Skip to content Skip to footer

Economist Richard Wolff on Roots of Greek Crisis, Debt Relief and Rise of Anti-Capitalism in Europe

What does this mean for the global economy?

As Greek voters reject further budget cuts and tax hikes in exchange for a rescue package from European creditors, who is to blame for the debt crisis embroiling Greece? Is Germany trying to crush Greece to set an example? Will Greece leave the eurozone? What does this mean for the global economy? We speak to Richard Wolff, emeritus professor of economics at University of Massachusetts, Amherst, and visiting professor at New School University. He’s the author of several books, including, most recently, Democracy at Work: A Cure for Capitalism. Still with us in Athens, Greece, is Paul Mason, economics editor at Channel 4 News.


AMY GOODMAN: Richard Wolff, Germany clearly is controlling this situation, of any country. Why do they want to crush Greece? Or do they?

RICHARD WOLFF: I think the Germans face a choice. They’re worried that as the richest country, as the country that controls the situation, and as a country that historically has benefited from the very thing that Greece now wants, which they don’t want to give to the Greeks, that they face the risk that if they crush Greece, it will produce the reaction Paul has described. On the other hand, they will send a message to the Spanish, to the Italians, to the Portuguese and others, who are basically in a very similar situation, only they’re much larger, and the Germans are therefore afraid they’ll have to bail out all of Europe. They can’t afford it. They’re terrified. On the other hand, if they don’t cut a deal with Greece, then they face the possibility of left-wing governments in these other countries and a whole transformation, and they’re choosing between them.

The irony here, the historical irony, is something I think we need to understand. Back in 1953, the Germans, with a very crushed economy—in that case, because of the Great Depression and the fact that they lost World War II—went to the United States, France and Britain and said, “We can’t join you as a bulwark against the Soviet Union unless you relieve us of our enormous debts, which are hampering our ability to grow.” Across 1953, they had meetings in London. When those meetings concluded, with the so-called London Agreement, here’s what Germany got from the United States, France and Britain: 50 percent of their outstanding debt, which was very high, was erased, and the other 50 percent of their debt was stretched out over 30 years. In effect, Germany got the relief of all of its basic indebtedness, based on two world wars that they were held accountable for, and that enabled them to have the so-called Wirtschaftswunder, the economic miracle that happened. They now refuse to give to Greece what they got. They refuse to allow Greece to have the chance to solve its economic problems just the way Germany asked for and got. And this discrepancy between these two countries is producing a stress inside Europe that is, what Paul Mason correctly points to, fundamentally dangerous to the whole project of a United States of Europe.

AMY GOODMAN: Well, Paul Mason, what about, for example, the people of Germany and other European countries versus their governments that are pressuring Greece right now? And also, in addition to your analysis of Germany’s role, Paul, people cannot take out more than what’s equivalent to $60, 67 euros, from the bank right now, the banks actually closed until Wednesday, if not beyond. And what does that mean? Is there a rift between younger people, who voted overwhelmingly no, and pensioners, who were more supportive of a “yes” vote?

PAUL MASON: No, no. I mean, let’s take that, to start with. Greek society is divided between left and right, between the grandchildren of people who fought in a civil war here in the late 1940s and indeed the Communist resistance movement that defeated the Nazis in 1944. So that goes back a long way. That’s the real division. And therefore, you know, one of the first sets of people on the streets when Tsipras even tried to make a compromise were 70 coachloads of Communist pensioners who tried to storm the street his office is in. So, don’t think it’s young v. old. Look, it is left v. right. And it is class—as Tsakalotos says there, it is a class issue, as well. The richest areas voted 80 percent yes, the poorest areas voted 80 percent no. But the Greek elite got a lesson that the poet Percy Bysshe Shelley taught the English elite in the aftermath of the 1819 Peterloo Massacre in the famous line from his poem: “Ye are many,” to the working class—”they are few.” You can’t win a referendum with only rich people. So, that’s the issue here.

On the question of the 60-euros-a-day withdrawal, again, it is, in a strange way, redistributive. Young people here earn, on average, 400 euros a month. That’s what you get for waiting tables. And you’ll find many graduates and Ph.D.s waiting tables. If you draw 60 euros a day out of your account, you’ll clear your 400 euros in a week. You’re not going to be drawing 60 euros a day out. Some people are walking around this city with five euros in their pocket. Now, that has been survivable for them, but not really survivable for businesses. And I’m finding, in the businesses I talk to, extreme pain. It’s the payments mechanism. It’s the supply chain. It is the ability to settle accounts. And, of course, I understand that large corporates, the big global corporates, are keeping supplies coming in, even while they’re not being paid. They’e been advised to do that to avoid reputational damage. But it’s the Greek corporates, it’s the Greek medium and large enterprises that don’t have that ability, where things are breaking down. So if the banks were to go on top of that, that would really be an awful situation.

And that is what—you know, to sum up here, because I do have to rush and do my day job, and indeed complete the documentary that we’ve been working on for six months here, is—the sum-up here is the Europeans cannot afford to let this country go. As Rick says, it’s about Europe. But we are one border here away from the Islamic State. So we have the Turkish border and then the Turkish border with the Kurdish areas, and that’s the Islamic State. Some Greek islands are five miles away—less than five miles away from Turkey, where Syrian refugees are pouring in at thousands a week. And then we are in the region of Vladimir Putin and the newly belligerent Russia. Do you really want a state that has the biggest spend per capita on military, in NATO, in Europe, to fail? That’s the issue. And it’s the issue, I know, that the American State Department is well aware of. The State Department are pressuring the Germans very heavily.

The problem is, as you suggested there, the German people. Don’t get your hopes up about a German mass revolt in favor of Greece. Yes, the left party, Die Linke, is a sister party of Syriza, and, yes, it rules a couple of regions. But the leader of the German Social Democrats has been saying to the Greeks, basically, “Get lost.” And many German voters who vote for that party, this German socialist party, and the two right-wing parties that run Germany, the CDU/CSU, have kind of switched off their solidarity with southern Europe. They’ve begun to think very nationalistically in terms of their own economy. And, of course, if you’ve got the Greeks voting for their own bailout and the Germans voting against, democracy is beginning, in other words, to tear the euro apart. I’m afraid that is—if Merkel makes a deal tonight, she’ll probably do it against the wishes of her own party and her own people.

AMY GOODMAN: Paul Mason, thanks for being with us, economics editor at Channel 4 News, producing the forthcoming documentary about Greece titled And Dreams Shall Take Revenge. Go to your day job. Speaking to us from Athens, Greece. And Richard Wolff is still with us. In our next segment, I want to talk to you about what’s happening here at home in the United States, and particularly the rise of the Democratic candidate for president, Bernie Sanders, who is a socialist himself, and what that means in this larger global context. But this whole issue that Paul Mason was just referring to, leaving the eurozone, what does that mean, actually? Especially for people in the United States, it’s hard to understand anything besides dollars as a currency.

RICHARD WOLFF: Well, basically, what the Greeks would achieve if they left the European Union is they would revert to their own currency. They could go back to the drachma, which was their currency before, or a new one. And once they control their own currency, they can also control the relative worth of that currency, relative to others. If that currency becomes much, much cheaper relative to the euro, which is what will happen, then everything priced in that local currency will appear very cheap to people with dollars or people with euros. And suddenly a Greek vacation will become much cheaper than a vacation anywhere else. Greek olive oil will outprice everybody else’s. And that has traditionally been the way that a country blocked into this dead end crawls its way out of that dead end. It’s painful, but they at least have the prospect that their goods will become very attractive around the world, what they have to sell, and they’ll begin to recoup.

The reason they want to go more and more in that direction is that the austerity imposed on them since 2010 has given them lots of suffering with no improvement, with no chance to get out of it, therefore they were choosing between a proven dead end and a difficult strategy, but one that has in the past worked and might in the end work again here, especially if leaving the euro meant they could also cancel their debts, with or without the approval of their creditors, the way the Germans arranged it. But if they had less debt and a cheaper drachma as their own currency, that’s a strategy that at least has a chance, whereas what they were in was endless promises that it will eventually work, that never came true.

AMY GOODMAN: What exactly is happening there, when you say the pain they are now feeling in Greece? What is the pain? And what do you see the future looking like if they do pull out of the eurozone? How will their economy be shaped?

RICHARD WOLFF: Well, they’re being squeezed by 25 percent or more unemployment, by a cutback in public sector, which is the largest part of their economy, of about 40 percent since 2010, drop in their actual wage. Businesses are closing because they can’t solve the payments problem that Paul talked about. So you have a general disintegration that has been worse in Greece than in any other country. That’s why they keep saying, “We’ve been the ones who have borne the brunt of all of this. And don’t make us do more. That’s unjust and not solidarity with the rest of Europe.” So, they’re struggling to keep their pensioners having enough to live, to prevent, for example, the continued exodus. They have lost tens of thousands of young Greek citizens, who were educated at the expense of the Greek economy and are now taking what they’ve learned to go to other countries and work and be productive over there. A country like Greece, which is small to begin with, can’t keep hemorrhaging its best and brightest young people at the same time that everybody else’s salary is collapsing. This is an economy that—where you have to look for a metaphor, go back to the depths of the Depression in the 1930s, when we had comparable kinds of situation of desperate people and rampant poverty. They want out of that, because, otherwise, they face an indefinite future of this kind of behavior.

AMY GOODMAN: What happens to the rich people in Greece? And what about the issue of taxes?

RICHARD WOLFF: Well, you know, that’s the unspoken but real story behind all of this, because the more the Europeans squeeze the Greeks, with a left-wing government, that government, especially strengthened by that referendum now, has to sooner or later—and Paul referred to this—go after the wealth that’s there in order to solve some of these problems. They should have done that a long time ago, but they never had a leftist government with a mindset to do it. Now they do. And that’s the great danger, that you’re converting a problem of European disequilibrium and inequality into a real class struggle between the mass of the Greek people, on the one hand, and the one place where wealth exists inside Greece, among the rich and the corporations, to help them solve a problem. So you’ve converted a European problem into a class struggle. And if Syriza can pull that off, the message sent to the comparable groups in every other European country is a staggering reconception of what the future of Europe may look like, where the words “anti-capitalism” become a unifying slogan for people across that continent. Merkel’s great danger is that in pushing as hard as she has, she may reap a whirlwind of results.

AMY GOODMAN: Is she aware of this?

RICHARD WOLFF: I’m sure she must be, although they are so caught up. The Germans are victims of their own propaganda. They converted an economic crisis into a nationalist, we-versus-them mentality—we, Germans who work hard, against the Greeks, who don’t. Reminded me of nothing so much as Mr. Romney’s unfortunate remark in the last campaign where he divided Americans into the 47 percent moochers and the 53 percent who work hard, trying to get the 53 percent to believe they were carrying the other 47. That’s what the Germans have done. “We Germans work very hard, and we’re carrying these lazy Greeks.” This—put aside the questionable issue of whether the Germans ought to play such a nationalist card, given their history, but this is a way of solidifying opposition to what’s going on, and this is a very, very dangerous track. But she may be trapped by it. She has done it now. So, as Paul said, her own people wouldn’t support making a deal. She’s made that impossible for herself.

AMY GOODMAN: A few months ago, we talked to Professor Noam Chomsky about what’s happening in Greece.

NOAM CHOMSKY: It’s very significant. But notice the reaction. The reaction to Syriza was extremely savage. They made a little bit of progress in their negotiations, but not much. The Germans came down very hard on them.

AMY GOODMAN: You mean in dealing with the debt.

NOAM CHOMSKY: In the dealing with them, and sort of forced them to back off from almost all their proposals. What’s going on with the austerity is really class war. As an economic program, austerity, under recession, makes no sense. It just makes the situation worse. So the Greek debt, relative to GDP, has actually gone up during the period of—which is—well, the policies that are supposed to overcome the debt. In the case of Spain, the debt was not a public debt, it was private debt. It was the actions of the banks. And that means also the German banks. Remember, when a bank makes a dangerous, a risky borrowing, somebody is making a risky lending. And the policies that are designed by the troika, you know, are basically paying off the banks, the perpetrators, much like here. The population is suffering. But one of the things that’s happening is that the—you know, the social democratic policies, so-called welfare state, is being eroded. That’s class war. It’s not an economic policy that makes any sense as to end a serious recession. And there is a reaction to it—Greece, Spain and some in Ireland, growing elsewhere, France. But it’s a very dangerous situation, could lead to a right-wing response, very right-wing. The alternative to Syriza might be Golden Dawn, neo-Nazi party.

AMY GOODMAN: That’s Noam Chomsky speaking in March. Are we in a very different or a very similar situation right now, Richard Wolff? You actually have just returned from France.

RICHARD WOLFF: Yes, in France, the very fear that Noam Chomsky referred to is a reality, that the anti-austerity position was taken by the far right, by Madame Le Pen, who has become an important political leader in France, who declared her solidarity with Syriza. That’s why the complicated politics of this. She sees the future of an anti-capitalism in France enabling her right wing to capture that kind of idea. But it’s a sign that the—below the surface, the anger about austerity, the resentment of the burdens of this crisis being shifted onto average people, is becoming a European problem. And the Germans may discover that they have isolated themselves yet again in European history by being the champion of something which is provoking a backlash larger than anything they had foreseen.

AMY GOODMAN: Do you think President Obama could be pressuring them in a different way?

RICHARD WOLFF: There’s no question in my mind, from the evidence we have, that the American government is more interested with a stable Europe than with provoking this kind of a split inside Europe, partly because of the ramifications here in this country, where the same anti-austerity is building. That’s one of the causes for the support for Bernie Sanders, for example. But he’s also concerned that the Germans are making a classic political error, going way too far, and that this will disturb global markets. The economic recovery in this country is very weak and very fragile, and that doesn’t want disturbance to come from a powerhouse like Europe.

AMY GOODMAN: We’re going to talk about the United States after break. Richard Wolff, our guest, professor emeritus of economics at University of Massachusetts, Amherst, visiting professor here in New York at The New School. This is Democracy Now! Back in a minute.

We have hours left to raise $12,000 — we’re counting on your support!

For those who care about justice, liberation and even the very survival of our species, we must remember our power to take action.

We won’t pretend it’s the only thing you can or should do, but one small step is to pitch in to support Truthout — as one of the last remaining truly independent, nonprofit, reader-funded news platforms, your gift will help keep the facts flowing freely.