.A., etc. As far as liquid fuels are concerned, the strategic cooperation of Greece with Russia and the choice of Iran as supplier -instead of the American protectorates- can secure the provision of much cheaper liquid fuels.
Finally, although the country’s 27 pharmaceutical industries are exporting to 80 countries, they only cover 18% of the domestic medicine demand, with the rest of it being covered by multinationals. Domestic medicine producers have repeatedly denounced the scandalous advantage given to the multinationals in the years of austerity and have claimed that they are able to provide for the 70% of the primary health care and the 50% of the hospital care with quality and low cost medicines as long as prescriptions are written differently…
In conclusion, with regard to food products, energy and medicines, but also other sectors, a revolutionary rupture will release unimaginable progressive social forces, which are now being amputated simply because no bourgeois government can implement the aforementioned measures, and will allow the society to enter to a new ‘golden age’.