Greece Financialization and The EU The Political Economy of Debt and Destruction

The Palgrave Macmillan
Greece, Financialization and

the EU
The Political Economy of Debt and
Destruction
Vassilis K. Fouskas
Constantine Dimoulas
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Vassilis K. Fouskas and Constantine Dimoulas

GREECE, FINANCIALIZATION AND THE EU
The Political Economy of Debt and Destruction
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MULTILATERAL DEVELOPMENT COOPERATION IN A CHANGING GLOBAL
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Caroline Kuzemko
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LEAST DEVELOPED COUNTRIES AND THE WTO
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Greece, Financialization
and the EU
The Political Economy of Debt and
Destruction
Vassilis K. Fouskas
Professor of International Politics and Economics, University of East London, UK
Constantine Dimoulas
Lecturer, Panteion University, Greece
© Vassilis K. Fouskas and Constantine Dimoulas 2013
Foreword © Donald Sassoon 2013
Softcover reprint of the hardcover 1st edition 2013 978-1-137-27344-4
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To Constantine Tsoukalas,
our teacher at the University of Athens (1984–88),
in the hope that this work continues
the arduous inquiry he began in the 1960s
with Nicos Poulantzas and Nicos Svoronos
Contents
List of Tables ix
List of Figures xi
Foreword xii
Acknowledgements xvii
Timeline of main events in Greece and Europe (October

2009–March 2013) xix
List of Abbreviations xxiii
1 Introduction 1
Part I Financialization and European ‘Integration’:

Theoretical Considerations
2 The Sinews of Capital and the Disintegrative Logics
of Euro-Atlanticism 11
2.1 Preliminary remarks 12
2.2 ‘Real’ capital, ‘fictitious’ capital and uneven
(and combined) development 20
2.3 Global fault-lines and the imperial
geo-politics of debt 34
2.4 Capitalism, populism and the state 45
2.5 Final touches 49
Part II Greece’s Fault-lines and the Political

Economy of Debt
3 The Vassal and the Lords 59
3.1 The beginnings and the ‘birthmarks’ 60
3.2 Exit the 19th century/kampfplatz-1 and default 64
3.3 Enter the 20th century/kampfplatz-2 and default 67
3.4 A tentative conclusion 78
4 Passive Revolution and the ‘American Factor’, 1940s–70s 81

4.1 The geo-political foundations of post-war growth 83
vii
viii Contents
4.2 Miracles and mirages: the ‘golden age’

of the drachma 88
4.3 Kampfplatz-3: lines of stress and fault-lines 97
4.4 Summing up 106
5 Kampfplatz-4 and the ‘European Factor’, 1974–89 109

5.1 The peculiarity of Greece: a bird’s-eye glimpse 111
5.2 The Right against the Right 115
5.3 Crisis of crisis management in the 1980s 121
5.4 Concluding remarks 131
6 Debt and Destruction: The Making of the Greek and

Euro-Atlantic Ruling Classes 134
6.1 Greece, the Euro-Atlantic world and
the power-shift to the ‘global East’ 135
6.2 The Greek workshop of debt and the profile
of the new bourgeoisie 139
6.3 The disintegration of the middle classes 168
7 By Way of a Conclusion: Greece’s Debt Crisis Today and

Some Normative Reflections 186
7.1 Seisachtheia in Greece, Europe and the world 187
Notes 192
Bibliography 226
Primary Sources 226
Think-Tank Reports 227
Secondary Sources 227
Index 237
Tables
3.1 Foreign loans and bankruptcies of the modern Greek state

(1824–32) 62
3.2 Balance of trade, 1920–30 (million drachmas, 1985 prices) 76
4.1 Evolution of the balance between exports and imports of
Greece, 1930–2008 90
4.2 Sectoral composition of GDP and rate of growth of GDP
at 1958 constant prices up to 1960, and from 1960 to
1974 at 1970 constant prices (million drachmas) 94
4.3 Percentage increase, GDP and manufacturing in selected
European countries (1950–70) and Japan (1960–70) 95
5.1 Sectoral structure of GDP at factor costs as percentage of
total 117
5.2 Hours lost in strikes (in thousands) for 1976, 1978 and
1980 117
5.3 Balance of payments deficit and invisible receipts
(1960–80) in millions USD; current prices 120
5.4 Some key economic indicators, 1974–89 122
5.5 Defence spending in selected countries in 1988 as
percentage of GDP 122
5.6 Evolution of GDP, expenditures of the ordinary budget,
expenditures for health, welfare and social insurance and
public debt in million drachmas in current prices,
1977–91 124
5.7 State aid to manufacturing (selected countries) 125
5.8 Inflation and money supply in Europe in the 1980s 126
5.9 Gross public debt in EEC countries (in % GDP) 127
5.10 General government net lending (+) or borrowing (–) (in
% GDP) 127
5.11 EEC/EC transfers during PASOK’s second term, 1987–89
(% change from previous year) 128
6.1 Evolution of public debt in selected countries as
percentage of GDP and per person, in nominal USD
(2002, 2007 and 2012) 136
6.2 National Elections in Greece, 1974–2012 140
6.3 Athens Stock Exchange share price indices, 1980–2002 152
ix
x List of Tables
6.4 Profitability of Greek banks as a percentage of their assets,

1988–2003 153
6.5 Profitability of Greek banks as a percentage of their assets,
2004–10 153
6.6 Mergers and acquisitions in the Greek banking sector,
1997–2010 154
6.7 International activities of Greek banks in 2010 156
6.8 Impact of the EU structural funds on Cohesion (PIGS)
Countries, 1986–2006 160
6.9 EU cohesion funds committed to PIGS, 2000–09 (in 1999
prices) 160
6.10 Evolution of the Greek public debt and its relation to
GDP in USD, 2000–2012 162
6.11 Annual loans of the Greek State, state receipts, receipts
from EC/EU and expenditures, 1998–2008 163
6.12 Annual change of exports over imports, the share prices
in Athens stock exchange and GDP in market prices,
1994–2010 164
6.13 Annual expenses of the Greek state in million euros,
1995–2011 179
6.14 Population +15th years and employment in Greece in
thousands,1998–2010 180
6.15 Employees according to their occupational status in
thousands, 1998–2010 181
Figures
6.1 Percentage of employment in agriculture, hunting and

forestry. Ireland, Greece, Spain, Italy and Portugal,
1999–2010 169
6.2 Percentage of employees in total employment. Ireland,
Greece, Spain, Italy and Portugal, 1999–2010 170
6.3 Percentage of self-employed persons without employees
(own-account workers). Ireland, Greece, Spain, Italy and
Portugal, 1999–2010 171
6.4 Percentage of contributing family workers in total
employment. Ireland, Greece, Spain, Italy and Portugal,
1999–2010 172
6.5 Percentage of self-employed persons with employees
(employers). Ireland, Greece, Spain, Italy and Portugal,
1999–2010 173
6.6 Occupational structure of Italy, 1999–2010 174
6.7 Occupational structure of Greece, 1999–2010 175
6.8 Occupational structure of Spain, 1999–2010 176
6.9 Occupational structure of Ireland, 1999–2010 177
6.10 Occupational structure of Portugal, 1999–2010 178
xi
Foreword
As I write this foreword, Greece has not defaulted. Not yet. Pundits
everywhere declared the default inevitable, or perhaps, on reflection,
somewhat evitable and, anyway, some added, it won’t be the end of
the world. On 8 March 2012 Robert Peston (BBC News) announced, ‘we
should perhaps be hoping that Greece defaults tomorrow’. And then
he went on to suggest that, in a way, Greece had already defaulted.
Jeffrey Rubin, former chief economist of CIBC World Markets, warned
(Huffington Post, 16 May 2012) that it might be the end of the world or,
at least, of the world as we know it:
‘Greek default would send shock waves through Europe’s banking sys-
tem. Massive write-downs by banks are sure to be followed by even
larger taxpayer-funded bailouts. Similar to the response to the sub-
prime crisis, governments will argue that some institutions are simply
too big to let fail. But the cost of bailouts won’t be limited to Europe.
A Greek default would start in Athens, but it wouldn’t be long before
it’s felt in Paris, Berlin, New York and Toronto. In today’s inter-
twined financial markets, everyone has exposure to everyone else’s
problems.’1
If this collective anguish shows anything it is that the world is truly

interconnected. It has often been remarked that Greece’s GDP is only
2 per cent of that of the EU and that its population of only 11 million
inhabitants is a fraction (also 2 per cent) of the EU’s 503 million. But
that is not small. Two per cent of the population makes Greece larger in
the EU than, in proportionate terms, Birmingham is in the UK, Naples is
in Italy or Lyons is in France. And it is pretty obvious that there would
be serious problems for the UK, Italy and France if cities of such size
‘defaulted’.
Interconnectedness gives Greece considerable power: if the country
did not matter, it would have been allowed to sink without trace long
ago. We know this because, as this remarkable book reminds us, Greece
has already defaulted many times since 1826. Such events caused barely
a ripple in the economic vicissitudes of Europe in the 19th and 20th
centuries. As the authors show, dealing with Greece meant dealing with
a state whose finances have always been in trouble.
xii
Foreword xiii
Historically speaking, defaults are not that unusual: a number of

Latin American countries have often stopped paying their debts. Two
economists at George Washington University, Graciela Kaminsky and
Pablo Vega-García, have pointed out that, between 1820 and 1931, there
have been 67 sovereign debt defaults in Latin America from the richest
country (Argentina) to the poorest (Bolivia).2 And the world did not end.
Today we are not so sure.
To understand the basis of the frenetic speculation and anxieties of the
last few years of which Greece has been at the centre, it is necessary to
step back, take a deep breath and look at the wider context, historically
and globally. This is what this book seeks to do and it does so admirably.
‘It’s the economy, stupid’, Bill Clinton declared famously. One should
add, ‘it’s never just the economy’. Fouskas and Dimoulas adopt a wider
perspective: the economy, yes, of course, but also geography and his-
tory and politics. Greek weaknesses and peculiarities are examined: its
nature as a laggard as far back as the 19th century; its foreign policy
subservience first to the European Great Powers (who after all ‘invented’
modern Greece and gave the country a Bavarian king in 1832) and then,
in the post-war era, to the USA; the presence of an exceptionally strong
diaspora of Greeks throughout the Mediterranean but also in the USA,
Great Britain, Argentina and the Balkans (when Greece was created, four
out of the top ‘Greek’ cities were outside Greece); the impact of an issue,
Cyprus, which has no parallel in the rest of Europe and which caused the
downfall of the regime of the colonels in 1974; the presence in the 1950s
and 1960s of a strong Left (mainly Communist), yet unable to achieve
its legitimate political place because of overt political repression. Greece
was not a Keynesian state in the 1950s and the 1960s when Keynesian
policies prevailed in much of Western Europe. It became one in the
1980s when Keynesian thinking had fallen from its pedestal: through-
out the 1980s Greece privileged the fight against unemployment over
and above controlling inflation, unlike everyone else. This policy was
perhaps unavoidable as it enabled the new socialist party, PASOK, to
establish the kind of political strength that social democrats had else-
where but not in Greece. These policies, which are a proximate cause
of the present crisis, cannot be understood if one does not understand
the particular anxiety of Greek bourgeois elites and of the intelligentsia
to catch up with what they regarded as the core countries (Britain and
France in the 19th century to which was added Germany in the second
half of the 20th century).
And the Greek crisis is not just about Greece. As the authors rightly
argue, the country’s political and economic history must be seen in
xiv Foreword
a comparative perspective. Being anxious about catching up with the

‘advanced’ countries, far from being a Greek peculiarity, is the condi-
tion of laggards everywhere: from Russia to 19th-century Japan, from
Latin America to other Mediterranean countries such as Italy and Spain.
The fate of laggards in history is somewhat curious. They are supposed
to catch up yet they cannot exactly replicate the action of the path-
breakers, for these operate in an environment in which, by definition,
there are fewer competitors. If you are on top and no one challenges you,
there is no need to try to change anything: there is a rationale behind
the conservatism of old elites. But the elites in laggard countries have
to be dynamic because they feel constantly threatened by outsiders who
may overtake them as well as by other classes and social groups (workers
and peasants) who fear that they will be sacrificed in the race towards
modernity. It is one thing to initiate change, it is another to have change
thrust upon you. The socio-economic pull of the West was such that,
outside the magic circle of the ‘advanced’ world, the elites in peripheral
countries such as Greece had to try to lead industrial and political rev-
olutions. The external world impinges far more on the laggard than on
the pioneers.
But ‘laggard’ is a rough category, as is the more recent one of ‘under-
developed’. Countries which have little in common are lumped together
because the one thing they certainly have in common is that of not
being in the top group. Greece was certainly a laggard country, but so
was Paraguay. The similarity ends here. As countries ‘caught up’, new
and more complex differentiations emerged. In the end, the industri-
alization of so-called laggard countries required not only favourable
circumstances and resources but also the development of a political will.
We should also bear in mind that when we talk of industrially lag-
gard countries we use the state as a unit of analysis. But within the
territory of each state, one often finds advanced sectors coexisting with
backward ones. If we ignored national boundaries, and hence poli-
tics, the outposts of the industrial world in mid-19th century Europe
would include the British Midlands, the Glasgow area, parts of German-
speaking Switzerland, francophone Belgium, Alsace and Lyon in France,
the Ruhr in Germany, Moravia (then in Austria-Hungary) and Lombardy
in Italy. Thus France as a whole was certainly industrially ‘backward’
compared to Britain and Germany but Alsace, at least in the decades
following the Napoleonic wars, outperformed the British average. Sim-
ilarly, present-day Greece exhibits significant internal differentiations.
Its richest region, Attica (the region dominated by Athens) is richer, in
terms of GDP per capita, than Berlin or Manchester or, indeed, the whole
Foreword xv
of Poland, the whole of Hungary and the whole of Southern Italy (2009
Eurostat figures).3
This is the wider historical setting within which Fouskas and
Dimoulas develop their ‘Marxisant’ approach, as they call it. This, mer-
cifully, is not some dogmatic attempt to rewrite the crisis as if it were an
updated chapter of Das Kapital, but a far more unified approach which
starts from an examination of the financialization of the global econ-
omy, a phenomenon which barely existed in Marx’s days, and then
moves into the realm of politics and, in particular, to the unfinished
construction of Europe. This is at the centre of the analysis as the EU
is a peculiar hybrid constantly torn between integration and disintegra-
tion. The euro countries possess some of the features of a state because
they have a currency in common, but there is no strong central author-
ity with the necessary powers to supervise the currency or to impose the
required fiscal discipline. The authors argue that today the disintegrative
tendencies in the EU are stronger than the integrative ones. These ten-
dencies are exacerbated by a recent factor, the global downturn and a
long-term tendency: the global shift to the East.
In theory the collapse of Communism should have reduced the geo-
political importance of Greece. But the disintegration of Yugoslavia
created a new regional role for Greece: no longer the NATO outpost it
was during the Cold War but a launching pad for the financialization
and stabilization of the Balkans in the difficult 1990s. This, the book
explains, led to Greece embracing neo-liberal economic reforms under
the direction of the Left (i.e., the PASOK of Prime Minister Costas
Simitis, Andreas Papandreou’s successor). This is what led to the further
interconnection of Greece with ‘Europe’, that is Germany and France
and their banks. The famed high military spending for which Greece
stands justly accused (the highest in Europe as a proportion of GNP)
is not due merely to the militaristic nature of Greek society, or to the
obsession with the Turkish threat, or the desire to use military spending
to keep unemployment down; in the main, the authors argue, it was
due to the role assigned to Greece in the Cold War: the militarization of
Europe’s ‘soft underbelly’. Dependency was always a feature of Greece,
which freed itself from Turkish rule in the 19th century not through a
kind of Italian-style Risorgimento but through the direct intervention
of the great powers. This, after all, was a country always dependent on
others: it had no significant raw materials and was always compelled
to import technology and know-how. How to finance this? Had the
country developed a thriving economy, it would have been able to raise
xvi Foreword
finance through taxation. As it is, major projects such as railway con-

struction and the building of the Corinth canal had to be undertaken
through foreign borrowing (including borrowing from Greeks living
abroad) and foreign investment.
Once the rule of the colonels collapsed (1974) and after a short con-
servative interregnum, all the new PASOK government could do was to
build a kind of welfare state by borrowing heavily, against the trend
of neo-liberalism. The alternative would not have been to follow the
neo-liberal trend, for this would have destabilized the new democratic
regime. The alternative would have been to construct a welfare state
concurrently with a restructuring of the economy. The failure of PASOK,
argue Fouskas and Dimoulas, was not due to welfare spending but
because of the wrong kind of economic policy.
The ‘fault-line’ analysis deployed in this book goes beyond the nation-
alist horizon still too often prevailing in these kinds of studies and far
surpasses the rather narrow journalistic accounts which see the causes
of the Greek predicament to be solely due to Greece and the Greeks.
In the era of globalization, political and historical analysis needs to be
globalized too. And this is what Fouskas and Dimoulas have achieved
with remarkable skill and dazzling scholarship.
Donald Sassoon
Professor of Comparative European History
University of London
Acknowledgements
We acknowledge a very special debt of gratitude to Constantine

Tsoukalas, to whom we warmly dedicate our book.
We are grateful to Donald Sassoon and Leo Panitch who read a first
draft of our argument in 2011, offering valuable advice and comments.
Then Donald, brushing aside his busy schedule, kindly agreed to write
the Foreword. We are also indebted to Savas Robolis for his constant
advice and encouragement in completing this research. Martin Wolf has
discussed with us the Greek/eurozone crisis and spent half a day with
our students giving a lecture on ‘Will the Euro-zone Survive the Crisis?’
His answer was, 50:50. This is still the case.
From the early 1990s until his untimely death in June 2009, Peter
Gowan had been a constant discussant, especially on the notion of
‘hub-and-spoke’ imperialism: we are still influenced by his original and
thought-provoking insights. We are also very thankful to Gilbert Achcar
for many stimulating and engaging conversations on the concept of
‘global fault-lines’ and for the interest he has shown in our work on the
Greek debt crisis. Constantine Dimoulas is very thankful to Catherine
Michalopoulou for helping him see complex sociological meanings
behind the numbers, and Athena Trelli for her immense support, despite
her everyday duties and commitments.
The theoretical argument we put forth in Chapter 2 has benefitted
from comments by Joseph Choonara, Maria Markantonatou, Darrell
Whitman, Yiannis Tolios and Irena Ateljevic. Once again, we thank
Bülent Gökay, the pioneer of the concept of global fault-lines, as well as
the editorial team of the Journal of Balkan and Near Eastern Studies. We are
very thankful to Gül Tokay and Ayla Göl for a wonderful and illuminat-
ing conversation on the concept of geo-culture over a nice pub meal in
London in January 2013. Vassilis K. Fouskas will always be indebted to
the Stanley J. Seeger Center in Hellenic Studies at Princeton University,
for giving him the opportunity to use the facilities of the Center and the
Firestone Library of the university on two occasions, in 2005 and 2011.
Some of the material incorporated in this book has been researched,
presented and discussed in the Center’s unique intellectual and friendly
environment.
xvii
xviii Acknowledgements
We thank Jairo Lugo for many enlightening conversations on the

Latin American debt crisis and Wolfgang Deckers for giving us so many
insights on Germany.
We thank Nikos Kotzias, John Milios, John Kitromilides, Elias
Ioakeimoglou and Costas Lapavitsas for many discussions on the global
financial crisis in general, and the Greek debt crisis in particular,
although none of them may be entirely satisfied with the outcome
they see here. Sabine Spangenberg sent us comments on sections of
Chapter 6: we are very thankful to her. Paul Hoffman, our MA student,
had volunteered to put the bibliography together: we are very grateful
to him.
Tim Shaw is an excellent Palgrave-Macmillan series editor, and
Christina Brian and Amanda McGrath have put up with all our tedious
requests. They have also put up with us missing so many deadlines for
the delivery of the manuscript. We are indebted to them.
Parts of the text and tables that appear in Chapter 6 have been pub-
lished in our joint article, ‘The Greek workshop of debt and the failure
of the European project’, Journal of Balkan and Near Eastern Studies, v. 14,
n. 1, March 2012. We thank Taylor & Francis for giving us permission
to reproduce some of its copyright material here. We would also like to
thank Richmond University, the American International University in
London, for a grant it gave to Vassilis K. Fouskas to visit Paris in 2012
for fieldwork on this project.
Last but not least, we would like to thank Tolis Malakos, one of
the finest brains of our generation, for so many stimulating conver-
sations on Greek and European politics. We also thank Alex Kazamias
for drawing our attention to Nikos Beloyiannis’ book on Greece’s debt
problem; Stan Draenos for many interesting discussions on the role of
Andreas G. Papandreou in the 1960s; and Takis Tsakonas for ‘not let-
ting us get it wrong’ on Greece’s policy of rapprochement with Turkey.
Maritsa V. Poros has been more than kind by offering to read the entire
manuscript. She has made very valuable comments and suggestions, for
which we both thank her.
Timeline of main events in Greece
and Europe (October 2009–March
2013)
5 October 2009 PASOK wins election after more than five years
of ND rule
February 2010 PASOK reveals that official statistics concerning
Greek debt and growth data have been
manipulated
May 2010 Troika and EFSF are established. They agree to a
bailout package of 110 billion Euros for Greece;
first austerity measures implemented. EFSF
firepower at 440 billion euros.
28 November 2010 85 billion euros for Ireland agreed
February 2011 IMF country report on Greece; Finance Minister
almost instantly produces ‘Greece: Medium
Term Fiscal Strategy 2012–2015’
3 May 2011 78 billion euros for Portugal agreed
10 June 2011 On admission by the EU that Greece needs a
second package, Germany asks for private
sector involvement (PSI)
29 June 2011 PASOK government wins parliament vote for
austerity by 155 to 138. One PASOK MP who
voted against the bill expelled from the party
21 July 2011 EFSF lending ability boosted further in order,
presumably, to enable banks to absorb costs
from Greek default. Troika agrees to second
bailout for Greece worth 109 billion euros,
offering a ‘haircut’ of 21 per cent
8 August 2011 ECB intervenes to steady Italian and Spanish
bonds
xix
xx Timeline of main events in Greece and Europe
September–October Untold austerity measures by PASOK (public

2011 sector lay-offs, complete welfare state
retrenchment; further wage and pension cuts;
VAT increase to 23 per cent; property taxation
and emergency taxation inserted into electricity
bill; abolition of minimum wage; total sell-off
of state assets). Official unemployment at
19 per cent and GDP contraction at 6.5 per cent
21 October 2011 Report by international lenders indicates that
Greece is insolvent and a ‘haircut’ of up to
60 per cent is needed in order to make debt and
the second bailout sustainable via further
austerity measures. Cypriot banks, especially
Laiki Bank and the Bank of Cyprus, are affected
27 October 2011 European leaders agree to another bailout for
Greece worth 130 billion euros and to a
‘voluntary’ agreement with private lenders for a
50 per cent ‘haircut’ in exchange for safer debt
through further austerity measures for Greece;
Greek banks under enormous pressure
31 October 2011 George Papandreou announces that the new
deal should be tested in a national referendum,
causing shockwaves in Greece and across the
eurozone; two days later, after meeting Sarkozy
and Merkel, he drops the referendum amid
accusations of subservience
November 2011 PNB Paribas, the French bank most exposed to
eurozone and Greek debt, writes down 60 per
cent of the value of its Greek holdings;
Papandreou resigns; formation of government
of national unity under Lucas Papademos,
former ECB vice president and former governor
of the Bank of Greece under Costas Simitis’
cabinet in the late 1990s
November PASOK, New Democracy and LAOS, an
2011–February anti-migrant right-wing party, back Papademos’
2012 technocratic government; Greek political scene
in complete disarray; elections scheduled to be
held on 19 February eventually postponed as
Timeline of main events in Greece and Europe xxi
PASOK and ND needed time to discuss

post-election coalition deals and pass a new
electoral law in their favour in order to survive
the debacle
February–March PSI involvement attempts to re-structure Greek
2012 debt via a mammoth 206 billion euros bond
swap. The new bonds issued will now be
subject to English law, which means that
Greece remains locked in paying its debt in
euros even if it decided to default and exit the
eurozone adopting a new drachma
6 May 2012 Elections in France and Greece bring victories
to the socialist Left (France) and the coalition
of radical left forces in Greece, Syriza; but
no government is formed, with elections
rescheduled for 17 June.
May–June 2012 Bankia, Spain’s banking conglomerate, in
need of liquidity. Conflict between the
Spanish government and ECB on whether
EFSF funds can be used to support Bankia’s
nationalization. Germany insinuates plan for
a Europe-wide Redemption Fund, which
involves Germany’s exploitation of eurozone’s
gold reserves in return for debt-sharing via
issuing of euro-bonds – a form of transfer
union constitutionally guaranteed by all
member-states
10 June 2012 Mariano Rajoy, Spain’s right-wing embattled
PM, receives 100 billion euros bailout from
EFSF/ESM. He boasts that the deal he
negotiated is better in that it does not involve
rigorous quarterly inspections and humiliating
memoranda, as was the case with Greece,
Portugal and Ireland.
17 June 2012 Syriza receives 26.89 per cent of the vote, less
than three percentage points behind New
Democracy (29.66 per cent). A tripartite
government is formed with ND, PASOK and
DIMAR, a moderate left party
xxii Timeline of main events in Greece and Europe
November 2012 Greece’s ‘domestic troika’ (ND, PASOK, DIMAR)

signs up for a third austerity memorandum with
the troika so that funds up to 44 billion euros can
be released. The aim of austerity measures is for
Greece to achieve primary budget surplus by 2016
so that it can amortize by 2020, bringing the total
debt down to 124 per cent of GDP. Social struggle
intensifies and opinion polls bring Syriza to the
first position, although neo-Nazi Golden Dawn is
also on the rise. The last quarter of the year shows
Greece having a contraction of 7.2 per cent and
official unemployment over 26 per cent (youth
unemployment above 56 per cent)
November– Greek political scene is dominated by the case of
December the so-called Lagarde list. In 2010, before she
2012 became head of the IMF, Christine Lagarde,
then French finance minister, gave her Greek
counterpart a list with 2059 names of wealthy
Greek individuals for investigation of possible tax
evasion. Shipowners, industrialists, bankers,
artists and even politicians and their relatives were
on the list and an estimated 13 billion euros had
moved through the accounts on the list between
1998 and 2007. The destination was Swiss banks,
especially a branch of HSBC in Geneva. Both
PASOK and ND governments had systematically
tried to cover this up until Fall 2012, when
journalist Costas Vaxevanis published the list.
Typically, Vaxevanis was sued for allegedly
violating the country’s data protection laws.
March 2013 Crisis in the Greek Cypriot banking sector induces
the ‘troika’, for the first time, to impose a ‘haircut’
on bank deposits over 100 thousand euros and
liquidate Laiki Bank. Bank of Cyprus survives.
Geo-political competition re-opens in the Eastern
Mediterranean between Turkey, Germany, Israel,
USA, Britain and Russia
Sources: The authors’ diary and The Economist, ‘Is anyone in charge?’,
1 October 2011.
Abbreviations
ABS Asset-Backed Securities

ASE Athens Stock Exchange
ASEAN Association of South East Asian Nations
BP British Petroleum
BSEC Black Sea Economic Cooperation
CDO Collateralized Debt Obligations
CDS Credit Default Swaps
CIA Central Intelligence Agency (USA)
DEI ημóσια Eπιχείρηση Hλεκτρισμoύ (Public Electricity
Corporation)
DIMAR ημoκρατική Aριστερά (Democratic Left, Greece)
DO Division of Offsets (Greek Ministry of Defence)
ECA Economic Cooperation Administration
ECB European Central Bank
ECOFIN Economic and Financial Affairs Council (Council of the
European Union)
ECU European Currency Unit
EDA Eνωμένη ημoκρατική Aριστερά (United Democratic Left)
EEC/EC/EU European Economic Community/European
Community/European Union
EEZ Exclusive Economic Zone
EFSF European Financial Stability Facility
ELSTAT Hellenic Statistical Services
EMU European Monetary Union
EOKA Eθνική Oργάνωση Kυπρίων Aγωνιστών (National
Organisation of Cypriot Fighters)
ERD Economic Research Department
ERE Eθνική Pιζoσπαστική Éνωση (National Radical Union)
ERM Exchange Rates Mechanism
ESM European Stability Mechanism
ESY Eθνικó ύστημα Yγείας (National Health System, Greece)
ETVA Eλληνική Tράπεζα Bιoμηχανικής Aναπτύξης (Hellenic
Industrial Development Bank)
EUROSTAT European Statistics (Directorate-General of the
European Commission)
xxiii
xxiv List of Abbreviations
FDI Foreign Direct Investment

FIR Flight Information Region
FYROM Former Yugoslav Republic of Macedonia
GAD General Armaments Directorate (Greek Ministry of
Defence)
GDP Gross Domestic Product
GM Genetically Modified (food)
GNP Gross National Product
GSEE ενική υνoμoσπoνδία Eργατών Eλλάδας (General
Confederation of Greek Workers)
ICEC International Commission of Economic Control
IDEA Iερóς εσμóς Eλλήνων Aξιωματικών (Sacred Bond of
Greek Officers)
IMF International Monetary Fund
INE-GSEE Iνστιτoύτo Eργασίας -ενικής υνoμoσπoνδίας Eργατών
Eλλάδας (Labour Institute-General Confederation of
Greek Workers)
IFC International Financial Commission
IPE International Political Economy
IR International Relations
KKE Koμμoυνιστικó Kóμμα Eλλάδας (Greek Communist
Party)
KKEes Koμμoυνιστικó Kóμμα Eλλάδας Eσωτερικoύ (Greek
Communist Party Interior)
KYP Kρατική Yπηρεσία ληρoϕoριών (State Information
Service, Greece)
LAOS αϊκóς Oρθóδoξoς υναγερμóς (Popular Orthodox
Rally)
LNFC League of Nations Financial Committee
MSA Mutual Security Agency
NATO North Atlantic Treaty Organization
ND Nέα ημoκρατία (New Democracy)
NHS National Health System
OAED Oργανισμóς Aπασχoλήσεως Eργατικoύ υναμικoύ
(Manpower Employment Organisation)
OASA Oργανισμóς Aστικών υγκoινωνιών Aθηνών (Civil
Transportation Organisation of Athens)
OECD Organisation of Economic Cooperation and
Development
List of Abbreviations xxv
PASOK ανελλήνιo oσιαλιστικó Kίνημα (Pan-Hellenic Socialist

Movement)
PCI Partito Comunista Italiano (Italian Communist Party)
PESEDE ανελλήνια Éνωση ημoσίων Éργων (Pan-Hellenic
Union of Public Works)
PKK Kurdistan Worker’s Party
PI(I)GS Portugal, Ireland (Italy), Greece, Spain
PSI Private Sector Involvement
REE Rare Earth Elements
RSC Refugee Settlement Commission
SIPRI Stockholm International Peace Institute
SPD Sozialdemokratische Partei Deutschlands (German Social
Democratic Party)
Syriza-USF υνασπισμóς Pιζoσπαστικής Aριστεράς (Coalition of the
Radical Left - United Social Front, Greece)
‘Troika’ The EU-IMF-ECB policy group formed in 2010 to
supervise the debt crisis in the periphery states of the EU
UK United Kingdom
UN United Nations
US/USA United States/United States of America
USSR Union of Soviet Socialist Republics
VAT Value Added Tax
WTO World Trade Organization
1
Introduction
What are the causes of the Greek debt crisis and what steps should be
taken in order to get out of it? Who is to blame for the destruction of
Greek society after three rounds of harsh austerity since 2010? How real
are the disintegrative tendencies in the European Union (EU) and how
can they be repaired, if at all? After some preliminary investigation and
review of the existing literature, we found out, to our chagrin, that these
questions are very hard to answer. It did not take us long to identify
three generic problems in the literature on the Greek/eurozone crisis.
The first is that most economic analyses dealing with the issue are
technical, lacking either historical depth and/or any theorization of the
issue from the point of view of social sciences. Whether Marxisant or
neo-liberal, they tend to draw inferences from quantitative data alone,
claiming ‘objectivity’ and brushing completely aside social agency and
political science. In the event, they brush aside the fact that dealing with
Greece means dealing with a state that has effectively been bankrupt
almost without interruption since its foundation in 1830.
The second problem in the literature is rather of a reverse nature:
splendid accounts on Greece’s debt problem have delved so much into
monetary history that they have lost sight of the contemporary speci-
ficity of the present phase of financialization that began in the 1970s
with the breakdown of the Bretton Woods regime and the problems fac-
ing the EU before and after the introduction of the European Monetary
Union (EMU). The abandonment of Bretton Woods on the part of the
USA ushered in a new era of credit (= debt) creation and speculation,
as the dollar was free from its ‘gold fetter’ to float in currency markets –
the era of the dollar standard.
The third problem we had to come to terms with is rather a ‘para-
dox’: no scholarly analysis of the Greek/eurozone crisis placed the issue
1
2 Introduction
in wider geo-political, geo-cultural and security contexts, as if political

economies and people function entirely in de-territorialized environ-
ments, or as if defence spending is not a factor augmenting public debt.
How could this aspect be missing, we thought, at the moment when the
security and geo-political dependence of the Greek state itself dates back
to its very act of foundation in 1830?
Having said this, we have tried to put together an ‘integrated’ argu-
ment comprising all the disparate elements we found problematic and
dealing with the ‘paradox’. We make a theoretical claim stemming from
heterodox discourses on financialization and crises, and come to detect
deep disintegrative tendencies within the European project. We then
move on to examine Greece’s political economy and international rela-
tions in historical and comparative perspectives from the 1820s to 1974,
the year of the collapse of military rule. Finally we provide in-depth
analysis of the post-1974 period, focussing especially on the making
of the current crisis from the mid-1990s onwards, when we identify
Greece’s transition to financialization under the ‘modernizing’ cabinets
of Costas Simitis. We pay particular attention to the agencies that are
mainly responsible for generating the crisis, and we answer the ‘para-
dox’ by adopting a ‘global fault-lines’ perspective. This has meant to
us that geographies, cultures, politics and security, national, regional
and global, have had to be factored into the analytical calculus of our
research agenda not only as dependent appendages of an ‘economic
instance’, however defined, that determines ‘in the last analysis the
other spheres of the social whole’, but also as co-constitutive parts of
that instance. Thus, we had to come to grips with broader international
issues, such as the global financial crisis that hit the Euro-Atlantic heart-
land in 2007, the impact of the collapse of the Soviet Union and the
current regeneration of Russia, the issue of a pronounced power-shift
to the ‘global East’ (China, India, Russia, Brazil, etc.) and the slow and
protracted decline of the USA and so on. As material production and
real value creation are being shifted to Asia and the ‘global East/South’,
those regions and countries tend also to be in possession of financial
surpluses, the debtor being the Euro-Atlantic heartland, not to men-
tion Japan. But Germany is a very peculiar case: it has retained its
industrial power and real value production and, taking advantage of its
stagnant wages, is a major exporter in the EU with large financial sur-
pluses that are recycled across the European periphery contributing to
its debt woes. In brief, this is a ‘global fault-lines’ picture, and without
even bringing into it security and military dimensions, a field in which
the USA still reigns supreme despite its pronounced erosion of economic
Introduction 3
power. Thus, we see the Greek state as an amalgamation of many class

concentrations and forces that pull it into a number of directions stem-
ming from within and outside the state. This research perspective, we
must add, is a globalist, anti-nationalist perspective.
We contend, therefore, that approaches to the Greek/eurozone debt
and banking crises that fail to contextualize these elements in an inte-
grated research agenda are bound to be analytically deficient and, from a
normative perspective, misleading, if not deeply misleading.1 We make
a case that the disintegrative tendencies within the EU today are far
stronger than the integrative ones, and we arrive at this conclusion
without even factoring in tendencies of ethnic succession (the list is
long enough – Scotland, Catalonia, Belgium, etc.). All in all, our simple
message here is that the causes of the Greek debt crisis are many and
complex, come from many quarters and they cannot be reduced just to
the role of the EMU, or the deficiencies of the European Treaties, or the
current account deficit, or the fiscal malaise of the Greek state.
A ‘global fault-lines point of view’ presupposes analysis of the field of
real politics, which is a field of division/conflict, a kampfplatz or, as Carl
Schmidt would put it, a ‘terrain of enemies and friends’, usually con-
centrated into two camps or poles/parties. As politics condenses class
and social interests, which are refracted through bureaucratic agencies
and institutions such as political parties, kampfplatz plays an important
role in disallowing class positions to project their immediate interests
within the heart of state power. This is the deepest meaning of Lenin’s
comment: ‘The bourgeoisie’, the Russian politician wrote, ‘may recog-
nise class struggles within the state apparatuses, but never in the core
of its state power’.2 In its stead, a ‘friend-enemy’ binary is created, a
‘phenomenology of the political’, which distorts the class antagonism
that stems from social class positions, rendering the kampfplatz of liberal
representative rule as the only possible rule. This is the case of Greece
from the second part of the 19th century to date – the exception of
course being the periods of straightforward dictatorial rule – and this
is the case almost everywhere in the Euro-Atlantic world and beyond.
Norberto Bobbio, one of the most important liberal-socialist philoso-
phers of the 20th century, in discussing Italy’s political system from the
national unification of his country to the late 1970s, wrote:
At the dawn of our parliamentary system, Cesare Balbo, the first

President in our parliamentary history, after having remarked that
‘the parties in all nations were always two’, and that the virtue of
representative governments was how to take the people out of the
4 Introduction
public squares and bring them to parliamentary rooms, he went on

to press that the very duty of governments was to reduce the par-
ties in the smaller possible number, if possible, to two parties, one in
government and one in opposition.3
But an important qualification needs to be made here. In periods of

acute economic and political crisis, like the current period, even the
liberal phenomenology of the kampfplatz disappears. Class power and
coercion become so concentrated in the state executive that every pre-
tension of liberal democracy and ‘binary’ antagonism withers away.
In the case of Greece and the European periphery today, because of
their dependency on the Euro-Atlantic core, this executive type of
Bonapartism is almost entirely imposed from outside.
We can now move on to lay out the presentation order of our research.
Readers should note that the book has been designed for many audi-
ences and those who are interested in delving into Greece’s history
from a globalist/European perspective are advised to skip the theoretical
essays with which we open our discussion (Chapter 2). As each chapter is
self-sufficient, those who are interested in understanding our argument
about the current crisis can go directly to Chapter 6.
We open the discussion with a broad theoretical chapter putting for-
ward a crisis theory of financialization and imperial geo-politics drawn
from Marx’s theory of value and making extensive and critical use
of the works of David Harvey, Robert Brenner and Giovanni Arrighi.
We maintain that a solid theory of money rests on the principle of bal-
ance between the real values produced and exchanged within a given
national economy and the amount of money in circulation within the
same economy. If there is no broad correspondence between these two
social relations (commodities and money), then a number of patholo-
gies appear, such as inflation, debt problems and so on. We also argue
that the current crisis process exposes the weakness of the USA to con-
tain Europe’s economic woes, while elevating Germany as a powerful,
monetarist imperial power within the EU. In this context, we decipher
a power-shift to other centres and caucuses of capital accumulation,
mainly in Asia, arguing that a better understanding of the current Greek
and European crisis can be reached by adopting a ‘global fault-lines’
perspective. This chapter establishes that, at the present phase of cri-
sis in Europe which opened up in 2009–10, the centrifugal tendencies
pointing to disintegration are far stronger than the centripetal ones.
Chapter 3 captures Greece’s political economy and geo-politics from
the year of its foundation as a modern state in 1830 to the outbreak of
Introduction 5
World War II in 1939–40. It becomes evident that Greece was born as

a dependent and subaltern social formation, with a very limited indus-
trial base but with a very valuable geo-political position in the mouth
of the Dardanelles and, later, the Suez Canal connecting Britain’s Indian
possessions with the Mediterranean and Middle Eastern oil. But because
of its dependency on the ‘foreign/imperial factor’ and weak industrial
base, the Greek ruling classes never managed to capitalize on the geo-
political importance of the country.4 In this context, this chapter also
captures the evolution of the Greek debt problem from one histori-
cal period to another, a problem that never goes away and is directly
related to two endemic issues: a permanent balance of payments prob-
lem and a domestic fiscal malaise, both of which are the result of a weak
industrial base, unable to produce capital goods and thus compete inter-
nationally, generating a pattern of sustainable economic development
and inter-dependence. Throughout the period in question, the sources
of the Greek debt and its dependence on the European core are both
external and internal. This chapter also examines in detail the political
and economic consequences of the defeat of Greece in Asia Minor in
1922, the only time in its modern history in which Greece behaved, at
Britain’s instigation, as a kind of imperial power. This chapter also looks
at the impact of the financial crisis of 1929 on Greece and the default
of 1932. Our discussion on the causes of Greece’s dependency and debt
generation over the decades takes place in tandem with the political
alignments and power coalitions that mark developments in the polit-
ical system (kampfplatz). We use the term ‘diaspora Greeks’ to describe
ethnic Greeks living in Ottoman territories from 1830 to 1922. This term
is not accurate, but we use it for reasons of convenience. Ethnic Greek
communities living in Ottoman lands are not ‘diaspora’ communities
because their origin can be traced back to ancient times, when ancient
Greek city-states colonized Asia Minor and the Black sea coastal areas.
Chapter 4 focuses on the political economy and international rela-
tions of Greece from the 1940s through to mid-1970s and examines
the new forms of dependence and subordination of the Greek state
and its ruling classes under the hegemony of the USA. It shows that
despite the rapid economic development of the country in the 1950s
and 1960s, Greece continues to be a dependent social formation, this
time on American capital and political-strategic imperatives, lagging far
behind the developed core and unable to articulate an independent for-
eign policy, especially on the Cyprus issue. Time and again, this chapter
illustrates the inter-connection and inextricable relationship between
political economy and geo-politics in which a weak industrial country
6 Introduction
(Greece) presents an elevated strategic value in Cold War conditions, yet

its ruling classes are unable to capitalize on it in order to offset the eco-
nomic disadvantage of dependency. This discussion relates directly to
the vicarious dictatorial regime of 21 April 1967. When an alternative
to the dependent ruling class (read: kampfplatz) of the 1950s and 1960s
appeared on the horizon under the leadership of Andreas G. Papandreou
in Greece and Archbishop Makarios in Cyprus, the USA halted the
democratic process by facilitating a dictatorship. At the same time,
it encouraged the vivisection of Cyprus in summer 1974. The depen-
dent/subaltern position of the country in the neo-imperial chain seems
to have been advantageous to Greece’s regional rival, and NATO ally on
paper, Turkey. This chapter also explains why Greece, as opposed to the
rest of Western Europe, did not follow a Keynesian policy during that
period, staying aloof of any attempt to build a proper welfare state and
provide a Fordist wage to its working population.
Chapter 5 focuses on the first period of metapolitefsi (‘political change-
over’, 1974–89), which corresponds to the political phenomenology of
PASOK-ND. It examines the reasons why the ruling political classes
of PASOK and ND advanced a Keynesian strategy ‘Greek-style’ at the
domestic level at a time when the rest of the West pondered (1970s)
and finally implemented (1980s) a new set of supply-side economics
(neo-liberalism), while unleashing the powers of financial capital (glob-
alization). A new cycle of debt spiral began appearing in the late 1970s
and 1980s, which the bipartisan ruling class was unable to control.
At the same time, American capital in Greece retreated, its position now
being taken by European capital and aid (e.g., Mediterranean integrated
programmes, various loans). We argue that the country entered into
the EEC in 1981, five years ahead of Portugal and Spain, mainly for
geo-political and security reasons. An extensive set of quantitative data
substantiate the main argument of this chapter: supply-side economics
was not the route out of the crisis of the peculiar Keynesian policy-
making in Greece in the 1980s, as the monetarists have argued and
the ‘modernizers’ of PASOK under Simitis embraced opposing Andreas
G. Papandreou’s ‘Keynesian populism’. The chapter views the second
part of the 1980s as a period in which PASOK experienced a kind of ‘cri-
sis of crisis management’, a concept proposed by Claus Offe to explain
the crisis of the welfare state in Western Europe.
Chapter 6 illustrates further the theoretical propositions made in
Chapter 2 by way of providing inferences drawn on a wide range of
quantitative and comparative data. Themes tackled here include: the
Greek banking system and its penetration into the Balkans and the Near
Introduction 7
East; the way in which Greece entered the constellation of neo-liberal

financialization in the mid-1990s, again with some 10–15 year delay
in comparison to the developed economies of the Euro-Atlantic core;
how neo-liberalism and financialization, instead of improving Greece’s
debt problem in the 1980s made it much worse by fostering debt-driven
growth; how EU transfers to Greece, instead of halting the debt spiral,
made it worse by destroying the country’s productive base even further;
and how Greece’s entry into the EMU in 2001 contributed to the aggra-
vation of the country’s debt problem. We have also presented a set of
data on state revenue and expenditure and defence spending. Counter-
ing arguments that privilege either the domestic or the external sources
of the Greek debt crisis, this chapter advances the following positions:
(a) the sources of the Greek debt are both external (e.g., the large cur-
rent account deficit due to its weak productive base) and internal (e.g.,
fiscal malaise); (b) that Greece’s entry into the EMU is not the only cause
of the Greek debt problem and that the country would have defaulted
anyway and much earlier had it not been for the specific geo-political
and security conditions of the early 1990s in the Balkans in the wake
of the collapse of ‘really existing socialism’; (c) the country’s subordi-
nation and dependency on the Euro-Atlantic core becomes even deeper
and more organic during the 1990s and 2000s, when the ruling politi-
cal classes of PASOK and ND subscribe completely to the programmes of
neo-liberalism and financialization; (d) the growth registered from the
mid-1990s onwards, the time when Greece enters the constellation of
financialization, is comprehensively debt-driven; (e) the reading of the
whole period, at least from the 2000s onwards, can be seen in the con-
text of a power-shift to the ‘global East’ (China, India, Russia, Brazil,
etc.) in which debtor states seem to reside in the Euro-Atlantic core
and Japan and the creditor ones to the ‘global East/South’. Eventually,
the argument, from the perspective of class agency, is that responsibility
for the country’s debt crisis should be placed squarely on Greece’s two
main parties ruling the country since 1974, in conjunction with the
Euro-Atlantic political elites, the inter-section of which is straddled by a
comprador cum financial oligarchy ‘Greek style’ (we define the concept
of ‘comprador bourgeoisie’ in Chapter 2). This chapter also discusses
the consequences of three rounds of austerity (2010–13), which led to
the disintegration of the middle classes, precipitating the end of the last
political kampfplatz of PASOK versus ND generating conditions for a new
polity and, perhaps, kampfplatz altogether.
As each chapter is self-sufficient with its own concluding remarks, in
our final concluding chapter we concentrate on the normative aspects
8 Introduction
of our research question: Is there a programmatic way out of the crisis for
Greece, Europe and the world? We answer this question affirmatively,
offering our thoughts for further reflection.
Before closing this introduction, we deem it necessary to include a
note on the method. As usually happens with researchers, either they
tend to start from theoretical assumptions, proceeding to the appli-
cation of those assumptions by trying to find quantitative evidence
and empirical/historical facts to support them (this is the case, pre-
dominately but not exclusively, with many political scientists);5 or they
amass first the empirical/quantitative data from which they then draw
inferences (this is the case, predominantly but not exclusively, with
many economists). We contend that these are flawed approaches and
are bound to lead the researcher into misleading inferences. The former
imposes theory on reality, or to paraphrase Marx, it is an approach that
‘makes its way not from reality into the textbooks, but rather from the
textbooks into reality’.6 The latter approach, however, might be even
more dangerous, inasmuch as it leads the research straight into the
realm of positivism, whose paramount deficiencies have already been
dealt with long ago.7
On the face of it, both approaches appear to be a world apart. Yet they
converge substantially, because both are comprehensively ahistorical,
lacking any profound understanding of the history of the subject matter
they study. Eventually, they disregard the role of the collective agency in
society and history, that is, the role of social classes and social/political
struggle. We have also tried to address this problem, but it is up to the
reader to decide whether or not we have accomplished our aims. After
all, the arguments we put forth here are but propositions for further
discussion and possible rectification.
Part I
Financialization and European
‘Integration’: Theoretical
Considerations
2
The Sinews of Capital and
the Disintegrative Logics
of Euro-Atlanticism
We advance here a crisis theory of financialization and imperial

geo-politics in order to recast key concepts and causal parameters related
to the sources of debt and the way in which the Euro-Atlantic area is in
danger of complete disintegration. Our central thesis is that ‘debt’ is
not just a category of political economy that can be theorized, but also
a geo-political notion that can be examined alongside an analysis of
imperial politics and the state. We unravel the deeper connection and
inter-penetration between capital, imperial geo-politics and the political
economy of financialization. In this context, we show how the present
crisis in the eurozone is a manifestation of deeper disintegrative tenden-
cies embedded in the hub-and-spoke system of neo-imperial governance
built by the USA in Western Europe, the Middle/Near East and East Asia
in the aftermath of World War II. This crisis process exposes the weak-
ness of the USA to contain Europe’s economic woes, while elevating
Germany as a powerful, monetarist imperial power within the EU. Yet
the picture is truly global and not just Euro-Atlantic. We contend that,
historically, the crisis dynamics of the current international order can be
best understood in terms of a power-shift to other centres and caucuses
of capital accumulation, mainly in Asia. Let us be more analytical.
Germany has every reason to want to reshape the political and eco-
nomic contours of Europe after its own model of capitalism, especially
now that the USA, a debtor power, is not in a position to impose across
the globe and Europe its own economic and political arrangements as
it did after the end of World War II, when it was a creditor power. The
plates of global economic power structures have for some time now been
shifting from the Euro-Atlantic heartland to the ‘global East’ (China,
India, Brazil, Russia, Germany, Indonesia, South Africa, etc.). This is
a structural-historical process that the USA cannot arrest. It can only
11
12 Financialization and European ‘Integration’
be delayed. This shift is dangerous because, as Lenin noted almost a

century ago well before the appearance of any systematic realist think-
ing in the discipline of IR, ‘when the relation of forces is changed,
how else, under capitalism, can the solution of contradictions be found,
except by resorting to violence?’ (emphasis by Lenin).1 Germany’s end-
aim in Europe is not far off the mark. It is fruitless and dangerous.
It is fruitless because, as we show below, regional and global fault-lines,
working in tandem with asymmetries generated by the ‘law of value’,
prevent Germany from accomplishing her objective of outright mone-
tary and even political domination of the EU. The metrics of violence
in Europe, at least for the time being, are not a European cum global
war as in 1914 or 1940. They are, under Germany’s tutelage, the trans-
formation of the European polities, especially in the periphery (Greece,
Portugal, Spain, Italy and Ireland), into coercive and predator policy-
making machines that have imposed untold austerity measures upon
their citizens and destroyed entire societies and communities on the
altar of ‘debt repayment’ and ‘bank recapitalisation’. This is as dangerous
as war can be.
2.1 Preliminary remarks
Let us make some further preliminary comments on the structure

and presentation order of the theoretical essays here, thus facilitating
reading and removing some conceptual and other obstacles.
The notion of ‘hub-and-spoke (informal) imperialism’ occupies a key
position in our analyses. In its ideal-typical form, it is a method of
imperial governance put forth and exercised by the USA in the after-
math of World War II in order to deal with the inadequacies of previous
European imperialisms that had been unable to tame the contradictions
caused by the uneven flows of capital and labour across time and space,
what Marx has theorized as ‘the law of value’. Hub-and-spoke arrange-
ments came to replace the imperialism of finance capital, substantiated
by the merger between industrial and banking capital under the aegis
of specific imperial currency blocs (the British, the French, the German,
etc.). Hub-and-spoke imperialism is what diversifies US post-war infor-
mal imperialism with all previous modern, and mainly formal, imperi-
alisms, which have been analysed by John Hobson, Rudolf Hilferding,
Nicolai Bukharin and V.I. Lenin. In their ideal-typical form, the great
virtue of hub-and-spoke arrangements is that the central imperial power
of the international system is in a position to dominate all major com-
ponents of international relations: the field of international political
The Sinews of Capital 13
economy – i.e. the centrality of the dollar in global currency markets

and commerce that is institutionalized via a number of international
organizations and institutions;2 the field of domestic politics – i.e. build-
ing structures of dependency within the polities of both the core and
the periphery; the ideational field of ‘friend-enemy’ binary in order to
placate allies and consolidate its grip on them – i.e. the ‘war on evil Com-
munism’ during the Cold War, which rallied European states against the
Soviet bloc; and the important field of geo-politics where, for example,
the USA became the dominant force in key parts of Eastern, Western and
central Eurasia.
Hub-and-spoke arrangements indicate subordination to the master
of all other lesser powers of the core, because the arrangement dic-
tated by the arch-imperial master can supersede or override in depth
and strategic significance any other bilateral relation cultivated by these
lesser state powers. For instance, and for a number of reasons, the USA’s
bilateral relation with Germany, today, as in the past, cannot be out-
flanked by whatever policy ties bind Germany together with France
within the EU.3 This is how the USA mastered and managed its primacy
in international relations.
Josef Joffe believes that this had also been the grand strategy of
Bismarck:
Imperial Britain’s strategy was to capitalise on its great advantage of

insularity – to stay aloof from the quarrels of Europe, if possible, and
to intervene against the hegemonist of the day when necessary [ . . . ].
Bismarck’s grand strategy was the opposite extreme: not intermittent
intervention but permanent engagement. To banish his ‘nightmare
coalitions’ the Iron Chancellor sought to cement better relations with
all contenders than they might establish among them. As long as
these relationships converged like spokes in a hub, Germany would
be the manager, not the victim of European diplomacy [ . . . ]. The US’s
global game is essentially a Bismarckian one, and that explains why
the rest of the world is not moving in on the US [ . . . ]. The appropriate
metaphor is that of hub and spoke. The hub is Washington, and all
the spokes are Western Europe, Japan, China, Russia and the Middle
East. For all their antagonisms towards the US, their association with
the hub is more important to them than are their ties to one another.4
Whether Joffe is right or not is besides the point. The fact of the mat-
ter is that Germany is trying to build this type of governance across the
EU today at a time when this method of governance is disintegrating
at the Euro-Atlantic level. Germany’s effort is becoming hopeless not

just because of the divergent rate of development within the EU, which
means that the ‘law of value’ has not lost an iota of its validity, but
especially because it is trying to build such relations on the basis of
monetary and anti-inflationist economics alone, lacking pan-European
political power tools and robust, demand-led components. The crisis
theory of debt we present here is tested in this context. But why is such
a theorization important?
Theory abstracts from reality, so it is an abstraction but, we argue,
an abstraction that has the potential to describe reality better than any
description. Most theoreticians claim that they can predict the future,
whereas historians, whose craft is to study and interpret the past, doubt
predictions.5 Whatever the case, social theories, in general, and politi-
cal and international theories, in particular, have limits for a number
of reasons of which two stand out: first, they can be put together
only in specific historical, both global and regional, contexts; second,
the intellectual power of abstraction tends to create a permanent gap
between policy environments and theoretical postulation, vindicating
the late Nicos Poulantzas’s thesis that ‘there is always a structural dis-
tance between theory and practice, between theory and the real’.6 Leo
Panitch and Sam Gindin are perfectly aware of this discussion when
they write:
[political economists working within a historical-materialist frame-

work] have often been hampered by Marxism’s inclinations to anal-
yse the trajectory of capitalism as derivative of abstract economic
laws. The conceptual categories Marx developed to define the struc-
tural relationships and economic dynamics distinctive to capitalism
can be enormously valuable, but only if they guide an understanding
of the choices made, and the specific institutions created, by specific
historical actors.7
Having said this, a crisis theory of debt comprises the ways in which debt
is ramified across the domestic and international environments of the
state per se as an expression of the asymmetrical circulation of values
in the real (e.g., industrial commodities) and fictitious (e.g., financial
derivatives) markets. We limit ourselves to presenting the theoretical
underpinnings of debt/liquidity crises under capitalism in general and
the way in which these crises articulate their effects on the state appa-
ratuses in the periphery, significantly altering the means by which the
dominant class fraction within the periphery state exercises hegemony.
Impossible to be absorbed or regulated by the state machine, debt and

fiscal crises tend to shift governmental power from parliament and other
formal representative bodies (e.g., tripartite representative or consul-
tative corporatist structures) to the executive, featuring what the late
Poulantzas called ‘authoritarian statism’. But whereas Poulantzas’s con-
cept in the late 1970s was capturing the manifestations of the first
phase of neo-liberalism cum financialization that needed to amass the
state’s coercive apparatuses to effect its first victories on organized labour
power (the beginnings of privatizations, welfare retrenchment, etc.),
today the concept can be used to support the latest phase of the neo-
liberal project, which is the result of its global, structural crisis. In the
1970s, we witnessed a fiscal crisis of the state in the core, whereas today
we are faced with a generalized debt crisis, both sovereign and banking,
in both the core and the periphery.8 In peripheral states, such as Greece,
where political and social institutions are anything but solid and robust,
even the executive seems to be disintegrating as the dominant political
factions within it seem to be unable to form stable cabinets so that the
austerity policy imposed by the creditors can be implemented. Today’s
crisis, moreover, is accompanied by ‘shock therapy’ austerity measures
in the periphery, and with measured austerity programmes in the core.
This precipitates the undermining of the welfare of the middle classes
in the periphery initiating a new, radical political phase, whereas the
core is experiencing a more protracted process of political disintegration
cum radicalization. We are interested here in the complex articulation
between capital, geo-politics and the state in the periphery in order
to capture theoretically the specificity of Greece in European, Balkan,
Middle Eastern and global contexts.
Under capitalism, crises seem to be emanating structurally (e.g., eco-
nomic crisis) and ‘healed’ by agencies (e.g., state policy). This may create
theoretical delusions. The celebrated agency/structure binary is but a
methodological projection reflecting organizational forms of politics
(e.g., state bureaucracy), which is necessary for the reproduction of cap-
ital as a social relation and a process. This, at the same time, justifies
an examination of those distinct organizational forms as separate sub-
jects of inquiry. In reality, however, they are an organic component of
capitalism as a social system. For both capital and the capitalist state
are structures and agencies alike and, as such, they result from and
are consubstantial with the social/technical division of labour and the
extended reproduction of this division across time and space, nationally
and internationally.9 Along with the capitalist relations of production
and exchange, the state itself generates crises as much as it fails to
solve them. Today’s harsh austerity policy, for example, especially in

the European periphery, spearheaded by the Euro-Atlantic ruling elites
as a means to restore confidence in financial markets and re-launch neo-
liberalism and globalization, is a delusion of extraordinary proportions,
inasmuch as the capitalist state and its managerial political classes are
organic components of the socio-economic conditions that caused this
crisis.10 The capitalist, as Marx more than once put it in Capital, is capi-
tal personified yet he/she is unable to control capitalism and its cyclical
crises. As we shall see in more detail below, all the ruling classes can
do is to plan how to switch from one crisis accumulation regime to
another, especially from Keynesian planning to liberal financialization
regimes (we dwell extensively on this below). From this perspective, Karl
Polanyi’s formulation in 1944 reads with interest:
There was nothing natural about laissez-faire; free markets could have
never come into being merely by allowing things to take their course.
Just as cotton manufactures – the leading free trade industry – were
created by the help of protective tariffs, export bounties, and indi-
rect wage subsidies, laissez-faire itself was enforced by the state [ . . . ];
laissez-faire was not a method to achieve a thing, it was the thing
to be achieved [ . . . ]. While laissez-faire economy was the product of
deliberate state action, subsequent restrictions on laissez-faire started
in a spontaneous way. Laissez-faire was planned; planning was not.11
One could argue, therefore, that what constitutes the structural weak-
ness of capital making it liable to frequent and periodic crises, is exactly
what makes it and, by extension, capitalism, resilient in time and space.
Credit and debt are mechanisms providing oxygen for capitalism as a
social system, guaranteeing the flow of capital and services, especially
via the creation of fictitious money and values. As we shall analyse in
more detail below, capital has the means to appropriate credit instru-
ments escaping to banking and finance each time it is faced with a
(over-accumulation) crisis in industry and real commodity production –
read: ‘real economy’. This is what David Harvey has called ‘the enigma
of capital’, for which we have reserved the term ‘sinews of capital’.12 But
the sinews of capital should also be searched outside of capital’s social
relation itself.
Capital and capitalism can bounce back or rejuvenate not just because
of economic reasons. Capital and the state prove resilient because,
among other reasons, they alternate the use of coercion and consent in
periods of prosperity and upswings, while pursuing primarily coercion
in periods of austerity and abrupt downturns, sapping resilience and

making capitalism and the state even more vulnerable. In general, the
more austerity measures deepen, the more social and class polariza-
tion deepen and the more likely it is for the state to employ harsh
coercion and violence – even to a point of declaring a ‘state of emer-
gency’. In other instances, the liberal state is keen on compromising
liberal democracy in order to exclude labour from assuming key posi-
tions within the state apparatuses proper – the case of Greece and other
Latin American countries after World War II. These observations apply to
the domestic environment of the state. But capital and the state occupy
a geo-political space which is hard to de-territorialize. Thus, both capital
and the (capitalist) state may well mobilize coercion and declare a state of
emergency due to perceived or real threats emanating not from inside the
territory of the state in question but from the state’s own geo-political
immediacy or international environment. Such conditions, whether
manufactured by the ruling classes or not, are regressive and reactionary.
They ‘heal’ organic crises of any regime of accumulation and convert
political and social struggles into defensive/aggressive nationalism.13
Under capitalism, the economic instance is not autonomous. It is rather
always embedded in politics, social relations and ideational and geo-
political regimes and situations. That is why we insist here on the role
of state security and geo-politics, which we see as co-constitutive vari-
ables in any crisis theory of debt. Geo-politics has the same function as
other forms and factors that both sustain and sap the capital relation,
such as forms of credit. As such, geo-politics both serves and undermines
the resilience of capital. It is, therefore, a substantial part of what we call
here the sinews of capital. It should be clear by now that the state is not
just a class relation alternating coercion and consent at the behest of
the dominant faction of the capitalist class; nor is it simply a terrain of
social struggle translating social demands for justice, high wages and
welfare into redistribution policies, thus balancing out capital-labour
relations – the key substantive claim in Poulantzas’s work on the cap-
italist state and a claim that one can also find in the Marxism of the
Second International, and especially in Austro-Marxism.
Poised to recast here some insights put forth by David Harvey, we
should also view the state and its articulation with the economic sphere
as a geographical site constantly seeking adaptation and ‘spatial fix’
due to the ways in which capital accumulation shapes global and
regional time and spatiality. With very few exceptions, the fundamental
concern of all ‘national-liberal’ bourgeois revolutions has been how to
increase the spatiality of the state in order to assist accumulation and
manage the transition from simple to extended reproduction of capi-

tal, thus facilitating ‘economies of scale’. No doubt, this was the case
with all bourgeois/industrial revolutions in Europe, North America and
elsewhere, and this was definitely the case with Eleftherios Venizelos,
Greece’s early 20th century celebrated liberal-nationalist politician par
excellence. But whereas Harvey perceptively integrates geography into
the analysis of capital as a social relation and a process, he falls short
of embracing geo-politics and security as co-constitutive analytical vari-
ables of capital formation and flows, thus capturing their effects on the
structure of capital and, for that matter, the territorial state. From this
perspective, the capitalist state enjoys two paramount features that are,
or should be, strictly interlinked so that it can enjoy a balanced position
in international politics, enabling it to absorb organically crises of over-
accumulation and, if need be, project power in order to devalue. The first
such feature is related to the robustness of its (capitalist) political econ-
omy; the second to the geo-strategic and geo-political significance of
the area it occupies and in which its political economy connects it with
its region and the globe. Nicholas J. Spykman, whose work influenced
the formation of US grand strategy and neo-imperial hub-and-spoke
arrangements after World War II, has convincingly argued that a state’s
foreign policy must reckon with geography and geographic facts: ‘It can
deal with them skillfully or ineptly; it can modify them; but it can not
ignore them. For geography does not argue. It simply is.’14
We, therefore, propose to factor in security and geo-politics as
co-constitutive, interactive variables and not just as appendages to cap-
ital accumulation, as Harvey’s, otherwise important, work does. In this
regard, Greece has been – and is – enjoying a substantial geo-strategic
value in the Eastern Mediterranean, which outstrips its overall capi-
tal formation. Its Aegean Sea, Balkan and Near Eastern location and
approaches, coupled with its influence in Cyprus, provide Greece with
a geography and a cumulative space (land, sea and air) that it is hard
for any imperial power to ignore, regardless of the global alliance sys-
tem in operation.15 The country, therefore, sits on the fault-lines of a
weak political economy and strong geo-politics. Pantelis Pouliopoulos,
the first general secretary of the Greek Communist Party at the age of 24,
and whose work and life are largely unknown not only internationally
but also in Greece proper, sensed all this when he wrote in 1934:
[Thus] the Greek economy contains in its very existence these two,
historically inextricably, unbridled trends: that of the capitalist East,
on the one hand, and of the capitalist West, on the other. A double
‘barbarism’: the former is ‘uncivilized’, the latter is too much ‘civi-

lized’. In this context, what seems to be a dawn from the one side,
comes as twilight from the other.16
We have laid down the general framework within which our analy-
ses will take place. First, drawing from Marx’s and Harvey’s works, we
will focus on the relationship between ‘real’ and ‘fictitious’ capital, the
crises they generate, and the way in which the capitalist state artic-
ulates its policy as a constitutive part of those two forms of capital
staving off crisis. We examine Harvey’s ‘second’ – the primary locus
being finance – and ‘third cut’ crisis theories (‘spatial fix’ and ‘accumu-
lation by dispossession’), the ‘first cut’ crisis theory being Marx’s own
crisis theory of over-accumulation. We then wrap up this discussion via
Giovanni Arrighi’s and Robert Brenner’s work, thus rendering our narra-
tive with a macro-historical perspective. This approach is very pertinent
when examining the case of Greece, especially in capturing the coun-
try’s defaults on its debt obligations during the course of its modern
history. We then examine the way in which imperial geo-politics and
global/regional fault-lines act as originators of debt as they straddle the
very contradictions of capital formation and its asymmetrical/uneven
rate of development. In this way, we address the two key objectives
set out in the beginning of this theoretical section: first, to recast a cri-
sis theory of debt creation by way of factoring in imperial geo-politics
as a constitutive variable of capital formation and its crises; second,
to show that the underlying cause of the severe crisis that erupted in
summer 2007 in the Anglo-American world, and then spread to the
eurozone and its periphery, is due to the terminal crisis of the hub-
and-spoke system of global neo-imperial governance built by the USA in
the 1940s, and which Germany’s monetary and anti-inflationist policy
is trying to recast in the eurozone today in vain. Thus, it seems to us
that Marx’s own value theory is still relevant, especially in capturing
the qualitative dimensions of the present crisis, hence the acknowl-
edgement on our part of the utility of the concept of ‘uneven (and
combined) development’. But our type of ‘injection’ of geo-politics and
security in the discussion, as well as ideational/geo-cultural aspects of
the political game, allow us to go beyond that concept preferring in
its stead that of ‘global fault-lines’. Herein lie the severe disintegrative
tendencies of the Euro-Atlantic political economies and imperial geo-
politics and the political logic that underpins them – neo-liberalism and
financialization/globalization. These claims will be further substantiated
in the narrative that follows.
2.2 ‘Real’ capital, ‘fictitious’ capital and uneven

(and combined) development
Capitalism is susceptible to crises. When the prevailing forms of politi-

cal economy under capitalism are industrial and commercial pertaining
to the form M-C-M’ (Money-Commodity-Money’), then crises manifest
themselves primarily in the ‘real’ economy, that is the sphere of produc-
tion and circulation of commodities that bear social value expended in
them by labour-power.17 A well-known historical form of this type of cri-
sis is the severe crisis of over-accumulation in the 1970s. Another is the
one that hit the industrial world in the 1890s. But when the prevailing
form of capital activity takes place primarily in the sphere of circulation
of money-capital pertaining to the form M-M’ – for instance, a rentier
earning interest on a large deposit of capital, what Marx used to call
‘money which begets money’ – then crises first manifest themselves in
the institutional sphere of production and circulation of paper, which is
the sphere of ‘fictitious’ or imaginary capital par excellence. Cracks in the
composition of the money form of capital and the credit system in the
20th century first appeared typically in the financial crisis of 1929–33.
The global financial and eurozone crises today also fall into that cate-
gory. Marx sees both these crisis processes of the ‘real’ and ‘fictitious’
economies as organically composed and opposed within the ensemble
of social capital:
The real difference between profit and interest exists as the difference
between a moneyed class of capitalists and an industrial class of cap-
italists. But in order that two such classes may come to confront one
another, their double existence presupposes a divergence within the
surplus value posited by capital.18
David Harvey’s classic work, The Limits to Capital, argues that Marx
developed a ‘first-cut’ theory of crises and that this is his theory of
over-accumulation and the falling tendency of the rate of profit that
apply to capitalist production and exchange. He then goes on to argue,
by way of building on Marx’s own work, for a ‘second-cut’ theory that
examines ‘temporal dynamics’ as these are shaped by a more integrated
view of the relationship between the ‘fictitious’ money generated by
financial/monetary arrangements and material production. Harvey, a
geographer, also sets out the parameters of a ‘third-cut’ theory, in which
he considers the ‘geography of uneven development into the theory of
crisis’. If capital breaks out of its (national or regional) shell, so to speak,
seeking investment outlets in various parts of the globe, then capital,

whether industrial (‘real’) or financial (‘fictitious’), is seeking a ‘spatial
fix’.19 We must now elaborate on these propositions, as they are crucial
in understanding the crisis in Greece and the eurozone, while grasping
the significance of our ‘global fault-lines’ argument.
Capital, whether ‘fictitious’ or ‘real’, perpetually requires market
space, investment opportunities and new geographies and, as such, it
needs political and even military backing. In other words, in theory, cap-
ital is consubstantial with political-expansionist undertakings, while it is
concerned about the security of its investments, actual or planned. But
because it cannot do all that by itself, it requires a state in the form of an
imperial state. Thus, every capitalist state is, potentially, an imperial state.
An ideal-typical explanation of a crisis of over-accumulation goes as fol-
lows. Because capital faces competition from other capitals – horizontal
forms of social struggle – and also competition from workers – vertical
forms of social struggle – and because its raison d’être is how to make
profit, it is forced to invest in technological innovation, new plantation,
etc. This is done in order to undercut competitors, but it is problem-
atic because it tends to reduce the presence of labour-power in material
production, which is the only source from which value and surplus-
value are extracted (according to Marx, no value and surplus-value are
created in the process of circulation, because the sphere of circulation
of commodities, whether real or fictitious, is assumed to be essentially
exchanges of equivalent values). Put differently, capital has as a result
an increase of the total investment at the expense of labour-power, the
latter being the sole producer of value and surplus value.20 Thus, the cap-
italist, that is the personification of capital, is entrapped. By investing in
technological innovation to compete with other capitals nationally and
internationally, capital pushes workers out of material production and
this results in the rate of profit – the ratio of surplus-value to the total
capital – to fall.21 The former is facing losses in profitability, the latter
faces unemployment, precarious work and pauperization. Thus, capital,
as well as labour, tends to migrate. New caucuses of capital accumu-
lation are formed around the globe and capitalism spreads worldwide.
Typically, this is Marx’s theory of over-accumulation crisis and of the
tendency of the rate of profit to fall, which can be found in full in Capi-
tal, v. 3, Part 3. Parts of the Grundrisse and of the Theories of Surplus-Value
are also extremely useful in understanding crises of over-accumulation
in capitalist history.22 Capital’s agony to survive pushes it to become
even more aggressive, global and expansionist, in fact imperialistic.
‘The export of capital from a country’, Bukharin says, ‘presupposes
an overproduction of capital in that country, an over-accumulation of

capital’.23
Marx and Harvey concur that the separation of ‘real’ and ‘fictitious’
capital is internal to the composition of capital as a social relation
and process. ‘Real’ and ‘fictitious’ forms of capital are inextricably con-
nected and Leo Panitch and others working around the important
review, Socialist Register, are correct in pointing this out. But to under-
stand this connection, as well as the problems resulting from it, we
need to grasp the way in which credit operates.24 As Marx has shown
in the third volume of Capital and elsewhere, credit is consubstantial
with the functional operation of capitalism as a dynamic social sys-
tem. As capitalists need to borrow in order to invest in production and
technological innovation – thus intensifying the extraction of relative
surplus-value – the credit they receive is but an anticipation of future
value production as a counter-value, hence its ‘fictitious’ nature. How-
ever, this is a risky affair, because capital’s investment strategy, which
now depends on borrowed money, may be unsuccessful. Capitalism
tried to solve this problem with the merging of industrial and banking
capital, what Rudolf Hilferding called finance capital, which, according
to Lenin and Bukharin, corresponds to the imperialist phase of cap-
italist development.25 The merging of industrial and banking capital
induced further concentration/centralization on a global scale, leading
some Marxists of the Second International, such as Karl Kautsky, to put
forth the theory of ‘ultra-imperialism’.26 But these were vain attempts.
Capital, as we saw earlier, continues to face opposition from workers and
from other capitals, both nationally and internationally. This struggle
saps the ability of capital to produce the use values and money required
to compensate for the capital borrowed/merged, and this regardless of
the degree of merger between banking and industrial capital and the
tendency towards concentration/centralization at the global level. ‘Fic-
titious’ capital is always an organic part of the credit form and the
asymmetrical functioning of the value-form supersedes its tendency
towards concentration/centralization. Thus, there is no guarantee what-
soever that the future will generate the value promised as a collateral, the
result being an increase in the gap between ‘real’ and ‘fictitious’ values
and a surrender of the processes of ‘ultra-imperialism’ or ‘global (capital-
ist) governance’ to that of uneven (and combined) development. These
processes multiply in periods in which crises of over-accumulation in
real economy lead to severe disruption and falls in the rate of profit,
thus pushing capitalists to diversify and embrace financialization (easy
profiteering through paper and bond trading, currency speculation, real

estate speculation, insurance, etc.).
According to Hilferding, financial capital, as opposed to finance cap-
ital (the fusion of banking and industrial capital), corresponds to the
competitive stage of capitalism in which credit institutions and banks
institutionalize usury, lend money and pursue all sort of activities
whether related to material production or not. Financial capital tends
to see money not as a means to investing in real economy in order
to (re)generate profitability, but rather as an end in itself. But whereas
this was mainly the case in the 19th century, contemporary forms of
operations by financial capital especially from the 1970s onwards –
i.e., after the fall of the Bretton Woods system and the introduction of
fiat money – have been extremely complicated and globalized. Today’s
globalization (i.e., financialization, the dominance of new and largely
uncommitted financial capital) has assumed an increased, and complex,
institutional independence as speculative and profiteering economic
activity (shadow banking, speculative arbitrage, stock market specula-
tion, property speculation, buying and selling paper and bonds, money
trading and speculation, insurance, dot.com bubbles, proliferation of
derivatives, e-commerce, digitization and complex mathematical formu-
las, etc.), flanked by powerful credit agencies, and moving more and
more away from material production.27 In other words, if finance cap-
ital is mostly directly committed to material production and growth
strategies, financial capital is most likely to be wholly uncommitted to
them. More to the point, in the conditions of extreme financialization
and neo-liberalism that prevailed from the 1980s onwards, i.e., after
what Leo Panitch and Sam Gindin called ‘the Volcker shock’, financial
capital has become a rather Ponzi development scheme undermining
the fundamentals of capitalist production and (relative) surplus-value
extraction.28 Financialization, as its recent crisis in the Anglo-Saxon
world and the eurozone has shown, is an extreme form of operation of
financial, uncommitted capital. Richard Duncan would go as far as to say
that this should not really be called ‘capitalism’ but rather ‘creditism’:
Once the constraint [the gold fetter] was removed [ . . . ], it also lifted
any constraint on how much credit could be created. It has been easy
for the US to maintain gold backing in the first post-war decades,
because it owned most of the world’s gold [ . . . ]. Credit and debt are
two sides of the same coin. In the US total debt – government, house-
hold, corporate and financial-sector debt, combined – expanded from
$1 trillion in 1964 to over $50 trillion by 2007. Credit growth on this

scale has been taken for granted as natural; but in fact it is some-
thing entirely new under the sun – only made possible because the
US broke the link between dollars and gold. The explosion of credit
created today’s world [ . . . ]. I call it ‘creditism’.29
Furthermore, financialization/creditism’ occurs in conditions of neo-

liberalism whereby deficits and debts are transferred from the state
onto the taxpayer, a key feature of neo-liberal economics which Robert
Brenner, perhaps misleadingly, calls ‘asset price Keynesianism’. Yet even
this seems unable to solve the fiscal crisis of the state and the mount-
ing debt and banking crises, hence the cock-up ‘strategy’ of present-day
elites for more austerity and welfare state retrenchment in order to stave
off the crisis. Overall, the use of financial instruments is the riskiest
form of profit generation under capitalism, one that leads constantly
to bubbles and ‘boom and bust’ cycles.30 Unsurprisingly, the operations
of financial capital always disturbed John Maynard Keynes, whose pri-
mary and sincere worry was the survival of capitalism by achieving ‘an
aggregate volume of output corresponding to full employment as nearly
as practicable’. Keynes, quite rightly, thought that financial exuberance
harms the well-being of capitalism as a social system:
Speculators may do no harm as bubbles on a steady stream of enter-

prise. But the position is serious when enterprise becomes the bubble
on a whirlpool of speculation. When the capital development of a
country becomes a by-product of the activities of a casino, the job is
likely to be ill-done.31
All in all, ‘the credit system internalises the contradictions of capitalism

and does not abolish them’,32 and a ‘moneyed capitalist’, as Marx put it,
will confront an ‘industrial capitalist’ within the remit of ‘divergence of
surplus value posited by capital’. Marxisant and heterodox discourses are
in broad accord with the narrative discussed above and the imbalances
that can be caused in the (national and global) cycles and flows of cap-
ital accumulation if the monies and pieces of paper in circulation do
not correspond to the real values produced. Claims on future revenues
are not real forms of capital and the M-M’ relation (‘money begetting
money’), taken in its extremes as speculative arbitrage, shadow banking
and other forms of Ponzi finance, generates more problems for capital-
ism than it solves. ‘If all money capital invests in appropriation’, Harvey
says, ‘then capitalism is not long for this world’.33 When capitalists,
that is, the personification of capital, migrate to finance to make up

their profit losses from real production and commerce becoming instead
‘asset managers’, ‘investment bankers’ and derivatives speculators, then
capitalism is indeed in its most vulnerable phase of operation.
We can now shed light on the interpenetration of, and contradiction
between, monetary and financial systems, an area in which Harvey’s
‘second’ and ‘third-cut’ crisis theory tackles well. This is of great signif-
icance, because it reveals one of the key sources of debt (both private
and public). Money is not only a measure of value and a medium of
circulation/exhange; it is also a form of capital – e.g., the circulation of
money via banks as capital – and, as such, it possesses both ‘real’ and
‘fictitious’ dimensions. Once money becomes capital with the media-
tion of the banking system, then it is potentially interest-bearing capital,
institutionalizing its properties via law: it can either be lent out as cap-
ital in return for interest, while at the same time ‘staying’ in the bank
and receiving interest. This is the first step for somebody to understand
the way in which capitalism has institutionalized usury. But capital-
ism is a dynamic system because it operates via credit institutions with
a keen propensity to lend. Capitalism encourages risk and innovation
and, in its ideal-typical form, needs a constraint-free environment. The
more exchange relations in commerce, banking and finance proliferate,
and the more technological innovation is introduced in both markets
and production, the more complicated and contradictory becomes the
relationship between real value creation and imaginary value creation,
between the sound base of the monetary system reflecting the circula-
tion of real commodities and the financial operations mediated by the
banking system, stock market, bond trading and ‘asset management’,
etc., i.e., fictitious values. Banks create fictitious money and fictitious
money, as we saw earlier, is as important for capitalism to survive as
any other form of capital. However, as we also saw earlier, there are
risks in the supply of money capital ahead of real value production.
These risks increase substantially when interest-bearing forms of capital
operate in conditions of generalized financialization with transactions
accomplished through the inter-banking system of commercial, invest-
ment and shadow banking. It is this that brings about a fundamental
and irreconcilable contradiction in the system, a key imbalance between
the monetary/money base of the system – the use of money as a mea-
sure of real value – and its financial institutions/operations – the use
of money as a medium of exchange and profiteering.34 Obviously, this
represents only a tendency. As Harvey points out, the monetary and
financial systems are united within the banking system, and, within the
nation state, the central bank becomes the supreme regulatory power
guaranteeing the quality of money as a lender of last resort. This is
why Joseph Schumpeter called the money markets and the banks the
‘headquarters of the capitalist system’.35
We can now understand better why the eurozone is facing the insuper-
able difficulties it has been facing since at least 2009: once the financial
crisis, first manifested in the Anglo-Saxon world, kicked in and trick-
led down to the eurozone’s banking sector and national sovereigns,
the contradiction between the monetary base of the euro-system – in
theory, the quantity of euro-money tied to real production and com-
modity values – and its leveraged financial institutions, both sovereign
and private, imploded beyond proportion. No doubt, the crisis became
so unmanageable because, unlike the cases of the USA and the UK,
the EU is not a state. It lacks a (European) Ministry of Finance, which
would have coordinated de-leveraging and provided (interest-free) liq-
uidity to its embattled banks and sovereigns to stave off the crisis. That is
why the eurozone has suffered a massive banking crisis and a sovereign
debt crisis, with its periphery states unable to arrest Germany’s recy-
cling of financial surpluses, producing and reproducing asymmetrical/
disintegrative tendencies within the EU via constant sovereign debt cre-
ation and bank liquidity crises. The European Central Bank (ECB) is
a bank, managing the euro as a promisory note and controlling the
interest rates on short-term euro-deposits. It also controls the supply
of money because it has its own printing press. As such, it can only lend
interest-bearing money to sovereigns or other banks. The ECB can also
buy government bonds – which is one of the so many plans put forth
to avert the collapse of the eurozone. But this will increase its liabilities
as it will have to print more money. Any acquisition of (fictitious) assets
requires the printing of money (liabilities), thus raising the spectre of
Europe-wide unstoppable inflation. The eurozone seems to be managing
its business without real value creation justifying debt, that is ficti-
tious, activity. This hardly heals financial and monetary asymmetries
across the EU, as well as within EU nation states themselves, especially
peripheral states, such as Greece or Portugal. Moreover, at a theoreti-
cal level, this is because in the periphery the asymmetry between the
monetary system and the financial system, or, put differently, the cleav-
age between real and fictitious capital/economy has been and is much
larger as the periphery, and first and foremost Greece and Cyprus, lack a
large material production base to compensate for the fictitious economic
activities of extreme financialization. On the contrary, Germany’s gap
between real value production and the level of debt is much smaller.
The use values circulating in Germany are not reflecting the same mon-
etary conditions in Greece and elsewhere and a euro used in Germany
does not buy the same equivalent in Greece, and vice versa. A euro cir-
culating in Germany is not the same as a euro circulating in Greece or
Holland. Thus, trade and financial relations between Germany, Holland
and other core countries, on the one hand, and periphery/Greece, on
the other, tend to widen the gap between Germany’s export-led growth
and Greece’s borrowing requirements needed to boost domestic demand
and consumption in neo-liberal times. This accounts for Greece’s large
current account deficits – an important source of the country’s debt. The
inability of the debtor countries to devalue in a common currency bloc
is a key structural cause that perpetuates and even enhances the gap
between the core and the periphery.
There is an expressed and visible divergence at all monetary and
macro-economic levels: prices, inflation, interest rates, pensions, debt.
Value and inflation differentials are reflected in currency differentials
and locking up so many different currencies together made the eurozone
implode. The core is exporting capital goods and advanced commodi-
ties, whether ‘real’ or ‘fictitious’, and the periphery is importing them.
For instance, the higher rate of Greek inflation made Greek goods more
expensive to Germans, while making German goods cheaper to Greeks.
This leads to Germany’s over-exporting capacity and Greece’s over-
importing consumption need and reflects the different magnitudes of
values circulating in Germany and Greece. In other words, the German
economy is quantitatively and qualitatively bigger and superior to the
Greek and indeed any other eurozone economy. This is the fundamen-
tal reason for Germany dominating the political economy of the euro.
The eurozone crisis reveals Germany as an imperial power, the true leader
of the EU’s monetary, anti-inflationist, multi-tier economic project of expan-
sion cum integration, what German officials from the early 1990s used to
call, rather euphemistically, ‘variable geometry’.36 There is also a political
dimension to this, in terms of decision-making. ‘The fate of Europe’,
Martin Wolf said in May 2012, ‘hangs on choices to be made in Berlin’,37
insinuating that Germany turned imperial. Before the crisis, the issue of
German financial/monetary supremacy within and outside Europe could
somehow be covered up under the façade of a ‘French-German axis’,
European elections and pan-European institution-build-up (common
fisheries policies, Common Agricultural Policy and so on).38 During the
crisis, this proved impossible. In other words, the euro is but an imperial
currency dominated by Germany’s monetary/material economic base.
It is the superstructure rising above Germany’s robust industrial and
technological base. Yet it cannot survive without a state regulating the

debt levels of the banks in the periphery, as well as the periphery’s
sovereign debt. In addition, it cannot survive without continuous wel-
fare retrenchment and wage freezing, which was a key factor boosting
Germany’s export-led performance at the expense of its EU partners and
especially of the periphery.
From 1999/2001 onwards, a lot of bad money (e.g., paper debt) has
been circulating in the European periphery creating false impressions
of growth. It has been mediated by a credit system whose fault-lines
between real and fictitious economy proved unmanageable due to the
lack of a strategic centre, i.e., a state political form, which would have
addressed the problem in a somewhat satisfactory manner reviving
European capitalism. ‘Crises of every kind’, Lenin wrote, and ‘economic
crises more frequently but not only these, in their turn increase very
considerably the tendency towards concentration and monopoly’.39
Germany may well steer developments towards, on the one hand, a
euro-core dominated by its industrial and monetary power, turning
the euro into a relatively hard and stable global currency and, on
the other, towards an impoverished periphery seeking ‘special’ subal-
tern arrangements with the core. But even in this scenario of German
power ‘concentration and monopoly’, as Lenin would call it, structural
problems will remain, as no capitalist system can ever solve crises of
over-accumulation and the tension between the monetary base of the
system and its financial operations. We can now move on to shed light
on Harvey’s ‘third-cut’ crisis theory.
From the perspective of uneven global and regional class relations,
one could argue that a notional source of debt is caused by a straightfor-
ward exploitation of the periphery and semi-periphery by the imperial
core. In this context, and in absence of a successful and robust import-
substitution policy, peripheral states such as Greece or Chile always
lag behind and have always to borrow from the core in order to off-
set disadvantages in technology, innovation, infrastructure and skills.
Imperialism, in this respect, was and remains appropriation of inter-
national value.40 But the notion of ‘periphery’ and/or ‘semi-periphery’
is spatial, dynamic and geo-political, not topological, static and geo-
graphic. It is to be found within states in the form of a geographical
split (e.g., Italy’s advanced North and underdeveloped South), or in the
form of the cleavage between ‘city’ and the ‘countryside’. In a sense,
it also applies to the entire globe, as pockets of advanced industrial
and service sectors may be concentrated, in specific periods of time, in
some parts of the world and not others (e.g., the Euro-Atlantic core,
Japan and Australia/New Zealand as opposed to the ‘Third World’).
What could be considered as periphery in 1960 – weak industrial and

technological base, under-developed liberal political institutions, con-
centration of poverty, etc. – may not be a periphery in 2010 and vice
versa: massive elements of under-development, poverty and deprivation
have always existed within the core and the industrial cities of the core,
from England’s Manchester during the era of industrial revolution and
after to present-day New York and Los Angeles. But if this is the way in
which capital’s uneven (and combined) development operates nation-
ally, regionally and globally, we should also take into account something
already pointed out earlier, namely that capital has an opposite, innate
tendency towards centralization/concentration in order to offset com-
petition with other capitals of the core and to outflank working-class
resistance. This contradiction is worth noting and we must provide some
analysis of it.
In the structural context of fierce (horizontal and vertical) compe-
tition, capital is ramifying its own crises, both nationally and inter-
nationally, along the lines of uneven (and combined) development.41
Building on the important work and findings carried out in the 1980s
by Andrew Glynn, Philip Armstrong, John Harrison and others, Robert
Brenner argues that the financial crisis that began in 2007 has at its
roots the inability of the US non-financial corporate sector to return to
pre-1970 levels of profitability. According to Brenner, ‘from the start of
the long downturn in 1973, economic authorities staved off the kind of
crises that had historically plagued the capitalist system by resorting to
ever greater borrowing, public and private, subsidizing demand’.42 There
had been a ‘persistent stagnation’ from 1973 to 1993 that the Clinton
administration had only partially managed to stop, as indeed under
Clinton, briefly, a return to profitability and growth seemed to be in
hand. But Clinton’s experiment did not take root, and for all intents and
purposes it never matched, or even came close to, the so-called ‘Golden
Age of Capitalism’ of the 1950s and 1960s. Brenner tells us that both the
Golden Age and the crisis of what he calls ‘overcapacity/overproduction’
was the result of uneven development:
From the very beginning, then, uneven economic development did

entail the relative decline of the US domestic economy. But it was
also a precondition for the continued vitality of the dominant forces
within the US political economy. US multinational corporations and
international banks, aiming to expand overseas, needed profitable
outlets for their foreign direct investment. Domestically based manu-
facturers, needing to increase exports, required fast-growing overseas
demand for their goods. An imperial US state, bent on ‘containing
communism’ and keeping the world safe for free enterprise, sought
economic success for its allies and competitors as the foundation for
the political consolidation of the post-war capitalist order, in the face
of the anaemia of domestic ruling classes sapped by war, occupation,
collaboration and defeat. All these forces thus depended upon the
economic dynamism of Europe and Japan for the realization of their
own goals.43
In other words, the profit squeeze and stagflation (high inflation accom-
panied by stagnation) of the 1970s was not due to high wages as
neo-liberal orthodoxy argued, but the result of global inter-capitalist
competition. Moreover, and whereas Nicos Poulantzas, Michel Aglietta
and others in France and Germany writing in the 1970s discerned
the state to act as a counter-tendency to the tendency of the rate of
profit to fall, Brenner confirms that state intervention, and the US state
intervention in particular, failed not only to stave off the crisis of –
what he calls – ‘over-capacity/over-production’, but also to set capitalist
states and economically integrating zones one against the other (USA –
Western Europe – Japan). In other words, the new strong capitalist-
economic caucuses that flourished at each end of Eurasia during the
‘Golden Age’ began undermining the supremacy of the USA in interna-
tional political economy. The result of this global capitalist competition
was stagnation, falling rates of profit and a ‘long downturn’, the sole
exception being the brief Clinton years, which registered a growth in
manufacturing induced by increased levels of borrowing.
All in all, the tendency of capital towards uneven and combined
development is as unstoppable as its tendency towards centraliza-
tion/concentration. Ernst Mandel put it as follows:
[Thus] even in the ideal case of a homogeneous beginning, capital-

ist economic growth, extended reproduction and accumulation of
capital are still synonymous with the juxtaposition and constant
combination of development and underdevelopment. The accumu-
lation of capital itself produces development and underdevelopment as
mutually determining moments of the uneven and combined movement of
capital. The lack of homogeneity in the capitalist economy is a nec-
essary outcome of the unfolding laws of motion of capitalism itself
(emphasis by Mandel).44
Having said that, it is safe to argue that combined and uneven develop-
ment applies to both ‘core-core relations’ and ‘core-periphery relations’,
precisely because the ‘law of value’ applies to all capitalist economies,

whether ‘developed’ or ‘under-developed’. This is very important
because we are confronting again the following contradiction: on the
one hand, capital’s motion pertains to uneven/asymmetrical develop-
ment, hence a unification of the world or a specific region under a
supra-national governance is an impossible undertaking; on the other,
capital, in its effort to outflank and out-compete other rival capitals,
has a tendency to concentrate/centralize, hence its attempts to create
regulatory institutions of ‘global/regional governance’ – the ‘Concert of
Europe’ in the 19th century, the League of Nations between the wars,
IMF, WTO, the UN, the EU, ASEAN, etc. The list is endless. When Lenin
was confronted with this innate contradiction of capital and imperial-
ism, he always took sides with the ‘law of uneven development’.45 At the
same time, however, as we saw earlier, he did not fail to note that eco-
nomic and political crises increase ‘the tendency towards concentration
and monopoly’. Bukharin is equally explicit:
Kautsky and his followers assert that the very process of capital-
ist development is favourable to the growth of elements that can
serve as a support for ultra-imperialism. The growth of international
interdependence of capital, they say, creates a tendency towards elim-
inating competition among the various ‘national’ capitalist groups.
This ‘peaceful tendency, they say, is strengthened by pressure from
below, and in this way rapacious imperialism is replaced by gentle
ultra-imperialism.46
This tension within Marxist and Marxisant theorizations of imperialism

and neo-imperialism can also be found, certainly under different shapes,
forms and concepts, within mainstream Anglo-Saxon scholarship in the
field of IR and International Political Economy (IPE). This is not the
place to review these approaches in detail, but it is worth pondering over
them to the extent that such an effort serves the purposes of grasping
a wider gamut of approaches on the subject of trade imbalances and
imperialism, as well as their substantive deficiencies.
The broad divide here is between liberal/cosmopolitan/‘democratic peace’
theories of globalization and inter-dependence, on the one hand, and
realist and neo-realist theories, on the other. The first cluster seems
to somewhat match the ultra-imperialist – ‘social democratic’, so to
speak – current within Marxism, whereas the realism/neo-realism clus-
ter corresponds better to those Marxists and Marxisants who subscribe
to the theory of uneven (and combined) development. Liberals and
globalizers see the increase in the volume of trade transaction across the
globe as a requisite for further cooperation and inter-dependence among
states, a process that demands more and more ‘issue-specific interna-
tional regimes’ regulating these complex inter-dependency processes.47
The premise for realists and neo-realists is that the international system
is anarchic and, as such, it is prone to conflict with all states agonizing
about how best to survive. They insist on the centrality of the state in
international politics and trade and see national economic and politi-
cal interests and unequal/uneven balance (and distribution) of power as
causes of war and conflict.48
However, none of those approaches can match the analytical and crit-
ical rigour of their ‘respective’ pairs within the Marxist tradition, broadly
understood. As far as the liberals/globalists are concerned, their analyses
are flawed by the emphasis they give to trade relations and markets –
whether ‘real’ or ‘fictitious’ – as permanent, historical factors of inte-
gration leading to ‘global governance’, ‘global civil society’ and peace.
Their ‘political-theoretical’ approach is often tainted by ‘human rights’
discourses used by USA and NATO elites to justify military interven-
tions across Eurasia after the collapse of the Soviet bloc. Some realists
and neo-realists, on the other hand, work on the false assumption of an
anarchic global political market composed of state units and great pow-
ers constantly trying to maximize their power-share in the international
system, something which causes war and the demise of those powers.
Such, for example, is the position of prominent ‘offensive realist’, John
Mearsheimer. In this internecine battle for power maximization and
survival, the winner, presumably, destroys the loser. Yet, this is empiri-
cally flawed: the USA did not destroy Japan or Western Germany after
it defeated them in World War II. Quite the opposite: it reconstructed
them because the aim was to create open markets and consumers for
its own capital surpluses, thus creating a political economy abroad after
its own home image.49 Eventually, both liberals/globalizers and realists
can be seen as the flip side of the same coin: the former see the domi-
nance of markets and trade as units of integration and cooperation, both
regionally and globally; the latter see the dominance of the global polit-
ical market, which is composed of (classless) state units in an anarchic
international system, with a propensity to developing and distributing
power unevenly. Arguably, the concept of the market dominates both
approaches and this is not the case within the Marxist tradition, broadly
conceived.
Capital looks for investment opportunities not in saturated markets
but in new markets and these markets can be found anywhere, not
necessarily in the developed core alone or exclusively in the under-

developed zones of the global South. Thus, the geography of uneven
(and combined) development sets in and capital displaces its crisis. This
is the point in which Harvey goes beyond Marx: by way of appropriat-
ing new production and regional and global distribution sites, capital is
effecting a ‘spatial-temporal fix’, reducing its crises to ‘minor switching
crises as flows of capital and labour switch from one region to another,
or even reverse themselves, and spark regional devaluation’.50 This is
only temporary, Harvey says:
The problem, of course, is that the more capitalism develops, the

more it intends to succumb to forces making for geographical iner-
tia. We here encounter a version of that contradiction that Marx
described as the domination of dead over living labour. The circu-
lation of capital is increasingly imprisoned within immobile phys-
ical and social infrastructures which are crafted to support certain
kinds of production, certain kinds of labour, processes, distribu-
tional arrangements, consumption patterns, and so on. Increasing
quantities of fixed capital and longer turnover times on produc-
tion check uninhibited mobility. The growth of productive forces, in
short, acts as a barrier to rapid geographical re-structuring in exactly
the same way as it hinders the dynamic of future accumulation by
the imposition of the dead weight of past investments. Territorial
alliances, which often became increasingly powerful and more deeply
entrenched, arise to protect and enhance the value of capital already
committed within the region.51
Let us look at the key ingredient of the USA’s international policy since
at least the 1890s. When US Secretary of State, John Hay, promulgated
an Open Door policy in 1899 for the USA challenging the monopoly
of China’s market by Europe’s imperial powers, he did so under pres-
sure from big individual capitals at home, which required substantial
overseas expansion to overcome their crisis of over-accumulation and
profitability in the 1890s.52 Open Door has since been a structural fea-
ture of US foreign policy projected across the globe and not just in
Europe or Japan. Since the 1890s, Open Door has been a key compo-
nent of the strategic culture of US policy-makers. It is an expression
of the domestic needs of US capital, whether industrial/technological or
financial, real or fictitious, that seeks investment outlets abroad and unfet-
tered, unprotected markets. It is a policy that goes pari passu with that
of ‘expanding liberal democracy abroad’ and ‘defending human rights’,
inasmuch as if liberal and democratic principles are not adopted across

the world, then American democracy is in danger at home – or at
least that is how US elites perceive global and regional realities.53 Open,
unprotected markets free of state intervention and open, liberal polities
are the ideal conditions for US capital and political and military agencies
to penetrate and establish themselves within the polities and economies
of other capitalisms in order to determine their direction. Free markets,
whether industrial, corporate or banking/financial, and open polities
friendly and subservient to the hegemonic power underscore perfect
conditions for the exploitation of labour and, importantly, perfect con-
ditions for US capital to overcome its over-accumulation crises. This is
what capital wants and seeks abroad if it cannot find it at home. If possi-
ble, capital wants to have zero production costs and zero risk. Marx put it
as follows: ‘[This] zero cost of labour is therefore a limit in a mathemat-
ical sense, always beyond reach, although we can always approximate
more and more nearly to it. The constant tendency of capital is to force
the cost of labour back towards this absolute zero’ (our emphasis).54 Is it not
exactly this that financial capital and the state are trying to achieve with
their policy of severe austerity they impose across Europe today?
2.3 Global fault-lines and the imperial

geo-politics of debt
‘World system’ theories and Fernand Braudel’s work are important

because their narrative aims at advancing a global analytical perspec-
tive, going beyond the narrow horizon of nation states and national
economies. They analyse global imperial systems and, some of them,
provide a cyclical interpretation of power-shifts occurring within and
between the structures of those systems. Cyclical theories of crises are
present in the work of many Marxisants – see, for instance, Kondratieff’s
work and how Immanuel Wallerstein has used Kondratieff waves to
interpret the financial crisis that set off in 2007–08.55 But Marx him-
self had had some interesting thoughts regarding the regular return of
crises under capitalism affecting specific business cycles. For example,
he writes:
The factory system’s tremendous capacity for expanding with sudden

immense leaps, and its dependence on the world market, necessarily
gives rise to the following cycle: feverish production, a consequent
glut on the market, then a contraction of the market, which causes
production to be crippled. The life of industry becomes a series of
periods of moderate activity, prosperity, over-production, crisis and

stagnation.56
And again in a footnote inserted in the French edition of the first volume
of Capital in 1872:
[But] only after mechanical industry had struck root so deeply that
it exerted a preponderant influence on the whole of national pro-
duction; only after foreign trade began to predominate over internal
trade, thanks to mechanical industry; only after the world market
had successfully annexed extensive areas of the New World, Asia
and Australia; and finally, only after all this had happened can one
day the repeated self-perpetuating cycles, whose successive phases
embrace years, and always culminate in a general crisis, which is the
end of one cycle and the starting-point of another. Until now, the
duration of these cycles has been ten or eleven years, but there is
no reason to consider this duration as constant. On the contrary, we
ought to conclude, on the basis of the laws of capitalist production
as we have just expounded them, that the duration is variable, and
that the length of the cycles will gradually diminish.57
Marx, nevertheless, never produced a theory of imperialism or a theory

of cyclical and recurring crises. Of all those trying to produce such a
narrative, Arrighi’s work stands out, because he does not simply invoke
long durée – i.e., long macro-historical cycles registering and analysing
periods in which ‘real’ and ‘fictitious’ capitals alternate in the domina-
tion of socio-economic and political orders in history. While remaining
within a Marxisant framework, he also expands Braudel’s insights by
applying them to 19th- and 20th-century global politics. Arrighi’s mon-
umental trilogy captures the long historic and hegemonic decline of the
USA, whose policies of globalization and neo-liberalism are incapable of
arresting.58 Arrighi and Beverly Silver describe how great powers rise and
fall through successive historical cycles linked to periods of economic
crisis, whether these crises are manifested in the real economy, thus
captured by Marx’s and Harvey’s ‘first-cut theory’ of over-accumulation,
or in the fictitious economy, captured by Harvey’s ‘second-cut the-
ory’ of financial and credit crises. Importantly, Arrighi, like Gunder
Frank and Wallerstein, does not believe in a strict separation between
modern and pre-modern eras. Imperialism and empires can flourish
very well under both commercial (pre-capitalist/pre-modern) and indus-
trial (modern/capitalist) regimes. Thus, both capitalist and commercial
empires in history moved through phases of productive or commercial

expansion and through phases of slowdown and deceleration marked
by financial expansion. The key contention here is that each time, espe-
cially in capitalist/modern history, empires expand their power, they do
so on the basis of their lead in the industrial-productive sector, whereas
when a phase of contraction and crisis opens they are forced to resort to
financialization in order to stave off crises in commerce or industry. But
resort to banking and finance, Arrighi and Silver argue, never manages
to restore the global primacy of the empire – Robert Brenner would add:
it also never manages to restore previous levels of profitability enjoyed
under the years of industrial expansion. All in all, resorting to finance
simply delays the empire’s decline and fall, and this is the case with the
US empire at present.
This argument of cyclical and recurrent patterns is better refined in
Arrighi’s Adam Smith in Beijing (2007), and in two other contributions
written shortly before his death (2009).59 Arrighi adopts Braudel’s peri-
odization of capitalism, identifying three periods of financial expansion:
the first was under the hegemony of Italian city-states in the mid-16th
century; the second was centred on Holland (mid-18th century); and the
third, in the late 19th century, was driven by the UK. We are interested
here in discussing the third period, because it is a period that came into
being as a result of the over-accumulation crisis in the UK (and other
core Western capitalist centres), and ended with the 1929–32 financial
crash. This is also a period in which capitalism as a mode of production
is operating in full, whereas all previous ‘Braudelian’ periods described
by Arrighi and other ‘world systems’ theorists are social and histori-
cal epochs structured alongside the dominance of commodity exchange
relations.60
The beginning of each financial expansion, Arrighi says, indicates
the ‘signal crisis’ of the global hegemon in the system. For example,
the ‘switch’ to finance at the end of the 19th century signalled the
beginning of the ‘terminal crisis’ of the British Empire. The finan-
cial meltdown of 1929–32 signalled the beginning of the end of the
dominant regime of accumulation, or in other words the end of the
hegemony of the UK system of global governance, and its subsequent
succession by the new global industrial and credit power, the USA. Sim-
ilarly, the US-led process of post-World War II capitalist accumulation,
centred on industrial development and growth in all core capitalisms,
gave way to financialization and, therefore, a protracted period of
US hegemonic decline began since the 1970s (‘the signal crisis’). This cri-
sis of financialization at present is but the ‘terminal crisis’ of the US-led
system of accumulation. In short, this is Arrighi’s Long Twentieth Century

concept. His Adam Smith in Beijing is a courageous and powerful intel-
lectual attempt to show that the new rising global leader to take over
from the USA is China – a position also shared by Harvey. China is the
new global centre of material accumulation of wealth, and potentially,
of political/military power, a view to which many scholars, including
non-Marxists, such as John Mearsheimer, subscribe wholeheartedly but
without adopting any Braudelian, or indeed Marxisant, perspective. Sig-
nificantly, Arrighi has dedicated his last book to Andre Gunder Frank,
another major exponent of the global power-shift to Asia.
We have shown elsewhere that Arrighi’s work does not factor in geo-
political and security issues as constitutive variables of hegemonic tran-
sitions, crises and conflict.61 His historicist-cyclical approach disallows
counter-factual history – for example: what if Germany (and Japan) had
won the World War I or II? Moreover, it cannot capture the spread, depth
and asymmetrical rate of development of economic power relations at
the present juncture, including Germany’s neo-imperial monetarist aspi-
rations in Europe. We need, therefore, to supplement his argument by
introducing the structuralist problematic of global and regional fault-lines
in which instances and units of the whole – politics, culture, ideational
elements, political economy, geo-politics and security – are constantly
interacting producing and re-producing equilibria and disequilibria and
defining periods of relative peace and prosperity and periods of crisis,
war and socio-political upheaval. Hegemonic transitions and regional
distributions of class power take place within this context, which is
not necessarily determined by the cyclical and historicist pattern of
recurrence of Braudelian historiography.62
We can now move on to build upon Harvey’s ‘third-cut’ theory of
‘spatial fix’ and ‘accumulation by dispossession’. Building upon this,
we can advance and test our argument that substantiates geo-politics,
geo-culture and security as constitutive variables in the determination of
debt creation. This is especially pertinent in countries such as Greece,
the Balkans or Middle Eastern states, whose geo-political value through-
out their modern history has far outstripped their industrial or financial
robustness. In short, we argue that global fault-lines help us build
into the structure and flow of capital relation a new set of contradic-
tions and determinations which are pertinent in understanding the
overall unfolding of a crisis situation, including debt crises. Thus, we
can decipher the ways in which geo-politics, at times, contradicts the
requirement of real capital formation creating fallacies, notional strate-
gic deficiencies and misconceptions that come to haunt policy-making
elites, whether national or imperial/international, for a long time. The

main institutional structure in which geo-political and security dimen-
sions of debt are crystalized is the defence budget of a state. Matters,
obviously, become extremely complicated when the state formation in
question is a subaltern state dependent upon imperial arrangements
but whose security and geo-politics outweigh its political economy –
which is the case with Greece and also Cyprus. From this perspective,
global fault-lines straddle the contradiction between the monetary base
of the capitalist system and its financial superstructures, making the sit-
uation even more explosive and precarious. But precisely for this reason,
global fault-lines add onto the lenient and resilient dimension of capi-
tal, strengthening its sinews in time and space. What makes capital weak
and vulnerable is what makes it at the same time strong and durable.
There is no single causal theory of crisis formation and our global fault-
lines argument asserts precisely this. From a theoretical perspective, this
is, we argue, the case of Greece and the eurozone today.
It should be clear by now that debt is a form of fictitious capital and
national/sovereign debt is fictitious capital par excellence. In a certain
ideal-typical form, debt is a type of imaginary capital whose magnitude
results partly from borrowing in order to cover deficits.63 Think of John,
an immigrant working in a car factory in Detroit, borrowing $10,000,
interest-free, from his old friend in London, Paul, to decorate his house
and fix the damp, because his modest wage disallows any savings. But
then John is unable to pay the money back on the set date as stipu-
lated by the private agreement signed with Paul. So John has a deficit.
Then John, unable to pay his dues, opts to go to the bank to borrow
$10,000 at 8 per cent interest in order to pay back Paul. He then pays
Paul half the amount, $5000, because he needs the rest of the money
to pay the decorators. But the amount he borrowed from the bank and
the monthly interest accrued become an even more unbearable burden
for John because his salary is not enough to provide the means for his
own subsistence while keeping up with regular payments to the bank,
on top of paying the decorators. This means that John cannot service his
debt obligation. He also has a $5000 deficit to Paul. In this case, John has
either to declare bankruptcy; or do something and get the bank to cancel
his debt – which is unlikely; or convince the bank to reduce the prin-
cipal ($10,000) – also unlikely; or convince the bank to cut the interest
rate down to an affordable level and roll over his debt – which is possi-
ble but no one can guarantee that this is an optimal solution for him,
as his living conditions will keep worsening. If none of this happened,
then the bank would have to start repossession proceedings (e.g., repos-
sessing John’s belongings, such as property, land). But John, as we saw,
has also the option of declaring bankruptcy. This means that he will be
put on the ‘black list’ of every bank in the country; he will not be able to
borrow again; and he should consider finding a better-paid job, so that
he can finally fix the damp in his house before it causes irreparable dam-
age. Obviously, matters are far more complex when we substitute John
with the Greek state; John’s salary and Paul’s interest-free loan to John
with Greece’s fiscal deficit; Paul’s decorators with Greece’s civil servants
and, finally, when we substitute John’s bank with Greece’s private and
international lenders (IMF, ECB, the EU) on terms stipulated by the class
interests of bond-dealers and creditors.
However, even in this example, we can still discern, in a primitive
and raw form, Harvey’s main theoretical proposition, namely the ten-
sion between ‘the financial operations of the system and its monetary
underpinnings’. John’s wage is the ‘price’ of his labour-power and, as
such, it has produced real value, so it constitutes the solid monetary
base of the system in the realm of circulation of equivalences. Neverthe-
less, the financial operation under way seems to be creating a bubble,
a ‘fictitious superstructure’ above this base, which substantially diverges
from John’s ability to pay offering the ‘price’ of his ‘labour-power’ as a
collateral. Matters, as we saw earlier, come to a head when the bank’s
interest-bearing capital comes to the fore. But the aforementioned visu-
alization does not include the location of John’s house. At this level of
abstraction, capital is disinterested in geography, although, as we know,
fictitious capital is very interested in house speculation and house prices
are inflated to serve the interests of fictitious capital according to the
property’s location: although both in Manhattan, New York City, ren-
tier interests price a one-bedroom flat in the Upper East Side four times
more than a flat of similar size and quality in Inwood.
Harvey, by elaborating on Marx’s, Hannah Arendt’s and Rosa
Luxemburg’s work, offers some further insights without exiting his
‘third-cut’ theory framework:
Capitalism survives [ . . . ] not only through a series of spatio-temporal

fixes that absorb the capital surpluses in productive and constructive
ways, but also through the devaluation and destruction adminis-
tered as corrective medicine to what is generally depicted as the fiscal
profligacy of those who borrow. The very idea that those who irre-
sponsibly lend might also be held responsible is, of course, dismissed
out of hand by ruling elites.64
This, Harvey says, is a form of ‘capital bondage’ and, we could add,

applies directly to core-periphery relations both within the EU and
globally. Brushing aside liberal (functionalist and neo-functionalist)

views about the so-called ‘process of European integration’, the truth
of the matter remains that the industrial core of the EU, that is primar-
ily Germany under the geo-political and security tutelage of the USA via
NATO, pushed for expansion seeking ‘temporal-spatial fixes’ in order
to overcome crises of over-accumulation. Problems, nevertheless, soon
accumulate when the periphery, whether Southern or East European,
needs to borrow from the core in order to consume products of the core.
Then ‘capital bondage’ is on the doorstep of the periphery: John has to
pay or, as Christine Lagarde, the IMF chief, put it just before the crucial
Greek election of 17 June 2012 in order to terrorize the electorate and
push it away from the radical Left of Syriza: ‘Greece, it’s payback time’.65
Harvey expands Marx’s category of ‘primitive accumulation’, which
he recasts as ‘accumulation by dispossession’ and asserts that whereas
capital is always producing crises, it, at the same time, has the ability
and the resilience to move them around, resembling the way in which
capital can ‘solve’ the housing question by moving populations around
in the very same city.66 This is part of what we have called the ‘sinews
of capital’. ‘Primitive accumulation’ is a term Marx used to describe the
early stage, or the ‘pre-history’ of capitalism, a kind of a violent tran-
sition period – for Marx, the birth of capital had been anything but
peaceful – in which the mass pauperization of peasant societies, whether
in metropolitan accumulation centres or in colonies, occurred while
attempting to adapt to the new social conditions imposed by capital,
reigned supreme. ‘Primitive accumulation’ includes a number of pro-
cesses, such as the creation of national debt in the colonies, land reform
and changes in property rights, commodification of labour-power, intro-
duction of a credit system and institutionalization of usury, etc. But
Harvey, as opposed to Marx, says that capitalism contains repeated
instances of ‘primitive accumulation’ and that this condition is recur-
rent and repetitive occurring in periods of severe crisis and hitting
popular strata whether in urban conurbations in advanced capitalist
societies, or in peripheral countries. This is what invigorates capital.
Soon after the collapse of the Soviet Union, East-Central Europe experi-
enced the barbarity of ‘accumulation by dispossession’ via Jeffrey Sachs
‘shock therapy’ programme.67 The process of extreme financialization
that began after 1971–73 is another instance, whereas neo-liberal policy-
making and privatization, Harvey says, is the ‘cutting edge of accumula-
tion by dispossession’. Harvey sounds more than prophetic, given that
he was writing this in the early 2000s, when the property bubble in
the USA, the UK, Spain and elsewhere was in full swing. But he, as
well as other scholars, such as Peter Gowan, could sense that the mas-
sive contradictions of financialization cum neo-liberalism, manifested
in periodic bail-outs and orchestrated crises of capital devaluation (e.g.,
South-East Asia), at times even via wars (e.g., Yugoslavia, Afghanistan,
Iraq), would soon implode. Thus, what appears to be capital’s strength
turns out to be a weakness.
However, we part ways with Harvey in that he sees geo-political space
and, by extension, geo-politics and security as an outgrowth of cap-
ital’s extended reproduction and continuous accumulation. As such,
capital presents an omnivorous propensity, looting and squatting every
space, every corner and, for that, requires an accumulation of politi-
cal power to protect it and its very (extended) reproduction. From this
perspective, geo-politics and the capitalist state seem entrapped in the
pincers of capital’s extended reproduction, reduced to being a mere
instrument in the structural imperial power of capital. But geo-political
space has a ‘value’ in itself, namely, a security value, well before it
becomes engaged in projects driven by capital and capitalist political
power. In theory, and if we set environmental problems aside, there
is always space (outer, subterranean and oceanic) and resources (oil,
gas, hydrocarbons, and more recently shale gas) available for capital
to exploit and, as Marx put it, ‘capital grows to a huge mass in a sin-
gle hand in one place, because it has been lost by many in another
place’.68 But capital and state imperial power have the tendency to
move and concentrate in certain places and not others, simply because
of the geo-strategic value of the place per se. Geo-strategy, that is, the
strategic management of geo-political interests, comes into play only
when specific imperial agencies and decision-making centres call upon
it. Thus, geo-political space has the capacity to attract political and eco-
nomic projects, because it is perceived as geo-strategically important
by key bureaucratic centres within the imperial system (state power
and agencies, policy-makers, various fractions of capital and business
interests directly involved in policy-making). Capital, as Benno Teschke
has convincingly argued, has de-territorialized international surplus
appropriation – read: imperial projects – but this de-territorialization has
been ‘geopolitically mediated’.69 In other words, geo-politics has a rel-
ative autonomy from capital’s extended reproduction across capitalist
time and space and political power and capital accumulation do not
always converge. There is, primarily, imperial power and capital concen-
tration in the Persian Gulf because of the geo-politics of oil, not because
of any innate tendency of capital, whether imperial or local, to occupy
that space to dump its surplus production in order to devalue. If instead
of oil – a geo-political category par excellence – the Middle East produced

only dates then imperial power and international capital would have
had no reason to be there. ‘Our paramount national security interest
in the Middle East’, a 1995 US Department of Defence report stated, ‘is
maintaining the unhindered flow of oil from the Persian Gulf to world
markets at stable prices’.70 The only missing element in the statement
is that these ‘prices’ have to be denominated in US dollars. A global
monetary/money dimension – ‘the dollar’ – is then linked directly to
a geo-political commodity – ‘the oil’ – co-determining imperial power
relations and the global hegemony of the USA. Defence and pharma-
ceutical industries come into the equation immediately when we invoke
the issue of wars in the Middle East and Central Asia. In the main, this is
the problematic of ‘weapon-dollar/petro-dollar coalition’ developed by
Jonathan Nitzan and Shimshon Bichler, a problematic co-determined by
IPE cum geo-politics.71
The relative autonomy of geo-politics from capital’s (cyclical) move-
ment under capitalism creates structural fault-lines in the system and
increases its existing tensions, already manifested in the three theories
of crises examined above. Our argument enhances Harvey’s approach
as much as it does Arrighi’s. More to the point, we argue, geo-politics
is directly related to the issue of debt creation. What was the rationale,
asks Alec Rasizade, for sustaining a particular type of policy over Caspian
oil in the 1990s exaggerating the amount of oil and gas that really exists
in the Caspian Sea region?
The first reason is geo-political. In the so-called Silk Road Strategy

Act of 1999, Transcaucasia represents an important geo-political isth-
mus, linking the Black Sea and Caspian seas and providing the West
with a ‘silk road’ to Central Asia. By reanimating the silk road,
which would avoid passing through Iran (historically its integral
part), Washington is trying to limit Russia’s influence in the region,
while at the same time restricting the number of potential allies for
Tehran [ . . . ]. Secondly, the interest of international oil companies
in sustaining the Caspian energy phantom can be easily explained
by their motivation of profit. All of these ventures are joint-stock
companies and shareholders of those companies derive their main
profit not from increasing dividends based on successful commercial
activity, but from rising price of their shares on the stock exchange
and oil futures on the mercantile exchange. This is the very essence
of Western business investment in the Caspian Basin. By participat-
ing in high profile Caspian projects and issuing rosy reports of great
resources, oil companies improve their stock image, generating an

instant profit without pumping a single barrel of oil. In fact, to begin
seriously extracting oil would be counter-productive given the danger
that the true extent of oil reserves would then be exposed.72
Thus, capital makes fictitious profits out of geo-political opportunities

widening the gulf between the monetary base of capital and its finan-
cial manifestation. In the example given above, even ideational elements
come into play, when financial journalists and analysts of all sorts exag-
gerate in their feasibility study reports the amount of oil and gas that
really exists in the Caspian Sea region in order to increase speculation
in the stock market. This is how the imperial geo-politics of oil becomes
a direct contributor to society’s debt.73
Having said this, it also seems to us that Harvey underestimates the
relative autonomy of the state, especially of the imperial state, to make geo-
strategic decisions based on geo-political and security considerations,
rather than the class interests of capital and its fractions as such. In this
respect, Harvey avoids putting forth an analysis of the state, viewing
instead the state, geo-politics and capital as congruent entities swal-
lowed up by the capital-form. This perspective, however, does not help
us understand fully NATO’s and the EU’s eastward enlargement pro-
cesses; NATO’s ‘humanitarian war’ over Kosovo; the USA’s invasion of
Afghanistan; the Suez Canal crisis in 1956, the list is long enough.
Could somebody reasonably argue that Latvia or, for that matter, Greece
and divided Cyprus, entered the EU primarily because German capi-
tal sought market space to devalue its surplus capital, thus overcoming
over-accumulation crises? This is definitely not the case, at least not pri-
marily. German, French and other core polities in the EU took these and
a number of other decisions also by taking into account geo-political
and security factors, and following NATO’s instructions. As Peter Gowan
has shown, the primary consideration of the Euro-Atlantic heartland
in the 1990s was how to stabilize hub-and-spoke arrangements in East-
Central Europe by way of excluding Russia and its client states, such
as Serbia.74 Thus, NATO’s war over Kosovo was bound up with NATO’s
eastward drive, hence it had been a matter of Euro-Atlantic security
to exclude Russia from the Balkans via eliminating Serbia’s pro-Russian
elites. But the mismatch/contradiction between geo-political structures,
on the one hand, and capital formation, on the other, is systemic and
straddles the mismatch/contradiction between the monetary base of the
system and its financial operations, so eloquently analysed by Harvey
himself. This exemplifies further our notion of ‘global fault-lines’ and
applies directly to our research agenda on the crisis of Greece and the
EU. Global fault-lines are the discursive articulation of economic, political,
ideational and geo-political instances in a social formation divided into classes
and determined by social struggle. Global fault-lines pave the ground for
severe tensions and imbalances in the instances concerned, especially
when severe economic crises kick in, upsetting the entire discursive
articulation of those instances.
From the theoretical perspective of global fault-lines, the political
economy and imperial geo-politics of the Euro-Atlantic heartland has
been under-going a slow and painful decline since the late 1960s, which
the collapse of the Soviet bloc not only failed to arrest but, on the con-
trary, made even more pronounced. A great part of the US-led Cold War
apparatus rested on the ideational scheme of the ‘global war on Commu-
nism’. With the disappearance of this ideational peg and its unsuccessful
and unconvincing replacement after 9/11 with the ‘war on terror’, the
(ideational) glue connecting the USA and West Eurasian rimlands seems
to have gone. Moreover, the geo-political expansion of the West in
Eurasia (via NATO) and the greater Middle East (via wars and establish-
ment of military bases) has not been a sign of strength but rather a
weakness highlighting the deep contradictions guiding the alliance and
USA’s policy in Eurasia after the end of the Soviet Union. This expansion
over-stretched US military capabilities and weakened the Cold War hub-
and-spoke arrangements the USA had built across each end of Eurasia,
with its Japanese bastion in the Far East and NATO’s presence in Europe
and the Near/Middle East, which includes Greece and Turkey. And as
this grand strategy was pegged on neo-liberal economics and extreme
financialization from the late 1970s onwards, thus lacking any political
cohesion and demand-led components, when all these pegs imploded,
the projects of expansion and profit-making upon which German-led
core European capital had invested so many hopes also went down the
drain. It is important to note that both globalization/financialization
and neo-liberalism are not conducive to growth, hence they are directly
connected with the creation of debt in the entire Euro-Atlantic zone
(USA + EU). Commodification of financial products and extreme manip-
ulation of financial instruments for easy profiteering are more conducive
to debt creation rather than growth, and this is something that applies
across Europe and the USA, not just Greece. With its manufacturing base
eroded and outsourced to the ‘global East’, the debt problem is becom-
ing a permanent feature of the ‘global West’. The production of real
use values has shifted to Asia and elsewhere and herein lies our argu-
ment about the decline of the West. But in the juncture that opened up
with the current financial crisis (2007–), the disintegrative tendencies of

both NATO and the eurozone are indeed very pronounced, undermin-
ing directly the primacy of the USA in international relations and the
emergence of a number of other centres of regional (e.g., Germany) and
even global (e.g., China) power. Simply put, Marx’s value theory, which
captures the convergent and divergent flows of capital-labour relations
generating and solving a number of (cyclical) crises in capitalist time
and space while shifting the terrain of global hegemony, has triumphed
once again.75 Presently, the sinews of capital are tested by their ability to
re-invent themselves against all odds and at the expense of the labour
movement in Greece, Europe and the globe.
2.4 Capitalism, populism and the state
We have already made some generic theoretical remarks concerning

the definition of the (capitalist) state. But as the focus of our empir-
ical work is on Greece and the eurozone, we thought it opportune
here to build upon these general theoretical comments to advance a
medium-range theory of the (capitalist) state in the global periphery, not
least because, historically, these states have developed such structures of
political dependency and economic subordination upon the core that
makes their capitalist – both economic and political – form of devel-
opment appear ‘distorted’ and/or as ‘lagging behind’ if compared with
analogous forms of capitalist development in the core (forms of institu-
tionalization of social demands and liberal democracy, level of industrial
and financial development, etc.).
Wallerstein’s description of the global imperial system composed of
core, periphery and semi-periphery has proved analytically useful, offer-
ing many heuristic tools and leading to successful applications in the
field of area/regional studies.76 In the main, and building upon some
aspects of Lenin’s and Trotsky’s work, ‘world system’ theorists employed
a concept of imperialism as an economic policy and trade mechanism
of the developed core (the North) for the exploitation of the periphery
(the South). We would like to argue that this approach, in structural
terms, pertains to the concept of uneven (and combined) development
that we examined above. But agency is as important as structure and
perhaps even more important because it identifies the socio-political
profile of the structure. The core recycles and appropriates values and
assets mediated in the global South via periphery comprador strata (e.g.,
great import consortia), with the political elites of the periphery becom-
ing the dependent and corrupt appendages of the industrial/financial
core. This, we repeat, is a global dynamic class relation and not a static
geographical phenomenon pertaining to certain regions or states. The
classic definition of comprador bourgeoisie, later embraced by Christopher
Chase-Dunn and others,77 comes from Nicos Poulantzas (via Andre
Gunder Frank):
[comprador bourgeoisie is a] fraction of the bourgeoisie which does

not have its own base for capital accumulation, which acts in some
way or other as a simple intermediary of foreign imperialist cap-
ital (which is why it is often taken to include the ‘bureaucratic
bourgeoisie’), and which is thus triply subordinated – economically,
politically, ideologically – to foreign capital.78
This bourgeoisie acts as a go-between for foreign companies in domes-

tic and foreign trade and in money markets. We are set to examine
the peculiar profile this bourgeoisie assumed in the Greek context,
but especially from mid-1990s onwards, as it was only then that neo-
liberalism and financialization (globalization), as political programmes,
made headways in Greece. Whereas the capitalisms of the Atlantic heart-
land in the 1970s and 1980s under the favourable post-1971 regime of
free exchange rates and dollarization were experiencing the transforma-
tion of industrialists into financiers and speculators, Greek capitalists
transformed themselves from petty industrialists and merchants to
go-betweens and comprador financiers under state protection and toler-
ance, enjoying remarkable tax privileges, especially from the mid 1990s
onwards. In other words, whereas the comprador element dominating
modern Greek politics and economics is of commercial nature, after
the mid-1990s it assumes predominately financial, fictitious character-
istics. In the first instance they were trading real (imported) commodi-
ties; in the second they were trading fictitious (imported) commodities.
Put differently, whereas the prevailing comprador commodification
(and debt creation) of Greece’s political economy after World War
II reflected the flow of real commodities, from the mid-1990s onwards
this commodification becomes predominately mediated with financial
commodities. From this perspective, and whatever the case, the main
source of the Greek and other periphery debt pertains to the struc-
ture of the country’s current account and balance of payments deficits
caused by the asymmetry of values produced and exchanged within
the European markets. Whether real or fictitious, markets do not pro-
duce equality. Those who gain are the developed countries of the
industrial/technological core. Marx, quoting Galiani’s work on money,

put it as follows: ‘where equality exists, there is no gain’.79 The peculiar
fusion of comprador and financial/rentier capital with the Greek state
apparatuses and political economy will be the leitmotiv of our empirical
analyses, especially when dealing with the post-1995 conjuncture.
Peripheral/subaltern states that are dominated by comprador ele-
ments of real or fictitious/financial commodities present some spe-
cific and peculiar characteristics. As far as their international relations
are concerned, peripheral states, we repeat, are deeply dependent on
decision-making processes that take place in the core – unless, of course,
if these states manage to break away from the imperial chain – as Cuba
did or as Allende’s Chile contemplated doing in the early 1970s. Struc-
tures of dependency on the core are built directly within the polities of
the periphery, manipulating key policy parameters, such as defence and
security matters, directing even executive decisions and determining the
state of exception (e.g., engineering and imposing dictatorships). True,
peripheral states, as all states, have to maintain a relative autonomy
from exogenous (imperial) and domestic (capitalist) agencies in order to
organize hegemony at the behest of the dominant transnational classes
and the local business classes. But arrangements between core and
peripheral states are such that, especially in periods of crisis, the periph-
eral state tends to assume characteristics of a ‘protectorate’ deprived
of any meaningful, even formal, autonomy/sovereignty. No doubt, this
had been the case of modern Greece in a number of instances during the
19th century, or after the Civil War (1940s and 1950s) and, arguably, this
has been the case of Greece since it entered into the bailout programmes
of the ‘troika’. With Greece taking on characteristics of a protectorate
and a ‘pariah’, and with the USA unable to intervene economically
via a ‘new Marshall Plan’ while other European powers are also in
troubles financially, Germany takes on characteristics of a neo-imperial
economic power within the eurozone.
Overall, hub-and-spoke and other hegemonic arrangements take place
in the periphery in a rather overt form, as the institutional materiality
of the peripheral state is fundamentally weak to provide the neces-
sary cover – without this meaning that the labour movement is also
weak. To put it differently, there are different hegemonic hub-and-spoke
arrangements between, say, the USA and Turkey, on the one hand, and
the USA and Greece, on the other. The same goes for a number of other
hub-and-spoke, whether political or economic, arrangements between
the core and its sub-divisions and the periphery. No doubt, this is
mainly due to the internal political-power structures, norms and socio-

economic characteristics of the peripheral state which, lacking a robust
industrial and institutional base to build necessary ‘protection fences’
(legal agencies and bodies, large ministries and information structures,
organized and professional bureaucracy, etc.) commits its political agen-
cies (mainly parties and trade unions) to clientelistic and nepotistic
practices to organize politically the hegemony of comprador capital and
its transnational masters within an enlarged state machine proper. The
interpenetration of the state and civil society in a peripheral state is
such that almost every individual, company, small or large business,
banks, trade unions, think-tanks, political parties are, directly or indi-
rectly, financially dependent on the comprador state. The state draws
legitimacy and power from the economic favours it can distribute to its
citizens and business, rather than from a defined institutional frame-
work within which citizens, political parties and business operate. Thus,
clientelism, nepotism and corruption are far more visible in a comprador
state/civil society nexus than in advanced capitalist state/civil society
nexus, although the magnitude of scandals, corruption and wheeling
and dealing that take place in the core are far more outrageous than
the respective practices in the periphery: capital, capitalism and their
political representatives, whether in the core or in the periphery, can
never be ‘pure’, honest, legal, humanistic and innocent. Having said
this, the comprador state, through its political parties, tends to orga-
nize its hegemonic consensus through specific strategies, such as that
of populism and political clientelism, which are strategies that build on,
and merge with, the family structures of society, which substitutes for
the welfare state in the periphery par excellence. But it would be wrong to
view these strategies only from the point of view of a lack of a robust cap-
ital base to absorb surplus labour. As the cases of Argentina, Brazil and
Greece have shown, popular mobilization and social protest have been
manipulated by populist elites in order to be directed into, rather unsuc-
cessful, new cycles of capital accumulation – e.g., import-substitution
policy – under the aegis of populist elites (Peron in Argentina, Vargas
in Brazil, Andreas G. Papandreou in Greece) which, in the meantime,
have struck new arrangements with their imperial patron.80 In this con-
text, populism and political clientelism do not correspond to an absence
of modernity in the periphery, for these strategies are put forth by
elites geared to block the labour movement from assuming power, a
fact which may entail the breaking away of the peripheral state from
the imperial chain. In other words, these are political strategies that flour-
ish not in absence of modernity but in view of modernizing against the labour
movement.81 Thus, it seems to us that, both theoretically and empirically,

the sinews of capital are mostly tested in the periphery.
Having said this, and as we already noted in the previous chapter,
the argument put forth by many political scientists, sociologists and
even political economists that clientelism and populism are products
of ‘under-developed civil societies’ is deeply flawed.82 A state of emer-
gency is more likely to take place in the periphery/semi-periphery than
in the core, because the crises that capitalism generates there cannot
be easily absorbed due to the lack of a robust institutional framework
spread vertically – across the axis state/civil society – and horizontally –
across the regions and the various segments of the social economy. That
is how a Marxist, such as Antonio Gramsci, explained the failure of rev-
olution in the West, while analysing fascism as a ‘passive revolution’.83
What the late Poulantzas, in his last theoretical statement, State, Power,
Socialism, called ‘authoritarian statism’ – by which he meant the power-
shift within the state apparatus from liberal-democratic institutions to
the state executive due to the crisis of Keynesian policy-making and
Fordism – should be viewed today in the context of a new and aston-
ishingly more dangerous state authoritarianism effected by neo-liberal
financial elites in order to overcome their comprehensive – Arrighi
would say: ‘terminal’ as it links it directly with the decline of the
US empire – crisis.84
2.5 Final touches
We can now draw a few conclusions.

A crisis theory of debt is possible if placed within Marx’s own frame-
work of value theory and its uneven (and combined) development.
It is the outcome of the (unavoidable) asymmetries created between
the monetary and the financial bases of the capitalist system. Debt,
that is fictitious capital, is created when the amount of money and
paper circulating in the market does not correspond to the amount of
real commodities produced and exchanged in the same market; when
use-values in which labour is expended and reified do not tend to
converge with the monies in circulation at all times. This is chiefly
due to the operation of the ‘law of value’ that Marx theorized in
Capital. The spatial dimension of the ‘law’ is manifested through the
uneven (and combined) development between the core and the periph-
ery of global, regional and national capitalisms and is mediated by
the existence of comprador capital, whether real of fictitious/financial,
that tends to dominate the periphery state. No regulatory framework,
whether global or national, liberal or state-based, can overcome the

contradictions and asymmetries developed by the ‘law of value’ during
capital’s flow and circulation. Thus, the main creator of debt is cap-
ital itself. But geo-politics, security and ideational issues also matter.
They should be seen as co-constitutive variables of capital formation
and circulation that are articulated in a discursive manner in time and
space, yet always cut across and determined by social/political struggle.
Thus, ‘global fault-lines’ supersede the heuristic value of ‘uneven (and
combined) development’. An ideal-typical periodization of crises in cap-
italist modernity, and the responses to them offered by capital and its
policy-making elites, may read as follows:
(a) The competitive phase of capitalism analysed by Marx postulated

the ‘law of value’ and the contradictions and crises of over-
accumulation stemming from it as permanent, structural features
of capitalism as a finite social system. The over-accumulation crisis
of the 1890s proved the validity of Marx’s value theory, a fact that
pushed capital to finance capitalism (=imperialism), i.e., the merg-
ing of banking and industrial capital, as a means to deal with
over-accumulation crisis in industry. Geo-politics, meanwhile, keeps
mediating between political and economic decisions. Debt creation,
due to the reasons outlined above, is a permanent feature of this
phase of capitalist development. The global hegemonic power that
corresponds to this historical period is Great Britain and the political
form of imperialism employed is predominately, but not exclusively,
formal. From the 1890s onwards, it should be noted, Open Door
becomes a permanent feature of US international policy.
(b) Finance capitalism (=imperialism), exemplified in separate currency
and geo-political blocs, formal imperial arrangements and com-
petitive geo-political alliances failed to produce stable systems of
governance and solid industrial growth, leading to the 1929 collapse
of the credit system, the rise of authoritarianisms and the World
War II. In other words, the merging of banking and industrial cap-
ital fails to solve the contradictions of capitalism generated by the
‘law of value’ and the developing fault-lines between the financial
and monetary bases of the socio-economic system. Debt creation
continues to remain a permanent, structural feature of the system,
which becomes pronounced between the wars, especially among
European powers, which borrowed massively from the USA during
World War I. The USA, a new imperial and creditor power, rose to
global prominence in the aftermath of World War I on an informal

imperial platform.
(c) Hub-and-spoke informal neo-imperial arrangements had been intro-
duced in full in the aftermath of World War II by the USA. They
come as a response to the crisis of finance capitalism and competing
imperial geo-political blocs that led to World War II. Hub-and-spoke
imperialism is an attempt to overcome the previous global and regional
fault-lines of the system placing the USA at the centre of it – hence the
acclaimed notion of ‘American primacy’– yet without relinquishing Open
Door. Right across the board of the discursive articulation of the
system’s structures, the USA introduced ‘primacy’: (a) The dollar is
placed at the centre of the global (capitalist) monetary system and
becomes the global reserve currency; (b) US agencies become embed-
ded within the polities of the Western core in order to control the
decision-making processes of formally sovereign states; (c) NATO is
created and so is the institutionalization of security and geo-political
dependency of Europe upon the USA; (d) there is an expansion of
hub-and-spoke in Middle Eastern peripheries, Latin America and
South Asia in order to fill the power-vacuum created by the defeat
of old European imperialisms and assume geo-political control of
hydrocarbons; (e) the creation of a master binary ideational narra-
tive, that is ‘the war on Communism’, helps consolidate not just
the grip of the USA upon Europe, but also to transform the domestic
political environments of European politics alongside that binary.
Open Door, we repeat, is a constant, permanent feature of US Cold
War international policy. However, the structures and the arrange-
ments introduced in the 1940s began to falter in the 1960s, as the
fault-lines of the system could not be tamed.
(d) The dollar’s role becomes increasingly volatile in the 1960s. After
the end of Bretton Woods system (1968–71) the first signs of the
decline of US hegemony become apparent. An over-accumulation
crisis hits capitalism again in the 1970s, the responses of capital
to it now being extreme financialization (globalization) and neo-
liberalism. The present crisis of neo-liberalism cum financialization
tests the sinews of capital to the extremes, a crisis that reverber-
ates across the Euro-Atlantic heartland at a moment when China,
India, Russia and a number of other economic and geo-political
powers are on the rise. It is one of those ‘ironies of history’ that the
USA found itself in a position to witness China’s economic and even
military competition, which is primarily, although not exclusively,
the result of its own Open Door international policy. After the col-
lapse of ‘really existing socialism’, geo-politics assumes a particular
significance for the USA as a means of control, via power-politics,
of each end of Eurasia cum the Middle East. Debt creation accel-
erates across the Euro-Atlantic heartland via imperial geo-political
ventures (Vietnam, Kosovo, Afghanistan, Iraq) and as material pro-
duction and manufacturing bases move to Asia and other emerging
economies. Well before the eurozone found itself entrapped in the
pincers of debt, the USA has, since Vietnam, been managing an
informal neo-imperialism without credit. But the responses to the
present crisis across the Euro-Atlantic heartland is not Keynesian
policy-making but the deepening of neo-liberal policies in order to
save the banks and myriad financial agents and interests across the
global financialization chain. This is the greatest historical test for
the survival of the economies of the core, especially in the eurozone,
which lack the protection of a state form.
Comprador strata, whether of real commercial or fictitious/financial

stock, are hostile to any organized and ‘rational’ form of state bureau-
cracy and regulation. To put this differently, they are ‘anti-Weberian’
and, especially after the turn to financialization and neo-liberalism in
the West, these social groups tend to dominate not only the periphery
but also the ‘developed’ core: power is being shifted to the ‘global East’,
the new global creditor; our world is becoming increasingly multi-polar.
The key fiscal business of comprador elements is to either escape tax-
ation or to manipulate state elites to produce legislation favourable to
them. Historically, core industrial capitalisms created vassal, dependent
peripheral states after their own image in which great import consortia
tend to dominate. But as core capitalisms themselves moved away from
industry and embraced financialization and services in their attempt to
counter-balance the falling rate of profit, peripheral capitalisms, such as
that of Greece, became financialized/globalized without having been pre-
dominately industrial before. In this sense, peripheral comprador strata
not only contribute to the creation of debt via the structures of balance
of payments and current account, but also to fiscal deficit, which reflects
the revenue/expenditure structures of the (peripheral) state. Thus, in
astratto, the debt has both internal and external sources and is consub-
stantial with the notion of imperialism (=appropriation of international
value via unequal exchange and uneven development). Time and again,
the main source of debt is capital itself and, in comprador states, the
main creator of debt is the comprador bourgeoisie and its relation of
dependency on capitals of the core. It is no accident that Marx exam-

ines briefly the issue of national debt in the overall context of his final
chapters of Capital, v. 1, which refers to the genesis of capital and the
issue of colonialism. He writes:
The public debt becomes one of the most powerful levers of prim-
itive accumulation. As with the stroke of an enchanter’s wand, it
endows unproductive money with the power of creation and thus
turns it into capital, without forcing it to expose itself to the trou-
bles and risks inseparable from its employment in industry or even
in usury. The state’s creditors actually give nothing away, for the sum
lent is transformed into public bonds, easily negotiable, which go on
functioning in their hands just as so much hard cash would.
And he continues:
Quite apart from the class of the idle rentiers thus created, the impro-
vised wealth of the financiers who play’ the role of middlemen
between the government and the nation, and the tax-farmers, mer-
chants and private manufacturers, for whom a good part of every
national loan performs the service of a capital fallen from heaven
apart from all these people, the national debt has given rise to joint-
stock companies, to dealings in negotiable effects of all kinds, and to
speculation: in a word, it has given rise to stock-exchange gambling
and the modern bankocracy.85
But if imperialism is inserted in the geo-politics of uneven (and com-

bined) development bringing about the imperial subordination of the
periphery to the core, then the origins of the debt cannot be just an
outgrowth of capital’s innate imbalances. Systemic fault-lines which,
as we saw earlier, include geo-politics as a co-constitutive variable, are
in operation. The debt created in the periphery due to uneven devel-
opment and unequal exchange of values might also have geo-political
origins (e.g., the entry of Latvia into the EU and NATO, or the entry
of Greece and Cyprus into the EU). A country may be first valued geo-
politically and in terms of security before entering into new imperial
arrangements economically. How else could one explain Greece’s entry
into the EEC in 1981, five years ahead of Spain and Portugal? But
this relation of dependency/inter-dependency implodes, when crises
of over-accumulation or financialization kick in. The sinews of capi-
tal are tested in the periphery, where weak links in the imperial chain
are likely to appear. Under regimes of industrialization, real commodi-

ties are produced in Detroit and exported to the periphery. Under
regimes of financialization, fictitious commodities are first generated in
Wall Street and the shadow commodity/security markets of the City of
London, and then travel to the periphery and the globe via a myriad
of brokers and banks. Either way, the relation of dependency/inter-
dependency is real and is translated into political domination of the
core over the periphery. Yet what is shaking the establishments of the
Euro-Atlantic heartland today are two things. First comes the lack of
real industrial base and the concomitant rise of China and other devel-
oping economies. Second, the crisis in the eurozone is all the more
explosive, because, on top of all these imbalances, contradictions, fault-
lines and problems caused by de-industrialization, the EU is not a state.
Neo-liberalism and financialization have been and are policy platforms
designed to assist the USA and the British states to overcome their over-
accumulation crisis of the 1970s. These policies cannot assist the EU to
overcome its crisis, if they really ever assisted the USA and Britain to
overcome their own, as serious arguments – with which we disagree –
put forth by a number of scholars maintain.86 Germany’s monetary and
anti-inflationist platforms weaken, rather than strengthen, the cause of
Europe’s political unification, making the euro a credible, imperial world
money. Thus, we have argued that the hub-and-spoke system of global
imperial governance built by US policy makers in the 1940s is being
disintegrated, not least because its expansion in Eurasia under the aegis
of neo-liberalism and financialization is, by and large, an impossible
undertaking.
Every capitalist state is a condensation of hegemonic class relations
drawing power from the social/technical division of labour and the
social relations of production. The polities and the economies of weak
states are excessively controlled and influenced by the dominant power
of the international system. Peripheral, weak states tend to be primarily,
but not exclusively, comprador states with weak industrial and tech-
nological capital formation and state institutions, but not necessarily
weak labour (e.g., Greece) and/or peasant (e.g., Mexico) movements and
caudillos. Capitalist modernity is as present in the periphery as it is in the
core and everything that characterizes capitalism as a socio-economic
system and political mode of governance (exploitation, extraction of
surplus value, corruption, authoritarianism, etc.) also applies to the
periphery. It is the degree of capitalist modernity that differs, not that
the core is ‘developed’ and the periphery ‘under-developed’. This is the
context in which political elites in the periphery employ such political
strategies as populism and clientelism, which we interpret as political

strategies aiming at ruling not in absence of modernity but at how to
modernize against the labour movement of the country in question.
We have laid out the key theoretical premises upon which our empiri-
cal narrative will be based. How does this theoretical discussion transpire
historically in Greece’s modern political economy and international
relations? To these issues we should now turn.
Part II
Greece’s Fault-lines and the
Political Economy of Debt
3
The Vassal and the Lords
What are the key features of the Greek social formation from the
foundation of the Greek state in 1830 to the late 1930s and how are
those features related to debt? Answering this question requires a peri-
odization of the Greek social formation as it came to be inserted in the
uneven cycles of production and reproduction of the imperial chain,
structurally marked by the hegemony of the core over the periphery.
The context in which we place our periodization corresponds roughly to
the upswings and downturns of European and global capitalism, which
should be seen in tandem with a major global hegemonic transition,
namely, from Britain’s predominance in the Eastern Mediterranean and
world affairs to the USA’s supremacy after World War II. Britain’s slow
imperial decline, which began as early as 1890s, finds clear expression
in the following historical facts:
i) inability to guide, both politically and militarily, its imperial alliance

against Germany during World War I in such important theatres
as Western Europe and the Near/Middle East; World War I turns
Britain and France into debtor powers, their public finances now
being dependent on the new creditor power, the USA;
ii) inability to streamline financial and geo-political developments, at
least in coordination with other European powers during the inter-
war period marked by the severe financial crisis of 1929–33 and the
rise of fascism and Nazism.
The thesis that cuts across our historical/empirical analysis here is that Greece
occupies a dependent/subaltern position in the international social/technical
division of labour. As such, it is subject to power arrangements and deci-
sions that are taken by power centres and bodies which are external
59
60 Greece’s Fault-lines
to Greece enjoying no democratic legitimacy whatsoever. This happens

even when these arrangements and decisions concern Greek society,
economy and politics par excellence. We argue – and it will become
clearer in the chapters that follow this one – that this feature has not
changed to the present day. This is directly related to what we call
here the ‘birthmarks’ of the Greek state as a territorial/geo-political
unit and social/class relation dominated by international and national
capitalism.
The first ‘birthmark’ is the perceived geo-political value of the coun-
try relative to its political economy and assets, which includes its state
capacity to direct growth projects. The second is the qualitative develop-
mental gap between Greece’s social economy and that of the advanced
core/metropolises, a hiatus that reproduces itself in capitalist modernity.
These two strictly inter-linked ‘birthmarks’ constitute the historic and
structural fault-lines of the country determining the freedom of action
available to state elites and other social and political agencies. They are
the DNA of Greek capitalism – and, indeed, of many other capitalisms
in the periphery.
We begin by outlining the origins of the Greek social formation,
the way in which it came into being and the forces that determined
its first appearance on the map. We then move on to review the first
developmental phase of Greek capitalism, which roughly corresponds
to Europe’s industrial boom during the second half of the 19th century
and the consolidation of an unstable nation-state system (Italy’s uni-
fication occurs in 1861 and Germany’s in 1871). Both sections make
clear the way in which Greece’s fault-lines straddle its political econ-
omy generating a permanent debt problem. They also demonstrate that
the sources of Greek debt are both internal and external. Finally, we
look into the Venizelist period of Greek history, which marked the first
four decades of the 20th century essentially completing Greece’s expan-
sionist phase – lasting almost 100 years – and bourgeois breakthrough.
Throughout the period in question (1820s–30s), Greece’s problem per-
sists: unable to catch up with the rest of the capitalist core, the country
is peculiarly sensitive to crises emanating from the core forcing it to
default on its debt obligations at least four times since the 1820s.
3.1 The beginnings and the ‘birthmarks’
The foundation of the Greek state in 1830 was primarily a geo-political

act engineered by England and France in order to check, deter and even
block Russia’s positions and expansion in the Eastern Mediterranean,
The Vassal and the Lords 61
and Egypt’s penetration of the Ottoman Empire through Crete and

the Peloponese.1 In this respect, the foundation of modern Greece –
a limited social formation encompassing the Peloponnese, Southern
Rumeli, Eboea and the complex of Cyclades islands – did not reflect
an endogenous ‘bourgeois breakthrough’ – the ‘capitalism of relative
surplus-value’ – drawn from the structural need of national-economic
forces to expand outwards – e.g., the imperial dynamism of Piedmont
in Italy or that of Prussia in Germany, or the movement of ‘enclosures’
in England. Rather, it was based on an unstable equilibrium of inter-
national compromises reflecting the weakness of the Ottomans and
the expansionist competing drives of France, England and Russia in
mastering the contracting Ottoman geographies. Greece was born as a
weak peripheral formation out of an independent, continental-imperial
formation with its geo-political value, as defined by Western imperial
interests, at par or even outstripping the potential of its political econ-
omy. This is Greece’s most important fault-line and structural constraint,
which was to be carried through to the present day, forming an essential
part of its identity.
Although Greek nationalism was the most advanced in the Balkans
and the Levant/Near East, the ‘revolution’ of 1821 was not a Greek
Risorgimento. The political parties dominating Greek politics after 1830
were literally called the English, French and Russian parties taking direct
orders from their foreign diplomatic representatives. Local landowning
elites blocked capitalist modernization and reforms. The imperial con-
trol of Britain, France and Russia over Greece became formal in 1832
with a ‘Protection Guarantee’ that essentially ended in 1923. The coun-
try’s security and geo-politics was entirely regulated and controlled by
exogenous powers. The country lacked raw materials and its economy
was dependent upon imports, especially in technology and know-how.
The capitalism of relative surplus value arrived in the 20th century, yet
without ever being able to catch up with the advanced core or even
to dominate the country’s social formation. This has had a number of
consequences of which two are important from the perspective of the
origins of the debt. First, given the scarcity of real value available for
redistribution, Greek state elites tended to finance the country’s meagre
welfare services and administrative needs via (external and domestic)
borrowing rather than taxation. Second, and because of the imbalance
and unevenness between real value creation at home and real value cre-
ation at the core, a permanent balance of payments deficit became a
constant feature in the current account of the country as it came to be
registered in the act of international commodity exchange. Thus one
conclusion seems inescapable: Greece, throughout its modern history,

always lagged behind the capitalist metropolises without ever ‘catching-
up’. This is Greece’s second fault-line and structural constraint that has
been a hallmark of the country’s identity throughout its modern history.
Both fault-lines, whose articulation is determined by social/political
struggle taking place at both national and international levels, found
expression in the state’s finances administered by subaltern and depen-
dent elites. The new state needed to finance its public sector and
this, given the low tax collection rate, added onto its total debt.
Britain and France, from the very beginning, managed to co-opt and
envelop the new Greek state elites into a permanent condition of finan-
cial and political subordination/dependency via the debt mechanism.
The main financial lever those two powers enjoyed at the time was
their lending capacity. Even before it achieved its truncated indepen-
dence, Greek elites began mortgaging the future assets of the country
to their foreign lenders. Greece received two loans during the war
of independence, whose nominal value was £800,000 and £2,000,000
respectively (Table 3.1). A primitive Greek state apparatus experienced
its first bankruptcy in 1824–25, i.e., during the war of ‘independence’,
as the loans offered by France and England to fund the war against
the Ottomans could not be serviced.2 In 1832–33 another loan of
60,000,000 (in gold francs) was contracted. It was entirely consumed
for the expenses of the regency and the maintenance of the army, a fact
which led to the bankruptcy of 1843 and a subsequent coup forcing the
King to concede a Constitution (3 September 1843).
From 1827 until 1877–78 Greece was excluded from Western finan-
cial markets because it was unable to pay its debts. During these five
Table 3.1 Foreign loans and bankruptcies of the modern Greek state (1824–32)
Period Total amount of loans per period
1824–25 (first bankruptcy) 2.8 million sterling, or 70.261 million francs

1826–43 (second bankruptcy) 2.39 million sterling, or 60 million francs
1844–93 (third bankruptcy) 25.5 million sterling, or 639.7 million francs
1894–1932 (fourth bankruptcy) 39.53 million sterling, or 992 million francs,
plus 80 million German marks, plus
8 million Canadian dollars
Source: Our compilation of data from a number of sources, such as the work of George Dertilis
(1980, 1984, 1988), and from Tassos Eliadakis, ‘The Greek public debt since 1824’, Patris,
3 November 2009. We have estimated ourselves the sum-total of foreign loans before each of
the four bankruptcies.
decades, governments resorted, rather unsuccessfully, to internal bor-

rowing while encouraging investment projects by wealthy diaspora
Greeks, whose comprador capital, together with Jewish and Armenian
merchant classes, was very prominent in the economy of the Ottoman
Empire.3 But the capital of diaspora Greeks was consumed in specula-
tive, brokering and other non-productive capitalist economic activities.4
It was only from the 1860s onwards that Greece began spinning
in the periphery of European industrialism, inserting itself into the
Western-led cycles of capitalist accumulation, yet without relinquish-
ing any of its key features: it remained geo-strategically subordinated to
exogenous – especially West European – agencies and structures, eco-
nomically underdeveloped relative to the European core, yet with an
important geo-political standing. The Greek orbit, due to its position in
the Aegean and Ionian Seas, was the key to the Black Sea and the Adriatic
because of its proximity to their mouths. Moreover, a large number of
Greeks could be found in all Ottoman areas, including Cyprus and Crete
(the Suez Canal was built in 1869). Arguably, then, the sources of the
country’s debt lie in its historical and systemic fault-lines conditioned
by its weak political economy relative to its geo-political significance.
The Greek bi-polar political matrix that emerged at the time, a political
phenomenology of opposing political forces and coalitions, became an
organic part of this structural force whose freedom of action was severely
constrained by it. At this point we need to advance an additional
explanation.
Imperial agencies cannot achieve their geo-political and class aims if
a range of elites located within the institutional framework of subal-
tern/peripheral states are not willing to serve those imperial interests.
In fact, one of the reasons why those states are subaltern is precisely
because of the role their elites are willing to play in the service of impe-
rial geo-political undertakings. We shall become aware that in Greece,
as elsewhere, the formalistic terrain of division and conflictual tension
between socio-political actors has at least since the 1860s been split
between two ‘opposing’ camps: the liberal/modernizing faction, on the
one hand, and the conservative/populist on the other. By kampfplatz
we refer here to the bi-polar political matrix of Greece’s formal political
game which cuts across the functional reproduction of capital-labour
relations across time and space in the context of the country’s subordi-
nate/dependent position in the imperial chain. Despite the insertion of
socialist/communist discourses in the Greek kampfplatz, especially after
the Russian revolution of 1917, the aforementioned phenomenology
kept recurring in the form of the same dominant bi-polar matrix. Thus,
the various crises occurring in the core find their way to the periphery
upsetting and even disintegrating not just the structural parameters of
accumulation of the peripheral states but also, due to their weak institu-
tions, the very bi-polar matrix of the kampfplatz. What follows is an
attempt at a periodization of the Greek social formation taking into
account the above discussion.
3.2 Exit the 19th century/kampfplatz-1 and default
The first cycle/period corresponds to developments reflecting the

bi-polarism between Charilaos Trikoupis (modernizer) and Theodoros
Diligiannis (conservative/populist) during the second half of the 19th
century. In many respects, their antagonism draws from the way in
which the Megali Idea (‘Great Idea’) could be accomplished. This was
a nationalist notion first promulgated in the Greek parliament in 1843
by pro-French Vlach politician, Ioannis Kolettis, aspiring at uniting all
Greeks within an expanded Greek state made up of all the ‘unredeemed
territories’, which encompassed, by and large, most Byzantine lands.5
Megali Idea became the nation’s strategic culture shared by all Greek
elites until, effectively, the collapse of the Greek front in Asia Minor
in August 1922. The populists favoured an immediate advance of the
Greek irredentist cause, whereas the modernizers saw the capitalist mod-
ernization of the country as a conditio sine qua non for its subsequent
expansion.
Trikoupis’ political bloc improved communications throughout the
country on the basis of closer collaboration with banking and indus-
trial capital. A courageous construction of railways took place between
1880 and 1909 and the Corinth canal was built (1893).6 French com-
panies, apart from investing in railways, also invested in mining and
gas production. Trikoupis modernized the military. Between 1879 and
1882, he introduced national conscription and the strength of the
standing army increased to 30,000.7 Prominent reforms occurred in
the judiciary, public administration and the parliament. A stock market
was created in 1876 and the country was admitted in Europe’s finan-
cial markets two years later. From 1879 to 1893 (the year in which
Greece declared its third bankruptcy), the governments of Trikoupis
and Diliyiannis made seven borrowing arrangements with Britain and
France. The total nominal value of loans was some 630,000 golden
francs (Table 3.1), although real money receipts did not exceed 400,000.8
From 1875 to 1880 onwards rich diaspora Greeks, acting under the
competitive pressure of European monopoly capital in the Eastern
Mediterranean basin, transferred significant financial amounts to the

country. Some participation of banking capital in works in infrastruc-
ture began.9 Banking capital was 33.5 million drachmas in 1884, soaring
to 125 million in 1910. At the turn of the century, the investment in the
building sector reached 143,000 million drachmas. The development of
finance, taxation and the penetration of the money economy in the
countryside led to the commercialization of the primary sector. After
1861, the production of cereals and grapes increased. Olive-tree culti-
vation rose from 62,500 acres in 1835 to 457,250 acres in 1881 and
in 1900 reached 650,000 acres.10 Tobacco crops also began to expand
after 1870, with Germany starting to import significant volumes of
Greek tobacco. With the production of currants, the volume of exports
increased substantially between 1857 and 1887, but did not reverse
the negative trend of the balance of payments. The agrarian reform
of Alexander Koumoundouros in 1871, although partial, granted prop-
erty rights to some 50,000 poor peasant families.11 Albanian, Bulgarian
and Montenegrin workers were seasonally and cheaply employed by
small and big landowners, especially after the annexation of Thessaly
(1881). Greek shipping should also be mentioned because it was the only
internationally competitive and constantly dynamic sector through-
out the 19th century and beyond.12 It was favoured by Otto’s policy13
and shipbuilding constituted one of the most vibrant economic activ-
ities in Syros and Piraeus. More specifically, some 5600 ships had been
constructed in the shipyards of Syros between 1834 and 1880 and in
1857 the island saw the foundation of the first shipping company in
Greece.14 The Greek merchant fleet increased from 8 steamships in 1875
to 114 in 1900. Britain and Greece dominated sea trade in the South-
Eastern Mediterranean and the Black Sea. By 1920, the size of the Greek
fleet was the ninth largest in the world, an extraordinary position given
the small size of the country and its population.15
But these improvements counted if compared to the previous phase
of inertia in Greece’s political economy. If compared to Western Europe,
then Trikoupis was as unsuccessful in advancing the capitalism of
relative surplus-value as Theodore Diliyiannis – his chief populist
opponent – was in building an alliance between the ‘tzakia’ estab-
lishment and the poor, or expanding Greece territorially (Diliyiannis’
irredentism suffered a serious setback when a 30-day war with a
German-trained Turkish army resulted in a humiliating Greek defeat).
Trikoupis’ public work programme laid the basis for the country’s
modernization in the 20th century, but without immediate positive
results, nor could Greece catch up with the core.16 Industrialization
was very weak and the plight of public finance reached extraordi-
nary proportions because his governments were dependent on foreign
borrowing and old unpaid debts. In 1875, Greece had only some
95 small factories and 7000 industrial workers. The balance of pay-
ments problem persisted. Budget deficits, because of high defence
spending and low tax collection, were financed by external loans,
whereas the continuous deficit in the trade balance required more
and more inflows of foreign capital. By 1893, Angelos Aggelopoulos
argued, ‘some 30 per cent of all public expenditure in Greece was
directed towards servicing the internal and external debt’.17 Thus, the
total Greek debt had both internal and external sources. Being under
pressure, Trikoupis increased indirect taxation and, together, popu-
lar discontent (Trikoupis imposed high levies especially on tobacco,
spirits and kerosene). Finally, as it was impossible to balance state
revenue and expenditure meeting pending external and domestic finan-
cial obligations, Trikoupis, amid the dramatic decline in the price
of currants, which was Greece’s main export item, was forced to
publicly declare Greece’s default on external loans in 1893 saying,
famously, ‘distichos eptocheusamen’ (‘unfortunately, gentlemen, we went
bankrupt’).
This Greek default is interesting for a couple of reasons. First, it comes
in the wake of the first crisis of over-accumulation in the advanced
industrial world (Western Europe and the USA) and the tariff wars found
the Greek state in a completely vulnerable economic position pushing
its dependent accumulation regime completely off balance. It is, there-
fore, interesting to see that the imperial cycle of upswing and downturn
impacts on the vassal (Greece) in a ‘trickle-down’ manner: if the core is
doing well, the vassal is also in a position to reproduce the fault-lines
that sustain it; but if the core collapses, then the peripheral vassal gets
severely damaged, with its fault-lines in a complete disarray.
Second, unlike the two previous defaults, Greece’s creditors refused
to negotiate debt payment conditions, insisting instead that a special
commission be formed to oversee the country’s finances – which was
eventually set up in 1897 as International Commission of Economic
Control (ICEC). The Commission was set up in the wake of Greece’s
defeat in the Turkish-Greek war of 1897 and made sure that Greece’s
lenders and bondholders were paid, while ensuring that war reparations
due to Turkey were also paid. This humiliating imposition surrendered
Greece completely to its imperial lenders and raised further obstacles to
the country’s goal of catching-up with the core.
3.3 Enter the 20th century/kampfplatz-2 and default
The second developmental phase corresponds to the era of the liberal

statesman, Eleftherios Venizelos, when the bourgeois breakthrough and
agrarian reform were accomplished. Skilfully representing the interests
of (declining) European imperialism while employing the nationalist
discourse of Megali Idea in the region, Venizelos expressed at the same
time the interests of the Greek comprador and banking capital – a class
extended across the arc Near East-Constantinople-Smyrna-Macedonia.
He modernized the country, mobilized wide popular strata in politics,
carefully leading the battle against the King and the old political class of
tzakia. However, the ‘Great Idea’ was neither an ‘offensive grand strat-
egy of power maximization’ conditioned by systemic imperatives, nor
an independent imperial claim emanating from within Greece, that is
to say, having endogenous bourgeois, industrial power-bases and sup-
port. Rather, it was a vicarious project sustained by the geo-strategic
(and reluctant) needs of Western European imperialisms in their termi-
nal phase of decline, especially of Britain, which saw Venizelos’ Greece
as being the best guarantor of its Near and Middle Eastern approaches
to India. None of the country’s systemic fault-lines of the 19th cen-
tury had been overcome; they had just been upgraded, refined and
immersed into a new set of contradictions and social/political struggle.
Moreover, a new systemic fault-line was inserted in the geo-political and
geo-economic plates of the globe, which became inculcated, in one way
or another, into the domestic environments of every single state in the
world. We refer to the global waves caused by the Bolshevik revolution,
the cutting-off of a large part of the globe from the imperial chain of
accumulation and the subsequent formation of political agencies and
forces across the world inspired by the achievement of the Bolsheviks.
In the context of Greek politics, this evolution undermined the hege-
mony of political bi-polarism – Venizelos versus the King – and what we
call here kampfplatz-2 includes also those agencies that questioned the
insertion of Greece into the imperial chain putting forward projects and
struggles aspiring at going beyond the horizon of the capitalist relations
of production.
During the Venizelist phase, three significant developments are worth
recording. The first concerns the way in which Venizelos comes to rep-
resent both Greek comprador interests and European monopoly capital
in the Eastern Mediterranean. The second regards the erroneous geo-
strategy within which these capitalist interests were enveloped, the
result being the defeat of the Megali Idea, a development that failed to
arrest the decline of European empires, i.e., primarily, of Britain and
France. The third development concerns the circumstances surrounding
the country’s fourth default on its debt obligations. We deal with these
themes in turn.
3.3.1 The subsumption of comprador to monopoly capital

Greek comprador communities outside the Greek Kingdom had been
thriving, especially after 1880. Turkish and Egyptian merchants had
been overwhelmed by Jewish, Greek and Armenian trade interests.
Greek shipping activities in the South-Eastern Mediterranean were also
thriving. The five largest Greek cities were Athens, Constantinople,
Smyrna, Alexandria and Salonica, of which only Athens was located
in Greece.18 However, the advent of imperialism (i.e., finance capital-
ism and massive export of capital from metropolises to the periphery
in order to stave off crises of over-accumulation at home) brought
about significant changes in the Eastern Mediterranean and the Balkans.
Whereas during the 19th century, the interests of European capital-
ism had been identified with those of new merchant and comprador
classes in the South-east Mediterranean, which were ‘almost exclusively
composed of members of various ethnic communities’,19 imperialism
began aggressively penetrating the Ottoman zones creating lines of
investment and aggrandizement linking up the Balkans and the Near/
Middle East with Britain’s Indian possessions. The Suez Canal (opened
in 1869) and the Turkish Straits were two choke-points of immense geo-
strategic significance, especially if seen in the context of new discoveries
of oil in Mosul and Britain’s navigation interests (in the early 1900s
the Royal Navy began switching from coal to oil, a development that
was completed in 1918). In order, therefore, to further their imperial
geo-political interests in and around the contracting Ottoman space,
Britain and France did not only antagonize the Ottomans but also the
very comprador and merchant activities taking place within the socio-
economic zone of the empire. The formation of monopoly capital and
its export propensity and aggressive attitude spearheaded by Britain and
France put high competitive pressures on the comprador elites of eth-
nic communities. This challenged and finally displaced the dominance
of their retailing and merchant activities in the Eastern Mediterranean
and all those engaged in them were now forced to look for state pro-
tection. This is the historical analytical framework in which the Near
Eastern Greek merchant/comprador classes began to transfer the basis of
their economic activities to Greece and sponsored Venizelos’ irredentism
providing Britain with a dynamic, yet clearly subordinate, ally in the

Balkans and the Near East during World War I. With the Ottoman
Empire collapsing, it was thought that expanding Greece would be the
best guarantor of Britain’s interests connecting sea passages as impor-
tant as Suez and the Dardanelles with land routes such as Palestine
and Mesopotamia – although Lloyd George, an ardent supporter not
just of Greeks but also of the Zionist cause, wanted to see a Jewish
state in Palestine, not least because he wanted, alongside Greece, a
second Christian-Zionist state to support Britain’s imperial position in
Western Asia. Lloyd George illustrates Britain’s rationale with the typical
language of the time. He said in 1919:
The Greeks are the people of the future in the South-Eastern

Mediterranean. They are very active and economically prosperous.
They represent Christian civilization against Turkish barbarism. For
the time being, they are some 5 to 6 million. If they expand – as
we British think – they will sum up some 20 million within fifty
years. The Greeks are perfect navigators and will become a great mar-
itime power. They thus will be able to guarantee our Commonwealth
interests across the region.20
Venizelos’ reasoning was proceeding apace. For him and his liberal
ruling faction, Greece was not a poor country but a country whose
wealth was unexploited. ‘Greece’, the Cretan politician claimed in
1920, ‘can feed 17 million people’.21 The liberal-nationalist Greek state
under Venizelos, therefore, had very powerful incentives to jump on
the French-British bandwagon, especially because Bulgaria and Turkey
sided with Germany during the crucial juncture of 1914–17. Having
the support of the Greek comprador classes and British imperialism,
and after the successful territorial gains that Greece achieved under
his Premiership during the Balkan wars (1912–13), Venizelos did not
hesitate to proceed with a major break with King Constantine I and
conservative forces.22 It was a rupture that ultimately split the coun-
try into two – the notorious ‘National Schism’ of 1916 with the
Venizelos government settled in Salonica and the King’s own in Athens.
Whereas Venizelos stood firmly in favour of the country’s participation
in the war on the side of Britain and France (the ‘Entente Powers’),
King Constantine and staff officer, Ioannis Metaxas, saw Germany and
Austria-Hungary as the most respectable military powers likely to win
the war but advocated neutrality. Importantly, Metaxas disagreed with
Venizelos on the feasibility and realism of Greece’s campaign in Asia
Minor. Metaxas exposed Venizelos’ flawed geo-strategic rationale to

invade Asia Minor in its entirety.
3.3.2 Geo-strategies of defeat

Before the outbreak of the war, following secret discussions between
Lloyd George, Winston Churchill and Venizelos, Britain promised
Cyprus to Greece on the proviso that she would be allowed to have
a naval base in the Ionian port of Argostoli, Cephalonia, in order to
check Italian and Austrian fleets in the Adriatic. But when the war
broke out, Britain annexed the island and modified its position. Wanting
now to secure Bulgaria’s participation on the side of the Entente or its
‘favourable neutrality’, Britain tempted Venizelos to offer the Thracian
port of Kavalla, as well as the town of Drama to Bulgaria. In return,
Greece would be given Cyprus and the Smyrna region if it would aid
Serbia entering the war on the side of Entente powers. Venizelos was
keen to accept the offer, but both the King and Metaxas were cate-
gorically against any concession of Greek territory, opting instead for
Greece’s neutrality.23 In 1914–15, Venizelos gave a tough diplomatic bat-
tle to secure Greece’s participation in the Gallipoli campaign, and thus
to establish the country’s presence in the Straits, but he was opposed by
both Russia and France, as well as at home by Royalist forces. Metaxas
himself had presented the most comprehensive rationale regarding the
Gallipoli campaign. He insisted that the Straits could be captured only
by a surprise attack, an advantage that the allies had lost from the outset:
by declaring war against the Empire, the Turkish Staff began fortify-
ing the Straits, a fact that was making the defence of the Dardanelles
impenetrable.24 In the meantime, and amid the war, Britain, France and
Russia agreed to the incorporation of Constantinople and the Straits
into the Russian Empire. Russia, in addition, would obtain the region of
Erzurum, Van, Trabzon, Bitlis and territory in southern Kurdistan. As an
incentive to enter the war, Italy was promised recognition of her inter-
ests in the Adriatic and Africa, permanent and complete sovereignty
over the Dodecanese while, with the Treaty of Saint-Jean de Maurienne
(26 September 1917), it was promised some 70,000 square miles in
Anatolia, including Adalya and Smyrna. France would ensure its inter-
ests in the Levant by obtaining Syria, Lebanon and the province of
Adana in Cilicia. Mesopotamia would belong to Britain and Palestine
would be internationally administered. That is how the Balkans and the
Near/Middle East were to be chopped off in secret by Europe’s declin-
ing imperialisms at the time. But there is more to the affair than meets
the eye.
In January 1915, when Greece was disputing its entry to the war,
and upon Venizelos’ request, Metaxas drafted two memoranda advis-
ing Venizelos that the dispatch of a Greek army to northern Serbia to
repel the attack of Germany and Austria and a Greek expansion into
Anatolia could not be sustained militarily and politically. In the first
case, Metaxas argued, the joint Greek-Serbian forces might be assailed
on the flank and rear by the joint Bulgarian and Turkish armies. In the
second case, any campaign in Anatolia was bound to encounter a hos-
tile population, as the Muslims outnumbered the Greeks even in the
vilayet of Smyrna, whereas the rugged nature of the country would
make it impossible to station any invading army within militarily defen-
sible frontiers. Thus, the Greek army would find it imperative to pursue
the enemy in the vast interior in order to achieve a conclusive vic-
tory. This would over-stretch the overall front and communication lines,
enabling the enemy to harass the Greek line while concentrating forces
in the interior and getting prepared for a concerted attack. An Asia
Minor campaign might be possible, Metaxas’ argument went, only if
two fundamental preconditions applied: first, the allies would have to
bind themselves in practice ‘to participate in the campaign with forces
sufficient to enable the operation to be brought to a successful conclu-
sion’; second, the whole of Anatolia ‘should be partitioned among the
Allied Powers or, failing this, the portion left under Turkish sovereignty
be reduced to such small proportions as no longer to constitute a serious
menace to the Greek possessions around Smyrna’.25 It is also noteworthy
that, contrary to Venizelos, Metaxas saw Anatolia as a single and indivis-
ible geo-economic and geo-political unit that could not function with
a sovereignty other than Turkish. He in fact saw that the most realistic
geo-strategic option for Greece was to claim Eastern Thrace.26
The overall subordinate and dependent position of Greece in the
alliance system to which it adhered to in the entire period before and
during the Greek-Turkish war (1916–22/3) is beyond question. This
becomes clearer especially towards the end, when three weeks before
the collapse of the Asia Minor front, on 1 August 1922, the Greek
army of Eastern Thrace made a desperate move and requested to occupy
Constantinople in order to create a fait accompli. However, it was told
by Britain that any advance into the international zone of the Straits
would be repelled by force. Understandably enough, the Greek govern-
ment saw this as completely unfair, because Greece, the sole belligerent
ally of the world war, was prevented from an act of war that could
possibly bring the war itself to a successful conclusion. As Michael L.
Smith noted, ‘the allies had adopted the entirely illogical position of
declaring themselves neutral in a war in which they did not recognize

belligerent rights to the belligerents’. And as ‘the basis of Greek policy
was cooperation with Britain [ . . . ], it was the British coolness there-
fore which exposed the desperate situation of the Greeks’.27 Winston
Churchill had his own way of making this point, when he remarked that
England wanted somehow to fight the war against Turkey ‘by proxy’;
and ‘wars when fought thus by great nations are often very danger-
ous for the proxy’, in that case Greece.28 With European imperialisms
in decline, and given the damage to the imperial chain itself caused
by the Russian revolution, monopoly capital expansion in the Eastern
Mediterranean, at the time, generated geo-strategies and comprador
proxies of defeat. Throughout the Asia Minor campaign (1919–22), the
Greek state, whether under Venizelist or Royal forces – Venizelos lost the
election of 1920 to Royalist forces losing even his parliamentary seat –
demonstrated no ability to act independently of its masters. We can now
move on to look at the historical circumstances that led to the Greek
default of 1932.
3.3.3 Greece in a European chain of debt

and the power-shift to the USA
Venizelos and Venizelist factions had effectively dominated the coun-
try’s politics from the collapse of the front in Asia Minor to 1936, when
Metaxas imposed a Nazi-style dictatorship. Their campaign to attract
investors – both foreign and Greek – in industry, shipping and finance
met with some success. The cycle of growth corresponding to Venizelos’
era witnessed significant participation of foreign companies in Greece’s
economy, especially in infrastructure and communications. A German
company extended the country’s telephone network and Ulen Co., an
American company, undertook to build a dam to solve Athens’ water
supply problem.29 A British company (Power & Traction) assumed the
monopoly in the generation and distribution of electricity in Athens
and Piraeus. The nominal capital of industrial firms rose from 8 million
drachmas in 1904 to 60 million drachmas in 1917. During the same
period, mining and various public firms had also increased their nom-
inal capital from 56.5 million drachmas to 109.2 million drachmas.
The urban population increased sharply and by 1917 the number of
Greek industrial workers in establishments with over 25 workers rose to
over 42,000.30 In 1936 Greece presented a total of 4415 factories with
some 233,000 workers employed in small- and medium-size manufac-
turing activity.31 By 1939 the share of the secondary sector in the overall
structure of the national income was 18 per cent. Economic activity
in textiles, tobacco, chemicals and foodstuff was very high even by

European standards. Inasmuch as these economic sectors were mostly
integrated with the European and global capitalist order, it is no accident
that they suffered most from the Great Depression, when the country’s
balance of payments worsened sharply and agricultural prices fell to an
unprecedented level.
Venizelos completed the agrarian reform. He passed a number of laws
favouring land distribution to peasants – a reform, however, that was
accomplished between 1917 and 1938. Between 1922 and 1938 more
than 400,000 acres had been distributed, which was nearly 39 per cent
of the overall arable land. The establishment of the Agricultural Bank
in 1929 facilitated credit to peasants. This resulted in the marginal-
ization of strong peasant movements, which had dominated other
Balkan (e.g., Bulgaria) and Latin American countries.32 At the same
time, it prevented an alliance between peasants and industrial work-
ers, depriving socialist and communist forces in Greece from acquiring
a mass constituency. In the long run, however, this proved to be catas-
trophic. By distributing small plots of land to peasants, Venizelos and,
essentially, the rest of the Greek ruling classes, made agriculture interna-
tionally uncompetitive inasmuch as large landowning/feudal types of
estates could not evolve into large-scale, modern capitalist farming.33
Eventually, Venizelos’ reforms benefitted the refugees who introduced,
especially in Greek Macedonia, the cultivation of crops such as tobacco
and cotton, thus moving agriculture away from the cultivation of cur-
rants, which monopolized the export trade of the country for several
decades. Germany began replacing Britain as Greece’s main export out-
let and imports from the USA dominated the country’s trade.34 However,
Britain enjoyed two key leverages over Greece. The first concerned
Britain’s grip on Greek security due to its naval supremacy in the Eastern
Mediterranean – a fact which led Venizelos to turn a blind eye to
the Cypriot revolt of 1931, arguing publicly that the Cyprus issue is
an internal affair of the British Empire; the second reflects monetary
arrangements. Two aspects are important here.
First, some estimates ‘of the total official external debt of Greece in
1932 put it at 2.3 billion gold francs of issued debt at nominal prices’.
Britain was the main creditor with 28.5 per cent of the total, followed
by France (22 per cent), the USA (11 per cent), Germany (4.5 per cent)
and Belgium (3.5 per cent).35 Other estimates, such as those put forth by
Mark Mazower, bring the number of British subjects holding Greek debt
up to 50 per cent.36 Second, the monetary system became streamlined
with the foundation of a central bank. The Bank of Greece, in 1927,
displaced the monopolistic position of the National Bank of Greece and

facilitated acquisition of much-needed credit by the state to finance its
increasing borrowing requirements after having lost the war to Turkey
(among others, the National Bank had note issuing rights and had
strengthened its position over the decades). The foundation of the Bank
of Greece brought immediately Greece’s monetary system under the
hegemony of Britain via the linkage of the drachma with gold and the
British pound (the exchange rate of the drachma against the British
pound was determined at 1 sterling = 375 drachmas).37
However, neither the rate of return from foreign investments nor the
anchoring of the drachma to gold and the British pound brought about
lasting stability.38 They made little difference in the overall structure of
debt and its reproduction, because the balance of payments constraint,
the borrowing requirements of the country in the wake of the refugee
influx (Greece received more than 1,300,000 refugees from Asia Minor),
as well as the inability of the governments to raise revenues via taxation,
persisted. Moreover, the Bank of Greece was founded on a pile of liabil-
ities and debt obligations, as a result of wartime loans guaranteed to
Greece by Britain, France and the USA. In addition, the Bank of Greece
‘had very restricted control over foreign exchange movements’, becom-
ing thus unable to attract ‘much of the exchange earned through either
exports or invisibles’, such as sailors’ and emigrants’ remittances.39 Time
and again, this shows the deep monetary and political dependence of
the Greek state upon foreign interests and agencies.40 In a way, how-
ever, the Greek ruling classes were ‘unlucky’. Their fate was hanging on
the finest of threads, for, the centre of global accumulation, wealth and
power had for some time been moving from Western Europe to North
America. The powers to which Greece was indebted, Britain and France,
were themselves operating under the debt fetter: they both owed large
sums of money to the USA.
During the war, the dollar became a world currency, equal in strength
to the British pound. The US Federal Reserve was established in 1913
and by then the USA had already achieved naval parity with the Royal
Navy in the Atlantic. European merchandise exports to Latin America
and elsewhere were severely curtailed by the war, with the USA occu-
pying an even more prominent global economic and political position.
During and after the war US international policy continued putting pres-
sure on European imperial powers on the basis of its Open Door policy,
especially as the Europeans were secretly dividing up the Middle Eastern
oil market, drawing up the petro-borders of the Ottoman empire. Europe
was short of capital. Capital scarcity in Europe meant high rates of return
for the USA, which strengthened the dollar forcing Britain and France
to peg their currencies against the dollar at depreciating rates, especially
during the war. Britain and France became over-indebted to the USA dur-
ing the war and both powers hoped to recover their debts by forcing
Germany to pay them heavy war reparations. In fact, the USA entered
the war in 1917 not least because staying out of it would have meant
‘an interim economic collapse as American bankers and exporters found
themselves stuck with uncollectible loans to Britain and its allies’.41
But after the end of the war, a vicious circle of debt payments became
evident: Britain and France could not pay back their war debts to the
USA, partly because Germany did not abide by what it signed up to in
Versailles, and partly because of the USA’s policy of raising tariff barriers
from as early as 1921, which did not allow European states to pay off
their war debts by exporting more goods to the USA. The US drive to
break up the system of Britain’s and Europe’s formal empires began in
embryonic form. ‘But’, Michael Hudson notes, ‘so reluctant was Europe
to recognize this ultimate policy intent – still only in its germinal stage –
that the only response was an angry Editorial in The Times of London
announcing the suggestion that Britain ship its National Gallery and
the British Museum to New York in partial satisfaction of its debts’.42
The system of formal European imperialisms could no longer support,
both politically and financially, the capitalist regime of accumulation in
Europe and the globe. Power had shifted to the new creditor power, the
USA. In this context, it is obvious that the situation for Greece was not
ideal.
Greek industry was internationally uncompetitive and mostly inward
looking, virtually unable to generate economies of scale providing state
budgets with the funds required to finance expenditure (public works,
resettlement of refugees, debt payment, defence needs, etc.). For exam-
ple, as we can see from Table 3.2, the total inflow of loans is so large
that it was impossible to be counter-balanced by foreign capital inflows
and investment in manufacturing. Table 4.1 (in Chapter 4), in addition,
shows the magnitude of trade deficit, which is the clearest evidence
proving that Greece, despite its progress in manufacturing between the
wars, remained, by and large, a comprador economy, that is an economy
dominated by import consortia, merchant activities and small-scale agri-
cultural production. Thus, the Greek state, and given its low rate of tax
collection, presented a transmogrified picture with its parlous state of
public finances unable to balance out the country’s new monetary base
with the foundation of a central bank requiring – at least in theory –
monetary stability. But the international factor was as important: when
Table 3.2 Balance of trade, 1920–30 (million drachmas, 1985 prices)
Year Imports (live animals Exports (live animals Deficit: occurs

food & drink, raw food & drink, raw due to the high
material and material and import of
semi-processed goods, semi-processed goods, industrial goods
industrial goods) industrial goods) of high quality
1920 2177.5 686.3 1491.2

1924 8053.7 3276.9 4876.8
1928 12,416.9 6331.0 6085.9
1929 13,276.1 6960.0 6316.1
1930 10,525.2 5985.7 4539.5
Source: Our compilation of data from Freris (1986) pp. 67–8.
the Great Depression began – between 1929 and 1933 – real output in
the USA declined by nearly 30 per cent and the unemployment rate
reached 25 per cent, whereas the banking system of the country shrank
by half (some 2500 banks closed down) – and Britain was forced to
abandon the gold standard in 1931. Greece, despite Venizelos’ procras-
tinations, also went off gold. In April 1932, Greece abandoned gold
convertibility and the drachma went on a free fall against all major
currencies, thus increasing dramatically the cost of servicing its debt.
The following month, the country was forced to default for the fourth
time in its modern history. The reality was inexorable: in 1929 France
blocked the Greek wine trade and, between 1929 and 1931, falling
export prices pushed the real debt service burden up by 45 per cent.43
The total external debt of Greece in 1932 stood at 514 million dollars.44
As with the previous defaults, the country’s debt crisis had both exter-
nal and domestic sources. The trigger, obviously, came from outside but
this generated a sea of events inside the Greek polity, setting off balance
the entire dependent architecture of capital accumulation and derailing
the dominant matrix of kampfplatz, the phenomenology of the political
game. This happened because the country’s internal financial flows did
not correspond to its monetary base. This fault-line between national/
international has characterized all of Greece’s modern debt crises and is
a direct expression of its dependent/subaltern position in the imperial
chain.
None of the above developments of the Venizelist cycle left social
forces untouched, especially the most politically advanced sections,
such as communist and socialist organizations. In 1918, the Greek
Federation of Labour (GSSE) was founded.45 A socialist federation under
Jewish-Greek leadership began in Salonica and trade unions were estab-

lished in Athens and Piraeus. With the law 281 (1910), which prohibited
the participation of employers in workers’ unions, Venizelos laid the
bases of Greek trade-unionism, although later, giving in to pressures
by his interior Minister, Constantine Zavitsianos, he passed Law 4229
(25 July 1929), the famous idionymo (‘idionym’), according to which
communist politics and ideas were considered a crime. Both the rate
of industrialization and the proletarianization of the refugee population
in Greek society were forced to operate under the pincer of the debt bur-
den, which created an explosive radical mix. All the developments we
described above had been straddled with specific state bi-partisan auster-
ity policies aiming at an increase in the rate of exploitation, which was
designated as an increase in relative surplus-value without any increase
in real wages. To give only one example, between 1928 and 1938 labour
productivity increased by 43 per cent and wages only by 24 per cent;
consumer prices between 1922 and 1935 rose by 207 per cent whereas
wages by only 83 per cent.46 This brought social struggle and left-
wing politics to the forefront of the decaying Greek political system,
whose main cleavage remained the same: Venizelists versus pro-Crown
populist factions (led by Panaghis Tsaldaris). In fact, when Metaxas
proclaimed a dictatorship on 6 August 1936, most leaders of the two
main political parties, liberals and populists, remained either silent or
joined the dictator. Only communist and socialist forces attempted to
put up some serious resistance against the Metaxas dictatorship and the
Crown.
Last but not least, neither the Greek kampfplatz of the Venizelist phase
nor the actual economic complexities before and after the 1929 credit
crunch present any substantial difference with other political systems
and divisions whether in the capitalist core or in the periphery – (e.g.,
the Balkans, Central Europe or Latin America). Severe economic disrup-
tions fed social upheavals and unstable cabinets everywhere, leading
to default, policies of autarky and import-substitution industrialization
and, in most instances, eventually, to authoritarian, fascist, populist and
Nazi cabinets. For instance, in Greece, between 1924 and 1928 there had
taken place 3 general elections, 11 military coups and 10 premierships
but, similarly, the so-called ‘radical phase of France’s Third Republic
(1871–40) saw ‘ten different cabinet configurations between the begin-
ning of 1924 and the end of 1926 alone’.47 Germany’s Weimar Republic
(1918–33) is another example. Having established itself after suppress-
ing the movement initiated by the sailors’ mutiny of October 1918, and
carried on by the Communist uprising of the Spartacus league (January
1919), Weimar produced 15 governments between 1919 and 1928 of

which the longest lasted for 18 months only.
3.4 A tentative conclusion
Some very important and strictly inter-related comments stem from our
analysis so far. We must also stress that, although not inconclusive,
these comments are not written in stone. They should be read as sugges-
tive and tentative remarks for improvement and possible rectification,
inasmuch as the quantitative data available throughout the period in
question are either non-existent or scarce, a fact that led us to rely exten-
sively on secondary sources that themselves recognize this constraint.
Here is our suggestive research agenda for further discussion.
First, the Greek war of ‘independence’ against the Ottoman Turks
was not a Greek Risorgimento, with an industrial Piedmont from the
North advancing its imperial power southwards. In addition, the dis-
parate armed groups of the various Greek chieftains during the uprising
(1821–28) had no resemblance to Bismarck’s army. The foundation
of the Greek state in 1830 was an act of geo-politics engineered by
exogenous imperial agencies in order to redress the balance of power
in the Eastern Mediterranean at the expense of a crumbling Ottoman
Empire. In the main, Britain and France wanted to check Russian and
Egyptian advances in the region, a policy that found expression in the
creation of a small Greek Kingdom in 1830, wholly subordinated, pri-
marily but not exclusively, to Britain and France. Thus, from the very
beginning, a truncated Greek social formation with a pre-modern eco-
nomic structure offers itself to its new lords as a vassal, but a vassal with
a disproportionate geo-political clout as it was perceived by Britain and
France. This regional fault-line was to become the birthmark of Greece’s
political economy and geography: it will never disappear.
Second, Greek capitalism had predominately been comprador and
agricultural in character and this persisted throughout the period
1830–40. As a consequence, Greece’s qualitative gap with the industrial
core reproduced itself across time and space, without being diminished
and despite the country’s numerous territorial expansions. Greece’s cap-
italist economic progress counts only if compared to the country’s own
previous phase of development, not to the capitalist core. The increase
in the rate of exploitation and the passage to the capitalism of the rel-
ative surplus-value between the wars did not dominate Greece’s social
economy. Had it done so, the country would have been in a position to
balance out its borrowing requirements and attain a more independent
presence in European politics especially when facing default in the

wake of the 1929 Great Depression. Moreover, none of the political
parties dominating the country’s political system had a mass base resem-
bling Western European politics. This does not mean that Greece was
‘under-developed’, whether politically or economically. It means that
the degree of capitalist modernity was qualitatively different, a fact that,
of course had quantitative consequences (persistent trade deficits and
borrowing requirements accompanied by four defaults). The issue of the
dependent/subordinate position of the country in the imperial chain,
therefore, remained unresolved, with Greece’s need to resort to external
and internal borrowing becoming all-pervasive. Greece’s second birth-
mark that will never disappear lies indeed in the qualitative gap between
the social economies of the core and its own social economy. The result
is a chronic deficit in its current account.
Third, because during the inter-war period the drachma had become
linked to the gold and the imperial currency of the time, the British
pound, Greece became more integrated into the international mone-
tary order determined by the fluctuations of the pound and the political
and economic might of the British state. However, when the finan-
cial and credit crisis of 1929 showed that the British state was a lame
duck, the imbalance between the country’s monetary base and its finan-
cial transactions/flows became increasingly pronounced – a fact which
is reinforced by our theoretical discussion in Part I – and, eventually,
implosive, forcing the country to impose a moratorium on interest
and capital payments (default). This was also due to persistent budget
deficits, which leads us to conclude that the sources of the Greek debt
are both external and internal. True, the debt crises were triggered from
outside but they had always found expression within the state proper
triggering budgetary crises and affecting the revenue/expenditure struc-
ture. The drachma, once it went off its gold parity, fell from 305 pounds
(March 1932) to 552 on 31 May of the same year. Shortage of foreign
exchange in the Bank of Greece meant that Greece could not keep up
with its monthly debt repayment. The response of the Greek elites was
a type of import-substitution industrialization that, for all intents and
purposes – see Chapter 4 – benefitted the country. The road to author-
itarianism, as elsewhere in Europe, the Balkans and Latina America,
was laid.
Fourth, from the 1860s onwards, the Greek political system pre-
sented itself as a bi-polar kampfplatz only to be marginally challenged
by the entry of communist and socialist matrixes after the Bolshevik
revolution. This ideal-typical configuration represents not only an
amalgamation of the organic contradictions of the prevailing regime

of capital accumulation in Greece; more importantly, it reflects the
way in which Greek politics is integrated in the Western division of
capital and labour, and the qualitative degree of divergence and conver-
gence between the core and periphery. The form of mass politics Greece
experienced in the 20th century, especially after World War II, is qual-
itatively different from the type of mass politics that took place in the
core. For example, Greece did not experience the type of mass political
parties, such as the German SPD or the Italian Communist Party, that
marked the politics of Germany and Italy respectively in the 20th cen-
tury. The hegemonic crisis in the core which became crystallized in the
Great Depression shook the politics of the core, upset the kampfplatz
across all political societies partaking in the international system and
led to autarky, self-sufficiency and closed political economies. Fascism,
Antonio Gramsci argued in his Prison Notebooks, is a ‘passive revolu-
tion’ because it develops the social productive forces of Italy but under
authoritarian, regressive political forms of governance. Such was indeed
the case across most of Europe and Latin America before the outbreak
of World War II, and such was to be the case in Greece from the early
1930s to mid-1970s. This is the period to which we should now turn.
4
Passive Revolution and the
‘American Factor’, 1940s–70s
The third distinctive phase of capitalist modernization in Greece

corresponds to the post-war economic boom of the 1950s and 1960s,
a period marked by significant US direct investment not just in Greece
but also in Western Europe and Japan/South-east Asia. Other forms of
economic support and aid in the framework of US international pol-
icy of Open Door also took place throughout the 1940s (‘Lend-Lease’,
the Marshall Plan, loans, etc.). However, and despite the country’s rapid
economic development during this period, Greece relinquished none of
its ‘birthmarks’: its new developmental cycle in the 1950s and 1960s
failed to bridge the qualitative gap with the advanced core of Western
Europe, Japan and the USA, whereas its geo-politics, because of the
Cold War, appeared to be quite upgraded relative to the past. Greece
and Turkey were perceived by the USA as a united geo-strategic bloc
able to deter, if appropriately supported, Soviet penetration/aggression
through the Balkans and/or the Dardanelles or the Caucasus. But from
the perspective of political economy, the most interesting feature of the
period is the non-adherence of Greece to Keynesian policy-making, high
(Fordist) wages and the creation of a welfare state. Especially for the Bank
of Greece operating under the immense influence of pro-monetarist
Xenophon Zolotas, pro-aggregate demand management policies were
out of the question. The reasons for that are primarily related to the
domestic security regime imposed after the defeat of the left-wing forces
in the Civil War, and to Cyprus geo-politics. All in all, Greece’s ‘golden
age of capitalism’ differed in two crucial respects in relation to its
Northern European counterparts: first, it took place under an enor-
mous expansion of the state’s security apparatus and, second, the state’s
management of aggregate demand was minimal. Time and again, how-
ever, none of those had been sovereign decisions of the Greek state.
81
Quite the opposite: they had been imposed, if not directly dictated,
by the ‘American factor’, Greece’s new patron, the USA. Moreover, pre-
cisely because of the dependence of Greece’s right-wing establishment
upon the USA, a wide range of opportunities had been missed, espe-
cially on Cyprus, in capitalising on the country’s Cold War geo-political
importance.
Another concern of this chapter is to show that the new type of
US hub-and-spoke hegemony established in the Euro-Atlantic heartland
and Japan by the USA in the 1940s rests on a qualitatively different type
of power arrangement between the lord and the vassal when applied
to the periphery (Latin America, Greece, etc.). The form of new depen-
dency relations between the new global master, the USA and Greece was
such that the Greek state and its ruling classes had much less freedom
of action in organising their hegemony within their social/national for-
mation proper.1 This form of dependency and subordination led to a
quasi authoritarian polity, whose culmination was the seven-year long
dictatorship of the Colonels (1967–74), most of whom were on the pay-
roll of Central Intelligence Agency (CIA).2 Thus, the ‘economic miracle’
of the 1950s and 1960s – in fact, during the years of the dictatorship,
Greece experienced very high rates of growth – occurred under authori-
tarian and deeply regressive forms of governance, hence the title of our
chapter here as ‘passive revolution’.
Interestingly, and this is our third preoccupation here, the bi-polar
matrix of the Greek post-war political regime – the kampfplatz of the
third period of capitalist modernization featured the Centre Union
party of George Papandreou versus the right-wing bloc of Constantine
Karamanlis and the King – persists in assuming qualitatively different
features. It had to respond to a genuinely democratic political move-
ment demanding the opening up of the political system and social
reforms. At the same time, it condensed the dynamics of a new geo-
politics in the Eastern Mediterranean epitomized, first, in the ‘East-West’
battles over Greece, Turkey and the Balkans (1940s) and, second, in
the Cyprus issue (1950s–70s). By shedding light on these themes, we
shall become aware of Greece’s inferior position within NATO rela-
tive to Turkey – about which, apparently, leaders such as Andreas G.
Papandreou and Archbishop Makarios were fully aware – and the con-
nection between Greece’s quest for democracy in the 1960s and the
conflict over Cyprus. More to the point, we shall see that the real cleav-
age in Greek politics was that between Communism/the radical left, on
the one hand, and anti-Communist forces, on the other, a cleavage that
was to be suppressed by the political phenomenology of the kampfplatz.
Passive Revolution and the ‘American Factor’ 83
We believe that one of the most under-examined fields in the study

of post-Civil War Greece is precisely the connection between domes-
tic Greek politics, Greece’s positioning in NATO, and the Cyprus issue.
In our view, this is the key to understanding why the democratic and
reformist movement of the 1960s in Greece led by George and Andreas
Papandreou did not manage to unblock the political system, leading
instead to the imposed dictatorship of 21 April 1967.
4.1 The geo-political foundations of post-war growth
Greece participated in World War II on the side of the West, repelled an

Italian attack through Albania but eventually succumbed to Germany’s
invasion in 1941 and was then occupied by three armies, the German,
Italian and Bulgarian. During the occupation, the fiscal and monetary
system of the Greek state broke down completely. Some 250,000 died
of hunger and more than 60,000 were executed by occupation forces,
whereas some 60,000 Greek Jews were killed or deported to concentra-
tion camps.3 As if this was not enough, a bloody Civil War followed that
lasted till the late 1940s. Middle classes almost ceased to exist. Hunger
and pauperization became common among the population. All in all,
between 1940 and 1950 more than 600,000 people out of a pre-war pop-
ulation of 7,345,000 perished. But Greece was a class and geo-political
zone of conflict par excellence and before its elites could even think seri-
ously of political economies of growth these conflicts should have been
settled beforehand.
As we saw earlier, US primacy becomes completely embedded in the
global capitalist system during and after World War II. Without ever
abandoning Open Door, the USA qualifies its supremacy via economic
(Marshall Plan, IMF, World Bank and dollar hegemony), security (NATO,
bi-lateral treaties giving the USA base rights) and ideational (‘the war on
evil Communism’) instruments, setting in motion new types of power
arrangements within the core. The paramount goal was the shaping
of the domestic environments of the states across the world after its
own model of liberal democracy. Importantly, the Cold War ideational
scheme of the ‘war on Communism’ had to be embraced by all the
ruling elites of the spokes, becoming official state policy. Controlling
each end of Eurasia – Western Europe and Japan – the USA could sub-
stantially assist the reconstruction of those crucial states creating large
consumer markets and outlets for its produce. Thus, the chief aim of
its policy in Europe and Japan was not primarily the containment of
the Soviet threat – a notion put forth by George Kennan – but the
establishment and ramification of US power within the core. The fore-

most drivers behind this policy were Dean Acheson and Paul Nitze –
not George Kennan. Only the USA could initiate and do all this in the
1940s because, in the main, it was the sole creditor and nuclear power,
in possession of 75 per cent of the world’s gold reserves while regis-
tering 60 per cent of the world’s total manufacturing output. But the
same policy-makers who took care to fathom and design the new policy
of imperial primacy for the USA in a ‘West-West’ context, at the same
time took care to fathom and design a new geo-strategy for the periph-
ery. From this perspective, Greece, Turkey, Iran and even Afghanistan
loomed large.4
As early as 1945, US strategists began developing the notion of
‘Northern Tier’. This term ‘describes the northernmost Near and Middle
Eastern countries on the border of or Near the Soviet Union’.5 Coun-
tries such as Greece, Turkey, Iran and, at times, even Afghanistan were
deemed indispensable for the success of the US policy of primacy in
Europe. The end of the war found Iran under the triple occupation of the
USA, Britain and the USSR. Stalin’s post-war determination to hold onto
Iran, as well as his subsequent challenge to provoke Turkey, prompted
the USA to consider both Near Eastern countries as having invaluable
strategic importance. Stalin wanted to control Iran’s oil and gas pro-
duction, gain access to the Gulf region and also use the Kurdish issue
‘as a means of making inroads to Turkey’.6 At the same time, he sent
diplomatic notes to Ankara requesting a base in the Dardanelles and the
return to the USSR of the former Russian provinces of Kars and Ardahan.
Turkey had borders with Communist Russia and oil and gas produc-
ing regions; it was situated on a large territory giving it strategic depth
and its standing army numbered some 460,000 men in 1946. In addi-
tion, Turkey had the potential to become a large Black Sea and Eastern
Mediterranean sea power and could offer significant listening posts to
the USA reaching out not only to the Balkans and the Soviet orbits, but
also the entire Middle East. Iran dominated the Eastern shoreline of the
Persian Gulf and Afghanistan provided a crucial, buffer type of land-
mass. The crises over Iran and Turkey, although they had been brewing
since the war years, manifested themselves almost simultaneously (Iran:
March 1946; Turkey: August 1946). It appears, however, that the most
pressing contingency was that of Greece.
Greece, apart from its symbolic geo-cultural value as the ‘cradle of
Western civilisation’, was experiencing an authentic type of ‘dual power’
situation. The democratic-radical bloc, a large section of which was con-
trolled by the pro-Soviet Greek Communist Party (KKE), which had
led the resistance against the German occupation, could overwhelm

minor nationalist and right-wing forces and assume power, especially
after Britain declared it had to cease underwriting financial assistance
to Greece. If Communist guerrillas had been successful in defeating the
nationalists in the second guerrilla warfare (1946–49), then Greece could
have easily become both the USSR’s and Bulgaria’s Trojan Horses for
gaining access to the Eastern Mediterranean. Such was the subservience
and dependence of KKE on the Soviet Union and Tito’s Yugoslavia that
its leader, Nicos Zachariades, re-opened the question of ‘minorities’ in
(Greek) Macedonia, arguing that the party should ‘protect the interests
of Macedonian people, who so bravely fought together with the Com-
munists against the Greek chauvinists’.7 Effectively, Zachariades was
advocating an independent Macedonia and Thrace, which was Stalin’s
and Dimitrov’s policy to access the Aegean/Mediterranean via control-
ling the new communist statelet of Macedonia. This absurd policy of
KKE alienated large sections of the Greek Macedonian peasantry, who
were mostly resettled refugees from Asia Minor, withdrawing their sup-
port for the KKE and other radical guerrilla forces.8 But what was it
exactly that prompted the USA to step into Britain’s shoes in the Eastern
Mediterranean?
Greece’s land border with Turkey across the Evros/Maritsa River had
to be maintained at all costs. As this border was adjacent to the bot-
tleneck of the Bosporus and the Dardanelles, defence of Aegean Greece
and Black Sea Turkey assumed particular importance. US strategists saw
Greece and Turkey as forming a united geo-strategic bloc able, if prop-
erly backed, to deter Soviet incursion into the Eastern Mediterranean
and the Suez via the Turkish Straits and/or the Aegean. It should be
noted, in this respect, that the Aegean is the key to the Black Sea,
rather than the other way around. It is no accident that Germany never
bothered to make inroads to Turkey during World War II in order to
outflank Stalin and reach the oil resources of Baku, so important for
Germany’s war machine. For Germany, it was enough to hold onto
the Aegean controlling the mouth of the Black Sea, thus its inward
and outward navigation and trade routes, a position that assisted Hitler
substantially in his East European and North African theatres. This
view was highlighted perceptively by a contemporary Turkish scholar in
1944:
If aid to Russia is not being sent by way of the Straits, this is due to
the facts that the Aegean islands are occupied by the Germans and
that ships destined for Russia are prevented from reaching the Straits,
all of which goes to show that the question of the Straits is linked to
the Aegean, the Mediterranean, and the entrance to them.9
But Greece could not be lost also for an additional reason. In meetings
with Stalin at Yalta and Potsdam, the Soviets made clear that the most
important countries for their security were Romania and Bulgaria, not
Greece, although they wanted a strong Communist force in Greece as
a kind of ‘soft’ Soviet power there. Thus, the Greek crisis of the second
guerrilla warfare provided Acheson with a perfect opportunity to launch
his ideational scheme of ‘war against evil Communism’, exaggerating
Soviet power projection capability in the region as much as the vul-
nerability of the USA itself. In February 1947, and in front of a group
of prominent senators and General George Marshall, Undersecretary
of State Dean Acheson gave a passionate speech explaining why the
USA must intervene in Greece. Acheson himself recalls in his memoirs:
[if Greece fell] like apples in a barrel infected by one rotten one, the
corruption of Greece would infect Iran and all to the East. It would
also carry infection to Africa through Asia Minor and Egypt, and to
Europe through Italy and France, already threatened by the strongest
domestic Communist parties’.10
Acheson countered arguments that the ‘USA is simply pulling British

chestnuts out of the fire’, or that an intervention can be justified on an
ad hoc basis on humanitarian grounds. For him, ‘it was not a matter of
bailing out Britain and responding to Greece and Turkey on human-
itarian grounds, but rather a strengthening of free peoples against
Communist aggression’. Thus, the USA had no other choice but to ‘pro-
tect its own security’ and in order to do that ‘it had to protect freedom
itself’. In describing this scene, James Chase, Acheson’s biographer, says
that ‘a deep silence followed Acheson’s call to arms’.11
It was no accident. Acheson’s call was unusual. It was not the con-
tainment of the Soviet threat in Europe via off-shore balancing and
the use of proxies, which was Kennan’s approach and an approach
that mainstream US policy-makers were accustomed to; but the actual
involvement of US agencies and the army inside the very governing
political and economic structures of the capitalist states by way of exag-
gerating both the Soviet threat and the vulnerability of the USA and
the free world, i.e., the issue of primacy. But the way in which the
Achesonian policy of primacy came to be implemented in the periphery
differed substantially from the way in which it was to find expression

within the polities and economies of the core. In the periphery, puppet
regimes had been installed conducting ‘democratic’ elections, sustain-
ing authoritarian states of emergency often via intelligence operations
and cracking down on Communism, all the while keeping the domestic
economies of the periphery open to world markets and US companies.
With the partial exception of Italy in the 1940s and 1970s, when the
Italian Communist Party was on the threshold of government, none
of the above took place in Western Europe during the Cold War. The
methods of US control there had been far more refined, sophisticated
and complicated. But in Greece, in Chile and other Latin American and
Third World countries, these methods of control had been the rule, not
the exception. This, as we shall see, had as a result the aggravation of
political relations of representation and legitimacy within the polities
of the periphery, creating severe problems for the consolidation of the
bi-polar phenomenology the USA itself wanted to create there. We shall
become aware of all this by looking at concrete economic and politi-
cal developments in Europe, Greece and Cyprus during the 1950s and
1960s.
Both Greece and Turkey received $400 million ($250 million to Greece
and $150 million to Turkey), coming within the USA’s security orbit.12
Bulgaria and Romania moved into the Soviet bloc, whereas Yugoslavia
came finally to employ a ‘non-aligned’ foreign policy in accordance with
the famous Stalin-Churchill ‘percentages agreement’.13 For all intents
and purposes, however, the defeat of the guerrilla movement in Greece
by nationalist forces in summer 1949 paved the ground for the stabi-
lization of the Greek polity along authoritarian practices and extreme
disciplinarian forms of the political game. The terms and conditions of
Greece’s own agreements under the Truman Doctrine and the Marshall
Plan ‘ensured that no economic or military decision of any consequence
could be taken by the Greek government without the prior approval or
consent of the US Administration or its representatives in Athens’.14 The
political, economic and geo-political premises of dependency and sub-
ordination for the country’s reconstruction and economic development
had been laid. At this point, and before we move on to examine the
political economy cycle of the 1950s and 1960s, an important point
needs to be reiterated.
Despite the fact that the ‘Northern Tier’ was bound to become irrele-
vant if the Greek link was missing, the actual geo-strategic ordering put
together by US policy-makers conceived of Turkey as more important
than Greece. One of the best researchers on the issue, Bruce Kuniholm,
put it as follows:
The security of Greece and Turkey were of critical importance to the

United States. While both countries offered bases for operations in
the Eastern Mediterranean, Turkey was strategically more important
because it dominated the major air, land and sea routes from the
Soviet Union to the Eastern Mediterranean and Persian Gulf. While
Greece could probably never resist an attack in force, Turkey could
impose an appreciable delay on attacking forces and, supported by
the United States, could offer strong resistance. Based on these con-
siderations, the JCS (Joints Chiefs of Staff) defined the following
long-range US strategic interests: (a) A Greek military establishment
capable of maintaining internal security in order to avoid Commu-
nist domination; (b) a Turkish military establishment sufficient to
secure continued resistance to Soviet pressure, and able to delay
Soviet aggression long enough to permit US and allied forces to deny
certain portions of Turkey to Soviet Union.15
4.2 Miracles and mirages: the ‘golden age’

of the drachma
To be precise, Greece’s ‘passive revolution’ did not begin in the 1950s but
during Venizelos’s cabinets in 1928–32, as indeed was the case in a num-
ber of other countries in Europe and Latin America, and even before.
Venizelos’s rule initiated both the authoritarian physiognomy the Greek
state began to assume in the 1930s – see, for example, the idionymon
Law mentioned earlier – and the take off of the Greek economy based
on a policy of exchange controls, multiple exchange rates and import-
substitution industrialization accompanied by clearing agreements and
quotas. A key aim of these economic policy measures was the protection
of foreign exchange in the Bank of Greece; another was the creation of
budget surpluses. These political and economic processes, it should be
noted, found their culmination in Metaxas’s quasi-Nazi cabinet from
August 1936 until the entry of Greece in the war in the autumn of 1940.
For, as the collapse of the world trade and laissez-faire redirected pro-
duction towards the home market, it was in his cabinet that political
dictatorship and coercion found its sister tendencies and match in the
political economy of autarky.
Default and exchange controls did indeed balance the budget, which
was in surplus for nearly four years (1933–36). The budget turned into
deficit again only after the heavy rearmament policy of Metaxas towards
the end of the decade. More than 2 per cent of gross domestic product
(GDP) represented savings from defaulting on external debt obligations,
as external debt requirements dropped ‘from 44 per cent of export earn-
ings in 1931 to just over 9 per cent in 1935 and 16 per cent the following
year’.16 Also, to a certain degree, import-substitution benefitted the pro-
ductive structure of the country (primary and secondary sectors) and
undermined comprador activities and capital. As Mazower notes, ‘com-
paring 1928–32 with 1933–37, we find that the import share of domestic
consumption fell from 38 per cent to 25 per cent for manufactured
goods, 67 per cent to 32 per cent for foodstuffs, and 64 per cent to 27 per
cent for wheat alone’.17 Between 1932 and 1938 growth was between 8
per cent and 9 per cent annually, the only countries surpassing Greece at
the time were Japan and the Soviet Union (textiles/weaves18 and chem-
icals were the two leading manufacturing sectors). In fact, as we can see
from Table 4.1, the only period in which Greece seems to have enjoyed
a surplus in its overall trade structure indicating high levels of interna-
tional competitiveness is the period that followed the default of 1932
and corresponded to the years of import-substitution industrialization,
exchange controls, quotas and clearing agreements. All other periods,
especially after its entry into the Eurozone in 2001 (see next chapters),
Greece has had persistent trade deficits.
But the contradictions of autarky and the defects in the country’s
weak infrastructure did not take long to resurface. Import restric-
tions imposed by the state obstructed the replacement of antiquated
machinery, plant and equipment. It was difficult for Greece to import
technological innovation and know-how, remaining a labour-intensive
economy with severe problems in the reproduction of its industrial
base and planning, all of which leads us to conclude that the passage
to the capitalism of relative surplus-value between the wars had been
extremely painful. To give only one example, in 1916, Greece’s main
exports were vegetables and currants (60.1 per cent), wine, meat and
milk, whereas in 1936 the main exports were again vegetables and cur-
rants (69.4 per cent), minerals and skins (tobacco becomes important
only between 1925 and 1933). This perpetuated the historically uncom-
petitive position of Greek industry and agriculture in international
markets, typically rendering the high rates of growth with characteris-
tics of a peripheral type of dependent/subaltern growth with no elements
of sustainability. The compartmentalization of land by Venizelos and
the Greek ruling classes sapped Communist influence in the country-
side, but at the same time it sapped the country’s position in European
Table 4.1 Evolution of the balance between exports and imports of Greece,
1930–2008
Year Exports as % of imports Year Exports as % of imports
1930 56.9 1974 46.1

1931 47.5 1975 43.3
1932 60.4 1976 42.0
1933 61.2 1977 40.2
1934 62.0 1978 43.0
1935 65.9 1979 40.4
1936 62.3 1980 48.8
1937 61.4 1981 48.2
1938 68.8 1982 43.0
1939 74.9 1983 46.3
1940 74.1 1984 50.1
No available data from 1941–50 1985 44.5
1951 25.5 1986 49.9
1952 34.6 1987 51.1
1953 47.5 1988 44.2
1954 46.0 1989 46.9
1955 47.8 1990 40.4
1956 41.0 1991 40.3
1957 41.9 1992 41.9
1958 41.0 1993 38.3
1959 36.0 1994 43.9
1960 28.9 1995 43.0
1961 31.3 1996 41.4
1962 35.7 1997 41.0
1963 36.1 1998 35.9
1964 34.9 1999 36.3
1965 28.9 2000 35.1
1966 33.9 2001 36.8
1967 41.7 2002 33.0
1968 33.6 2003 29.8
1969 34.7 2004 29.1
1970 32.8 2005 32.0
1971 31.6 2006 32.4
1972 37.1 2007 30.9
1973 41.6 2008 28.6
Source: Our compilation of data from ELSTAT, Concise Statistical Yearbooks from 1930 to
2008, Athens.
agricultural markets. Thus, the Greek state, once again, could not attain
an independent economic and foreign policy during and after the war.
Soon after the approval of the Marshall Aid to Greece, an American
commission was formed (ECA – Economic Cooperation Administration)
not only to advise but also to lead and direct the Greek government
about how to use US aid in combination with the country’s domestic

resources and needs.19 The government’s budget had to be approved
beforehand by the US mission – as is the case in today’s Greece with the
‘troika’. Special provisions were made with regard to security and mili-
tary matters, whereas a separate agreement was signed which imposed
on Greek governments to work towards balanced budgets, price stabi-
lization and enforcing law and order. These agreements ensured that no
security/military ‘decision of any consequence could be taken by the
Greek government’20 without prior approval by the USA, or indeed –
as it became common sense in the years that followed the end of Civil
War – without approval by ‘the Embassy’ – meaning the US Embassy
in Athens. Law 509 of 1947 was a direct consequence of these agree-
ments. It remained in force throughout Greece’s economic ‘miracle’
providing severe penalties for those advocating the overthrow of the
existing order (the KKE was outlawed until 1974). It is on the basis of
this Law that thousands of KKE members, including Nikos Beloyiannis,
had been arrested, tried, imprisoned and killed or exiled. Nothing sim-
ilar happened in France or in Italy. Hub-and-spoke arrangements there
took on completely different forms. In Italy, for example, and despite
the fact that the allied troops remained in the country until January
1947, the independence of the political classes to shape developments
was paramount. Not only the Italian Communist party participated
in the drafting of the Constitution of 1947, but also participated in
national coalition governments and its leader, Palmiro Togliatti, was
Minister of Justice (June 1945–October 1946).21 Moreover, Marshall Aid
in Europe was not just a matter of Open Door. The European aid was to
be administered in a coordinated way by West European governments
in view of boosting European cooperation and economic growth, mak-
ing Europe as a whole capable of purchasing US products without the
need of US aid.22 Marshall Aid pushed the Europeans towards closer
economic cooperation, especially in the fields of coal and steel indus-
try. Hub-and-spoke arrangements in Western Europe were refined and
sophisticated; in Greece, they were direct impositions indicating out-
right subordination of the country upon the USA. Even the country’s
electricity grid, DEI (Public Electricity Corporation), from its foundation
in 1948 until 1955, was financed by the Manufacturers Hanover Trust, a
New York/Brooklyn company, and managed directly by the USA’s Ebasco
Services, a major construction and engineering firm.
4.2.1 ‘Taking off’: the devaluation of the drachma

Although US aid to Greece was reduced with the passage of time, it
continued well till the late 1950s. Gradually it came to be offset in the
national accounts by other sources of income, such as remittances from

sailors and emigrants. Tourism also began assuming particular signifi-
cance as a source of national income.23 But the key policy development
that occurred in Greece after the end of the Civil War was the aban-
donment of import-substitution industrialization. Xenophon Zolotas,
who was to play a major role as Governor of the Bank of Greece,
had already become the most influential critic of import-substitution
industrialization between the wars, arguing that ‘the rapid expansion
of industry was built on sand and was totally dependent on protection-
ism and the devaluation of the drachma which diminished the pressures
of international competition’.24 Zolotas, who was influenced by liberal
economists, stood for balanced budgets and detested high wages, credit
expansion, full employment and inflation. For Zolotas, monetary sta-
bility was the key to success. He pursued consistently his ideas after
the war, which finally came to fruition in 1952–53, when the drachma
was devalued by 50 per cent against the US dollar, and Greece joined
the Bretton Woods system of fixed exchange rates (April 1953). But
even this was not a sovereign decision. As George Stathakis shows in
his wide ranging studies of Greece’s post-war economy, the drachma’s
devaluation and the pursuit of monetarist policies were, in the main,
an American decision in which Dean Acheson was very much involved
through the ‘Welldon Group’ and the MSA (Mutual Security Agency).25
The new rate was set at $1 = 30,000 drachmas, but the three zeros
were excised from all prices and banknotes, and the real exchange rate
became $1 = 30 drachmas. The internationalization of the Greek econ-
omy under Bretton Woods was a matter of time. Export subsidies had
been dismantled and import restrictions eliminated. Two decades of
economic development and low inflation ushered in, facilitating for-
eign direct investment accompanied by tax privileges for foreign and
shipping capital.26 Law 2687 of 1953 offered massive tax privileges and
‘guarantees to the owners of capital imported into Greece for invest-
ment to re-export the capital, interests and profits abroad’.27 The same
Law prohibited confiscation of foreign assets and investments. By the
mid-1960s, Greece was operating almost as an offshore paradise, some-
thing which can be inferred by such policy acts as Law 4171 of 1961
or the promulgation by the dictatorship of Laws 89 and 378 of 1967
and 1968 respectively. Conglomerates such as the Esso-Pappas refinery
in Salonica, or companies such as Dow Chemicals, Pirelli, Goodyear,
Pechiney Aluminium and Republican Steel flooded into Greece through-
out the 1950s and 1960s.28 Greek shipping capital began investing
in banking, shipyards, tourism, chemicals, fertilizers and insurance.
The best example here was the well-known Andreades Company –

‘Omilos Andreadi’, after the name of shipowner and tycoon, Stratis
Andreadis – which controlled Greece’s Commercial Bank with capital
that exceeded 35 per cent of the total liquid capital in Greece’s econ-
omy. Through his Company, Andreades’s private group was in control
of Eleusina Shipyards, phosphor fertilizers, insurance and other busi-
nesses. His empire received a severe blow when the governments of
Constantine Karamanlis in the post-1974 period embarked on a pro-
gramme of extensive nationalizations and state expansion.29 All in all,
and under such favourable business conditions, profitability increased
across most sectors of economic activity, especially in manufacturing,
banking and commercial activities. Yet robust and sustainable economic
development associated with a virtuous cycle of high wages, welfare
projects and solid public investments in infrastructure was anything but
forthcoming. Let us explain why.
By 1952 most of Greece’s economic activities reached pre-war lev-
els. Inflation fell from 15 per cent in 1954 to just over 2 per cent in
1959 and then remained stable for a number of years. The balance
of payments exhibited a deficit, but it was largely offset by invisible
earnings, tourism, US aid and war reparations. Investments were facil-
itated by the Bank of Greece, which provided liquidity to commercial
banks in the 1950s. But until 1957, ‘US aid contributed more than 75
per cent to the overall budget deficit requirements, including invest-
ment expenditures’.30 In fact, as we can see from Tables 4.2 and 4.3 the
real ‘take off’ occurred in the 1960s (the dictatorship lasted from 21 April
1967 until the Turkish invasion of Cyprus in July 1974), during which
time Greece presented rapid rates of growth that could match those of
all other countries, including Japan and Germany. The stability of the
drachma, nevertheless, became a key propaganda tool for the right-wing
ERE party of Constantine Karamanlis. In the crucial election of 1963 (see
below), ERE ran on the following ticket: ‘This drachma is yours. Do not
let Papandreou take it away from you’.
As with the inter-war period, no signs of Keynesian policy-making
could be observed (deficit spending, welfare projects financed via taxa-
tion, high (Fordist) wages policy and intervention in aggregate demand
management, etc.). Productive investment was left mostly in the hands
of private capital. In Italy, for example, from 1949 to 1950 the rapid
economic development that began taking shape was mainly instigated
by domestic structures and the state via Keynesian instruments of
demand management. The Italian miracle, although incapable of solv-
ing the problem of the Mezzogiorno, was driven by export-led, highly
Table 4.2 Sectoral composition of GDP and rate of growth of GDP at 1958
constant prices up to 1960, and from 1960 to 1974 at 1970 constant prices
(million drachmas)
Year Agriculture Industry Services Rate of growth of GDP %
1950 28.8 13.6 48.5 0.3

1951 30.3 13.6 50.5 7.9
1952 28.5 13.4 52.2 −0.2
1953 31.9 13.5 48.5 12.9
1954 30.9 14.7 47.7 2.9
1955 30.1 15.1 48.2 6.7
1956 29.2 15.7 47.9 6.0
1957 30.7 15.6 46.6 7.6
1958 27.6 16.5 48.0 2.5
1959 27.8 16.2 47.5 4.2
1960 25.0 17.3 48.2 3.0
1961 26.3 13.8 48.7 11.2
1962 22.7 14.4 51.3 0.5
1963 24.8 14.2 49.7 10.0
1964 23.0 14.9 49.9 7.5
1965 23.1 15.0 49.5 9.2
1966 22.1 15.5 50.4 5.3
1967 21.4 16.1 50.9 4.6
1968 18.5 17.0 51.3 5.6
1969 18.0 17.8 50.4 9.3
1970 18.2 19.0 50.3 8.3
1971 17.4 19.5 49.9 7.9
1972 16.9 19.3 49.5 9.1
1973 15.5 21.0 49.7 8.3
1974 16.6 20.8 51.9 −1.8
Note: Industry refers only to manufacturing and agriculture and includes fishing and forestry.
Other sectors adding up to 100 per cent include construction, mining and electricity.
Throughout the period, dwellings accounted for about 45–55 per cent of total construction,
and public sector investment was chiefly in construction absorbing, at times, up to 70 per
cent of it.
Source: Our elaboration of data based on Freris (1986) pp. 145 and 156; Constantine Tsoukalas
(1986) pp. 236 ff.; George Karabelias (1989) State and Society in Post-1974 Greece (Athens:
Exantas), pp. 66 ff, passim.
competitive industries.31 Thus, contrary to the rest of Europe and the

capitalist world, neither the welfare state in Greece nor serious inter-
vention in the aggregate demand happened during the ‘golden age of
the drachma’. With an average unemployment of about 5–6 per cent,
the period stretching from 1950 down to 1970 saw an apotheosis of
a rather disorganized private capitalism, development and investment,
especially in construction and the way in which private and political
Table 4.3 Percentage increase, GDP and manufacturing in

selected European countries (1950–70) and Japan (1960–70)
GDP Manufacturing
France 5.0 5.8

Germany 6.2 8.0
Greece 6.0 8.1
Ireland 2.5 4.7
Italy 5.4 7.9
The Netherlands 5.0 6.3
Portugal 5.1 8.6
Spain 6.1 8.4
UK 2.7 3.3
Japan 10.0 16.7
Source: Our calculations using data from Robert Brenner (2006) The
Economics of Global Turbulence (London: Verso), p. 82, passim and
Angus Maddison (1973) Economic Policy and Performance in Europe,
1913–1970 (London: Collins/Fontana), p. 51.
interests were being intermingled. Between 1960 and 1970 fixed capital
investment absorbed 25 per cent of GDP, but the defence budget was
equally high, at times as high as 9 per cent of GDP. This was partly due
to Greece’s NATO commitments and partly due to financing a domes-
tic regime of oppression and compulsion. In this milieu, attempts had
been made to maintain working-class discipline via an authoritarian,
anti-Communist state, which had essentially excluded more than half of
the population from political and institutional participation, especially
state employment.32 But we need to look at two important variables: the
structure and contribution of manufacturing to the GDP; and the issue
of internal and external migration, a phenomenon that marked Greek
society and politics after World War II.
As we can see from Table 4.2, the share of industry to GDP increased
from 14 per cent to 19 per cent. The relative decline in agriculture we
observe should not be confused with an increase in the overall output by
nearly 5 per cent, whereas the growth of services remained almost stable
at around 50 per cent. What we have also come to conclude by studying
the statistical data provided by Hellenic Statistical Services (ELSTAT) and
the Bank of Greece during this period is that the structure of industrial
production remained qualitatively unaltered. For example, chemicals
prevailed over food, tobacco, drink and clothing, but capital goods
industry (metallurgical, mechanical, production of means of produc-
tion, transport equipment and technological innovation) changed only
marginally. In 1966, the main imports were transport equipment (19 per
cent), machinery and electrical equipment (17 per cent), metals and
metallic products (9.4 per cent), minerals (8.7 per cent) and chemicals
(8.2 per cent). The same year, the main exports were food and bever-
ages (32.5 per cent), agricultural products (28.2 per cent), weaves and
clothes (11.4 per cent) and minerals (8.2 per cent). These data allow us
to infer that Greece, during its ‘golden age of capitalism’, continued to
import technologically advanced products from the capitalist core, and
export labour-intensive products using previous generation technology.
Thus, the comprador bourgeoisie of the Venizelist era regenerated itself
by trading imports for final consumption purchased from the core, while
sharing power with private capital that was mainly of foreign origin or
interests. This reproduced the structure of deficit in the balance of pay-
ments, undermined the country’s positioning in the global economy
and perpetuated its dependency also by way of decision-making powers
foreign capitals/interests enjoyed in the Greek political system. Thus, to
paraphrase Giuseppe Tomasi di Lampedusa in his il Gattopardo, every-
thing seemed to have changed in Greece during the 1950s and 1960s,
yet everything remained the same.33 Everything, but one variable: the
regime of post-war ‘passive revolution’ came to be challenged head-on
by social forces generated by the very truncated economic miracle itself.
Rapid economic development went hand in glove with internal
and external migration. During the peak period of economic develop-
ment (1960–70) some 800,000 people emigrated mainly to Australia,
the USA and Germany, a fact that eased unemployment and under-
employment. Emigration covered up the inability of the private sector to
provide employment, whereas the public sector was constantly replen-
ishing itself with civil servants loyal to the parties of the Right. Domestic
migration reduced the numbers of economically active population
engaged in agriculture – although, as we saw earlier, overall produc-
tivity in agriculture increased – and revolutionized construction levels
and urbanization in the most anarchic and unplanned manner possible.
Athens became Greece’s major urban centre with some 3.5 million peo-
ple in 1975, growing from only 1.3 million in 1951. By 1975 more than
37 per cent of the country’s population lived in Athens and 18.4 per cent
in Salonica. This type of population movement, coupled with the exclu-
sion of large popular strata from political and institutional participation
and the lack of welfare provision, created an explosive, radical socio-
political mix. Because of the absence of mass parties of the Left, what
was needed was the interpellation of this social radicalism by a charis-
matic political leadership that also knew how to foment nationalism
among the people so that the monopoly of nationalist discourses could

be snatched away from the Right and the Crown.34
4.3 Kampfplatz-3: lines of stress and fault-lines
The ideal-typical terrain of bi-polarism shaping Greek political develop-

ments during the ‘golden age’ is the juxtaposition between the Centre
Union party led by old Venizelist politician, George Papandreou, on
the one hand, and the right-wing forces of Constantine Karamanlis and
the Crown, on the other. Matters, of course, were far more complicated
and serious tensions and lines of stress existed within those two gov-
erning blocs. All cabinets had been unstable and backstage plots and
counter-plots involving the army officers and security personnel were
very common. It is important to note that Greece’s kampfplatz during
this period is over-determined and controlled by the so-called ‘American
factor’. The dependent/subaltern position of the Greek social formation does
not concern only the field of political economy but, and perhaps even more
importantly, the political and security/military fields of the formation as a
whole. Even discourses and political movements such as those devel-
oped by Andreas G. Papandreou in the 1960s within the Centre Union
party of his father had initially been supported by US agencies aiming
at containing the rise of the United Democratic Left (EDA).
EDA, founded in 1951, received over 24 per cent of the vote in the
May 1958 election, becoming the main opposition party to Karamanlis’s
National Radical Union (ERE). EDA was perceived as an umbrella orga-
nization for the outlawed KKE since the end of the Civil War. The
election of May 1958 was a landmark and alarmed Washington, because
it became clear that nationalist and right-wing forces cannot contain
the electoral rise of a genuine Left especially when the liberal centre
is fragmented – as indeed was the case in 1958. Since then, US policy-
makers had been in search of a pro-capitalist and pro-Western alterna-
tive to the rise of EDA. In other words, they wanted to frame kampfplatz
in order to control it. The vehicle to achieve this was the Centre
Union party founded in 1961 and led by George Papandreou (in fact,
Papandreou, in the national election held that same year, cut EDA down
to size pushing it into third place).35 US policy-makers wanted a liberal-
democratic party in Greece after the image of the Democratic Party of
John F. Kennedy and loyal to the USA and NATO. This would define the
contours of the political phenomenology of Centre-Left versus Centre-
Right, steadily anchoring Greek politics within NATO while sidelining
EDA and Communism. It became obvious, therefore, that the Greek
kampfplatz had been imposed and, under constant US superintendence

and vigilance, simply because the real field of division was between the
forces of Communism and the democratic Left, on the one hand, and
the forces of anti-Communism, on the other. The US plan of inject-
ing a second anti-Communist force within the Greek polity made a lot
of sense, but it eventually failed to work inasmuch as lines of stress,
especially within the Centre Union party and over Cyprus’s geo-politics,
evolved into fault-lines. In addition, the nationalist Right also appeared
to be disorganized and fractious, especially in its quarrels with the
Crown and its lack of dynamic leadership (Constantine Karamanlis left
Greece in 1963 after being defeated by George Papandreou’s Centre
Union in the 1963 election). The advent of the Greek dictatorship, there-
fore, appears to fit in a conventional explanatory mould: apparent social
disorder and political anarchy jeopardizing the pillars of the system,
in this case, Greece’s ‘Hellenic-Christian’ civilization and its system of
private property. But this is not really true. We cannot understand the
reasons why a dictatorship was effectively imposed upon Greece, if we
fail to appreciate the role of young Papandreou in the politics of Centre
Union, the significance of the Cyprus issue and the cohesion of NATO’s
Southern flank for the USA.
George Papandreou (and EDA) denounced the results of the 1961 elec-
tion as rigged by the National Radical Union (ERE) of Karamanlis, refus-
ing to recognize his government. Without procrastination, Papandreou
immediately and single-handedly declared his unyielding democratic
struggle against the Right. Possessing no instruments that are offered
by a mass party (coherent and disciplined organization, national sys-
tem of party branches, links with organized labour and trade unions),
this political strategy helped Papandreou in harnessing support among
the disparate forces of the Centre-Right, EDA and, broadly speaking, the
new migrants in Athens and Salonica, all of whom could embrace his
perspective of institutional renewal, democratization and pro-welfare
reforms. ERE could only capitalize on the achievements of economic
development and monetary stability, hence its main pre-election slogan:
‘This drachma is yours. Do not let Papandreou take it away from you’.36
Papandreou’s Centre Union won the November 1963 election, but the
votes were not enough to achieve the parliamentary majority required
to form a government. And as the parliamentary balance of power was
held by EDA – whose social influence was still important especially after
the murder of its MP, Gregory Lambrakis, by obscure underworld ele-
ments in Salonica – he forced a new election in February 1964 in which
he achieved an unprecedented victory with nearly 53 per cent of the
vote. Papandreou’s cabinet, which lasted less than two years, had no
substantial time to deliver on reforms, yet signs of Keynesian policy-
making appeared, especially under the influence of his son, Andreas.
Characteristically, Papandreou tried to re-negotiate the multi-million
investment license of Esso-Pappas in order to deprive the company,
which was run by the Greek-American millionaire, Tom Pappas, from
having the monopoly of oil supply for Greece’s domestic market. The
licence was offered to Pappas by the Karamanlis government without
parliamentary scrutiny. True, Papandreou did not have much success
in renegotiating the agreement, but the credit should go to his cabi-
net, which tried to regulate monopoly capital. The overall philosophy
drew from Keynesian economics. On the occasion of Greece’s agreement
with the EEC in 1960, a policy pioneered by Karamanlis, the young
Papandreou wrote:
Economic development is not to be measured in terms of the

country’s per capita income, but in the distribution of income [ . . . ]
Economic development means an increase in the opportunities for
productive occupation and a continual widening of the participa-
tion of the popular classes in a growing national income. That is the
meaning of social democracy.37
(Emphasis by A.G. Papandreou)
To a great degree, however, the problem was the blocked character of

the Greek political system, which suffocated the needs of a highly mobi-
lized society for democratic reform. During George Papandreou’s battle
to control the Ministry of Defence, allegations that Andreas Papandreou
was the leader of a left-wing conspiratorial group within the army,
known as Aspida (Shield), became widespread and a court case began.
This organization, apparently, was the leftist counterpart of the ultra-
nationalist IDEA (Sacred Bond of Greek Officers), which was founded
by Greek officers in the Middle East during World War II.38 The crisis
reached a climax in July 1965, when George Papandreou came to con-
front the King in a battle that he apparently lost, as a crucial number
of his MPs, gathered around Constantine Mitsotakis, withdrew parlia-
mentary support to his Centre Union government. A long period of
instability followed leading to the dictatorship of 21 April 1967. How-
ever, neither the dispute over the control of the Ministry of Defence,
nor the problems of governance Greece faced since July 1965 were the
main causes of the April coup. We argue that the dictatorship was the
result of two issues that are strictly interlinked: the first is the political
mistrust shown by the US Embassy towards Andreas G. Papandreou,

who served as Minister to his father’s cabinets, and was the natural can-
didate to lead the Centre Union party after the death of his elderly and
ailing father. The USA did not want Andreas to become Prime Minister.
The second reason is related to Cyprus’s and Greece’s Cold War security
and the public support Andreas rendered to Makarios. Simply put, the
USA wanted a solution to the Cyprus issue based on a form of partition
of the island between Greece and Turkey, a policy that both Andreas
and Makarios opposed with a rationale that undermined the pillars of
NATO’s Cold War policy. Young Papandreou’s public policy seemed to
be going beyond the constraints laid out by the neo-imperial power. As a
consequence, the process of democratization in Greece had to be halted.
4.3.1 Acheson’s Cyprus scar, or how the USA impeded

democracy in Greece
Discreetly assisted by both his father and Constantine Karamanlis him-
self, Andreas arrived in Greece in 1959 to become head of a new
Economic Centre, which was supported with funds by the Ford and
Rockefeller foundations. This very event shows exactly the bi-partisan
support the USA rendered to the mainstream Greek political class
in order to establish a functional political phenomenology sidelining
EDA and squashing Communist influence. By that time, however, the
ERE party of Karamanlis and Evangelos Averoff – Karamanlis’s Foreign
Minister – had laid the policy determinants of the Cyprus issue in close
cooperation with the British.
Britain had relinquished responsibility over Greece in the mid-1940s,
but it did continue to be the master of Cyprus. The island was per-
ceived to be the key – especially after the loss of Palestine – to Britain’s
Middle Eastern approaches and the Suez Canal. Cyprus was Britain’s for-
mal colony and had an ethnically mixed population (about 80 per cent
ethnic Greeks and 18 per cent Turkish/Muslim Cypriots, the rest were
Maronites, Armenians and other minorities). By and large, although
the issue is far more complicated, neither Greece nor Turkey had for-
mally raised any Cyprus question until after summer 1955. Aimed at
containing the Greek Cypriot anti-colonial and pro-enosis (union with
Greece) struggle on the island, Britain convened in London the so-
called ‘Tri-partite Conference’ (Britain, Turkey and Greece). In a way,
this undermined the success of US policy in the Balkans and the Near
East, the ‘Northern Tier’ programme, as well as the 1953 Balkan Treaty
of Friendship and Cooperation between Turkey, Greece and Yugoslavia.
Archbishop Makarios, the foremost Greek Cypriot leader of the political
branch of National Organisation of Cypriot Fighters (EOKA), opposed
Greece’s participation in the Conference, but to no avail.39 With the

inclusion of Turkey as an interested party in the Cyprus issue, it became
clear which type of solution the British desired for Cyprus: a solution
based on a form of political division of the island between Greece and
Turkey, and with Britain having a superintendent and semi-formal role
in view of maintaining at least its military bases there. Britain, in fact,
had adopted almost openly a policy of ‘divide and rule’ over Cyprus,
which, at a social level, included the recruitment of Turkish Cypriots as
auxiliary police force aimed at suppressing the Greek Cypriot uprising.40
For these reasons, at least from 1957 onwards, Makarios began discreetly
opposing Colonel Grivas’s armed struggle on Cyprus as he rightly saw
that any continuation of violence played into the hands of the British
policy of ‘divide and rule’. To the Greek Cypriot aim of enosis the Turkish
Cypriots, encouraged by the British and actively supported by Turkey,
counter-posed taksim (partition). Especially after the foundation of the
Cypriot state in 1960, Makarios had essentially dropped any reference to
enosis inasmuch as it would have meant further involvement of Turkey
and other NATO powers in Cyprus, leading to its permanent vivisec-
tion. This turned the entire nationalist establishment in Cyprus and
Greece – whether official or underground – against him.41 These two
processes, one at the elite level the other at societal level, fomented
Greek and Turkish nationalism inside and outside the island and laid
the ground for the Constitutional arrangements of London-Zurich in
1959–60, which were basically negotiated by Karamanlis and Averoff,
on the Greek side, and Adnan Menderes (Prime Minister) and Fatin
Zorlu (Foreign Minister), on the Turkish side. Britain had, therefore, laid
out the constraints within which the minor players, Greece and Turkey,
could operate. If the Greeks wanted enosis and if the Turks wanted
taksim, then the best way is the middle way, that is, a painful compro-
mise by both sides concerned. Nonetheless, it should be said that enosis
was never mainland Greek policy in the 1950s or before, despite the fact
that taksim was Turkish policy instigated by Britain. Enosis was the pol-
icy of the Greek Cypriots in the 1950s alone (and also before that), not
the policy of the Greek state. Taksim became Turkish policy in the 1950s,
because Turkish policy-makers wanted to avoid encirclement of Turkey’s
vital air-lanes and water passages, from the Northern Aegean down to
Rhodes and the Cyprus/Syria zone, something which would have been
the case if enosis was effected. Turkey has always connected the Cyprus
issue with the strategic position of the Aegean, and if taksim is successful
in the former, then it should also be tried in the latter.
But it is a myth that compromises do not have winners and losers.
The essence of the London-Zurich agreements – with which Makarios
disagreed signing up after enormous pressure exerted upon him by

Karamanlis and Averoff – was basically twofold: first, that executive
power had essentially to be shared between a Greek Cypriot President
and a Turkish Cypriot Vice President, and despite the fact that the Greek
side was the majority ethnic population on the island; second that three
NATO powers, Britain, Turkey and Greece, maintained the right to inter-
vene in the internal affairs of the Republic as ‘guarantor powers’, a
right stipulated with a Treaty provision, the so-called Treaty of Guar-
antee (here, the Greek Cypriot side surrendered any meaningful form
of sovereignty not just to NATO but to Turkey’s superior geo-strategic
posture within NATO).
Predictably, the Cypriot Constitution collapsed because it could not
provide for a functional polity. President Makarios, impossible to govern
by enlisting the support of his Vice President who enjoyed the right to
veto all significant decisions in matters of foreign, economic and admin-
istrative policy, put forth his ‘Thirteen Constitutional Amendments’
(1963). Inter-communal fighting ensued, with the Turkish Cypriots leav-
ing their positions in the government and withdrawing into militarily
protected enclaves. Greek Cypriot forces overwhelmed inferior Turkish
Cypriot militia and the Turkish government threatened to invade the
island invoking the Treaty of Guarantee (in fact, Turkish warplanes
did bomb Greek Cypriot positions). However, Turkey’s operations were
stopped at the 11th hour by US President, Lyndon Johnson, with an
unusually harsh diplomatic letter to the Turkish PM, Ýsmet Ýnönü.
Makarios won the battle at the UN, as resolution 186 of the SC recog-
nized his Greek Cypriot government as the sole legitimate government
on the island to impose law and order.42 At the same time, however,
Turkey’s foreign policy changed tack and began fostering ties with the
USSR.43 At this very juncture, the US assumed the political initiative
sidelining Britain.
The mediating task fell on the shoulders of the architect of the USA’s
international policy, Dean Acheson. In secret talks in Geneva with
Turkish and Greek officials behind the back of Makarios, Acheson pro-
posed a number of compromise plans, maintaining NATO’s cohesion
by avoiding a war between Greece and Turkey over Cyprus. To this
end, Turkey would receive a military base on Cyprus and some Turkish
Cypriot villages would be administered by Turkish Cypriots, whereas
the rest of the island would unite with Greece. The logistics for achiev-
ing this were equally important. The scheme assumed that Makarios,
who opposed any NATO solution to Cyprus, as it would automatically
have meant vivisection of his land between three NATO powers (Greece,
Britain and Turkey), would have either to conform to this settlement or

otherwise be eliminated. Greece, could either convince Makarios diplo-
matically, or enforce a military solution upon him, deposing him from
power and proclaiming enosis. Once enosis was achieved, then Greece
would have invited fellow NATO member, Turkey, to establish its mili-
tary bases on Cypriot soil. For all intents and purposes, this was a proposal
put forth by the American state to a subaltern ally. Thus, when Zolotas, at
the time Governor of the Bank of Greece, asked the USA for economic
assistance, the official reply he received was that ‘the USA could not see
their way to any special assistance until there had been a solution in
Cyprus’.44 This is how subaltern and hegemonic elites, behind the back
of their people, trade national security and geo-politics for money and
the other way around. US President Johnson officially suspended the
Acheson mission on 9 September 1964.
Constantine Mitsotakis was in total agreement with Acheson’s par-
tition scheme, arguing that, if necessary, it should be imposed on
Makarios with a coup.45 George Papandreou was lukewarm and rather
favourable and had already sent secretly a full Greek division to the
island (circa 6000 soldiers) in April 1964, which could now be used to
depose Makarios and effect the terms of the plan. The Greek Prime Min-
ister’s line in his discussions with the US Embassy and President Johnson
himself was that the best solution to the problem of Cyprus was enosis.
This would bring Cyprus into Greece’s and NATO’s defence and security
orbits, eliminate the large Communist party on the island that sup-
ported Makarios, and even eliminate President Makarios himself. But
his son Andreas had a different opinion. In an interview he gave to Eric
Rouleau in Le Monde, young Papandreou argued:
Certain Western powers have attempted to create a rift between Presi-

dent Makarios and our government by asking us to condemn his poli-
cies. In this fashion, they have shown that they do not understand
anything about the Cyprus situation. Makarios is not an isolated
leader. He is the genuine spokesman for his people, and his policy
expresses the will of the overwhelming majority of the Cypriots. It is
therefore both useless and dangerous to turn against Makarios.46
Makarios and Andreas stood indeed firmly against the Acheson plan.
It is important, however, to understand young Papandreou’s rationale
and political manoeuvring in full.
For Andreas, Greece’s coercive domestic regime was the result of the
passive subordination of the Greek elites to the USA since the Civil
War and the economic dependence of the country upon foreign capi-
tal and aid. Appointed as Minister to the PM in the government of his
father, he had been assigned with overseeing the Greek intelligence ser-
vice, State Information Service (KYP), which had literally been created
by the CIA in the aftermath of the Civil War. His ministerial experi-
ence was very telling and instructive: he found out that the CIA was
secretly financing KYP ‘to the tune of $300,000 annually without super-
vision of the elected Greek government’.47 His economic and theoretical
analyses that Greece was effectively a dependent protectorate of the
USA – what he later called ‘paternalistic capitalism’48 – found a revealing,
first-hand empirical foundation. But young Papandreou had a refined
and highly sophisticated approach to the operations of the ‘American
factor’ in Greece. To him, US policy in Greece was not ‘monolithic’.
In the main, three US services and agencies in Greece were compet-
ing over who was going to have the upper hand in determining the
country’s policy. The first was the State Department; the second was the
Military Mission and the Pentagon via NATO; and the third was CIA.
Of these three agencies, Andreas argued, the CIA had the upper hand,
closely followed by the Pentagon. He was also aware of the fact that
Turkey enjoyed a superior geo-strategic position than that of Greece
within NATO, so any Cyprus solution within NATO would tend to
favour Turkey. In various public speeches, interviews, articles and inter-
ventions, Andreas argued that Greece must cease to be a dependent,
comprador state serving US interests, developing instead a robust indus-
trial policy which was the precondition for its national independence
and dignity. To Karamanlis’s strategic notion that ‘Greece belongs to
the West’, Andreas juxtaposed the slogan that ‘Greece belongs to the
Greeks’. Exogenous structures and agencies would cease determining
Greece’s foreign and economic policy only if a new, socialist political
class assumed power on the basis of a Keynesian developmental agenda.
For Andreas, Cyprus was a case in point. It showed that Greece’s national
interest was subsumed not only by the USA and NATO, but also by
Turkey, precisely because Turkey was assessed as having superior geo-
strategic value than Greece in Cold War conditions. In an interview in
the newspaper Eleutheria (Freedom) on 6 February 1967, Andreas, for
the first time, accused openly the USA of the policies it imposed on
Greece as inimical to the country’s national interest. The USA, Andreas’s
argument went, wanted to lock Greece up to Turkey’s security system
within NATO, especially over Cyprus, effectively making Greece operate
as Turkey’s satellite within the overall framework of US Cold War inter-
national policy. But then, ‘if détente made NATO recede even in Europe,
what is the purpose for having a NATO solution in Cyprus?’49 In this

masterful way, Andreas divested the right-wing from its monopolistic
appropriation of nationalism, transplanting it into a progressive social-
ist programme favouring democratic reform and endogenous industrial
development.
As a result of these public positions, the CIA, in its reports, used
to characterize Andreas ‘as the most dangerous, opportunistic, ruthless
and unscrupulous politician in Greece, a politician whose views were
to be regarded with the deepest suspicion’.50 The CIA and the Pen-
tagon feared that with Makarios and Andreas in charge in Cyprus and
Greece respectively – Makarios was also one of the founding leaders of
the non-aligned movement – the entire programme of NATO’s deter-
rence in Europe, the Mediterranean and the Middle East would fall apart.
Andreas, however, was giving private assurances to the US Embassy in
Athens that the USA should not be afraid of him because he had to do
what he was doing in order to win popular support and that, once he
was in power, the radicalism of the people would be defused following
implementation of institutional reforms. But the US Embassy in Athens
never believed Andreas’s private assurances and inferred that, at best,
‘Andreas is a demagogue’.51 Lines of stress between the core faction of
the Centre Union led by Andreas, on the one hand, and the American
state, on the other, evolved into fault-lines. Significantly, these fault-
lines were not primarily premised on economic issues, but on a security
and geo-political Cold War issue: the fate of Cyprus.
Whether Andreas meant what he was saying privately to the
US Embassy in Athens is irrelevant, because the election scheduled to
take place in May 1967 would have given an overwhelming majority for
the Centre Union to carry out its democratic and reformist programme
that the country badly needed. But democracy, same as the quarrels
about who would be in control of the Defence Ministry, was not the
USA’s preoccupation and the election never happened. Most of the lead-
ing group of the Colonels that engineered the coup of 21 April 1967
were on the payroll of CIA. Their justification was that the country had
entered a phase of political anarchy and chaos, ready to slide to Commu-
nism, and anarchy undermined Greece’s ‘Hellenic-Christian civilization’
and the values of ‘fatherland, religion, family’.52 The ‘American factor’
impeded not just democracy in Greece in the 1960s, but also contributed
to the vivisection of Cyprus by projecting Acheson’s plans forward to
execution in summer 1974.53 Turkey was also quick to open the issue of
the Aegean Sea as early as 1973, asking that a median line be drawn in
the water and air lanes of the Sea.54 Both issues, it should be said, linger
to the present day despite Greece’s and Cyprus’s entry to the EEC/EU in
1981 and 2004 respectively.
4.4 Summing up
Greece’s social, economic and political destruction caused by the war

and German occupation and, later, by a bloody Civil War, was addressed
by first defining the contours of its geo-politics and security within Cold
War conditions. The economic reconstruction of Greece would not have
happened the way it did, if the country’s Cold War security positioning
had not previously been determined and agreed upon by the USA and
the USSR. Thus, geo-political and security arrangements preceded, at
least in the case of Greece, other vital matters, such as economic and
social development and welfare.
But the most interesting, and rather under-examined, aspect of this
period is the way in which the USA, the country’s new patron, blocked
the democratic process in Greece. In fact, the USA impeded the transfor-
mation of socio-economic dynamics into a political and institutional
reform programme via the pro-Keynesian programme of George and
Andreas Papandreou. The solution the American state had opted for was
dictatorship for Greece arresting the process of democratization gener-
ated by rapid economic development, accompanied by the partition of
Cyprus in order to satisfy Turkey. Time and again, it seems that Greece’s
economic, social and political processes have been over-determined by geo-
political and security contingencies that connected NATO’s global concerns
in Cold War conditions with regional conflicts and parameters. However,
the actor the superpower pleases more is not just the actor that counts
more geo-strategically. This is just a fundamental pre-condition affect-
ing decision-making processes, especially when the hegemon sets out
its regional and global priorities. But agential strategies and responses
by regional actors count too. When Turkey was stopped from interven-
ing in Cyprus in 1964 by the USA, it approached immediately the USSR
starting a number of important cooperative undertakings. Greece, due
to the dependency and subservience of its Centre and Right-wing elites
to the master, was never in a position to pursue similar policies. The
Greek kampfplatz was fractious, fragmented and easy to be manipulated,
whereas the involvement of the Crown offered nothing but confusion
and irritability. Thus, when Andreas Papandreou in the 1960s dared to
challenge these cornerstones of Greece’s modern politics, he and his
policies went down the drain. The dictatorship of the Colonels took
place for two main reasons: first, in order to stop Andreas from coming
to power; second, to ‘solve’ the Cyprus issue on the basis of Acheson’s

partition plan.55
Despite Greece’s rapid economic growth in the 1950s and 1960s, the
country, once again, failed to catch up with the advanced core: it could
not develop economies of scale remaining largely dependent on foreign
direct investment and US aid and loans; its produce was labour intensive
and internationally uncompetitive, thus the balance of payments prob-
lem persisted; and, very importantly, as opposed to what happened in
the core, Greek governments stayed aloof from any type of Keynesian
policy-making (deficit spending, high wages and social welfare). How-
ever, the penetration of private foreign capital in Greece in the 1950s
and 1960s is such that it makes possible for one to argue that the power
and influence of a comprador bourgeoisie is on a par with the power and
influence of foreign capital (mainly of US origin). This combination of
developments made the situation in the 1960s explosive, a situation that
the Centre Union party wanted to address. Having said this, Greece’s
position as a dependent/subaltern state in the neo-imperial chain of
Cold War politics remained structurally unaltered, both politically and
economically. The predominant socio-economic and political element
is not just the comprador bourgeois (the key importer of technological,
transport and other advanced equipment and know-how with broader
financial and banking operations) but also the operations of private for-
eign capital, whose investments had been greatly facilitated by Greece’s
conservative political elites in the 1950s and 1960s. However, due to vast
portions of foreign capital operating in the country, we would argue
that comprador capital was forced in the conjuncture of the 1960s to
share power with foreign private interests. In this context, we argue that
the comprador element, in its contradictory power-sharing with private foreign
capital and the political system, created the most outrageous conditions of
dependency and subordination, rather than inter-dependency and sustainable
growth. The dictatorship imposed on Greece was a sign of weakness of
the Greek polity, not a sign of strength.
Last but not least, we have tried to show that hub-and-spoke neo-
imperial arrangements in Greece – and elsewhere in the periphery –
had been of a qualitatively different political and economic order
than those undertaken between the USA and other countries of the
advanced core. This can be seen from the ways in which foreign capital
penetrated Greece; the type of arrangements that were being engi-
neered by the political/economic/security nexus inside the country;
and the way in which this particular type of penetration disorga-
nized production and national planning, leading to an uncontrollable
construction boom whose negative consequences reverberate to present-

day Athens, Salonica and other major provincial cities. Apparently,
Andreas Papandreou was fully aware of these differences in the USA’s
post-World War II international policy. In formulating a question to
Stanley Hoffman – one of the gurus of post-war American academia
in the field of IR – at a Princeton University conference in December
1968, Andreas said: ‘The Atlantic alliance includes powerful advanced
nations which are not dominated by the US in the same sense as the
Latin American republics. The pattern here is one of rapidly grow-
ing economic domination hand in hand with political infiltration and
control’.56
The theoretical discussion that preceded in Part I, and the historical
underpinnings of the Greek social formation we have presented in the
last two chapters, inform our study of post-1974 Greece. We can there-
fore now turn our attention to the fourth period of the Greek kampfplatz,
which corresponds to the political phenomenology of PASOK versus
New Democracy. The sources of the Greek debt crisis today are consub-
stantial with the external and domestic articulations of the post-1974
kampfplatz. It is no accident, therefore, that the current crisis has not
just turned out to be a simple, albeit acute, debt crisis but a severe crisis
of the political phenomenology that has ruled the country since 1974.
5
Kampfplatz-4 and the ‘European
Factor’, 1974–89
The stagflation that hit the Euro-Atlantic core in the 1970s can surely be
seen as a peculiar crisis of over-accumulation, what Robert Brenner calls
‘overcapacity/overproduction’ caused, among others, by ‘uneven devel-
opment’. Laggards, such as West Germany and Japan whose economies
had been destroyed by World War II, managed not only to catch-up with
the USA but also to out-compete it, the result being a fall in profitabil-
ity from which the heartland has never managed to recover to date.
But ‘uneven development’ alone cannot explain everything. The con-
cept suffers from a certain reductionism – as it reduces everything to the
economic sphere – and Euro-centrism, marginalizing developments and
contradictions stemming from other parts of the world. For instance, the
1970s stagflation is linked to a number of structural and agential factors,
including the power of Arab nationalism and anti-colonial movements
that reverberated across the Euro-Atlantic centres of capital accumu-
lation; the failure of the USA in Vietnam and the class struggles that
occurred in the 1960s (May 1968 in France, the ‘Hot Autumn’ in Italy in
1969, etc.); and the policy of deténte, which was sourced not just from
the first signs of economic decline of the US empire, but also from
geo-political and security concerns. Thus, to the concept of ‘uneven
development’ we proposed as supplementary the notion of ‘global fault-
lines’, a hermeneutic, all-encompassing term setting out a new research
agenda in IR and IPE.1
The responses of the Anglo-American world to its crisis can also
be understood from the point of view of ‘global fault-lines’. First,
it was dollar devaluation all the while getting rid of its gold fetter
($35 = 1 ounce of gold), thus ending the Bretton Wood system. Sec-
ond, petro-dollar recycling and replenishing of the US Treasury with
values and paper produced by petro-states, especially Saudi Arabia has
109
to be factored in (momentarily, the mantra that was going around

was that the dollar was now pegged to petrol – the ‘black gold’). The
events are truly complex and causes mix with effects and vice versa.
The end of the fixed exchange rates system signalled the beginnings of
financialization/globalization, as speculators and investment banks pro-
liferated moving the global political economy from a M-C-M’ relation
into a M-M’ one, what Marx used to call ‘money begetting money’. The
Anglo-Saxon polities also got on the move, fixing their domestic agen-
das on anti-Keynesian/anti-welfare grounds. Financialization went hand
in glove with supply-side economics and the transition from deténte to
Reagan’s new aggressive security policy in the 1980s. Meanwhile, the
USA had previously negotiated with Mao’s China its exit from Vietnam’s
quagmire, a highly costly affair from every point of view (economic,
political and moral).2
If the empirical categories of financialization/globalization apply pri-
marily, but not exclusively, to the external environment of the state,
then neo-liberalism/neo-conservatism applies primarily, but not exclu-
sively, to the internal (policy) domain of the state. The ‘freedom agen-
das’ of Friedrich Hayek and Milton Friedman became incarnated in the
neo-liberal political programmes of Thatcher and Reagan in Britain and
the USA respectively, whereas Paul Volcker, Chairman of the American
Fed from 1979 to 1987, raised interest rates to a peak of 20 per cent
in June 1981 with the ostensible aim of fighting inflation, although
his real objective was to ‘smash’, as Leo Panitch put it, ‘working class
power’.3 At the very same time, in the 1980s Reagan launched the ‘star
wars’ project bringing the USSR down to its knees. Effectively, it was
a security confrontation that ended the global bi-polar phenomenol-
ogy of ‘evil Communism versus democracy and freedom’, and not just
the antagonism of two opposing social and economic systems as such.
Broadly speaking, the era of globalization cum neo-liberalism, the era of
the New Right, began in the 1970s only to find its triumphant apogee
in the Clinton era in the 1990s, when Communism had collapsed and
most people thought that the ‘end of history’ is really at hand, because
free market capitalism and history are identical and with no other alter-
native social system in sight. However, in the following decade this type
of capitalism also collapsed and people again began to realise that – to
paraphrase Louis Althusser – the future lasts a long time and surprises
are always possible, although some might say that alternatives are still
possible but within capitalism.4
The European project for a common market was in limbo during most
of the 1960s. But by the late 1970s West European leaders began to
Kampfplatz-4 and the ‘European Factor’ 111
realize that they needed to get on the move to overcome the over-
accumulation crisis of their economies. The end of deténte by the
USA was not good news for Germany, because it disallowed German
capitalism to penetrate the Eastern markets with a certain ease, while
simultaneously pursuing the re-unification of Germany via its Ostpolitik
of Willy Brandt. But the Cold War was revived by the USA itself when
it placed Cruise and Pershing missiles on West German soil, something
which destroyed Germany’s ‘little deténte’.5 The Anglo-American aggres-
sion in economics was accompanied by an aggressive global security
drive aiming not just at the defeat of Communism, but also at keep-
ing Europe and Germany under the grip of NATO and the USA. Thus,
and given the collapse of the dictatorships in Southern Europe in the
mid-1970s, the obvious candidates for expansion were Spain, Portugal
and Greece. But the fact that Greece entered the EEC five years ahead
of Spain and Portugal cannot be explained by reference to the theory of
over-accumulation alone. As we shall see below, security mattered more
than some people might have thought.
5.1 The peculiarity of Greece: a bird’s-eye glimpse
The fourth phase of Greece’s modernization corresponds to the

kampfplatz of PASOK versus the ND. This phase was marked by low
rates of growth, high inflation and the opening up to Europe’s capital
and various forms of aid and loans. It is through those exchanges and
policy undertakings that the country became exposed to neo-liberalism
and financialization, the new set of constraints placed upon the policy-
making structures of nation-states. One interesting feature of this period
is the revival of comprador capital, which, with or without state support,
is now becoming a great force importing finished and capital goods
from the European common market. During the period in question,
the dependency of the Greek economy moves away from US capital
to come under the supremacy of European capital and aid, although
the superintended role of the USA, whether via NATO or not, remains
unaltered. It is very interesting to note that Greek statistical agencies
recorded US aid in the form of ‘investment loans’ until 1980, whereas
from 1981 onwards this entry was replaced by ‘Transfers from the EEC
and EEC Members and Receipts Collected in Favour of the Latter’.
US aid as investment loans amounted to 14,572 million drachmas in
1978 and 28,104 million drachmas in 1980, but transfers from the EEC
increased from 9420 million drachmas in 1981 to 22,124 million drach-
mas in 1985 and 113,068 million drachmas in 1991.6 However, this is a
very peculiar dependency, and this is another interesting feature of the

period.
Whereas during its ‘golden age’ Greece skipped any welfare policy
and state expansion while following, like a poodle, the USA on secu-
rity matters – the sole exception, as we saw, was the George Papadreou
period –, the ruling political classes of the country exert now an idiosyn-
cratic autonomy in the field of economic policy-making resisting for at
least 15 years a fully fledged implementation of neo-liberal packages.
This has also led us to propose the periodization (1974–89), which coin-
cides with the end of both the Cold War and PASOK’s second term in
office. This resistance took the form of an unprecedented expansion of
the state into the aggregate demand management at a time when this
role of the state was in retreat everywhere. How do we account for this
‘idiosyncratic autonomy’ of the Greek state and resistance to supply-
side economics? We contend that there are three inter-related reasons
for these developments.
The first, and perhaps most important, is the social/class struggle
within the country proper (the same applies to Spain and Portugal).
While the entry of the masses into democratic politics was blocked
for nearly 30 years (1944–74), the New Democracy (ND) of Karamanlis
was forced to open up the political system and implement a number
of institutional reforms to ease public discontent. The second reason
relates to the problematic structure of Greek capitalism in conjunc-
tion with the stagflation of the 1970s. The two main parties defining
the political phenomenology formed a new bipartisan consensus at the
heart of the state apparatus, which merged with a local, state-fed bour-
geoisie in order to counter-balance the falling tendency in the rate of
profit by means of extensive nationalizations.7 This, in a way, hap-
pened all over the Western world in the 1970s but in Greece, as we
shall see, it assumed extraordinary proportions and lasted well beyond
that decade. The type of political clientelism exercised by both main
parties should be seen as forms of recruitment for the reproduction of
consensus in the service of this state-led power arrangement. The third,
and equally important, reason regards security. State expansion had also
been necessitated by the Cyprus emergency of 1974 and Turkey’s per-
ceived provocations in the Aegean in the 1970s (also Turkey, in 1983,
recognized the ‘Turkish Republic of Northern Cyprus’, whereas in 1987
Greece and Turkey were on the brink of war when Turkey sent a ‘Sismik’
ship for oil exploration in the Aegean). For the ruling elites this meant
that national security should, especially in the 1970s, take priority over
economic adjustments (read: neo-liberal policy-making and exposure to
financialization) required by the global policy shift of Anglo-American

and, later, European capitalism. It could also be argued that both ND
and PASOK capitalized on national security and geo-political issues to
tighten their grip on the state and economy in conditions of excessive
international competition resulting from the country’s gradual abolition
of protective tariffs since 1961 in order to enter the EEC in 1981.8 From
this perspective, the sources of the Greek debt crisis today are indeed
to be found in the 1970s and 1980s and can be grasped by resorting
to the fault-lines developed between security, economic and technolog-
ical sluggishness, social struggle and the new international constraints
of neo-liberalism and financialization the country had to conform or
adjust to.
But did the process of the so-called ‘European integration’ bring about
any change to this ‘idiosyncratic’ power arrangement in Greece? Yes it
did. But the change was slow and painful and one can only pinpoint
the full insertion of Greece into the orbit of neo-liberal capitalism and
financialization only after the mid-1990s, that is after the Maastricht
Treaty and the strict monetarist criteria imposed on member states wish-
ing to partake in the currency union to be launched in 1999. In fact, as
we shall see in detail in the following chapter, it is only after the mid-
1990s that the structure of Greek capitalism began to change, altering
at the same time the profile of the indigenous bourgeoisie and shooting
up the fetter of debt, both internal and external. But there are also two
other themes we wish to emphasize here.
There had been an observable economic affluence and prosperity all
around Greece, especially in the 1980s, despite the fact that productivity
output and growth were low. A new and large middle class had taken
root in Greek society, a class that had direct or indirect links with the
state providing political support to the two big parties, but mostly to
PASOK – Marx used to say: the middle classes are the class-pillars of
the regime. But what financed the prosperity, consumerism and micro-
rentier activities of this class? We shall see that the source of funding for
the unproductive activities of this class was debt cum inflation, which
sustains our theoretical proposition put forth in Chapter 2, namely that
if the amount of money circulating in the country does not correspond
to the real values produced within the country then the end result is
debt. But if this is correct, then the question arises: are the historical
sources of the Greek debt crisis today to be found in the failure of the
Greek state to adopt outright neo-liberalism and financialization during
this period? The monetarist assessors in the central Banks, as well as
their followers, whether in Greece, in Europe or the USA, then and now,
answer this question in the affirmative. We beg to differ. We argue here

that although the historical sources of the current debt crisis are indeed
to be found in the 1970s and 1980s, the problem was not what had not
been pursued, i.e., neo-liberal globalization, but the mode of governance
of what had been pursued.
Last but not least, the most conventional accounts of the period
1974–89 examine Greece, whether in a comparative context or not, as
a two-step case whereby the first was marked by a ‘transition to democ-
racy’ phase (1974–81) and the second by a ‘consolidation of democracy’
(1981–89). According to this line of argument, both periods, it should be
said, were marked by a flurry of ‘political clientelism’ and ‘populism’.9
Typically, most of those accounts, view ‘democracy’ and ‘democratic
consolidation’ as linear and successive processes hemmed in by the
metaphysics of progress, which is emptied of any class context, the
only problems being clientelism and populism misguiding the masses
and creating holes in public finances as they do not conform with the
prudent policy of neo-liberal globalization. Although we have benefit-
ted enormously by studying these accounts – in fact we have learnt
a lot from them – in the end we find them to be deeply misleading.
Liberal democracy in Greece and indeed everywhere, especially institu-
tional democracy, has always been at stake and never a given, vested
right. Moreover, as we have shown elsewhere, both populism and clien-
telism are forms of social and political struggle that cut across the state
machine reverberating within the state executives and contributing to
their reshuffling and reorganization.10 Lenin used to say that the bour-
geoisie is ready to recognize (political) class struggle within the state
apparatuses, but never in the dense executive core of the bourgeois
state. This is true but not exactly accurate. The fact is that closed sub-
systems and administrative micro-cores of power centres exist in every
state organization – and indeed business and business executives – and
are impenetrable to liberal democratic practices and norms, never mind
what is enshrined in liberal laws and protocols.11 One of the reasons
why corruption and embezzlements of all sorts occur under capital-
ism, whether in the core or in the periphery, is because there is no real
democratic control of those micro-cores of power, that know how to
manipulate the system and present as legal and legitimate those transac-
tions that are illegal and illegitimate. Whether in the periphery or in the
core, whether under populism/clientelism or ‘advanced liberal demo-
cratic regimes’, rules and norms of liberal democracy are there to be
manipulated by the executives of those democracies and not vice versa.
It is the executive that makes the law, not the other way around. Thus,
the way we have chosen to put forth our arguments here support and
facilitate an understanding of Greek politics and political economy from
the point of view of class analysis, a rather forgotten qualitative method
in social sciences that builds upon quantitative and comparative data.
5.2 The Right against the Right
As the USA and Britain began drifting away from Keynesian policy-
making in the 1970s and 1980s in order to arrest outsourcing and the
fall of profitability in manufacturing, other states in the core had to
adjust their policies to this twin programme. Greece, which formally
qualified as a member of the core in 1981, also had to start adopting
a neo-liberal agenda, i.e., liberalization of the banking and financial
system, welfare state retrenchment, wage cuts, deregulation of labour
market and wide ranging privatizations of public utilities and business.
None of this happened – in fact, quite the opposite – and Greece, after
all, never really had a welfare state.12
Karamanlis, amid the Cyprus crisis, regrouped the right-wing ele-
ments of the regime forming a new party, the New Democracy (ND),
and later won the election held in mid-November 1974 with a spec-
tacular 54 per cent of the vote (see Table 6.2 in the next chapter
for a comprehensive breakdown of all electoral results from 1974 to
2012). On 4 September 1974 Andreas Papandreou founded PASOK. In
December Karamanlis called a referendum on the future of the monar-
chy, which saw only a mere 30 per cent of the Greeks being loyal
to the Crown (most votes in favour came from traditional conserva-
tive areas in Peloponnese). Karamanlis solved once and for all the old
dilemma dominant in Greek politics since the Venizelos era, namely
the dilemma ‘Monarchy or Democracy’ – hence the name rendered to
the period stretching from 1974 onwards as ‘Third Hellenic Republic’.13
A new republican Constitution was formed and the two Commu-
nist parties, the result of a split in 1968 over the Soviet invasion of
Czechoslovakia, KKE and KKEes, were legitimized.14 Karamanlis with-
drew Greece from the military structure of NATO, a tactical move to
appease popular discontent over the Cyprus issue and the wide-spread
popular belief that the junta was engineered by the Americans and
Henry Kissinger, at the time both National Security Adviser and Secre-
tary of State. One of Karamanlis’s greatest successes in foreign policy was
the gradual abandonment of the doctrine that ‘the war danger comes
from the North’, imposed by the USA’s global ideational policy of the
‘war on Communism’. Instead, Karamanlis, after the Turkish invasion
of Cyprus, considered Turkey to be the principal rival of Greece in the

Eastern Mediterranean, thus changing the country’s security priorities
and responding by re-militarizing all East Aegean islands in defiance of
the Treaty of Lausanne (1923). Defence spending increased massively
under Karamanlis, a fact that contributed to the country’s deficit (by the
late 1970s Greece was spending as much as 5.75 per cent of its GDP on
defence).15 It seems that the Right understood the simulacrum of the
‘war on Communism’, thus adopting post-Cold War security policies
before the end of the Cold War itself. At the same time, Karamanlis
began negotiating Greece’s entry into the EEC. Skilfully separating
Greece from the increasingly complex Iberian negotiations, Karamanlis
successfully reached an accession agreement with the Community in
April 1979. The Treaty of Accession came into effect on 1 January 1981,
ten months before Andreas Papandreou’s PASOK came to power, whose
rhetoric was both anti-EEC and anti-NATO.
Greece’s entry into the EEC was seen as a serious blow for Turkey. As a
Turkish economist put it: ‘The extension of EEC membership to Greece
[ . . . ] put Turkey at a disadvantage and required readjustments on the
part of both sides’.16 But it is already perfectly clear that Greece did not
enter the European Communities because of its industrial robustness or
economic assets. Greece entered the EEC five years ahead of Portugal and
Spain primarily for security and geo-political reasons. At the same time,
the entry of Greece and, later, of Spain and Portugal, was obviously serv-
ing the needs of the European core to overcome its over-accumulation
crisis of the 1970s via trade liberalization and other advantages.
The opening-up of the post-1974 political system to the parties of the
Communist and socialist Left invited political participation and redistri-
bution of value and wealth produced during Greece’s ‘Golden Age’. But
it is wrong to assume that this participation was somehow ‘donated’ to
the popular masses. Quite the opposite: it was the result of their con-
tinuous struggle since the years of the Civil War, and then through the
years of the ‘passive revolution’. The real GDP growth in 1975 market
prices was 9.9 per cent in 1969, 8.9 per cent in 1972, 7.3 per cent in 1973,
6 per cent in 1975, 3.4 per cent in 1977 and 1.6 per cent in 1980, just the
year before PASOK assumed governmental power. This had been taking
place in an economic environment in which the extended reproduc-
tion of the public sector pertained to minimal progress in real economy
growth, especially in manufacturing, something that can be seen from
the structure of GDP by economic sector (Table 5.1). At the same time,
the labour movement began to show its strength. In 1978 more than
7400 hours were spent on general strikes and abstention from work, a
Table 5.1 Sectoral structure of GDP at factor costs as

percentage of total
Sector 1961 1971 1980
Agriculture 26.3 17.4 14.4

Industry 13.8 19.5 21.3
Services 48.7 49.9 53.0
Source: As per Table 4.2 in the previous chapter.
Table 5.2 Hours lost in strikes (in thousands) for 1976, 1978 and 1980
Type of economic activity 1976 1978 1980
Mines/manufacturing 2984 1828 2115

Construction 81 1017 3771
Electricity/water 546 344 876
Commerce/hotels/restaurants 195 153 129
Transport/communications 1630 2296 2471
Banks/insurance 516 474 4778
Social/communal services 146 466 2309
General strikes (hours lost) 43 830 4450
Total 6145 7406 20,933
Source: Our compilation of data based on Karabelias (1989) p. 140.
number that soared to 20,933 hours in 1980 (Table 5.2). The number of
general strikes alone rose from 43 in 1976 to 4450 in 1980.
Since 1961, when the association agreement with the EEC came into
effect, Greece began abolishing gradually all tariffs on imports from the
EEC, a fact which decimated any Greek competitive advantage within
the common market leading to sharp falls in profitability. After all,
The majority of plants were of a handicraft nature. Out of roughly

129 thousand plants in 1978, 125 thousand had an average employ-
ment of 2.2 persons, while plants employing over 100 persons did
not exceed 750. This element played a decisive role in the competi-
tive position of Greek industry in its ability to expand internationally
or to improve its technological potential.17
The worst was yet to come. The 1970s recession and two oil shocks
(1973, 1979) had slowed down global trade, blocked Greek exports
and deteriorated further the country’s balance of payments problem.
Elsewhere in Europe and the Balkans in the 1970s and 1980s, such as
in Yugoslavia, the stagflation created a vicious cycle of debt and infla-

tion leading to IMF intervention and, eventually, to the break-up of the
country.18 For Greece, despite the relatively high export growth rates
in the 1970s (see also Table 4.2 in the previous chapter), ‘the deficit
in the balance of payments in relation to the gross national income
increased from 1,4 per cent in 1960 to 4,7 per cent in 1970 and to
11,3 per cent in 1985’.19 This resulted chiefly from the weak techno-
logical base of Greek industry, which could not sustain competitive
pressure from an increasingly open European environment. In 1976,
the main imports were transport equipment (27.9 per cent), minerals
(21.4 per cent) and machinery and electrical equipment (13.04 per cent),
whereas the main exports were, similarly as in the past, concentrated
in traditional sectors, such as weaves and clothes (18.5 per cent), food
and beverages (17.1 per cent), minerals (15.0 per cent) and agricultural
products (11.4 per cent). This is the context in which the revival of the
Greek comprador bourgeoisie took place after the dictatorship, assim-
ilating now to European rather than American big capital. Eventually,
the main beneficiary of Greece’s entry into the EEC was the EEC and
the dominant economic powers within the EEC, that is primarily (West)
Germany:
EEC’s share in non-oil imports of Greece increased from an average of

54.5 per cent in the years before accession (1978–80) to 64.3 per cent
after accession (1981–85). A similar trend can be observed in indus-
trial goods, where the EEC’s share increased from an average 67.9
per cent (1978–80) to 70.3 per cent after accession (1981–85).20
In 1973–74, Nicos Poulantzas was already noticing Germany’s economic

domination within the EEC:
It is in West Germany, however, that American investment is growing

more rapidly and massively, and it seems that Germany will replace
Great Britain in the lead [ . . . ] It is even more important to note it at
a time when German economic domination within the EEC is being
ever more strongly asserted, and when Germany is setting itself up as
the champion of ‘European integration’.21
Thus, the small percentage increase in manufacturing (Table 5.1) did not
reflect a qualitative increase in output or, even less so, in profitability
heralding investment projects and economies of scale. Rather, it repre-
sented the absorption by the state of a large number of private business
in order to offset their falling rate of profit caused by class struggle,

uneven development, the global recession and the lack of investment
in the few Greek industries that could compete internationally (the
Greek state preferred to finance the traditional sectors of food, textiles
and beverages, rather than technological innovation and research and
development). Against the background of Cyprus and the Aegean crises,
the post-1974 Greek state began extensive nationalizations especially in
the Greek manufacturing sector (since 1981 the EEC has offset some
of the costs of uneven development in the primary sector by subsidizing
Greek agriculture). Undeniably, this fact contributed to the deterioration
of public finances and an increase in the state’s borrowing requirements,
further accentuated by a poor tax receipt collection. Just a year before
the ‘Volcker shock’ in the USA and the advent of Thatcher to office in
Britain, the Governor of the National Bank of Greece in 1978, Angelos
Angelopoulos, argued:
There are some private enterprises that are very important for the
overall performance of the national economy. Nevertheless, due to
internal and external factors, they encounter financial difficulties,
which are bound to increase as Greece approaches the European
Common Market. It would be wise, therefore, to increase the spend-
ing to them [ . . . ]. In essence, a new state organisation, helped by
commercial banks, should be set up in order to subsidise or take over
the management of those enterprises facing economic problems.22
The Greek Right was somewhat set against the new international
Right and its twin programme of neo-liberalism and globalization/
financialization. Contrary to conventional wisdom coming mainly from
right-wing circles and pro-monetarist economic analyses,23 the debt and
inflationary spirals of the Greek economy began in the 1970s under
Karamanlis, not in the 1980s under Andreas Papandreou. The average
rate of inflation between 1974 and 1981 was 16.8 per cent and the
current account deficit in relation to GDP increased from 1.3 per cent
in 1960 to 4.0 per cent in 1970 and to 5.3 per cent in 1980. Then,
under PASOK, it skyrocketed to 10.0 per cent in 1985, mostly because
of the entry of the country into the EEC in 1981, after which time
Greece had to abolish the extensive protectionist barriers of its indus-
trial sector (quantitative restrictions, financial and tax discrimination
of imports, etc.),24 but also because of an increased public sector bor-
rowing requirement to finance public deficits, lack of tax receipts and
electoral cycles. True, part of the inflation was imported due to the
global recession, which made all imported commodities very expensive,

but state policy also mattered. From 1974 to 1981 a number of nation-
alizations took place in the banking sector, transport – including air
transport – and shipyards. Some 80 per cent of the commercial banking
system came to be controlled by the state through majority sharehold-
ing and at some point in the early 1980s, the Greek state controlled
almost 50 per cent of the total fixed capital, participating, in one way or
another, in almost every economic activity.25 Thus, the wealth produced
during Greece’s ‘golden age’ began somewhat to be ‘redistributed’ via a
set of state-managerial policies, such as nationalizations and an exten-
sion of the public sector via clientelistic recruitment, what the Greeks
call rousfeti. But the internal debt accumulated in this way could not be
offset by other sources of income due to the global recession and the
structural incapacity of the Greek industry and agriculture to compete
internationally. In other words, the response of the Greek state to the
international recession of the 1970s was not a set of selective nation-
alizations accompanied by financialization and a gradual adoption of
supply-side economics, but the unfolding of a peculiar type of massive
state expansion, against the background of a ballooning trade and bud-
get deficit, the former being only partially offset by invisible receipts
(mainly migrants’ and sailors’ remittances), and tourism (Table 5.3).
To sum up: Greek policy after the fall of the Colonels was undoubtedly
motivated by geo-political and security concerns, as the Cyprus crisis led
the ruling elites to massively increase defence spending, a factor that has
since been contributing to the state’s budget deficit. At the same time,
neither the degree of social struggles nor the effects of stagflation upon
the Greek economy gave Karamanlis’s cabinets the comfort to entertain
a different set of policies following developments in Europe and the
USA. However, despite the fact that the Greek state appeared to have had
a large degree of autonomy compared to policy developments taking
place in the core, at the same time, owing to its uncompetitive industry,
it continued to be a dependent/subaltern state in every respect. But this
Table 5.3 Balance of payments deficit and invisible receipts (1960–80)

in millions USD; current prices
1961–65 1966–70 1971–75 1976–80
Trade deficit 481 836 2319 4908

Invisible receipts 330 679 1488 3426
Source: Compilation of data from Freris (1986) p. 188.

period is also important for an additional reason: it registers a transition

from the dominance of US capital in Greece to that of European capital.
It is in this context in which comprador capital, the agent of foreign
capital in the country, ‘resumed’ its operations.
Andreas Papandreou was even more ‘radical’. When in opposition, his
tactic was to argue against Greece’s entry into the EEC and membership
in NATO. Karamanlis, as we saw earlier, following the Cyprus deba-
cle, withdrew Greece from the military structure of NATO, and reversed
Greece’s military doctrine, now considering Turkey as the main enemy.
But Papandreou, catapulting even KKE’s anti-EEC and anti-NATO posi-
tions, argued for a complete withdrawal from NATO and the sinking
of various Turkish exploration ships that were periodically appearing
in the Aegean Sea in search of oil. Before it assumed office, PASOK
was proclaiming ‘import-substitution’ policies in order to strengthen
Greece’s industry and export capacity, yet none of this was really deliv-
ered after 1981. Was it the case that Andreas gave to the US Embassy
in the 1970s the same assurances he gave to the US Embassy in the
mid-1960s, namely that, once in power, he will respect capitalism and
NATO? We do not know. What we certainly know is that he and his
party did not deliver from positions of power what they promised to
deliver while in opposition.
5.3 Crisis of crisis management in the 1980s
Throughout the 1980s, the state, under PASOK’s populist management,

continued to expand forms of corporatist intervention, despite a wors-
ening of public finance, accelerating inflation and a ballooning debt,
both external and internal. Faithful to ND’s economic programme
rather than to its own,26 PASOK expanded the role of the state in the
economy by nationalizing and even increasing employment in many
firms that were facing economic/profitability problems: in the tourist
sector (e.g., Xenia-Hotels), in energy (e.g., Petrola Oil S.A.), in trans-
portation (e.g., OASA), in construction (e.g., Hercules General Cement
Company S.A., the largest cement company in Europe), and in tex-
tiles (e.g., Peiraiki Patraiki, the largest textile manufacturer in Greece).
PASOK’s rescue operations employed a very specific method: it involved
the conversion of at least 50 per cent of each company’s outstanding
debt into equity shares owned by the government via state-owned com-
mercial banks that had initially issued the loans to those lame-ducks.
By 1985, some 40 companies with nearly 28,000 employees and with
a total debt of 170 billion drachmas ($6.9 billion) had been partially
Table 5.4 Some key economic indicators, 1974–89
1974–81 1982 1983 1984 1985 1982–85 1985–89 1989
GDP growth 3.1 0.4 0.39 2.7 3.1 1.6 2.5 2.08
Gross capital −1.9 −1.9 −1.3 −5.7 5.2 −0.9 6.5 2.38
formation
Inflation 16.8 20.7 18.1 17.9 18.3 18.7 14.3 16.8
Unemployment 2.3 5.8 9.0 9.3 8.7 8.2 8.5 8.4
Debt (% of 26.3 36.1 41.2 49.5 57.9 46.2 78.1 65.6
GDP)
Sources: Compiled from the European Commission, European Economy: Annual Economic
Report 1990–91, Brussels, November 1990, p. 281.
or entirely nationalized. This amalgamated business and banking cap-

ital under the aegis of PASOK’s populist wing headed by Papandreou
himself. As a consequence, with gross capital formation and low labour
productivity and capital output, the inflationary trend in the economy
continued upwards. Worse, these policies failed to arrest unemploy-
ment, despite a flurry of clientelistic and nepotistic appointments in
the public sector, including generous pension and holiday schemes and
so on (Table 5.4).27
This same populist wing expanded the public sector, increased defence
spending (Table 5.5) and created a universal health system (NHS), while
maintaining wage rises in industry around 30 per cent, a real increase
close to 6 per cent yearly. PASOK did very little to reform public admin-
istration, while the setting up of an efficient tax-collecting machine
Table 5.5 Defence spending in selected

countries in 1988 as percentage of GDP
USA 5.7
Greece 4.2
Turkey 2.9
Spain 2.0
Portugal 2.7
France 3.6
Italy 2.3
The Netherlands 2.8
UK 4.1
Source: Data compiled from www.milexdata.sipri

.org (Stockholm International Peace Research
Institute, accessed on 3 December 2012).
was delayed, thus encouraging an underground economy and various

illegal economic activities. Despite the 26 per cent growth in real per-
sonal incomes during the 1980s, personal income tax receipts were still
at the low level of 4.5 per cent of GDP, which was less than half the
OECD and EC averages.28 But the impressive phenomenon of the 1980s
is state expansion, as if Greece wanted to do in less than a decade what
other European states did in 30 years and under completely different
international circumstances.
From the late 1970s and throughout the 1980s, state expenditure
became possible due to internal and external borrowing, which resulted
in the massive contribution of the state’s economic activity to the
GDP. But contrary to West European practices in the 1950s and 1960s
in which high wages, the welfare state and state expansion were the
result of progressive taxation and high productivity outputs, PASOK cab-
inets attempted to build all the above on borrowing. State expenditure
became larger and larger as a percentage of GDP, not because of the
high collection of tax receipts as argued by neo-liberals, but because the
government of PASOK threw most of its borrowed money in support-
ing state expansion for political and electoral purposes. This practice
bears very little resemblance to Keynesian policy-making. However, in
this way, PASOK created a new, state-fed, middle class – what the Greeks
call nea tzakia, which literally means ‘new fireplaces’, as every middle-
to-upper middle-class house in Greece ought to have a fireplace – which
formed the power-base for many years to come. As we can see from
Table 5.6, state expenditure for welfare provision and social insurance
presented a very marginal increase if compared to the total state expen-
diture. The increase in social expenditure was higher after 1986, but
this did not lead to a consistent pattern of income redistribution. In the
main, this was the result of a massive increase in the numbers of pen-
sioners due to the increase of the average life-span and the problems
registered in the various pension funds, which had been established
in the 1950s. This is also the context in which massive tax privileges
for the nea tzakia and wider petite bourgeois social strata triumphed
over the social reorganization of production and distribution in view of
increasing output and productivity. These PASOK policies, Constantine
Tsoukalas argued, created the new social archetype of ‘gatecrasher’ or
‘free-rider’.29
In order to cope with increased competitive pressures within the
European common market, as well as the acceleration of inflation and
public borrowing requirement (Table 5.10), PASOK announced a 15
per cent devaluation of the drachma in 1985 followed by a two-year
Table 5.6 Evolution of GDP, expenditures of the ordinary budget, expenditures

for health, welfare and social insurance and public debt in million drachmas in
current prices, 1977–91
Year GDP Expenditures Expenditures for Public debt

of ordinary health, welfare and
state budget social insurance
1977 844,628 208,293.80 20,927.10 206,674.50

1978 1,012,987 247,464.10 25,966.70 328,179.20
1979 1,245,376 310,896.50 28,577.00 373,517.10
1980 1,517,084 357,858.80 38,685.10 430,429.40
1981 1,859,971 633,777.50 60,166.30 589,402.10
1982 2,310,688 673,583.30 87,865.50 889,206.40
1983 2,731,903 881,677.70 109,154.30 1,114,346.00
1984 3,361,607 1,244,893.20 117,516.20 1,550,803.90
1985 4,132,078 1,499,167.80 142,762.50 2,021,059.60
1986 4,894,781 1,849,968.00 167,988.00 2,406,956.40
1987 5,478,103 2,423,762.10 255,117.70 3,059,709.30
1988 6,619,583 3,339,794.0 376,429.80 4,190,855.90
1989 7,852,681 4,147,440.0 494,506.20 5,198,954.20
1990 9,226,518 6,211,901.0 491,796.50 7,350,847.70
1991 11,058,656 9,179,909.0 538,669.20 9,640,215.20
Source: Calculations based on data from ELSTAT (1977–91) Greece: Statistical Yearbooks
(Athens: ELSTAT).
‘austerity program’.30 Skillfully negotiating with the Council of Eco-

nomic and Finance Ministers of the EC (ECOFIN), and in return
for absorbing the shock in Greek agriculture caused by the entry of
Portugal and Spain in 1986, PASOK secured a loan of 1750 million
ECUs in support of austerity. What did the two-year ‘austerity pro-
gram’ achieve? It achieved almost nothing of any substance.31 Inflation
decelerated marginally and any additional income or productive output
was diverted towards the repayment of stabilization loans. Although
injected in reduced portions, state aid to manufacturing continued in
substantial quantities especially if compared to the rest of the EEC at
the time (Table 5.7). Thus, the government’s borrowing requirement
‘jumped from 280 billion drachmas (15.8 per cent of total budget expen-
diture) in 1985 to 650 billion drachmas (24.3 per cent) in 1987’, while
industry and agricultural output became even more uncompetitive
relying increasingly on subsidies and loans.32
Neither had the internal imbalances been reduced by implement-
ing supply-side policies and austerity (fiscal restraint, wage and benefit
cuts, etc.), nor the external imbalances been improved by boosting
Table 5.7 State aid to manufacturing (selected countries)
Per cent of value added ECU per person employed
1986–88 1988–90 1986–88 1988–90
Germany 2.7 2.5 994 984

Greece 24.3 14.6 2983 1502
Spain 6.8 3.6 1749 936
France 3.8 3.5 1437 1380
Portugal 2.2 5.3 302 758
UK 2.6 2.0 770 582
Source: Data compiled from OECD Economic Surveys (1993) Greece (Paris: OECD) p. 16.
competitiveness and export-led growth, the latter being an almost

impossible undertaking due to the structural-historical problems of
the Greek productive sector (small-scale industry, small farm produc-
tion, low technological output and innovation). The fault-lines between
the monetary base of the social system and its financial undertakings
represented in the vast quantities of uncommitted money-capital in cir-
culation found its most clear expression in the monetary policy of the
programme. In order to attract money to service its debt, the PASOK
government increased interest rates across its commercial banking sys-
tem. This, automatically, increased the servicing of debt. To solve this
problem, the government increased the supply of money, thus bringing
in inflation from the back door. A vicious cycle of debt creation, both
domestic and external, was being created because the policies of the
PASOK government failed to address the structural problems of Greek
capitalism, now accentuated due to the country’s entry into the EEC-
EC. The only real ‘achievement’ of the ‘stabilization’ programme was
the decrease in average earnings (wages and salaries): for 1986 and 1987
they fell in real terms by 10 per cent and 4.7 per cent, respectively.33
However, the decade of PASOK needs to be brought into perspective in
order to reach a better understanding of the complex inter-relationship
between state/economy/society, on the one hand, and state/European
economy, on the other.
Similar austerity programmes had been applied across Europe at the
time, beginning with Mitterrand’s famous U-turn in 1983. Mitterrand
abandoned his Socialist/Keynesian programme for reasons we cannot
examine here – some say he abandoned it because he did not really
want Socialism in France, whereas some others blame the global supply-
side conditions depriving the French socialists of Keynesian instruments
needed for the implementation of Socialist policies.34 From our per-

spective, what matters is that France, under Mitterrand, embraced
neo-liberal globalization from 1983 onwards and yet its public debt
condition did not improve. In Thatcher’s Britain, the average inflation
throughout the 1980s was above 6 per cent, whereas no dramatic drop
in the country’s debt situation took place despite harsh austerity and
privatizations. Other countries in the periphery such as Spain, Italy
and Portugal implemented similar anti-inflationary programmes in the
1980s, yet none of them managed to seriously tame either debt or infla-
tion (Tables 5.8 and 5.10). Moreover, Italy, Belgium and Ireland also
suffered from serious debt problems throughout the 1980s, with the
ratio of their public debt to GDP exceeding over 100 per cent at the end
of the decade (Table 5.8).35 Elsewhere, matters were critical: in August
1982, Mexico defaulted on loan repayments and several other countries
in Latin America were on the verge of abandoning their foreign debt
obligations (Tables 5.9 and 5.10).
Under PASOK, the public sector became the dominant labour mar-
ket in the Greek economy. The more PASOK members poured into
the public sector, making an already disorderly state machine even
more dysfunctional, the more affluent and larger were the middle
classes becoming. Whereas before 1974 the right-wing concentrated
Table 5.8 Inflation and money supply in Europe in the 1980s
1981–85 1986–90
Prices MS Prices MS
Denmark 7.9 15.9 4.1 5.6

Germany 3.7 5.4 1.6 6.2
The Netherlands 7.2 8.4 2.6 9.5
UK 7.0 14.5 5.3 17.1
France 9.8 10.0 3.2 7.2
Italy 14.2 12.7 5.5 9.3
Ireland 11.2 10.3 3.2 5.3
Spain 12.1 15.2 6.5 12.3
Portugal 22.8 23.8 12.0 16.6
Greece 19.5 28.0 17.3 22.6
Notes: MS = Money Supply.

Source: Data compiled from Donald Sassoon (1996) One Hundred Years
of Socialism (London: Fontana), p. 450 and Robert Holland (1993)
The European Imperative. Economic and Social Cohesion in the 1990s
(Nottingham: Spokesman), p. 29.
Table 5.9 Gross public debt in EEC countries (in % GDP)
1980 1986 1989 1990
Belgium 76.9 123.7 129.9 129.4

Italy 59.0 88.5 98.9 100.9
Ireland 76.8 115.7 104.7 101.4
Greece 28.8 65.3 85.1 89.5
The Netherlands 45.9 71.7 77.6 77.8
Portugal 37.1 68.4 71.5 67.8
Denmark 39.3 67.2 63.3 62.8
Spain 18.1 48.5 45.2 44.7
Germany 32.7 42.7 43.6 43.7
UK 54.3 58.1 45.7 43.0
France 24.6 34.2 36.0 36.1
Luxembourg 13.8 13.8 8.8 7.8
Community of 12 41.0 58.5 59.0 58.9
Source: Data compiled from the Official Journal of the European Communities (28 February
1991), No C53/25 available at www.eur-lex.europa.eu (accessed on 11 December 2012).
Table 5.10 General government net lending (+) or borrowing

(–) (in % GDP)
1983 1985 1987 1990
High deficit countries

Greece −8.3 −13.8 −12.0 −18.6
Italy −11.8 −12.5 −11.2 −10.0
High debt countries
Belgium −11.2 −8.5 −7.1 −5.6
Ireland −11.8 −11.3 −9.1 −3.3
Portugal −9.0 −10.1 −6.8 −6.0
Source: Data compiled from the Official Journal of the European Commu-
nities (28 February 1991), No C53/25 available at www.eur-lex.europa.eu
(accessed on 12 December 2012).
predominately on recruiting personnel from conservative-nationalist

families to police Communism, the new political landscape after 1974
shifted the nature of the recruitment, adapting it to electoral cycles and
the catch-all character of PASOK as a political party. According to the
census for public employees by the Greek census agency conducted in
1956, civil servants, including army officers, accounted for 64,956 or
0.85 per cent of the total population (7,632,801 at the time accord-
ing to 1951 census). In 1961, the population was 8,388,553, the civil
servants numbering 104,840 or 1.2 per cent. Although there are no

available data concerning public employment in the 1970s and 1980s,
according to the 1991 census the total population was 10,259,900 but
the number of civil servants in 1988 had moved up to 589,386 or
5.7 per cent of the total population.36 We have a useful yardstick by
moving forward some 20 years: in 2011 the total population of Greece
was 10,787,690, yet the number of civil servants had soared to 768,009
(2010 census conducted by the Ministry of the Interior) or 7.1 per cent
of the total population. This represents an increase of 15.4 per cent
at a time when the official unemployment rate was 16.3 per cent in
the second quarter of 2011 (see relevant data in the next chapter).
This, given that from the mid-1990s onwards Greece entered completely
the cycle of neo-liberalism cum financialization (see Chapter 6), shows
that clientelism and Greek-style corporatism survived under whatever
regime of accumulation, be it under Andreas Papandreou’s populism or
the ‘modernizing’ and supply-side cabinets of Costas Simitis’s PASOK
(1996–2004) or Karamanlis’s Jr. ND (2004–09). Moreover, strong family
ties, widespread petty-bourgeois ownership that created strong inher-
itance structures, as well as a widespread sense of community, all of
which was the result of past and present policies aiming at undercutting
Communist influence, backed the creation of a relatively prosperous yet
highly unproductive societal structure.37 Thus, despite the stagnation
in private capital performance and growth ratio, as well as the reduc-
tion in salaries/wages due to the ‘stabilization program’, people’s income
potential and purchasing power increased drastically. Funding coming
from European programmes in the 1980s further buttressed the new
managerial structures of income distribution (Table 5.11) under PASOK.
This funding, it should be said, anything but offset the country’s loss
Table 5.11 EEC/EC transfers during PASOK’s second term,

1987–89 (% change from previous year)
1987 1988 1989
Mediterranean integrated
programmes 823 52.3 −53.3
Regional funds −6.7 4.0 72.8
Agricultural subsidies 8.5 6.0 32.1
Source: Data compiled from Dimitrios Chalikias (1990) Annual Report

of the Governor of the Bank of Greece for the Year 1989 (Athens: Bank of
Greece), p. 141.
of international competitiveness, chiefly caused by the entry into the

EEC. In the event, agriculture and industry had all but disappeared by
the mid-1990s, making way for a recomposed, but always large, middle
class and new, small-size, private service sectors dominated by private
banking capital, financial operators and a finance-oriented comprador
bourgeoisie, all phenomena we will explore in Chapter 6.
Having said this, and compared to its northern European partners or
the USA, one could argue that Greece in the 1980s and early 1990s
was a poor state with rich people. This happens when subaltern rul-
ing elites in the periphery, with the tacit approval of their foreign
masters, create hallucinations of affluence by allowing societies to live
on borrowed money for purposes other than those serving the stabil-
ity and economic sustainability of those societies – never mind that
almost all policies proclaimed were named as ‘stabilization policies’.
Arguably, therefore, PASOK’s pro-welfare policies of the 1980s and its
peculiar Keynesianism boosting aggregate demand management – a
trend that continued, although in diminishing forms, half-way through
the 1990s – was not the result of a ‘rational choice’ on the part of
an independent entrepreneurial bourgeoisie in order to maintain and
reproduce an extended subsumption of labour to capital with the state
as the key class arbiter in disputes. It was something else.
The Greek ‘welfare’ state was the product of a peculiar ‘Keynesian’
political strategy that drew mainly on borrowing and the wealth gener-
ated in the 1950s and 1960s and justified on (external) security grounds.
We insist that this was primarily a bipartisan (ND + PASOK) strategic
intent, rather than a lack of an alternative due to the structural defi-
ciencies of the Greek economy. PASOK’s case is very interesting. With a
tradition of civic culture lacking in Greece, PASOK’s charismatic leader
knew that all forms of clientelistic practices and political participation
are in effect mechanisms for the acquisition of consensus, all the while
undermining the electoral and political strength of the Communist
Left. At the same time, Papandreou knew very well that intervention
in the aggregate demand management by way of bailing out lame-ducks
is economically problematic. Instead of advancing investment in the
productive sector, especially in the production of capital goods, technol-
ogy and innovation, PASOK cabinets used vast amounts of inflationary
(debt) money to finance a large middle class while nationalizing a num-
ber of lame-ducks and encouraging the agricultural sector to become
dependent on EEC subsidies. This enervated workers and peasants alike,
making them, directly or indirectly, dependent upon a dilapidating
state machine, hence our argument at the time that the ‘Third Hellenic
Republic has exhausted itself’.38 Thus, contrary to neo-liberal – and at times

even social democratic – orthodoxy, the fundamental problem that the ruling
party elites of both ND and PASOK had to face and solve was not so much
how to rule in absence of a modern industrial sector, but how to modernize
against the labour movement.39 It is also this bipartisan approach by both
PASOK and ND that brought about the type of extended political clien-
telism and public sector expansion Greece came to experience from the
late 1970s onwards.
It is then clear that the post-1974 ruling classes of PASOK and ND
decided to frame kampfplatz within a redefined imperial chain in which
European capital began playing a predominant role, determining the
contours of Greece’s economic policy. The adaptation was slow but
even when they did so by the mid-1990s onwards, the prevailing norm
of the political game – clientelistic and nepotistic recruitment of state
personnel – remained untouched. It is in this sense that we argue
that liberal and even social democratic arguments about ‘clientelism’,
‘populism’ and ‘corruption’, as phenomena hindering capitalist devel-
opment and modernization, do not make sense. But more to the point,
if this liberal argument held water, then Japan and the USA, two of
the most clientelistic regimes in the world where also corruption is rife,
would have never experienced modernity and other economic and tech-
nological advances over the last century. Corruption is embedded in the
political culture of Hokkaido in Japan, not to mention the financial
scandals in the USA, such as Enron, the more recent Madoff finan-
cial scandal, etc. Both countries, as well as Italy and France, are listed
by Transparency International’s corruption index as highly receptive to
bureaucratic corrupt practices in both private and public sectors. But
even a pre-university educated pupil knows that these countries are
some of the most advanced and powerful states in the world. In the
same vein, one could refer to the large public sectors and welfare states of
Scandinavia, which enjoy nevertheless a very low GDP/debt ratio. There
is no correlation, therefore, between clientelism/nepotism/corruption,
on the one hand, and debt creation/high growth, on the other. As we
have seen, the debt is the historical and structural result generated by
the fault-lines between the monetary and the financial bases of the
system, that is the severe disequilibrium between the real commodity
value produced in the country, on the one hand, and the large amount
of money in circulation thrown into the market for consumerist and
political purposes.
In the post-1974 period, Greece seems to have received the ‘dividend’
of its (formal) inclusion in the European core in return for suffering
defeat in Cyprus (the USA supported wholeheartedly Greece’s entry into

the EEC). The Greeks perceived it primarily as an economic and secon-
darily as a security reward compensating them for the Turkish security
advantage on Cyprus. Within the transatlantic bloc, things were more
complicated. For the USA and NATO, Greece and Cyprus were per-
ceived as key security pillars within the Western alliance and entry of
Greece within the EEC would diminish possibilities of war between two
NATO allies. For the EU, and especially for (Western) Germany and other
countries of the core, the entry of Greece into the EEC meant primarily,
but not exclusively, a market of another 10 million consumers whose
purchasing power could buy their technologically advanced products.
And if the Greeks did not have the money to buy those products, then
that is too bad for them: they would have to borrow money from the
core in order to afford buying those commodities, which is exactly what
happened.
PASOK did fail to lead modernization in Greece in the 1980s tak-
ing the country into a sustainable path of growth, because it did not
advance an economic policy of industrial growth drawing from the vast
popular movement that brought it to power. If anything, it offered a
replenishment of the state machine with loyal PASOK members, while
being faithful to the economic and security programme of ND, which
was a NATO programme. The case of Greece in the 1980s, a decade
which ended with PASOK sinking in a series of financial scandals, could
fit the perceptive term ‘crisis of crisis management’ coined by Claus Offe
in his analysis on the crisis of the Keynesian state.40
5.4 Concluding remarks
Greek state elites did not follow neo-liberal globalization in the 1970s
and 1980s, either because they did not want to, or because they could
not, or both. Pressure on those elites, especially in the 1974–81 period,
was coming from three different quarters. The first type of pressure was
exercised by the popular movement demanding the long overdue demo-
cratic reforms and political participation. The second stems directly
from the country’s security and geo-political issues in Cyprus and the
Aegean and the perceived threat from Turkey (in 1988 Greece was sec-
ond only to the USA in defence spending as percentage of GDP); and
the third is related to the weakness of the Greek industrial base, which
immediately sought state protection from increasing international com-
petition and risk exposure due to the country’s agreements with the
EEC-EC since 1961 and the stagflation that prevailed in the 1970s; its
entry into the EEC in 1981; and the Delors package of 1986 vis-à-vis the
Maastricht deadline of 1991–92.
This picture is extraordinary. ND and PASOK began building a post-
authoritarian state by way of pioneering inflationary, pro-Keynesian cum
corporatist measures, at a time when similar policy undertakings were
in retreat everywhere, except in Scandinavia. There was no major drift
towards neo-liberalism and financialization in the 1970s and 1980s,
and indeed halfway through the 1990s, as was the case, for example,
in François Mitterrand’s France (the famous U-turn, 1982–83) or in
Felipe González’s Spain (especially from the second half of the 1980s
onwards). Both the ND and PASOK, once in office, had to manage the
disintegrative tendencies in the productive sector (falling rate of profit,
blockage of exports, shrinkage of agriculture), while dealing with soci-
etal demands for political participation and securing employment. But
the Greek economy, due to its structural deficiencies and severe weak-
nesses, including the weakness of the crisis management of PASOK
in power which failed to lead modernization, could not sustain these
undertakings and, by the late 1980s, sank into the debt/inflationary
spiral. Greek political elites found themselves borrowing externally and
domestically in order to sustain shrinking primary and secondary sectors
and a rudimentary welfare state without even contemplating reduction
of defence spending. Thus, the Greek state could not overcome its his-
toric fault-lines, that is its dependent/subaltern position in the imperial
chain and the negative or positive security dividends it receives – or
can capitalize on – from its geo-political position. All in all, this is the
substratum of the fourth Greek kampfplatz as defined by the political
phenomenology of PASOK versus ND, and that is why we insist that
approaching the issue from the point of view of ‘transition to, and con-
solidation of, democracy in Greece’ leads to a rather misleading research
agenda. However, it took another 20 years for this kampfplatz to com-
pletely exhaust itself and sink altogether in an unprecedented sovereign
debt crisis triggered by the global financial crisis of 2007–08.
Pro-inflationary and Keynesian policies à la Grecque, coupled with the
country’s extensive dependency on European capital inflows, provided
the socio-economic environment in which the Greek comprador bour-
geoisie rediscovered itself as a dominant social and political class in
Greece. This class shared power with a new state-industrial class that
received state protection via a wave of nationalizations that started
under Karamanlis in the 1970s, a process that became exhausted by
the late 1980s, when neither invisible earnings nor EU subsidies were
enough to offset the debt caused by such undertakings. If the comprador
bourgeoisie is the main referent for the external debt, then this state-
aided class with the two main parties managing public sector recruit-
ment and lame-ducks via internal and external borrowing, i.e., via
management of the government’s borrowing requirement, is the main
referent for the budget deficit. Both processes, however, took shape at
the heart of an institutionally dilapidated state machine. If PASOK’s wel-
fare state in the 1980s was primarily financed through borrowing, then
taxation was eventually what was buttressing the nationalized lame-
ducks. Gerassimos Arsenis, Economy Minister during PASOK’s first term
in office, is very frank when he says that his government had either to
liquidate a large number of lame-ducks, or to nationalize and finance
them through taxation. Interestingly, New Democracy had made the
same decision in 1979–80.41 This also proves our point that there had
been a bipartisan consensus between ND and PASOK in the manage-
ment of the Greek economy during this period, a management that
resulted in a severe crisis towards the late 1980s jeopardizing the very
survival of the bi-polar regime.
It is true that PASOK and ND in the 1970s and 1980s outflanked
social struggle via corporatist methods and political clientelism creat-
ing a new bipartisan middle class, directly or indirectly dependent on
the state. They tried to achieve modernization and qualify Greece as
member of the core by undercutting the power potential of an indepen-
dent labour movement. Bourgeois politics can outflank social struggle
from the bottom up via whatever method (corporatism, high wages,
political clientelism, etc.), but it cannot outflank competition among
its factions, whether these factions operate nationally or internation-
ally or both. It is, therefore, important to consider the transformation
of the dominant classes in Greece in the 1990s and 2000s alongside the
international trends of financialization and European integration pro-
cesses, which pushed Greece and the European periphery to bankruptcy
in 2010–11 and, together, at least as far as Greece is concerned, to the
collapse of its fourth kampfplatz.
6
Debt and Destruction: The Making
of the Greek and Euro-Atlantic
Ruling Classes
We seem to have come full circle. In February 1947 Dean Acheson saw in
the fall of Greece the fall of Western civilization as a whole and urged the
US establishment to provide aid to Greece and intervene there, because
the ‘fall of Greece will contaminate the whole of Europe and the Middle
East’ benefitting the Eastern Soviet enemy. Today, Greece’s fall is also
imminent challenging the survival of the entire European architecture
whereas the entire Middle East is up in flames, yet no analogous plea
has been made by the USA. The American president, Barack Obama,
even warned the British PM, David Cameron, not to put in jeopardy
Britain’s position in the EU by calling a referendum.1 An unprecedented
decision by the ‘troika’ in March 2013 forced the restructuring of the
financial system of Cyprus, liquidating Laiki Bank and imposing a ‘hair-
cut’ of up to 60 per cent on any deposit above 100,000 euros. Why is
all this happening? Is Greece (and Europe) no more important for the
USA to necessitate a kind of a new Marshall Plan to solve Europe’s and
Greece’s financial woes? We argue that the USA does what it does today
not because it considers Greece and Europe insignificant, but because
it is no longer the power it used to be in the 1940s and 1950s. Our
thesis will become clearer by looking briefly at the main tendencies
and processes of the international system since the 1970s, processes
and tendencies that affect or even condition the preferences of the
various political agencies and national states today. The section that fol-
lows lists and comments upon three such processes, all of which are
strictly interlinked, thus exemplifying further our theoretical discussion
in Chapter 2.
134
Debt and Destruction 135
6.1 Greece, the Euro-Atlantic world and

the power-shift to the ‘global East’
The first process is the crisis and slow and protracted decline of the
position of the US empire-state in the international system. We con-
tend that this decline has its origins in the events of the 1960s and
1970s and that at the root of it is the downward pressure on prof-
itability under conditions of sharply increased competition between
US, West European and Japanese capitals. It is important to note
that European capitalist interests, under France’s initiative at the time,
in order to protect themselves after the massive losses they suffered
with the dollar’s devaluation, produced the so-called ‘Werner Report’,
which described a policy ‘process by which monetary union could
be achieved by 1980’. But the project did not go ahead. Moving for-
ward in time, competitive pressure on US capital in the 1980s came
also from South-East Asia, whereas in the 1990s and 2000s China,
Russia, and the EU under Germany’s drive could be added as com-
petitors to the USA. We also contend, contrary to a number of other
significant contributions on the subject, that neo-liberalism/supply-side
economics and financialization/globalization have failed to arrest both
the decline of the US empire-state and the fall in profitability in the pro-
ductive economic sector. In fact, financialization/globalization are poli-
cies heralding the weakness and irreversible decline of the hegemonic
power – Giovanni Arrighi would say: ‘terminal decline’ – as its power
base no longer rests on real value-creation but on fictitious value-
creation (see also Chapter 2). Systemic fault-lines, antagonisms and
global competition are constantly in operation leading to the collapse of
neo-liberal financialization today, one of the victims of which is Greece.
The tragedy with Greece and other peripheral countries is that they
entered the regimes of financialization and neo-liberal accumulation
from an already weak position, inasmuch as real value creation there
(and the periphery) was either being appropriated by imperial under-
takings (e.g., loans) or had always been weak in terms of production of
capital goods, etc., issues that we have examined in previous chapters.
But the decline of US hegemony, which is consubstantial with the
decline of mass material production in the Euro-Atlantic world, should
be seen in parallel with an equally slow and protracted power-shift to
the ‘global East/South’, that is to say to countries, regional caucuses and
societies such as China and South-East Asia, India, Russia, South Africa,
Indonesia, Turkey and Brazil. In this context, the most important feature of
international politics since the 1970s is not the collapse of Soviet Communism
but the transition to capitalism of such countries as Russia and China, insert-
ing new matrixes of economic and geo-political antagonism to the clumsy
expansion of the Euro-Atlantic core in Eurasia since the fall of the USSR.
China is the world’s second largest economy, with an annual economic
growth of more than 8 per cent – it overtook Japan in February 2011. It
dominates the world market on rare earth elements (REE) – europium,
gadolinium, dysprosium, terbium, etc. – supplying 95 per cent of the
world’s consumption. This means that China has the potential to con-
trol the future of consumer electronics and green technology. Chinese
textiles have dominated Latin America, and Chinese oil companies have
now penetrated Africa’s hydrocarbons market.2 The evolution of pub-
lic debt in the traditional capitalist core is deeply worrying, whereas
the new emerging economies of the ‘global East/South’ present a much
healthier record over the time span of a decade (2002–12, Table 6.1).
China’s industrialization goes hand in glove with its demand for oil and
other hydrocarbons. It became the world’s second largest consumer of
petroleum products in 2004, having surpassed Japan for the first time
Table 6.1 Evolution of public debt in selected countries as percentage of GDP

and per person, in nominal USD (2002, 2007 and 2012)
Country 2002 2007 2012
As % of Per As % of Per As % of Per

GDP person GDP person GDP person
USA 32.5 11,658.40 36.6 16,184.46 67.8 32,578.19

UK 37.7 9515.74 43.4 18,694.56 86.4 32,288.30
Germany 59.1 13,469.30 67.8 25,252.08 81.8 34,233.80
France 56.9 12,819.22 63.9 24,733.72 85.9 35,973.61
Italy 108.1 21,220.68 105.7 35,425.07 120.1 41,495.93
Japan 143.9 43,563.15 172.0 57,542.20 212.0 100,876.09
China 27.3 288.57 20.7 460.53 15.3 859.21
India 58.3 278.75 59.1 518.65 48.5 683.10
Brazil 68.2 2212.72 56.4 3456.34 54.2 6221.24
Russia 48.3 983.04 8.9 640.07 8.3 989.07
Spain 55.4 8210.19 39.4 11,515.04 68.2 21,093.48
Portugal 51.3 5991.26 64.0 12,887.90 113.1 24,103.16
Ireland 35.1 9500.33 24.7 13,796.59 105.6 53,039.32
Greece 103.7 10,900.00 107.3 26,711.12 161.6 40,887.15
Latvia 13.8 474.53 10.7 979.92 43.7 5257.01
Poland 37.9 474.53 47.2 4539.92 53.7 6284.90
S. Africa 45.2 852.64 32.4 1702.47 34.1 2546.48
Source: Data drawn from the Economist Intelligent Unit www.economist.com/content/global

_debt_clock (accessed on 8 January 2013).
in 2003, with a total demand of 9.7 million barrels per day.3 Given
that Eurasia as a whole accounts for 75 per cent of the world’s energy
resources and 60 per cent of its gross national product (GNP) and with
60 per cent of the world’s proven oil reserves residing in the Middle
East alone, one can easily grasp why there has been a ‘new great game’,
involving all major Eurasian powers as well as the US. As we have shown
elsewhere, Greece, Turkey, Cyprus and the Balkans have been partaking
in this ‘new great game’ in a variety of ways: from their participation in
the Black Sea Economic Cooperation (BSEC) initiative in the 1990s, to
a number of oil and gas pipelines projects connecting the Caspian Sea
region with the Black Sea and the Aegean/Southern Balkans, the list is
long enough.4 Greece, an almost bankrupt state by the early 1990s, was
nevertheless viewed by NATO powers, together with Turkey, as ‘a zone of
stability’, an ideal launching pad for a variety of western financial oper-
ations that could use their Greek counterparts to penetrate the Balkan
economies from the South. Greek rentier and financial interests would
act as conduits of the big Western capital interests in this new scramble
for the Balkans and, at times, in direct competition with Russia. This, in
our view, coupled with the country’s new, post-Cold War, geo-political
importance, averted the bankruptcy of the country in the early 1990s
rendering it with another 15 years of fictitious prosperity and growth.
In fact, as we shall show in this chapter, the growth registered in Greece
in the 1990s and 2000s was debt-driven. Financialization increased the
global debt in the time span of a decade (2002–12) in every country on
the globe except China, India, Brazil, Russia and South Africa. This, apart
from being an indication of the slow global shift taking place, at the
same time points to a policy of international seisachtheia (global cancel-
lation of debt) as the only feasible policy of relief for the working masses
across the world in order, among others, to boost their purchasing power
and drive them out of poverty and deprivation.
The third important process, obviously, was the end of the Cold War.
It was an event with massive geo-political and economic consequences:
it opened the door to Germany’s re-unification; prompted NATO’s east-
ward enlargement followed by that of the EU, thus turning East-Central
Europe – as Peter Gowan put it – ‘into a kind of passive, support hinter-
land for West European multinationals’.5 In retrospect, however, NATO’s
and the EU’s expansion projects seem also to have benefitted the ‘loser’
(USSR/Russia) and not just the ‘winner’ (USA/Europe): with the excep-
tion of the 1990s, Russia has today become a respectable Eurasian power;
re-asserted its influence in Ukraine and Belarus; regained its position in
the Caucasus after the successful suppression of Chechen and Georgian
nationalism; and it is the key force with China in the Shanghai Coopera-
tion structure going as far as to organize joint military exercises, whether
around Taiwan or in the Caucasus/Caspian zones. But there is also some-
thing else. The collapse of Soviet Communism removed the ideational
peg for the USA upon which its Cold War discourse was based: it could
no longer exaggerate the threat of the USSR/Russia upon Europe or itself,
nor could it exaggerate the vulnerability of itself. This had seriously
begun undermining the ideational pillars of US hub-and-spoke imperial-
ism in Europe. True, 9/11 provided a substitute, the ‘war against terror’,
but it had neither the ideational force nor the material-power backing to
support the USA’s vain neo-imperial drive in the Middle East and Central
Asia under Bush Jr. It is no accident that Obama abandoned frequent ref-
erences to ‘America’s global war on terrorism’, although the scheme may
well re-enter US hegemonic discourses under a new Republican adminis-
tration. This is why we argued that the USA’s power-projection in Eurasia
after 9/11 was not a sign of strength, but a sign of weakness, especially
economic weakness.6
The Cold War was not just a ‘war’ of the West against the USSR, a
deterrence policy to avert the Soviet invasion of Europe. As William
Appleman Williams, Gabriel Kolko, Walter LaFeber and many other
revisionist historians have argued, the Cold War had primarily been a
US-induced strategic undertaking to secure the unity of the Western
core (Western Europe, Japan, USA) under the primacy of the USA. Or,
as NATO’s first secretary, Lord Ismay, put it when asked in 1949 what
NATO is about: ‘NATO is being founded in order to keep the Americans
in, the Russians out and the Germans down’.7 That is why NATO did
not dissolve after the collapse of the ‘Soviet enemy’ and the dissolu-
tion of the Warsaw Pact. Quite the opposite. Ultimately in the service
of US hub-and-spoke strategy, NATO expanded eastwards to fill in the
power void created by the withdrawal of the Soviet power from East-
Central Europe, the Balkans and Central Asia, all the while keeping
its grip on Germany and Europe. A politically united Europe under
Germany’s or Franco-German hegemony has never been a good prospect
for two main reasons: first, because European interests could have shut
out US exporters from entering European markets; second, a politically
united Europe would have duplicated NATO turning it into a redundant
security actor in Eurasia.
The essays in this final chapter of the book offer our empirical expla-
nation of the Greek (and European) debt crisis that began in earnest
in 2009–10. The generic argument is that the European cum Greek debt
crisis can only be conceived of in the framework of a power-shift to
the ‘global East/South’, a process conditioned by historical and systemic

fault-lines.8 We draw on specific and original quantitative data to pro-
ceed with an analysis that goes beyond the structural parameters of the
crisis, identifying the class and political profiles of agencies responsible
for the crisis. Our main specific argument is that the causes of the Greek
debt crisis, today, as in the past, embrace both external and domestic
deficiencies of the Greek social formation. Thus, we counter arguments
that see as the main cause of the Greek malaise the external environ-
ment of the Greek state (e.g., large and unsustainable current account
deficit, financial inflows), especially since its entry into the eurozone
in 2001; and arguments that source the crisis domestically, viewing it
primarily as a fiscal crisis (e.g., tax evasion, large defence spending, pub-
lic sector profligacy). In doing so, we shall become aware of Greece’s
geo-political significance for the Euro-Atlantic core in the new constel-
lation of forces in the Balkans and the Near East, as well as identify
the profile of the new bourgeoisie, which has been the key mediating
agent in bringing about neo-liberal financialization in the country. This
chapter illustrates further the main theoretical points we made in the
first part of our work, namely that the debt is the result of the asymmetry
between the monies/paper circulating within a given social formation,
on the one hand, and the real values produced within that social for-
mation, on the other. Finally, we shall examine changes in the class
stratification of Greek society, the result of three rounds of harsh aus-
terity measures since 2010 imposed by the troika and slavishly followed
by pro-bailout cabinets (see Timeline at front of book). These cabinets,
it should be noted, represent the old, post-1974 regime. At present, the
debt crisis seems to have wiped out the bipartisan ruling class of PASOK
and ND almost entirely, although they managed to cling together and
form a government in the wake of the June 2012 election, with the rad-
ical Left of Syriza missing the first position by a whisker (see Table 6.2
and Timeline). For all intents and purposes, the post-1974 kampfplatz
is dying.
6.2 The Greek workshop of debt and the profile

of the new bourgeoisie
The strict monetarist criteria of the Maastricht Treaty – under nego-

tiation since Delors’ Single European Act in 1986 – and later of the
so-called ‘Stability Pact’, coupled with the end of authoritarian social-
ism over Greece’s northern borders, undermined the political, economic
and ideational bases of the peculiar bipartisan ruling class formed in
140
Table 6.2 National Elections in Greece, 1974–2012
Year of elections 1974 1977 1981 1985 1989 June 1989 November 1990
Percentage of actual votes to each party which received more than 1% of valid votes or at least one MP. (In brackets is the number of seats in
the parliament.)
Number of registered voters 6.241.006 6.403.738 7.059.778 8.008.647 8.379.435 8.637.323 8.453.695
Actual voters 4.963.558 5.193.891 5.753.478 6.422.466 6.669.481 6.798.159 6.698.591
Invalid votes 54.584 64.117 82.421 57.372 147.918 101.675 112.551
Valid votes 4.908.974 5.129.771 5.671.057 6.422.466 6.521.563 6.696.484 6.586.040
PERCENTAGE OF VALID VOTES AND NUMBER OF SEATS TO THE MAIN PARTIES

New democracy 54.37 (219) 41.84 (171) 35.87 (115) 40.84 (126) 44.25 (145) 46.19 (148) 46.89 (150)
PASOK 13.58 (13) 25.34 (93) 48.07 (172) 45.82 (161) 39.15 (125) 40.67 (128) 38.61 (123)
United left1 9.47 (8)
Union of center-new forces2 20.42 (60) 11.95 (16) 0.40 (–)
National democratic union3 1.08 (–)
4
Others (very small parties ) 1.08 (–) 0.89 (–) 1.71 (–) 1.61 (–) 2.08 (–) 0.87 (–) 1.06 (–)
KKE (Communist party) 9.36 (11) 10.93 (13) 9.89 (12)
KKEεσ . (Communist party) 1.34 (–) 1.84 (1)
National Array5 6.82 (5)
Alliance 6 2.72 (2)
New Liberals7 1.08 (2)
Party of Progressives8 1.68 (–)
Coalition of the Left and Progress (SYNASPISMOS)9 13.12 (28) 10.97 (21) 10.28 (19)
SYRIZA 10
Democratic Left11
ANTARSYA12
Table 6.2 (Continued)
1993 1996 2000 2004 2007 2009 2012 May 2012 June
Percentage of actual votes to each party which received more than 1% of valid votes or at least one MP. (In brackets is the number of seats in
the parliament.)
Number of registered voters 8.972.258 9.140.742 9.372.541 9.897.626 9.918.917 9.929.065 9.949.401 9.949.401
Actual voters 7.019.193 6.978.656 7.026.527 7.571.601 7.355.026 7.044.606 6.476.751 6217000
Invalid votes 119.564 198.607 158.516 166.667 196.020 186.185 152.647 61.335
Invalid votes 6.899.629 6.780.049 6.868.011 7.404.934 7.159.006 6.858.421 6.324.104 6.155.665
PERCENTAGE OF VALID VOTES AND NUMBER OF SEATS TO THE MAIN PARTIES

New democracy 39.30 (111) 38.12 (108) 42.74 (125) 45.36 (166) 41.84 (152) 33.47 (91) 18.85 (108) 29.66 (129)
PASOK 46.89 (170) 41.49 (162) 43.79 (158) 40.55 (116) 38.10 (102) 43.92 (160) 13.18 (41) 12.28 (33)
United left1
Union of center-new forces2
National democratic union3
Others (very small parties4 ) 1.47 (–) 2.29 (–) 2.06 (–) 0.95 (–) 1.22 (–)
KKE (Communist party) 4.53 (9) 5.61 (11) 5.52 (11) 5.90 (12) 8.15 (22) 7.54 (21) 8.48 (26) 4.50 (12)
KKEεσ . (Communist party)
National Array5
Alliance6
New Liberals7
Party of Progressives8
Coalition of the Left and 2.94 (−) 5.12 (10) 3.20 (6) 3.26 (6)
Progress (SYNASPISMOS)9
SYRIZA10 5.04 (14) 4.60 (13) 16.78 (52) 26.89 (71)
Democratic Left11 6.11 (19) 6.26 (17)
ANTARSYA12 1.19 (–)
141
142
Year of elections 1974 1977 1981 1985 1989 June 1989 November 1990
Democratic Renewal (DEANA)13 1.01 (1) 0.67 (1)

Democratic Coalition14
Independent Greeks15
Golden Dawn16
Trust17 0.39 (1) 0.45 (1)
Independent muslims 0.72 (2)
Destiny (Muslims) 0.25 (1)
Greens alternatives 0.58 (1) 0.77 (1)
LAOS18
DRASI-FS19
Creation Again20
Cooperation in single member regions 1.02 (4)
Political Spring21
Democratic Social movement (DIKI)22
1 Coalition of the two communist parties and EDA (Democratic Left).

2 In 1977 renamed EDIK.
3 Radical Right.
4 Included, also the parties that do not gain more than 1% of the national votes or the parties that do not elect at least one member in parliament.
5 Radical Right.
6 KKEεσ ., EDA and some other socialists.
7 The party of the future leader of New Democracy and Vice President Constantine Mitsotakis.
8 Successor of the National Array.
9 The successor of the United Left.
10 The successor of Synaspismos.
1993 1996 2000 2004 2007 2009 2012 May 2012 June
Democratic Renewal (DEANA)13 0.8 (–)

Democratic Coalition14 2.55
Independent Greeks15 10.6 (33) 7.51 (20)
Golden Dawn16 6.67 (21) 6.92 (18)
Trust17
Independent muslims
Destiny (Muslims)
Greens alternatives 1.05 (–) 2.53 (–) 2.93 (–)
LAOS18 2.19 (–) 3.80 (10) 4.60 (15) 2.90 (–) 1.58 (–)
DRASI-FS19 1.80 (–)
Creation Again20 2.15 (–) 1.59 (–)
Cooperation in single member regions 4.87 (10) 2.94 (–)
Political Spring21
Democratic Social movement (DIKI)22 4.43 (9) 2.69 (–) 1.79 (–)
11 Euroleft Separated from Syriza.

12 Radical Left and leftists separated mainly from the Communist party(KKE).
13 The party of the future President Constantine Stephanopoulos.
14 Liberals separated from New Democracy.
15 Radical Right-Nationalists separated from New Democracy.
16 Radical Right-Nationalist Nazi orientation.
17 Political Party of Muslims in Thrace.
18 Radical Right-nationalists.
19 Liberal Right.
20 New party: Liberal Right based on internet advertisement and Facebook.
21 The political party of the current leader of New Democracy Adonis Samaras.
22 Socialists separated from PASOK under the leadership of the ex-minister of finance Dinitris Tsovolas.
143
the 1970s and 1980s. This unleashed all forces hitherto ‘suppressed’.
Deregulation of markets, privatizations and liberalization of banking
and financial capital began pace slowly but steadily after 1991–92, while
accelerating under the ‘neo-revisionist PASOK’ of Costas Simitis after
1996, when Simitis succeeded the ailing Andreas Papandreou.9 At the
time, the mantra in Greece was ‘modernization’ against Papandreou’s
‘populism and clientelism’. Accordingly, from the mid-1990s onwards,
the (dependent) ruling class of the previous decades began transforming
itself into a new agent adapting to, and taking advantage of, domestic
and international circumstances. Increasingly, this class began assum-
ing the features of a ‘broker’ between international/European financial
capital, on the one hand, and government, on the other. Thus, whereas
the formation of the (dependent) ruling classes in the 1970s and 1980s
was primarily sourced from within the domestic environment of the
state, the transformation of these classes into a new hegemonic agent
was primarily induced from without, owing to the new constraints
imposed by the internationalization/Europeanization of the Greek state.
In this respect, the structures of political and economic dependency
of Greece, themselves made up of exogenous agents and structures,
grew even deeper roots than hitherto. Simitis’ vague ‘modernization’
agenda meant, above all, acceleration of the disintegrative tenden-
cies of Greece’s productive base (textiles, cement, agriculture, foodstuff,
etc.). All in all, the structural asymmetries and fault-lines between
the European core – especially after Greece joined the eurozone in
2001 – and its periphery, first and foremost Greece, became astoundingly
pronounced.
6.2.1 Three views on the crisis

The most authoritative view that considers the external environment of
the peripheral/debtor state as the main cause of the debt crisis in Europe
comes from Martin Wolf. In a lecture he gave in London on 3 October
2012, the chief economics commentator of the Financial Times argued:
This is not, in its origin, a fiscal crisis, but a balance of payments

cum financial crisis. In the run up to the crisis, there were huge inter-
nal capital flows. These opened up current account imbalances and
generated huge divergences in competitiveness. After 2008, cross-
border private financial flows suffered a series of ‘sudden stops’. These
caused, or aggravated, a fiscal crisis.10
An almost identical thesis was advanced by Costas Lapavitsas et al.,

at least as far as the origins of the crisis was concerned: ‘The crisis’,
it is argued in a Report produced by the group ‘Research on Money

and Finance’ based at SOAS, University of London, ‘is not due to fiscal
profligacy [ . . . ]. Its roots lie in the loss of competitiveness by the periph-
ery coupled with an enormous financial expansion in the 2000s’.11
Germany, due to its suppression of wages, became far more competitive
than any other European country, a fact that enabled it to recycle its
financial surpluses across Europe rendering especially the periphery and
Greece with huge financial account surpluses. In short, this tendency
sees the crisis emanating from the financial sector, which facilitated
borrowing for the periphery via low interests rates, especially in the
1990s and early 2000s. But when this came to an end from the mid-
2000s onwards, and especially with the onset of the financial crisis in
summer 2007, the equilibrium was destroyed. With the global financial
crisis setting in, rising interest rates exposed the public and private sec-
tors, which were now in possession of large amounts of bad securitized
paper/debt that belonged to the periphery. Lapavitsas, in addition, goes
as far as to argue that the EMU has created a split between core and
periphery, creating discriminatory and hierarchical relations between
the two. The cure, in this respect, is a debtor-led default and exit from
the eurozone, imposition of exchange controls followed by a new indus-
trial policy and the introduction of a new national currency. As far as
the banking sector is concerned, it should be nationalized. This Left
strategy would have the additional benefit of breaking the yoke of aus-
terity in the rest of Europe, especially Germany, which would be forced
to boost aggregate demand and raise wages in order to boost domestic
consumption. For all intents and purposes, the underlying assumption
here is going back to the autarky of the 1930s, although it is never
explicitly said.
These analyses make a lot of sense especially from a technical, ‘struc-
turalist’ point of view. Technically, there is no doubt that the debt crisis
in the periphery was triggered from outside the periphery state. But this
was the trigger, for the underlying causes are much more diverse and
complex. The thesis is vulnerable especially when we bring into the pic-
ture agency and history. As we have already shown, the split between
core and periphery in Europe has not been caused by the introduc-
tion of the EMU. Rather the opposite is true: the EMU was introduced
in order to bring about economic and developmental cohesion across Western
Europe, overcoming the gap between core and periphery. This, of course, was
an illusion; it was wishful thinking, the intention of Europe’s policy-
makers. The reason why this did not happen has to do with the way
in which real value creation, exchange and distribution unfolds across
states, regions and societies, pertaining to uneven development and a
number of other parameters captured by the concept of ‘global fault-

lines’. Monetary unions, as with the operations of the gold standard, do
not, and did not, cause the gap between core and periphery either in
Europe or globally. To give one example only, Italy’s monetary union
in the 19th century did not cause the economic gap between the North
and the South. This had pre-existed Italy’s unification and reproduced
itself over time and space to the present day by way of integrating into
its historical movement the capitalist relations of production operating
under the new common currency, the Italian lira.
Core-periphery relations are enshrined in the structural and historical
reproduction of Greek capitalism as a social formation and pertain to
Greece’s peculiar forms of dependency and subordination upon the core.
Greece and other periphery countries in Europe and the world do not
need to participate in any monetary union whose usurious and impe-
rial effects would be to lead them to bankruptcy and default. As we
have seen, Greece has defaulted several times in its history and has
constantly been in a debt spiral without participating in any currency
union – indeed having its currency pegged to an imperial currency was
good enough to trigger bankruptcy given the vulnerability and weak-
nesses of the country’s productive and technological sectors. Most likely,
and for reasons we have already mentioned, it would have defaulted on
its debt obligations even without participating in the EMU since 2001,
and it could have defaulted earlier, in the late 1980s or early 1990s,
had it not been for the challenges created in its northern borders by
the collapse of the Soviet Union (NATO’s and EU’s eastward expan-
sion, oil and gas pipeline projects, projection of financialization into
the Balkans, etc.). Both financialization and the collapse of ‘really exist-
ing socialism’ in its northern borders had simply given Greece another
15 years lease of life. Bankruptcy would have happened anyway, with or
without participation in the EMU. In the end, the forms of dependency
and subordination of Greece are not just economic. They are primarily
political.
The second tendency in the recent literature on Greece sees the fiscal
component of the state as the main culprit for generating the unprece-
dented debt crisis of 2010–13. The focus here is on the institutional
weakness of the Greek state, its fiscal malaise and inability to enforce
tax collecting mechanisms, the issue of political clientelism, etc. As two
representatives of this tendency put it:
The capacity of the Greek economy to exercise effective counter-

cyclical expansion has been fatally undermined by its chronic
inability to exercise fiscal discipline when the economy was still

expanding [ . . . ] The inadequate progress in improving long-term
fiscal sustainability is demonstrated in a public debt to GDP ratio
[ . . . ] Excessive public indebtedness reflects diachronic weaknesses
including inefficient public administrative and budgetary structures,
inadequate collection of revenues and tax evasion, high defence
spending, and a tradition of clientelistic appointments in the public
sector.12
Other similar views come from assessors and researchers from the Eco-
nomic Research Department (ERD) of the Bank of Greece, experts and
assessors of the ECB, and think-tanks around the Directorate-General for
Economic and Financial Affairs of the European Commission:
[ . . . ] Deep-seated problems in the Greek economy remained unad-

dressed, reflecting a pro-cyclical fiscal policy; as a result, the country
continued to run large fiscal and external deficits [ . . . ] The widen-
ing of the deficits was mainly expenditure-driven [ . . . ] The large
and widening fiscal deficits contributed to growing current-account
deficits [ . . . ] In the case of Greece, the widening of the current
account deficit was caused entirely by the behaviour of the public
sector.13
It is interesting here to note how this tendency minimizes the external

dimension of the crisis (low interest rates and high borrowing, finan-
cial flows, etc.) in order to attribute to the state primary responsibility
for causing the Greek debt problem. The second extract, in particular,
considers the current account deficit as driven entirely by the state, a
thesis which is rather flippant. As one of the two main expressions of
the balance of payments – the other being ‘capital/financial account’ –
the current account does straddle the domestic and external environ-
ments of the state, the determining factor being the social productive
basis of the state. Germany was in a position to recycle its financial
surpluses, which were constantly entering and exiting the periphery
states’ accounts proliferating their debt ratio, precisely because it had the
strongest industrial/institutional structure in the eurozone (and not just
stagnant wages, as Martin Wolf and Costas Lapavitsas et al., argue: stag-
nant wages is just one factor among many others). The aspect of social
relations of production is wholly ignored by this tendency. Together
is also ignored the real interaction between the domestic and exter-
nal sources of debt. External disequilibria may have domestic sources,
such as the current account. But this regards ‘cross-border’ competi-

tion among various class fractions: if European companies, for example,
out-compete Greek ones, resulting in a trade deficit for Greece, this is
sourced domestically owing to the weakness of Greek business and econ-
omy as a whole, which cannot balance competitively against the core.
This can happen regardless of the shape of the public sector and its fiscal
condition. The solution proposed by this tendency is close to that of the
troika: strict anti-inflationary policies, harsh austerity measures, cutting
down the size of the public sector, complete welfare state retrenchment –
the aim being the creation of primary surplus acquiring certain freedom
of movement. As an editorial of the Financial Times put it: ‘Athens will
soon reach primary balance, where the state’s revenues suffice to pay
for its expenditures apart from debt service. This changes the political
calculus. It ends Athens’ financial dependence if it chooses to default.’14
The third tendency/view, around which a number of European
economists, neo-Marxists and various Europeanists converge, is that the
European project has been deficient from its birth and the real problem
is ‘neither Greece nor Germany but the system of the Euro’.15 Despite the
variations and tensions within this current, they all seem to accept that
the real cause of the crisis lies at the heart of the European project, which
also becomes the privileged terrain of political struggle for overcoming
the crisis. In this respect, one of the most interesting and progressive
approaches comes from John Milios and the group around the journal
Thesseis (‘Positions’) based in Greece.
According to Milios et al., neo-liberal globalization has not only
solved the problem of capitalist profitability which dominated the
stagflation period,16 but also facilitated real economic convergence
between centre and ‘periphery’, especially within the eurozone.17 This
can be seen from the high rates of growth and profitability in the
‘periphery’ – Milios et al., do not accept ‘world systems and dependency’
theories, hence their usage of inverted commas for the term ‘periphery’ –
ten years before the crisis and the large financial surpluses circulating
in Greece and other ‘periphery’ states. In fact, it was the high rates
of development in the ‘periphery’ which ‘attracted “savings” from the
“centre”, financing increased demand.’ This view was first formulated
in 1990 and argues that Greece’s current account deficit is sustainable to
the extent that the conditions of profitability for capital are good and
Greece attracts foreign investments and invisible earnings (e.g., emi-
grants’ remittances).18 The authors assumed that the conditions that
prevailed in the 1960s will continue to be the same, now under the
aegis of German capital:
The perspective of Common European Market [ . . . ] is expected to

boost the inflow of foreign (investment) capital in Greece to such a
degree that: (a) it will boost the penetration of foreign commodities
in the Greek market and (b) it will be accompanied by a correspond-
ing augmentation of the marginal efficiency of concrete domestic
business units and branches.19
On the basis of this assessment, this tendency argues that Germany’s

‘economic locomotive’ in Europe would bring about positive results
for the Greek economy in the 1990s, whereas European capitalism as
a whole does not generate internal tendencies of disintegration of its
exchange rate system.20 This view proved to be short-sighted, for the
authors disregarded completely uneven development and the fact that
the growth registered was unsustainable and artificial because it was
debt-driven. As we shall show below, the ‘German economic locomo-
tive’ and the EMU contributed to the further disintegration of Greece’s
and the European periphery’s productive base. In the end, this ten-
dency illustrates that ‘financial account surpluses in the periphery are
responsible for the ballooning of current account deficits’.21 It is herein,
moreover, that lies the innate deficiency and contradiction of the
euro-project:
On the one hand, the symbiosis within the eurozone has until now
been built upon persistent financial account imbalances mostly due
to different rates of growth and profitability. On the other hand,
without the latter it would be difficult for the eurozone to exist,
because it is at the same time a way of offsetting the pressures
imposed upon labour.22
But this argument is cyclical because the ‘surplus’ which is enshrined

in the structure of financial (capital) account is in fact a form of debt
with claims on the assets and individuals of peripheral countries via
borrowing, credit default swaps (CDS), etc. As we shall try to show
below, financial surpluses circulating in Greece and the periphery were
not going into investment projects and the real economy, but into
consumption and easy profiteering via the banking system (portfolio
investment, mortgages, loans, etc.). Moreover, this form of debt was cal-
culated into the GDP and GDP per capita, presenting as ‘convergence’
a process that was really and truly profoundly uneven and divergent,
widening the gap between core and periphery within the EU instead of
diminishing it.23 However, what is really interesting in this approach
is that it turns its back on nationalism, protectionism and a return

to the autarky of the 1930s, viewing a nonchalant European polity
as a field of social struggle unifying the fragmented social tissue of
European societies. From this perspective, it would be a serious mis-
take for the Left to advance a strategy based on going back to national
currencies.24
A significant variant of this point of view comes from the Institute of
Labour of the Greek trade unions and one of its best researchers, Savas
Robolis. According to Robolis, the EU Treaties incorporate not a solution
to core-periphery cleavage but a perpetuation of it.25 Research carried
out by the Institute examining inter-branch relations of the Greek
economy using input–output techniques and backward and forward
multipliers argues that the economy was in an upward spiral because,
despite the challenges of uneven development, inflation and debt, the
growth recorded was based on domestic consumption and demand.
However, the research comes to conclude, this type of growth was even-
tually based on large volumes of imports, disintegrating inter-branch
production units and sapping endogenous sustainable development.26
This view, led by Robolis and other political economists within Syriza,
argues for a radical political reform of the EU Treaties so as to over-
come the consequences of uneven development which takes place at
the expense of the periphery.27 Other more modest and functional-
ist approaches within this tendency come from such Europeanists and
political economists as Stuart Holland and Yannis Varoufakis, who argue
for a restructuring of Europe’s debt through the issuing of Euro-bonds
on a three-act programme (ECB intervention to recapitalize insolvent
banks; ECB-issued Euro-bonds to cover all member-states’ Maastricht-
compliant sovereign debt; and a pan-European investment recovery
programme led by the European Investment Bank (EIB).28
Obviously, the approaches we have just reviewed are but a fraction
of the growing scholarly literature on the subject of Greece/eurozone
debt crisis.29 However, they are indicative of what dominates the cur-
rent scholarly debates, thus offering readers the necessary yardstick to
assess our own analyses. Our main concern is to identify the causes of
the current crisis and the agencies driving it. Looking at the structural/
technical parameters of the crisis as economists usually do is not good
enough for us: (class) agency, history and comparison hold the keys to a
holistic understanding of our subject-matter, and indeed every subject matter
at least in the field of social sciences. Also, we will move on to look at the
main consequences of the crisis and austerity policy that ensued.
6.2.2 Stock exchange bonanza and banks

As we saw earlier, Greece did not simply have a problematic structure of
public debt that appeared in the 1980s, something which was also true
in the case of Italy, Belgium and other countries at the time. Greece had
also tried to resist neo-liberalism and financialization, but all the while
lacking robust export-orientated sectors to buttress sustainable levels of
development, thus matching the rising trend of its debt structure and
the borrowing requirement. As Greece was moving out of the domain
of Keynesian policy, and entering the structures of neo-liberalism in
the 1990s, a new policy framework of speculative and rentier activities
became entrenched, contributing to making even more problematic,
unsustainable and unmanageable the domestic structures of debt by
the ruling parties of PASOK and ND. The comprador element in the
Greek social formation is the key in grasping the origins of the crisis as
an articulation of domestic and external factors in the generation and
mismanagement of the debt problem.
In the beginning it was asset capitalization, equity and profits through
the share price index in the Athens Stock Exchange (ASE). The bubble
of the ASE was largely buttressed by privatizations and the underground
economy, as those positioning themselves in the ASE and buying and
selling shares were not required to prove their income status, or where
their income came from (Table 6.3).30 The bubble burst in September
1999, never to reach that level again. As elsewhere in the West, the
result of this speculative boom and bust cycle was to circulate paper
assets and liquidity away from production, while concentrating wealth
in the hands of very few speculators who ‘cashed out and got out’,
switching the focus of their speculative activities elsewhere, mainly
abroad. The loser, as usual, was the small investor – some 10 per cent
of Greeks had bought shares on the stock market, an apotheosis of
Greek ‘popular capitalism’, what Tony Blair in the late 1990s used to call
the ‘stakeholder society’, the pillar of his ‘Third Way’. European funds
continued strengthening this fictitious liquidity by boosting the stock
market with more than 3500 million euros every year since 1988. This
chorus of shares and paper assets increased in the 2000s as more busi-
nesses entered the market and ramified their activities in the banking,
financial and other services. Large amounts of accumulated income on
the part of middle and lower middle classes were taken away, free of tax,
from the financial capital through the ASE and without adding one iota
to the competitiveness of the Greek economy. It is no accident that from
the mid-1990s onwards hitherto unknown businessmen and companies
Table 6.3 Athens Stock Exchange share price indices,

1980–2002
Year Share Price Indices Annual change

in price indices
1980 74.9
1985 50.4 −24.5 (’80–’85)
1990 488.3 437.9 (’90–85)
1995 914.15 425.85 (’90–95)
1996 933.48 19.33
1997 1479.63 546.15
1998 2737.6 1257.97
1999 5535.1 (on 17–9–1999 2797.5
it peaked at 6335)
2000 3388.9 −2146.2
2001 1748.4 −1640.5
2002 2263.6 515.2
Source: Concise Statistical Yearbooks for the respective Years,

Hellenic Statistical Agency (ELSTAT).
appeared amassing a number of activities in Greece, the Balkans and the

Near East, in the field of banking, construction, defence equipment and
procurement (including offset agreements), large-scale import–export,
mass media, informatics and energy, all phenomena that should be
seen in conjunction with the policies of privatization and deregulation –
the essence of Costas Simitis’ ‘modernization’ agenda after he assumed
power in 1996 just before the death of Andreas Papandreou.
From 1994 to 1999 more than 100 companies had been privatized, the
most important being AGET-Hercules, the cement company; Hellenic
Shipyards; Peiraiki Patraiki (textiles) and a number of banks, includ-
ing Hellenic Industrial Development Bank (ETCA). The privatization of
Olympic Airways, the country’s loss-making airline carrier, was blocked
by its workers, but was eventually carried out in the late 2000s.31 Given
the small size of the country, an unusual number of new commercial
banks sprang up, including European and international banks and their
subsidiaries. In the end, however, following privatization, the Greek
banking sector pursued a triple strategy.
First, instead of adopting an expansionary investment strategy to deal
with increasing international competition vis-à-vis the country’s entry
into the eurozone, the Greek banks pursued an aggressive policy of
mergers and acquisitions bringing about an oligopolistic condition to
the Greek financial sector and high profits. This was the case as much
Table 6.4 Profitability of Greek banks as a percentage of their assets, 1988–2003
Year 1988–90 1991–94 1995–97 2000 2001 2002

(mean (mean (mean
annual annual annual
profitability) profitability) profitability)
Profitability 0.48 0.94 0.69 n.a. n.a. n.a.

after taxes
Profitability 0.58 1.28 1.01 1.9 1.5 0.6
before
taxes
Source: Data based on the annual reports of the Governor of the Bank of Greece, Athens.
Table 6.5 Profitability of Greek banks as a percentage of their assets, 2004–10
Year 2004 2005 2006 2007 2008 2009 2010
Profitability after 0.4 0.9 1.1 1.5 0.2 0.09 −0.55

taxes/individual
banks
Profitability after 0.5 0.8 1 2.1 0.7 0.15 −0.3
taxes/corporations
Source: Data based on the annual reports of the Governor of the Bank of Greece, Athens.
before (Table 6.4) as after (Table 6.5) the entry into the eurozone. As a
result, at the time of writing (December 2012), Greece has some 61 banks
of which 34 are Greek, 33 branches which belong to banks from EU
countries and five banks from outside the EU. But only five commercial
banks control nearly 70 per cent of the liquidity market in Greece of
which 80 per cent is owned by Greek banks (Table 6.6).32
It is worth noting that, according to the Governor of the Bank of
Greece in 1998, the profitability of the Greek banks was much higher
than in other European countries. But this happened due chiefly to the
second type of strategy adopted by the banks, which was massive lend-
ing to the Greek government.33 For more than ten years (1999–2009),
the Greek banks, through lending to the Greek governments, presented
massive profits on their balance sheets, and at the expense of the Greek
taxpayer.
According to an original research paper published by Constantine
Manolopoulos,34 in 2010 the National Bank of Greece had an accu-
mulated holding of Greek debt of 17.9 million euros, or 88.6 per cent
of its investment portfolio; Piraeus Bank (of Sallas family) 7.3 million
Table 6.6 Mergers and acquisitions in the Greek banking sector, 1997–2010
Piraeus Bank 1997 acquisitions of Chase Manhattan’s activities in

Greece
1998 acquisitions of Bank of Macedonia-Thrace
Credit Lyonnais Greece
Chios Bank
1999 acquisitions of UK national Westminster’s
branches in Greece
2001 acquisitions of ETVA (Greek bank for
industrial development)
EFG-Eurobank 1996 acquisitions of Interbank
1998 acquisitions of Bank of Athens
Bank of Crete
1999 acquisitions of Bank of labour
Dorian Bank
2001 merger of Telesis investment Bank
Alpha Bank 1999 acquisitions of Ionian Bank
National Bank 1998 acquisitions of National Mortgage Bank which
of Greece acquired national Dwelling
Bank in 1997
2006 acquisitions of Turkish Finansbank
Marfin Bank 2003 merger with Investment Bank
2007 merger with Egnatia Bank that acquired the
Bank of central Greece a
popular bank in 1997
Societe generale 2003 acquisitions of General Bank
Credit agricole 2000–10 step-by-step Commercial Bank of Greece
acquisition of (Emporiki)
Aspis Bank 2002 acquisitions of ABN AMRO’s branches in
Greece
euros or 83 per cent of its investment portfolio; EFG-Eurobank (of Latsis

family) 7.3 million euros or 97.1 per cent of its investment portfolio;
Greek Postal Services (state-owned) 5.6 million euros or 98.5 per cent of
its investment portfolio; Alpha Bank (of Kostopoulos family) 4 million
euros or 87 per cent of its investment portfolio; AteBank (state-owned)
3.4 million euros or 75.6 per cent of its investment portfolio; and
the Commercial Bank, which is owned by the French Credit Agricole,
1.7 million euros or 83.2 per cent of its investment portfolio.
The third strategy pursued by the banks under this new regime of neo-
liberal financialization in order to increase their speculative profits and
assets was the aggressive promotion of ‘new products’, such as mutual
funds. These funds absorbed a significant amount of savings of ordinary

people. The asset value of mutual funds in Greece was 1.1 per cent of
GDP in 1990, 5 per cent in Portugal, 3.1 per cent in Spain, 5.5 per cent
in Ireland and 3.7 per cent in Italy. But seven years later in 1997, the
asset value of mutual funds soared to 22.4 per cent of GDP for Greece,
26 per cent for Portugal, 34.9 per cent in Spain, 69.9 per cent in Ireland,
18.9 per cent in Italy and 24.7 per cent in prudent Germany.35 We can
see here the bubble of financialization in the 1990s getting almost out of
hand across Europe and not only in Greece, as well as Ireland standing
out as a peculiar case with a highly vulnerable banking sector. It is those
paper assets (debt) which had been inserted in the statistics, appear-
ing as ‘real’ GDP growth, yet what in fact had been debt, portfolio and
bond activity, as well as other services and products circulating in Greek,
European and global markets. This all went hand in glove with the
destruction of the productive (primary and secondary) sectors of the
economy, which were now completely unable to compete internation-
ally. Thus, when the crisis kicked in and blew up the chain of debts
and paper assets across the European banking sector, the IMF and the
ECB were among the first to step in to recapitalize them defending their
Balkan kin. By that time Greece had amassed an amazingly brave oper-
ation in the financial and security markets of the Balkans and the Near
East (Table 6.7).36 By the end of 2011, the Greek banks had received 86.8
billion euros from the ECB and nearly 30 billion euros from the Greek
government. But this is now taxpayer money that the Greek citizens
have to pay. The troika supports this solution because the assets of the
Greek banks do not belong to any public utility whose main sharehold-
ers are the Greek people, but to investment funds and foreign interests
holding nearly 82 per cent of their shares, whereas their official own-
ers own less than 10 per cent and the Greek insurance fund less than
5 per cent.37
Back in December 1996 cotton growers protested violently against the
government, for refusing to reschedule about $1.3 billion in debt owed
to the state-controlled Agricultural Bank and to obtain reinstatement of
a tax break on fuel. Strong protests also took place in Athens in 1998,
when PASOK Finance Minister, Yannos Papantoniou, in coordination
with the managing directors of the Commercial Bank, announced the
tendering of a majority stake in its Ionian subsidiary.38 In 1998, the
drachma was devalued by 12.1 per cent against the ecu, as the price
of entry to the ERM. By the end of the millennium, Greek state authori-
ties were presenting highly positive statistical data vis-à-vis the country’s
entry into the eurozone, which was scheduled for 1 January 2001, two
Table 6.7 International activities of Greek banks in 2010
Country Asset value Loans in Deposits in Number Number

in million million million of of ATM
euro euro euro branches
Egypt 2018 979 1477 65 120

Albania 1750 1352 1223 157 212
Bulgaria 11,461 9460 5530 706 1443
UK 6799 1447 1680 6 0
USA 628 394 544 13 16
Cyprus 13,730 7688 8068 87 88
South Africa 141 121 107 11 7
Ukraine 1291 926 463 153 158
FYROM 1254 855 935 91 136
Poland 5693 5184 3262 335 0
Romania 17,347 12,506 5661 845 1387
Serbia 4931 3609 2160 471 514
Turkey 23,348 16,762 12,444 556 1629
Total 90,391 61,283 43,554 3496 5710
Source: Our own estimates based on data from the Union of Greek Banks (2011).
years after the launch of the euro for the core of Europe: GDP was
around 3.5 per cent, one of the highest in Europe; inflation was down
to 4 per cent and the budget deficit had shrunk to 1.9 per cent of GDP,
well below the Maastricht convergence ceiling of 3 per cent; the inter-
est rate of 12-month Treasury bill in 1997–98 ran at 9.5 per cent, with
the EMU fluctuating criterion being 7.8 per cent. Meanwhile, interna-
tional lenders began bidding for contracts with the Greek government
in the run up to the Athens Olympics of summer 2004, just as Greek
rentier/financial capital penetration into the new Balkans/Near East
assumed enormous proportions.
6.2.3 The new comprador element and the collusion

between ‘modernization’ and corruption
Companies, such as the Alpha Group, Mytilineos S.A., Bobolas S.A.,
Intracom Holding S.A., Marfin Bank, MIG and the Sfakianakis Group,
began dominating the new business environment. The Sfakianakis
Group, for instance, which started in the early 1960s manufactur-
ing buses, saw its profits declining in the 1980s and quickly diversi-
fied into comprador activities, becoming Greece’s prime car importer
from Germany, France, Italy and the USA. Greece’s telecommunica-
tions operator, OTE, while under a programme of partial privatization,
bought Romania’s Rom Telecom defeating Telecom Italia, the only other
bidder.39 US companies provided technology and other capital for fur-
ther modernization. The Mytilineos business group bought Romanian
SC Somerta Copsa Mica, a lead and zinc smelter company, with a view to
expanding it into metal processing, boosting its supplies to Kosovo and
Macedonia/Former Yugoslav Republic of Macedonia (FYROM). Cement
manufacturing Titan, in a joint venture with Holderbank of Switzerland,
acquired Macedonia’s plant Cementamica USJE. Latsis, a London-based
shipping company, participated in investment ventures in Bulgaria and
Romania through the ‘Euro-merchant Balkan Fund, operated by Global
Finance, a Greek venture capital fund manager’.40 Around the same
time, Spiro Latsis set up Eurobank EFG in Greece, the third largest pri-
vate bank in Greece, recycling paper and values stemming from oil
trade and equity investment in Poland, the Ukraine, Turkey, Serbia,
Romania and Bulgaria. In this delirium, divided Cyprus, an EU member
state since 2004, was an offshore paradise and tax haven accommodat-
ing rentier and financial activities, whether of Greek, British, Russian,
Serbian or Persian Gulf origin.41 At the same time, Cypriot banks,
which have a significant presence in the Greek market, kept buying
Greek debt in increasing quantities. Thus, straight polygonal lines con-
nect Dubai, Cyprus, London, Athens, Cairo, Sofia, Belgrade, Damascus
and Moscow, reflecting the new geography of parasitic capital with no
growth prospects in the carriage bag of its travellers. In this Eastern
and Middle Eastern geographical architecture, Athens was a key pawn
and conduit in the service of financialization and neo-liberalism. It
should be noted that the amount of tax evasion of this new super-rich
comprador along with financial class was enormous.42
None of the above activities was conducive to real growth. Greek
investments in the real economy involved small- and medium-sized
enterprises in the textile and brewing industries in Greece and the
Balkans, but this could neither offset nor arrest the new domination
by financial and rentier/comprador capital, that is, the capital of debt,
corruption and tax evasion.43 Simitis’ ‘modernisation’ and ‘anti-populist’
programme co-constituted this new reality, which penetrated deeply
into Greece’s social tissue, destroying the social mores and culture
of working-class and agrarian communities. As the organic produce
became increasingly replaced by the imported GM product of the core,
the best the local producer could do was to embrace the international
domination of his/her market becoming a petty comprador. At the same
time, Simitis created a new type of social alliance, the ‘social alliance
of modernization’, gathered around the ‘party of the stock exchange’
and unified via a complex paralegal corruption network forming a new

bipartisan consensus across the trembling kampfplatz of post-1974 Greek
politics. PASOK and ND were now united behind a range of wheel-
ing and dealing related to acts of privatization, management of state
financial flows and recycling of debt, defence expenditure (see below),
re-arrangement of privileges and re-distribution of benefits and political
clientele.44 It can be argued, therefore, that despite the fact that the class
determinants of the Greek bourgeoisie had been changing, the coalition
of power and the structure of the ruling bipartisan class, including the
large number of civil servants, remained unaltered. The structures of
dependency and subordination of the Greek state elites to Euro-Atlantic
power centres also remained the same.
Neither Simitis’ ‘modernisation’ and ‘anti-tax evasion’ programme
(1996–2004), nor the similar ‘modernization’ programme pursued by
the ND cabinet under Karamanlis Jr. (2004–09) brought any benefit to
state finances. According to multiple announcements by the Ministry
of Finance in September–October 2011, more than 6000 individuals
owe more than 150,000 euros, each one of them to the Inland Rev-
enue. For the sake of comparison, the total amount these individuals
owe to the tax authorities is in the region of 30 billion Euros, whereas
the annual spending of the Greek state for wages is less than 23 billion
Euros. No accident, therefore, that the public debt doubled from 2000 to
2009, and at the expense of the average Greek consumer. Yet this abrupt
rise was not accompanied by an increase in the productive output of
the economy, as the country’s GDP presented a less dynamic structure
(Table 6.10). Interestingly, if we also factor in defence spending, which
was justified purely on ideational rather than real grounds, this dimen-
sion of public spending did not only add onto the debt structures of the
country, but also extended corrupt practices to the heart of the state.
One of the reasons why France, in the first place, and Germany are
the main holders of Greek debt is because Greek political elites, in
their ‘patriotic attempts’ to move away from the USA’s pro-Turkish grip,
began using French and German weapons suppliers. By exaggerating
both the threat coming from Turkey and Greece’s and Cyprus’s own
vulnerability, the ‘realists’ of the Greek cabinets could bid for high-
tech expensive military gear: in 2009 defence expenditure in Greece
was over 3.3 per cent of GDP, as opposed to 2.4 per cent for France,
2.7 per cent for Britain, 2 per cent for Portugal, 1.4 per cent for Germany,
1.3 per cent for Spain and 4.7 per cent for the USA. At the beginning
of the fully fledged crisis of 2010, Greece bought six warships from
France at a cost of 2.5 billion euros and six submarines from Germany
at 5 billion euros. Between 2005 and 2009 Greece was one of the largest
European importers of weaponry.45 During that period, the purchase of
26 F-16s from the USA and 25 Mirage-2000 from France represented
nearly 40 per cent of the total import volume of the country. Accord-
ing to Stockholm International Peace Institute (SIPRI) data for 2006–10,
Greece is the fifth weapons importer of the world, with a global quota of
4 per cent, about half that of India (9 per cent), and two thirds of China’s
imports (6 per cent) – it is worth noting that the Chinese GDP is about
20 times bigger than Greece’s nominal GDP.46 Most of these transactions
took place through the Greek state issuing debt, that is, pieces of paper.
In Greece, there is no such thing as an ‘industrial-military complex’, but
rather a comprador-military complex, a key faction within the wider finan-
cial/comprador oligarchy network, which is dominated by the Ministry
of Defence, doing all sorts of wheeling and dealing under the radar of
a liberal Constitution and the taxpayer. In 2011–12, for example, Akis
Tsochatzopoulos, a highly regarded PASOK cadre who challenged Simitis
in the party leadership in 1996, was being investigated and imprisoned
with regard to his activities as Minister for National Defence between
1996 and 2001. Accusations against him include bribes he and his asso-
ciates received for defence systems – mainly submarines and Patriot
batteries – that were bought under his leadership. Thus, the entire secu-
rity of the country is a dependent spoke of the Euro-Atlantic core,
whether American or Franco-German. But there is also something else
we wish to mention.
Not all defence deals had been, or are being, dealt with by issuing state
bonds/debt. Offset regulation became part of the official Procurement
Law, 3433/2006. The Greek Ministry of Defence is in charge through
the department of the General Armaments Directorate (GAD), and the
Division of Offsets (DO). Offsets and procurements are a complicated
method of purchasing weapons and military technology, involving, pri-
marily, barter agreements. This means that private interests in Greece
can barter all sorts of assets, including land and infrastructure, on the
altar of corrupt defence deals and hot money. The threshold for offset
request is 10 million euros. Much is done for the defence of Cyprus and
the Aegean islands against the ‘Turkish enemy’.47
6.2.4 EU transfers to Greece and the PIGS cannot

stop the debt spiral
Having said this, the doubling of the Greek public debt from 2000 to
2009 (Table 6.10) should not be surprising. In addition, we can see
from the table the increase of extra charges for the Greek taxpayer
(5th column) all of which had been happening without any corre-
sponding increase in productivity and output. The Greek GDP has been
growing at a much slower pace than the debt (4th column). The ruling
parties of ND and PASOK became increasingly unable to manage the
debt. The structural funds coming from the EC/EU also did very little, if
anything at all, to improve social cohesion and productivity in Greece
and other PIGS (Tables 6.8 and 6.9).48 A careful look at the empirical evi-
dence we possess suggests that during 2000–09 EU transfers towards the
PIGS never went above 1.53 per cent of GDP, or 220 euros per person per
annum. In fact, the so-called structural and cohesion funds disintegrated
the productive structures of the PIGS even further, instead of advancing
sustainable development, real growth and socio-economic cohesion.
Table 6.8 Impact of the EU structural funds on Cohesion (PIGS) Countries,

1986–2006
Country Gross value added Investment in Labour

(GVA % per knowledge-ICT productivity
annum) (% per annum) (% per annum)
86–93 94–99 00–06 86–93 94–99 00–06 86–93 94–99 00–06
Greece 2.63 3.19 3.36 −0.01 −0.03 −0.02 0.974 0.883 0.576
Spain 0.60 1.55 1.96 −0.01 −0.03 −0.04 0.193 0.565 1.008
Ireland 2.86 3.52 2.72 0.03 0.12 0.16 0.981 −0.106 0.407
Portugal 3.58 5.63 4.78 −0.02 −0.03 −0.05 0.724 1.882 1.671
Source: GHK (2002) ‘The thematic evaluation on the contribution of the structural funds to
sustainable development; synthesis report’, DG Regio, E.C., pp. 54–7; and GHK, PSI, IEEP,
CE (2003) ‘The contribution of the structural funds to sustainable development; a synthesis
report’ (Volume 1), DG Regio, EC, Chapter 4.
Table 6.9 EU cohesion funds committed to PIGS, 2000–09 (in 1999 prices)
Country Total resources Per person/ Percentage of Cumulative

in billion euro per annum National GDP impact in
in euro GDP 2000–09
Greece 23.80 220 1.25 15.89

Spain 54.30 140 0.62 16.67
Ireland 3.76 100 0.25 7.47
Portugal 22.50 220 1.53 16.75
Sources: EU (2010) ‘Ex-post evaluation of cohesion policy programs 2000–06 co-financed by

EFDF; Synthesis report’ pp. 115–17; Reiner Martin (2003) ‘The impact of the EU’s structural
and cohesion fund on real convergence in the EU’, European Central Bank, p. 5.
Moreover, the import/export ratio from 1994 to 2009 shrank at the

expense of exports and despite significant growth (Table 6.12). Thus,
the international competitive position of Greece worsened, the export-
led manufacturing sector disintegrated further, and all this despite high
borrowing and the rise in the share price index of the ASE (Table 6.12).
Further, the structure of exports over imports shows the magnitude
of the problem, caused by a combination of the uneven development
between the core and the peripheral Greek state and of the policies
pursued by the ‘new’ coalition of power (PASOK + ND + new financial
comprador bourgeoisie) straddling the geo-political fault-lines of the
country. From 1994 to 2009 the Greek economy lost almost 40 per cent
of its competitiveness despite the fact that GDP growth remained rel-
atively good, whereas the period 1999–2004 was the highest in the
EU; domestic and external borrowing increased (Table 6.11); and the
ASE’s price index was doing quite well. In this respect – manipulation
of statistics apart – the relatively wealthy picture of the Greek economy
before the current crisis was not because of the improvement of the real
economy, but rather to the speculative, rentier and consumerist activi-
ties of the new business and middle classes, coupled with the recycling
of European/German financial surpluses in the country’s account and
banking system. In other words, as elsewhere in the West, especially in
the USA and the UK, the growth registered was debt-driven, whereas the
disintegration of the domestic economy from the mid-1990s onwards
went hand in glove with the relative growth of comprador together
with financial elements – substantial increase of imports of financial
products and increase of financialization through the ASE and exter-
nal and domestic borrowing via banking mediation. The aim of the
Euro-Atlantic powers was crystal clear: use the new bipartisan power
coalition of ‘modernizers’ in Greece to penetrate the Balkans and the
Near East not just for financial/speculative purposes, but also for geo-
political reasons. These involve, for example, the contribution of Greece
to the stabilization of Albania, Bulgaria and FYROM/Macedonia, while
maintaining the balance of power in the Aegean and Cyprus. In this
context, the crisis that broke up in 1996 between Greece and Turkey
over the uninhabited islands of Imia/Kardak, as well as over the trans-
fer of S-300 Russian missiles to Cyprus, not to mention the case of
the Kurdish rebel, Abdullah Ocalan in 1999, or the crisis over FYROM’s
name, still lingering, need to be remembered. Moreover, financialization
and expansion of banking capital across South-east Europe from the
mid-1990s onwards induced a policy of rapprochement between Greece
and Turkey, which was short-lived and opportunistic as indeed were
all arrangements sponsored by comprador capiral and financiers.49 All

of these problems, of course, and despite the fact that none of them
benefitted Greece’s geo-political and security interests, had been duly
exploited by the bipartisan power bloc pushing for an increase in
defence spending, that is the purchasing of weaponry by issuing pieces
of paper (debt). During the era of neo-liberal financialization, Greece’s
dependent/subaltern position in international and European politics
deepened further along with the disintegration of the productive base
of the country (Table 6.10).
The borrowing requirement of the Greek state increased rapidly after
2001. This was a result of further internationalization/Europeanization
of the Greek state with the insertion of the country into this peculiar
form of world money, the euro (Table 6.11). We see that whereas the
initial loans were sourced domestically, this ceased to be the case after
2007, as the 2007–08 financial crisis wiped out the accumulated wealth
of small paper-asset investors, while at the same time the Greek state
was forced to pump money into the banks degrading the structure of
the budget deficit. This, in turn, could not have been offset by European
Table 6.10 Evolution of the Greek public debt and its relation to GDP in USD,
2000–2012
Year Public debt Annual change % annual Public % annual

change in debt per change in
GDP person public
debt per
person
2000 139,689,071,038 10,087,641,291 100 12,840.70 100

2001 149,776,712,329 28,884,931,507 107.2 13,701.68 106.7
2002 178,661,643,836 47,538,356,164 119.3 16,293.75 118.9
2003 226,200,000,000 47,538,356,164 126.6 20,602.64 126.4
2004 272,540,983,607 46,340,983,607 120.5 24,820.27 120.5
2005 271,193,150,685 −1,347,832,922 99.5 24,701.92 99.5
2006 287,170,808,219 15,977,657,534 105.9 26,211.64 106.1
2007 329,765,753,425 42,594,945,206 114.8 30,014.36 114.5
2008 346,575,409,836 16,809,656,411 105.1 31,555.10 105.1
2009 385,542,465,753 38,967,055,917 111.2 35,082.30 111.2
2010 378,241,095,890 −7,301,369,863 98.1 34,419.71 98.1
2011 375,772,602,740 −2,468,493,150 99.3 34,172.04 99.3
2012 393,420,821,918 17,648,219,178 104.7 35,741.33 103.8
Source: www.economist.com/content/global_debt_clock.
And Hellenic Statistical Agency (ELSTAT), 2011.
Table 6.11 Annual loans of the Greek State, state receipts, receipts from EC/EU and expenditures, 1998–2008
Year Domestic Foreign Receipts Receipts Expenditures Receipts –

loans loans from EC/EU expenditures
1998 (million drachmas) 9,609,693 1,344,888 98,202 9,521,604 21,378,017 −11,856,413

2001 (thousand euros) 14,990,301 1,773,632 2,658,226 41,021,321 60,443,281 −19,421,960
2002 (thousand euros) 29,956,909 379,321 1,371,316 37,437,431 69,144,977 −31,707,546
2003 (thousand euros) 35,934,079 2,034,098 1,052,393 37,866,221 76,952,341 −39,086,120
2004 (thousand euros) 40,165,350 9,882,539 2,810,607 39,859,803 92,781,544 −52,921,741
2005 (thousand euros) 39,416,790 5,379,852 2,623,819 42,969,056 90,437,198 −47,468,142
2006 (thousand euros) 27,439,833 9,715,000 3,563,523 47,363,182 88,122,280 −40,759,098
2007 (thousand euros) 35,822,354 25,544,219 4,810,946 49,962,035 116,178,904 −66,226,868
2008 (thousand euros) 34,906,408 34,754,244 4,668,300 52,530,042 126,912,696 −74,382,654
Source: Calculations based on data from the Concise Statistical Yearbooks of ELSTAT for the respective years. Hellenic Statistical Agency (ELSTAT).
163
funds whose volume was not sufficient (Table 6.11, column 4). It is clear
to us that from 2007 onwards the Greek debt has been split between
national and international/European agencies and structures. Thus, the
‘haircut’ agreed at the end of October 2011 and effected in the second
Memorandum of February–March 2012, applied to the Greek banking
sector, which found it impossible to survive without substantial recapi-
talization from European Financial Stability Facility (EFSF) funds. Greek
Cypriot banks operating in Greece were also affected by the ‘haircut’,
adding on to the malaise of Cyprus’s financial sector. Time and again,
this recapitalization was being carried out at the expense of the taxpayer,
leading mathematically to a creditor-led default, as initially pushed for
by Germany and as the third round of austerity in Fall 2012 showed,
followed by another bailout (see Timeline at front of book). Greece
is unable to service its debt or ever pay back some of the principal
as the actual and projected rate of growth from 2010 to 2013 ranged
between –2.5 per cent and –7.5 per cent, whereas the interest rate for
Table 6.12 Annual change of exports over imports, the share prices
in Athens stock exchange and GDP in market prices, 1994–2010
Year % exports Share Price Annual change of Gross

over imports Indices Domestic Product in
market prices
1994 43.9 110.9

1995 43 914.15 110.9
1996 41.4 933.8 107.4
1997 41 1479.63 106.8
1998 35.9 2737.6 105.2
1999 36.3 5535.1 103
2000 35.1 3388.9 103.4
2001 36.8 1748.4 104.2
2002 31.5 2263.6 103.4
2003 29.8 2263.2 105.9
2004 29.1 2786.2 104.4
2005 32 3663.9 102.3
2006 32.4 4394.13 105.2
2007 30.9 5178.83 104.3
2008 28.6 1786.51 101
2009 36.3 2196.16 98
2010 28.7 1413.94 95.5
Source: Data compiled from the Concise Statistical Yearbooks of ELSTAT and the
National Accounts of Greece for the respective years. Hellenic Statistical Agency
(ELSTAT).
borrowing has always been above 3 per cent. Moreover, the European
banking system, too, seems to be unable to cope with the stress on its
peripheral banks and pension funds inasmuch as the degree of leverag-
ing takes on enormous proportions. Greek banks alone, for example, are
dependent on ECB credit lines that amount to over 100 billion euros.50
The new ruling classes of Greece, together with their Western masters,
have failed spectacularly to deliver growth and sustainable develop-
ment to the Greek population. What they deliver, though, is a peculiar
form of ‘creative destruction’, whereby the mechanism of national and
international debt generates forms of primitive accumulation, that is,
social destruction and pauperization, as Marx foresaw more than 150
years ago.
There is no doubt, therefore, that whereas the trade deficit and var-
ious forms of external borrowing especially during the period of low
interest rates are substantial sources of the overall Greek debt, numer-
ous other factors, mainly of domestic origin, have to be factored into
every calculation. Trade deficits are articulated in the current account,
and especially in the structure of the unequal/un-equivalent trade inter-
action between Greece and the European core, particularly Germany,
Italy, France and the Netherlands. Approximately 70 per cent of Greek
imports come from Europe, whereas about 55 per cent come from EU
member states. Germany’s share of total imports is 12 per cent, Italy’s
11 per cent and France’s 6 per cent. Of the total of Greek exports,
some 64 per cent goes to EU member states (11.5 per cent to Germany,
11 per cent to Italy, 4.2 per cent to France). On the surface, it appears
that the import/export relation is in equilibrium, but this is not the case.
In terms of absolute value, Greek exports to Germany are in the region
of 1.9 billion euros, whereas the value of German exports to Greece are
in the region of 7.2 billion euros.51 But there is also the dimension of
financial account. This can take various forms: Foreign Direct Invest-
ment, portfolio flows and other flows driven by the banking sector of
the core. Recycling of German surpluses becomes clear from the over-
all composition of German exports over imports, thus accelerating the
pace of concentration of the overall debt. In this context, the analyses
by Lapavitsas et al., are meaningful:
[I]nternational transactions of eurozone countries have been driven

by the requirements and implications of monetary union. Periph-
eral countries have lost their competitiveness relative to Germany
because of initially high exchange rates as well as because of the
ability of German employers to squeeze workers harder. The result
has been a structural current account surplus for Germany, mirrored

by structural account deficits for peripheral countries. Consequently,
German FDI and bank lending to the eurozone have increased signif-
icantly. ‘Other’ flows to peripheral countries rose rapidly in 2007–08
as the crisis unfolded, but then declined equally rapidly. That was the
time when peripheral states were forced to appear in credit markets
seeking funds.52
Thus, the overall Greek debt today after the ‘haircut’ of February–March
2012 – about 281 billion euros outstanding, down from 350 billion
euros – stems both from domestic (private and public) and external
(international and European) sources. It is the articulation and interac-
tion of those two sources that should be considered carefully, and which
should account for any meaningful auditing effort leading to debt can-
celation. Companies and business ‘territorialized’ in the peripheral state
cannot compete, let alone out-compete, the companies and business
capacity and dynamism of the core. But what can happen, and did, espe-
cially in the case of Greece, is that companies, financial or otherwise, of
the core use local comprador agents to penetrate regional markets. The
context, at all times, remains geo-political and security always matters
(the Macedonian issue, the case with Russian S-300 missiles, the Aegean
issue with its most recent highlight about the Exclusive Economic Zones
[EEZ]53 , etc.). Even during the current crisis, geo-politics held some pride
of place.54
6.2.5 Some concluding points

Our main findings in this section are as follows:
(a) The high growth rates of the post-1995 period in Greece are not
a result of the improvement of the real economy (productivity,
technological innovation, output and valorization), but due to the
speculative and consumerist activities of middle-to-upper middle
classes and the comprador together with financial elements that
have dominated the Greek social formation since then. Thus, a
pronounced fault-line was being created between the real com-
modity values circulated in the Greek market, on the one hand,
and the large amount of bad money, or debt, collateralized by
pieces of paper (fictitious values). The Athens Stock Exchange and
off-shore business interests escaping taxation, coupled with aggres-
sive penetration of the Greek banking sector in the Balkans/Near
East/North Africa – which was basically used as a conduit of German
and French financialization plans for the region – constituted the
form that ‘asset price Keynesianism’ (Robert Brenner) assumed in

Greece. Alongside this picture one can draw the profile of the new
comprador bourgeoisie, the main agent of dependency for the coun-
try. The main difference with the comprador element of the past
is that this time around the commodity traded is primarily, but
not exclusively, fictitious rather than real. Financialization and neo-
liberalism have shattered the country’s already weak productive-
material base, including its small commodity base of production.
(b) The entry of the country into the eurozone has accelerated the
proliferation of the country’s debt via the mechanism of uneven/
un-equivalent development but, as such, it did not cause it. Our
historical investigation indicates that a Greek bankruptcy would
have happened anyway, as it happened in the past and when the
country was not participating in any currency union – having its
currency pegged to an imperial currency was enough to cause havoc.
Greece has never really been solvent. Bankruptcy was bound to
happen much earlier had it not been for the geo-political and secu-
rity circumstances of the end of the Cold War and the need for
the Euro-Atlantic powers – especially the US – to have (and use)
Greece and Turkey as anchors of stability in the Balkans and the
Near/Middle East.
(c) The sources of the Greek debt crisis are both internal and external
and, in general, pertain to the historical fault-lines of the coun-
try: a weak capitalist economic structure relative to the advanced
core; and a relatively important geo-political/regional position rel-
ative to its real economic assets and industrial/technological base.
The management of those fault-lines by the coalition of PASOK-ND
in the post-1974 period – the fourth Greek kampfplatz – proved, as in
the past, to be subordinate to the class and security interests of the
core, unable to articulate independent national/class claims against
it. The kampfplatz of the fourth period remained a wholly depen-
dent spoke of the Euro-Atlantic hub and a corrupt administrator in
managing the relation of representation between itself and civil soci-
ety. Myriad of financial, geo-political and class interests, hemmed
in by corrupt deals, cut across the vertical articulation of corpo-
ratist interests between PASOK-ND and civil society, on the one
hand, but also the horizontal articulation between PASOK-ND and
the Euro-Atlantic core, on the other. From this perspective, as we have
argued elsewhere, this Greek tragedy is the making of the Greek and Euro-
Atlantic ruling classes.55 Thus, the sinking of Greece in a mountain
of debt is not bringing down only the post-1974 ruling coalition
of PASOK-ND, but it is also likely to drag down with it the entire
Euro-Atlantic architecture built alongside the Achesonian principles

of hub-and-spoke US neo-imperialism. And because the stakes are
very high, our speculative point is that the Obama administration
has instructed privately Germany to keep Greece in the euro-fold at
all costs, as it has done with the British premier, David Cameron,
publicly in January 2013, when Cameron contemplated having a
referendum over Britain’s EU membership. But if this is the case with
the horizontal articulation of class and security interests, what about
the vertical one, that is the nexus between the Greek state/political
system, on the one hand, and civil society, on the other?
To answer this question we need to consider changes in the structure

of the middle and lower-middle classes, which constitute – or used
to – the main electoral base of the two ruling parties – classes that
Marx, in his analysis of Bonapartism in the 18th Brumaire (1852), called
‘classes-pillars of the regime’. We will argue that the current crisis has
eroded key electoral constituencies of those parties, as delivery of clien-
telistic/corporatist strategic undertakings of regime reproduction are no
longer possible. Neither PASOK nor ND can manage the crisis, let alone
provide a progressive exit from it.
6.3 The disintegration of the middle classes
First, we will present some empirical data on the occupational structures

of Ireland, Portugal, Greece, Italy and Spain from 1999 to 2010 in order
to decipher possible changes in the class stratification of the European
periphery following their entry in the eurozone. Second, we will provide
an interpretation of those data, also by way of bringing up some more
evidence concerning changes in the annual expenses of the Greek state,
so as to show the extent to which social income reduction is related
to state expenditure before and during the crisis. We will then consider
the impact of three austerity rounds upon Greek society, the weakest of
all periphery social formations and the one that has suffered most from
the policies imposed by the troika and their local agents. We do not wish
here to enter into a theoretical discussion about the definition of class.56
We can read here a very interesting set of data. In Figure 6.1 we can
see that occupation in the primary economic sector is relatively high
in all periphery states, but after their entry into the eurozone the trend
is downwards. Interestingly, the crisis seems to have stabilized employ-
ment in the Greek primary sector, whereas in all other countries the
trend continues to be downwards also during the crisis. Figure 6.2 shows
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1991 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 2009 2010
Ireland Greece Spain

Italy Portugal
Figure 6.1 Percentage of employment in agriculture, hunting and forestry.

Ireland, Greece, Spain, Italy and Portugal, 1999–2010
Source: Calculations based on data from Eurostat.
that wage labourers increased across the periphery after their entry into
the eurozone, even in Greece, a country with high numbers of self-
employed people. Figure 6.3 shows that the number of self-employed
people in the periphery, although shrinking, is rather high. The excep-
tion here is Italy where the numbers of the self-employed increased
after 2003. In Ireland, Portugal and Spain, self-employed occupational
structures follow a downward spiral. Figure 6.4 confirms that we are wit-
nessing the same trend towards an increase in the numbers of waged
labour and this, especially in Greece and Italy, takes place at the expense
of small family businesses. From Figures 6.5, 6.6, 6.7, 6.8 and 6.9 we
can infer that EMU entry boosted the position of middle classes in
Greece, as opposed to Spain and Ireland, whereas in all other countries
except Italy the number of middle classes remains stable. In Portugal
(Figure 6.10), the weight of family-based business shrank at the expense
of waged labour. What is the primary sociological inference that can be
made? In all periphery countries the EMU contributed to an expansion
of waged labour, primarily at the expense of family business, the sole
exception being Italy. This means that neo-liberal financialization under
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 2009 2010

Italy Portugal
Figure 6.2 Percentage of employees in total employment. Ireland, Greece, Spain,

Italy and Portugal, 1999–2010
the EMU regime contributed significantly to sapping social solidarity

that is represented, especially in the periphery, by the family unit as a
business unit. However, as we shall see, a number of other factors – cul-
ture, inheritance – have somewhat counter-balanced extreme forms of
social poverty and pauperization. The high levels of unemployment and
a number of other consequences that appeared as a result of the harsh
packages of austerity, especially in Greece, become nevertheless diffi-
cult to be handled by social agencies (families, local communities, small
professional associations, etc.) and barter has appeared in big cities and
among the poor. The state cannot really offer any help because it is com-
mitted to the programme of the troika, that is, paying back the debt by
squeezing out the taxpayer and selling off the public assets of the coun-
try. At the same time, it undermines its own fundamental function as an
employer of last resort and as a provider of basic needs: medicine, pen-
sions, salaries, education; and we refer only to those, because the Greek
‘welfare’ state never really provided significant housing and unemploy-
ment benefits to those really in need. The following evidence is very
suggestive (Table 6.13):
25.0
20.0
15.0
10.0
5.0
0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 2009 2010

Italy Portugal
Figure 6.3 Percentage of self-employed persons without employees (own-

account workers). Ireland, Greece, Spain, Italy and Portugal, 1999–2010
We can see that before and after the entry of the country into the
eurozone the largest expense of the state was the servicing of debt (inter-
est payments and amortizations). Moreover, servicing the debt was by
far the largest expenditure rather than, for example, payment for salaries
and pensions. This means that even if the current Greek government
stops completely payment of salaries and pensions, even in this extreme
case, the money that will be saved will not be enough to service the debt.
It is clear that the dependence of Greece on its lenders deteriorated after
the entry into the eurozone. As we noted earlier, the strategy of the
lenders is to transfer the debt from the private to the public sector, onto
the shoulders of the taxpayer. The narrative as told by the Governor of
the Bank of Greece, George Provopoulos, is as follows.57
In 2005, Greece’s external debt was 114.4 per cent of GDP, of which
145,230 million euros was the debt of the general government, 7217
million euros the debt of the Bank of Greece and 52,499 million
euros the debt of other credit institutions of the country. But in 2011,
when the country’s debt soared to over 160 per cent of GDP, the debt
of the general government was 156,995 million euros, the debt of the
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 2009 2010
Ireland Greece Portugal

Spain Italy
Figure 6.4 Percentage of contributing family workers in total employment.

Bank of Greece 104,750 million euros and the debt of other banks
and credit institutions 91,191 million euros. With the restructuring of
the Greek debt and the ‘haircut’ which was inherent in the strategic
intent of the Memoranda, the debt was indeed transferred onto the
public sector, with the recapitalization of banks becoming the main
concern of the troika all the while leaving the ownership status of the
banks untouched. The debt has been socialized/nationalized but not the
banks. This has had some unbearable consequences for the post-1974
PASOK-ND regime.
Throughout the post-1995 period of neo-liberal pandemonium in
Greece, and despite the high rates of growth – which, as we have seen,
were debt-driven – the Greek economy failed to create employment
(Table 6.14). The economically active part of the population amounts
to less than 60 per cent of the total population, whereas unemployment
remains high. For instance, the entry of migrants, especially Albanians,
into the Greek labour market cannot be measured well, as most of
them are illegal and employed in the informal sector (others, such as
Pakistanis and Bangladeshis or Afghans enter mainly via Turkey). During
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2008 2009 2010

Italy Portugal
Figure 6.5 Percentage of self-employed persons with employees (employers).

the 1990s and 2000s a major trend reversed, accentuating the fault-lines
on which the Greek economy rests: from a migrant-sending country
in the 1950s and 1960s, Greece became a migrant-receiving one, elim-
inating one source of invisible earnings that had a positive effect on
the balance of payments. Instead, large numbers of migrants from the
Balkans, the Middle East and Central Asia poured into Greece after the
collapse of ‘really existing socialism’, only to find themselves in a hos-
tile and rather racist social environment, which was partly due to the
inability of the formal Greek economy to create permanent employ-
ment and equal opportunity – something which is not unique across
the Euro-Atlantic core.58
As we have seen, the structural and historical features of the Greek
economy are shallow: a nonchalant industrial and agricultural sector
that cannot compete with the core, and a large public sector all topped
with the activities of comprador (import–export) and micro-comprador
(small local traders) capital in its fusion with the ruling political
parties of PASOK and ND. But post-1995 developments have moved
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1999 2001 2003 2005 2007 2008 2010
Agriculture, hunting, Employees

forestry
Self-employed without Self-employed with
employees employees
Contributing family workers
Figure 6.6 Occupational structure of Italy, 1999–2010

economic activities away from the ‘real’ economy into the fictional
and parasitic wealth of financialization, transforming the comprador
trader of real commodities into a comprador trader of fictitious com-
modities. Yet this and other transformations did not severely challenge
the class and income structure of Greek society apart from eroding tra-
ditional family business. But how could a society operating alongside
a neo-liberal model and internationalized through financialization and
Europeanization be viable if almost 50 per cent of its population is idle
or unemployed (Table 6.14)? Yet, from the fall of the Colonels to the
eve of the current crisis, the Greeks survived and even thrived negotiat-
ing new social and political contracts with the ruling classes via electoral
cycles. This was feasible for a number of reasons, of which two stand out:
the strong inheritance structure of Greek society, coupled with strong
family ties; and the large number of civil servants.
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1999 2001 2003 2005 2007 2008 2010

forestry
employees employees
Figure 6.7 Occupational structure of Greece, 1999–2010

Roughly speaking, from the late 1970s 2010 the middle and petty
bourgeois class composition of Greek society remained structurally
unaltered. Just as ND’s and PASOK’s policies in the 1970s and 1980s
failed to add an iota in the country’s economic development prospects,
so the new parasitic forms of capital accumulation and the shift
to financialization caused neither widespread proletarianization nor a
reduction of state personnel.
A key sociological feature of Greece, perceptively captured by the work
of Constantine Tsoukalas in the 1980s and 1990s, is the large number
of its civil servants, micro-proprietors renting studio flats to tourists,
petty-merchants, shopkeepers, lawyers, doctors, taxi-drivers, hoteliers,
seasonal professions related to tourism and builders and car engineers
of all sorts. Underground economic activities are also thriving. The size
of the black economic sector has been estimated to be as high as 45–50
per cent of GDP. The two ruling parties provided special regulations
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1999 2001 2003 2005 2007 2008 2010

forestry
employees employees
Figure 6.8 Occupational structure of Spain, 1999–2010

for the expansion and reproduction of those strata, and especially for
chemists/pharmacists, taxi drivers, judges, constructors, public works
builders,59 providers of social services and lawyers. This large middle –
yet diversified – class constituted the key pillar of the two-party rule
alternating in office since 1974 – ND and PASOK. One would expect that
a radical change in the structure of market and production would affect
the class positions of those strata, yet nothing of the sort happened.
As we have seen, neo-liberalism and the peculiar type of financialization
introduced since at least the mid-1990s altered the profile of the Greek
bourgeoisie, yet no substantial change appears in the composition of
middle and lower-middle classes, which form the largest voting bloc of
both ruling parties par excellence.
According to Greek Labour Force Surveys (Table 6.15), the self-
employed with employees (small business) amounted to 262,900 in
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1999 2001 2003 2005 2007 2008 2010

forestry
employees employees
Figure 6.9 Occupational structure of Ireland, 1999–2010

Source: Calculations based on data from Eurostat
1991 and 354,900 in 2010, the petty bourgeoisie (‘own account

workers’) decreased slightly from 1,095,200 in 1991 to 975,300 in 2010,
whereas the high number of unpaid family members remained almost
unchanged. Importantly, salary and wage earners rose from 2,270,900 in
1991 to 2,660,100 in 2010, an increase mainly owing to the rise in the
number of civil servants. In other words, the party-state machinery,
despite all these projects of privatization and restructuring that took
place under Europe’s Stability Pact programme and Simitis’ ‘modern-
ization’, did not stop recruiting state personnel. Thus, no substantial
changes occurred and no proletarianization took place. This is another
way to see how the rates of growth achieved during the post-1995 period
were debt-driven. In fact, the accumulation of capital in Greece during
that period took the form of external and domestic borrowing and spec-
ulation and boom and bust cycles in the Stock Exchange. This is how
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
1999 2001 2003 2005 2007 2008 2010

forestry
employees employees
Figure 6.10 Occupational structure of Portugal, 1999–2010

Source: Calculations based on data from Eurostat
Greece’s new bourgeoisie, in its fusion with the two governing parties of ND
and PASOK, retained its voting bloc and influence inside and outside the par-
liament and reproduced the consensus achieved under the old Papandreou and
Karamanlis in the 1970s and 1980s.
The expansionist reproductive ability, therefore, of middle and lower-
middle classes is remarkable: they adapted to the new economic envi-
ronment by negotiating new clientelistic and corporatist contracts with
the ruling parties. Apart from the state’s traditional role as clientelis-
tic recruiter, the regeneration and financialization of social economy
allowed a high level of consumption via the domestic mechanisms
of consumer debt creation (consumer loans, credit card facility, share-
buying, etc.). Money became cheap, and was recycled through the new
private commercial banks, which wanted to take advantage of and
capitalize on, the consumer’s modest wage or property ownership as
Table 6.13 Annual expenses of the Greek state in million euros, 1995–2011
1995 1997 1999 2001 2003 2005 2007 2009 2011
Civil servants and pensions 7523 10,309 12,070 13,866 16,526 12,399 21,909 25,870 22,990
Interest 9848 9439 9694 9711 9416 9774 9796 12,325 16,348
Amortizations 10,534 9996 12,777 21,615 20,738 23,543 21,135 28,843 8139
Subsidies to soc insurance 235 2656 2745 3429 4387 6168 8744 15,266 15,896
Subsidies to peasants 433 370 284 390 479 637 734 665 666
Subsidies to public firms and utilities 1493 1187 1418 686 211 238 2335 1472 1207
Source: Calculations based on data from the annual reports of the Governor of the Bank of Greece (1995–2011). The figures before 2001 have been
converted according to the official exchange rate of the entry of the drachma into the EMU (1 euro = 340.75 drachmas).
179
180
Table 6.14 Population +15th years and employment in Greece in thousands,1998–2010
Year Population +15th years Labour force % of population Employees Unemployed % of labour force Non-active
1998 8669.10 4512.8 59.1 4023.70 489.20 10.80 4156.30

1999 8754.70 4583.7 59.4 4040.40 543.30 11.90 4171.00
2000 8830.80 4617.2 52.3 4097.90 519.30 11.20 4213.60
2001 8898.50 4581.6 51.5 4103.20 478.4 10.40 4316.90
2002 8957.70 4652.2 51.9 4190.10 462.10 9.90 4305.40
2003 9008.90 4728.40 52.5 4286.60 441.80 9.30 4280.50
2004 9056.90 4823.20 53.3 4330.50 492.70 10.20 4233.70
2005 9102.60 4848.80 53.3 4381.90 466.90 9.60 4253.90
2006 9150.10 4880.20 53.3 4452.10 427.40 8.80 4269.90
2007 9206.70 4917.90 53.4 4519.90 398.00 8.10 4288.80
2008 9230.10 4939.70 53.5 4582.50 357.10 7.20 4290.40
2009 9262.40 4974.50 53.7 4531.90 442.60 8.90 4287.90
2010 9301.50 5021.00 54 4427.00 594.00 11.80 4280.50
Source: Greek Labour Force Surveys, 2nd quarter of each year, Athens 2011.
Table 6.15 Employees according to their occupational status in thousands,

1998–2010
Year Self-employed Own account Salary and Unpaid family

with employees workers wage earners members
1991 262.9 1095.20 2270.90 231.3

1998 292.5 1007.20 2337.40 453.2
1999 305.8 991.6 2370.70 405.6
2000 326.7 998.4 2466.30 394.1
2001 336.3 954.3 2545.30 346.3
2002 315 996.5 2616.00 333.3
2003 310.2 1018.5 2746.20 341.9
2004 346.8 962.5 2784.80 274.9
2005 352.2 967.5 2834.10 277.5
2006 364.6 962.8 2896.40 291.2
2007 369.7 963.4 2974.80 290.4
2008 381.2 957.6 2922.10 268.9
2009 384.9 961.2 2853.90 263.7
2010 354.9 975.3 2660.10 242.9
Source: Labour Force Survey 2nd quarter of each year.
collateral. In this respect, Greek society did not differ from other states of
the Euro-Atlantic core. House mortgages played a role in the boom-bust
cycle of 1995–2010, but not a significant one as in Spain, the UK or the
USA. This is in large part the result of the inheritance structure of Greek
society – the result of reforms effected in the Venizelos era and the insti-
tution of dowry that is still operational, especially in the countryside – as
well as the family culture. Owning at least one house in the countryside
and one in the city, mainly Athens or Salonica, the average petty bour-
geois Greek family would hoard money to buy their children a small
flat in the city, but they would never really encourage them to take out
a mortgage. Athenian and other urban families would rather have their
children live with them until they get married – yet this is something we
find extensively in other societies too, that is, Italy – rather than push-
ing them to become independent and lead their own lives. Taking out
a home mortgage is a rather new, post-1995 phenomenon in Greece.
It, together with a wide range of loans available, began with the ‘new
economy’ and became somewhat popular in the 2000s, but never really
threatened the balance sheets of the banks in case, for example, of a
consumer default as a result of an increase in interest rates. Arguably, as
elsewhere, all these activities, a mix of old and new attitudes in society,
did anything but contribute to the productive output of the country as
a whole.
The above euphoria lasted until the new Papandreou government,

elected in October 2009, announced that statistics regarding debt and
GDP growth had been manipulated. Greece, immediately, became a
hotbed for speculation as its debt was due to mature by 2013–14. In
2009, Greece’s growth crashed, unemployment was rising sharply, the
public debt-to-GDP ratio stood at 127 per cent and the budget deficit
was 15.4 per cent of GDP. Turning to the IMF and the ECB for assistance
spelt disaster. As we know from the Latin American (1980s) and East-
Central European (1990s) experiences, the IMF’s expertise is not how to
help ‘poor nations in need to go back on a path of recovery’, but how
to exploit the debt mechanism to deplete the resources of those states
and repatriate the much needed cash for the Treasuries of the core, espe-
cially the US Treasury.60 The ECB is no better. It does not accept state
bonds, but lends out to commercial banks at 1 per cent interest. These
banks, in turn, multiply the interest rate to lend out to the European
periphery states with debt problems. This is straightforward usury creat-
ing conditions of primitive accumulation, inasmuch as the employees of
financial capital, that is the political personnel of the vassal and beyond,
are forced to implement policies that lead to pauperization. In the case
of Greece, these policies are enshrined in the Memorandum of Understand-
ing (May 2010), the IMF Country Report on Greece (February 2011) and
all the other Memoranda that followed (see Timeline at front of book).
Over time, the austerity measures become all the more unbearable. The
combined policies of the IMF and the ECB are leading the Euro-Atlantic
economies as a whole, not just the periphery, into the abyss. The Cyprus
crisis of March 2013 brings the German-led EU into confrontation
with Russian interests and Near Eastern geo-politics and security issues.
Almost one third of the Cypriot bank deposits to be levied belong to
Russian interests. The geo-political dimension sees Germany raging at
Russia in order to have the Russians excluded from the division of spoils
over the Cypriot gas bonanza discovered within the jurisdiction of the
Republic of Cyprus. Russia has port facilities in Tartus, Syria, but it could
be interested in financing alternative facilities in Cypriot ports owing to
the unstable political situation in Syria. Cyprus, on the other hand, is
already in advanced talks with the US energy company ‘Noble’ over the
construction of a liquid gas terminal (LNG). Before the eruption of the
crisis, it had also granted exploration rights to the French oil company
Total to search blocks 10 and 11 of the Cypriot EEZ. Construction of
the terminal is about to start in 2016 and the terminal, capable of deliv-
ering up to 6 million tonnes of LNG per year, will be fully operational
by 2019. Turkey opposes Russia’s overtures, a stance reinforced by the
parlous state of affairs in the Republic. It claims co-ownership of the gas

reserves via the Turkish Cypriots, while pushing for the abandonment
of the LNG terminal and opting instead for an underwater pipeline con-
necting the gas field with southern Turkey. Germany is pushing for the
pipeline option that connects the field directly with Turkey, but France
and, to a certain degree, the USA, opposes this. Greece’s interest stands
for designating its Exclusive Economic Zone (EEZ) together with Cyprus,
thus extending its sovereign rights around the Cypriot continental shelf
and acquiring a stake in Cypriot gas, but Greece’s ruling elites at the
time of writing – a coalition of PASOK, ND and DIMAR – are too sub-
servient to the troika to even contemplate such a move that would anger
Turkey. If anything, the Cyprus crisis shows that geo-political competi-
tion accentuates the crisis of the EU, driving its member-states further
apart, splitting effectively the North from the Mediterranean South.
Middle and lower-middle classes, especially the self-employed, are
now faced with extraordinary policy measures. Reduction in social
spending (health care, pensions, education) has already had a very dam-
aging effect, and the Value Added Tax (VAT) for bars and restaurants
has increased from 13 per cent to 23 per cent, threatening one of the
mainstays of the Greek way of life. Some 150,000 jobs are to be cut in
the public sector. Emergency taxation and extra property taxation, the
latter inserted into the individual’s electricity bill, have already been
enforced. Cuts in pensions and salaries have been as high as 40–50
per cent. Unemployment currently stands at 1.0 million and is pro-
jected to exceed 1.3 million, out of a total population of 11 million.
In February 2013, Greece’s unemployment reached 26.8 per cent, the
highest in Europe, whereas youth unemployment soared to 57.6 per
cent. From 2010 to early 2013 more than 3500 people committed sui-
cide for reasons related to the economic crisis. Because of the banking
crisis and loss of confidence, by June 2012, Greek banks have seen
deposits drop by 87 billion euros.61 Greeks have begun emigrating
abroad and Albanians started going back to Albania. Barter agreements
have appeared in working-class and peasant communities in urban cen-
tres and the countryside, and racism and xenophobia are on the rise.
The neo-Nazi Golden Dawn party is also on the rise. Hospitals can-
not cope with emergencies, soup kitchens have appeared in all major
cities and the university system is on the brink of collapse. For more
than four years (2008–12), all major Greek cities, especially Athens,
have been war zones: no ordinary rule of ‘rallies’ or ‘marches’ applied
and the country, being under the constant threat of the ‘troika’ not
to release the next ‘tranche’ of money, had been entirely paralysed.
Thus, as purchasing power was constantly on the wane, the GDP fell
by a further 7.4 per cent in the second quarter of 2011 and remains
at the same level during the second quarter of 2012. This reverses all
the gains made by Greek labour and the progressive socialist movement
since 1974. The conditions of primitive accumulation that are being
created, have also demolished the very political constituency of the
post-1974 Greek kampfplatz. The policies imposed by the ‘troika’ and
implemented by PASOK and ND undermine their very political exis-
tence. The ‘classes-pillars’ of the regime, as Marx put it, are no longer
providing political and electoral support. PASOK and ND, as party for-
mations, need a major overhaul by their masters if they want to play
some political role in the future of Greek politics. Especially, they need
the support of the EU and German capital. In this context, it should be
noted that the corporatist-clientelistic apparatus of the Greek political
system is undergoing a profound crisis itself. True, the ruling classes of
the post-1974 bipartisan regime are currently trying to hold onto power
and contain their fall by forming ‘emergency governments of national
unity’. But these governments are in fact very close to the definition
of a Bonapartist regime, in which the executive becomes a puppet in
the hands of financial oligarchy manipulated by exogenous class agen-
cies at will. The concept of ‘authoritarian statism’ elaborated by Nicos
Poulantzas in his last theoretical statement, State, Power, Socialism, by
which he meant a shift of power from the legislative to the executive
at the state level, it can now be seen in a much broader and complex
context in which the executives of the European periphery are being
transformed into puppets in the hands of Euro-Atlantic financial capital
in the midst of its agony to survive collapse.
Some of the main conclusions of this chapter have already been pre-
sented above. However, we would like to stress here the following two
themes. First, any understanding of the Greek and European finan-
cial/debt crisis at present, as indeed of the global financial crisis that
lit up in summer 2007, should be examined against the background of a
power-shift to the ‘global East/South’, especially against the background
of a protracted and slow decline of the USA, matched by a concomitant
protracted and slow rise of China and other populous states in global
affairs. To us, this seems to be the real issue dominating international
politics over the last two decades, and not the collapse of the Soviet
Union or the terrorist attacks on the USA on 9/11. As argued, the most
important events since the stagflation of the 1970s have been the tran-
sition of Russia and China to capitalism and not just the collapse of
the Soviet empire. Small states, such as Greece, remain pawns, at times
indispensible ones, in the greater schemes of the global powers.
Second, Greece, as opposed to other peripheral European powers
(e.g., Spain), embraced financialization and neo-liberalism with some
15 years in delay (since mid-1990s). We have argued that this was
partly a result of geo-politics, because Greece (and Cyprus and Turkey)
entered the power calculus of the Euro-Atlantic core as ‘capitalist zones
of peace and stability’, eager to act as conduits of Western financial
interests in the Balkans/Near East. New oil and gas pipeline projects
connecting the Caspian Sea region with the Black Sea, Balkan and
Aegean zones made Greece (Cyprus and Turkey and indeed the entire
Balkan peninsula) indispensible for the Euro-Atlantic core in this new
environment of transition to capitalism and financialization. Thus,
although Greece was on the verge of bankruptcy in the early 1990s,
it was saved by the opportunities opened up for Western finance in
the Balkan and East European markets following the collapse of the
USSR. As Greece embraced financialization and neo-liberalism under
the Socialist cabinets of Simitis, a new comprador class began dominat-
ing Greece’s economic-political scene, while pushing for a rapprochement
with Turkey. The main feature of this class is not the trading of real
commodities (e.g., importing cars from Germany), but the trading of
fictitious commodities (e.g., setting-up AIG insurance subsidiaries in
Greece and the Balkans, or trading CDS and other financial ‘products’
via banks). It is this new comprador element in its fusion with the
political phenomenology of PASOK-ND which, together with the Euro-
Atlantic elites, compose the agencies that are primarily responsible for
the current debt crisis.
7
By Way of a Conclusion: Greece’s
Debt Crisis Today and Some
Normative Reflections
Most accounts on the Greek debt crisis miss three or four, so to speak,
‘big pictures’ or ‘images’, all of which are interlinked. Even when some
of these ‘images’ are apparent in their accounts, they have not been
understood together as a whole.
The theoretical ‘image’. This entails failure of theorizing the crisis
on the basis of a heterodox theory of money and finance. But the-
ory is important because, as we have argued, it is an abstraction that
has the potential to describe and interpret reality better than any
description. The generic understanding of financial crisis that stems
from heterodox political economy is that financial crises are caused,
primarily, by imbalances between the real values/commodities pro-
duced and exchanged in a specific market and the mass of money
and paper (credit/debt) that circulate in the same market. So was the
case with many financial crises in history, and so is the case with the
European debt and banking crises today. This deficiency, coupled with
the notion of the unequal distribution of actual values and the role of
geo-politics/geo-culture, is at the heart of the disintegrative tendencies
within the Euro-Atlantic core. And the question can be posed only in
this way, because if the EU disintegrates, then NATO may do the same.
The ‘image’ of the power-shift to the ‘Global East’. This concerns the fail-
ure of analysts to examine the debt crisis in Greece and the European
periphery in the context of what is happening in the world as a whole.
If the 1900–40 was a period of transition from Europe’s, mainly formal,
imperial system to the USA’s, mainly informal, neo-imperial hub-and-
spoke power arrangements, then the period that ushers in with the
stagflation of the 1970s opens up a long and protracted decline of the
USA, accompanied by a concomitant power-shift to Asia and the ‘global
186
By Way of a Conclusion 187
East/South’. We have tried to show that any comprehensive understand-

ing of the current crisis in the eurozone would be insufficient if the
issue is not placed within this broader and peculiar context of tran-
sition from one hegemonic system to another in a ‘global fault-lines’
context. We have also stressed that this transition is very peculiar. It does
not resemble, for example, the transition from the British to US global
hegemony, and this should be taken into account for any type of policy-
making attempted by the forces of the Left in Europe, especially when
they are in power. To give only one example, whereas British economic
decline affected directly its military decay – for example, by World War
I the USA had already achieved naval parity with Britain in the Atlantic –
in the USA matters are rather the opposite: the USA’s economic decline
occurs almost in inverse ratio to its military capabilities (this should not
be confused with the country’s disastrous wars and, in fact, defeats in
Iraq or Afghanistan). A ‘global fault-lines’ perspective helps us address
this issue.
The ‘image’ of comparative history and comparative empirical analysis.
Gramsci once famously said that ‘to write the history of a political party
is to write the history of that country from a monographic viewpoint’.1
But if a party, in the main, is a concentration of national contradictions
and forces, then a country is a concentration of global contradictions
and forces, of global and regional fault-lines. Thus, the metaphor can be
extended: to write the history of a state is to write world history from
a monographic viewpoint. We have indeed tried to write the history of
Greece, from a globalist point of view and in a comparative perspec-
tive. This, in fact, is the correct method. It goes beyond the nationalist
horizon of professional historians, whose job is usually ideological: it
is to justify and glorify the actions of their ruling classes and pay trib-
ute and allegiance to their kin-states or political party bureaucracies to
accomplish personal ambitions. By viewing Greece from a globalist class
perspective, that is to say, by viewing Greece as a terrain of concentra-
tion of global, regional and domestic contradictions, we have been in a
position to overcome the trap of nationalist and ideological narratives
on the current crisis.2
7.1 Seisachtheia in Greece, Europe and the world
We can list here the following generic propositions/findings concerning

the inter-connection between Greece’s, Europe’s and the world’s crisis
today. These propositions assist us in identifying and making plain our
normative answers.
(a) There is a pronounced power-shift from the Euro-Atlantic core to

Asia that can be quantified/measured by the outsourcing of material
production from the former to the latter, and the flow of surpluses
from Asia/China to the USA/West accompanied by the indebtedness
of the latter. The current phase of financialization/globalization that
appeared after the collapse of Bretton Woods in 1971 is extremely
complicated and connects almost every part of the world. The best
term describing these (and many others) asymmetries and processes
is ‘global fault-lines’, not ‘uneven development’. ‘Global fault-lines’
is behind the disintegrative tendencies of the US-led hub-and- spoke
neo-imperialism. ‘Uneven development’ does create asymmetries,
but these are asymmetries spread from the economic to the polit-
ical and other levels, thus suffering from certain reductionism.
‘Global fault-lines’ is far more holistic and all-inclusive a concept,
taking into account geo-political, ideational and other parameters
as co-constitutive elements of the economic instance, which may
determine in the ‘first’, rather than in the ‘last’, analysis depending
on the contradictions of the historical cycle and conjuncture.
(b) The European project is inherently deficient, for it put the cart
before the horse: it created a common currency/market without a
fiscal union and a federal state corresponding to it. The beneficiary
turned out to be Germany, the power with the strongest industrial
base and export-led capacity in the EU. Germany recycles its sur-
pluses at the expense of the European periphery, augmenting the
debt of the latter especially under EMU conditions.
(c) Greece, historically, rests on some very peculiar fault-lines. The
country, and rightly so, has – since its very foundation as a territo-
rially limited Kingdom in 1830 – been perceived by imperial powers
as geo-strategically and geo-politically important, yet, from an eco-
nomic and political point of view, substantially weak and easy to
be manipulated. Greece has always occupied a dependent/subaltern
position in the international division of labour and a very weak
and technologically backward industrial sector, hence its persistent
balance of payments problem throughout its history.3
(d) Another major fault-line on which the country rests is the anxiety of
its bourgeois elites to ‘catch up’ with the Western core, be it ‘Britain
and France’, or the USA, or the EEC/EU. But the failure of those elites
to achieve that goal since the 19th century has been spectacular.
Thus, Greece always lags behind. Recent examples include: failure
of the Greek state to intervene in aggregate demand management
in the 1950s and 1960s; introduction of a peculiar Keynesianism in
the 1970s and 1980s at a time when such a policy was in retreat
in the West; late adoption of neo-liberal financialization from the
mid-1990s onwards.
(e) A state can go bankrupt regardless of its participation in a monetary
union. In this regard, the EMU did not create the core-periphery
split within the EU, although it certainly aggravated it in absence of
a European federal state with fiscal powers. Therefore, a ‘default and
exit strategy’ alone cannot solve Greece’s problem, not least because,
as we have shown, the sources of the Greek debt crisis as such are
not only external, but also internal and concern the peculiarity of
the nexus between comprador financial interests and the dilapidated
state machine. It should also be taken into account that Greece,
throughout its modern history, has been a bankrupt, rather than
solvent, state.
If the above propositions are essentially correct, what policy should

inform the action of the Greek and European Left? An ancient Athenian,
Solon, did not simply legislate the abrogation of the debt of slaves with
his ‘seisachtheia laws’; he also devalued the currency, the so-called ‘mna’,
in order to facilitate payment of debt from ordinary citizens, and intro-
duced new democratic institutions. We go one step further. We argue for
a policy of international and socialist seisachtheia.
As we have seen, the debt is not only unsustainable in Greece and the
European periphery, but in the world as a whole and especially among
the leading powers of the Euro-Atlantic bloc – Germany being, rela-
tively, the exception. For Greece and the rest of the periphery, this may
(or may not) entail a debtor-led default and exit from the eurozone, but
the immediate task of the labour movement, above all in Greece, should
be the destruction of the institutional and political connection between
the corrupt comprador cum financial capital and the state administra-
tive elites in order to address the domestic sources of debt creation
(in other periphery countries the crisis is not sourced by comprador cap-
ital). Moreover, Greece’s exit alone is not feasible or desirable, if not
accompanied by an international strategy of debt cancellation both by
the Greek and the European Left, as well as the democratic forces within
the USA. This is because of the complicated, inter-penetrative and asym-
metrical nature of today’s financialization. A technical exit alone from
the eurozone will not bring about the desired results, namely boost-
ing the export-led industrial capacity of the country, increasing income
from sources such as tourism, regeneration of the real economy, espe-
cially of agriculture, alternative energy projects, such as solar energy,
etc. Abrogation of debt payment and debtor-led exit would mean noth-
ing if not accompanied by a radical domestic restructuring of the nexus
between real economy and the state under the leadership of produc-
tive social classes, a social agency that, in the main, needs to be created
in Greece, Europe and the West. For this to happen, Greece needs to
be surrounded by markets from which it can borrow, and those mar-
kets would be shut, or they would be very expensive, if a policy of
international seisachtheia is not implemented either beforehand or simul-
taneously. In addition, there is a political problem. If Greece’s exit from
the eurozone is not negotiated and agreed upon by its lenders, who in
the meantime should have committed themselves to a program of inter-
national debt cancellation, then the danger of a dictatorship, whether
left-wing or right-wing, should not be excluded under conditions of
class polarization and disappearance of middle classes. In other words,
a return to the 1930s, as many have already rushed to prophesy, may
come true. From this perspective, the desirable course of action is interna-
tional seisachtheia and return to an environmentally sustainable model of
industrial development and agriculture under the leadership of new Left forces
and, failing this, in conditions of continuous generalized pauperization, a
negotiated exit from the eurozone in coordination with all other periphery
countries, that is Ireland and the other Southern European countries. Noth-
ing else, in our view, can benefit the peoples of Greece, Europe and the
world. Germany’s strategy towards the periphery borders on Bismarkian
lines, which is a ‘hub-and-spoke’ method – as we saw in the first part
of the book. First, it was Greece that was a ‘special case’, with a corrupt
civil service and a parlous state finance that needed to enter a bailout
programme; then it was Portugal, Ireland and Spain and even Italy,
all ‘special cases’ for which different treatments applied. The last such
‘special case’ was Cyprus. Germany pursued different strategies towards
each of the indebted countries in order to isolate them from each other
and deter especially the formation of a South European front against its
interests.
The restoration of Greece’s productive capacity on a new basis may
take time to take root and achieve positive results. A new political
party system is certainly in the making and great care should be taken
by it so as to avoid repeating the mistakes of all previous kampfplatz.
Other periphery countries within the EU are facing similar, although
not identical problems. We believe that neither the EU nor the Euro-
Atlantic core will be the same after the end of this crisis, regardless
of what happens to them and the dollar-euro relation, and whether
or not they subscribe to a seisachtheia perspective. The ECB, as Martin
Wolf argued, has succeeded in removing the tail risk of a eurozone

break-up by gaining German support for a promise to buy sovereign
bonds, but no one knows what would happen if it had to start deliv-
ering on the promise.4 Thus, the key to a successful democracy is the
collective agency and not banking strategies. Only an open, democratic
and progressive mass movement, guided by truly organic intellectuals
recognized by the movement itself, can deliver not just the seisachtheia
agenda described above, but also block the rise of neo-Nazi reactionary
forces in Greece, Europe and beyond.
Notes
Foreword
1. http://www.huffingtonpost.com/jeffrey-rubin/what-will-a-greek-default_b
_1521461.html.
2. Graciela Laura Kaminsky and Pablo Vega-García, ‘Varieties of Sovereign Crises:
Latin America, 1820–1931’ Department of Economics, George Washington
University and NBER, June 2012, www.crei.cat/conferences/ief-workshop/
Vega.pdf.
3. Eurostat’s figures of Richest & Poorest NUTS-2 Regions at GDP PPP 2009. NUTS
stands for Nomenclature of Territorial Units for Statistics.
1 Introduction
1. Lack of a ‘global fault-lines’ perspective in the early 1990s had led one of us
to see the collapse of the Greek political system as imminent, because the
elements factored into the analysis were mainly economic and of domes-
tic political origin, overlooking global security and geo-political implications
brought to bear upon Greece following the end of the Cold War, a fact which
gave a lease of life to Greece’s political system for another 15 years; see,
Vassilis K. Fouskas (1995) Populism and Modernisation: The Exhaustion of the
Third Hellenic Republic, 1974–94 (Athens: Ideokinissi).
2. Ibid., pp. 57 ff. in which an analysis of Leninism as a continuation of Russian
populist tradition towards power is made, followed by Lenin’s social demo-
cratic turn after the Bolsheviks assumed power in 1917 (the ‘tax in kind’,
electrification, etc.). This approach to Leninism, that is, Lenin’s own trans-
formation from a radical semi-populist Marxist to a social democrat has been
conveniently ignored by all ‘Communist’ or ‘Radical’ parties across the world
to date.
3. Norberto Bobbio (1978) Compromesso e alternanza nel sistema politico italiano
(Roma: Mondo Operaio/Edizioni Avanti!) p. 29.
4. This was sensed by Nikos Beloyiannis in a book on the history of Greece’s
foreign borrowing and dependence, which he must have finished in the first
part of the 1940s; see, Nicos Beloyiannis (2010) The Foreign Capital in Greece
(Athens: Agra), especially the section of the book that discusses when ‘a loan is
good and bad’, pp. 325–33. Using a number of mainstream Greek economists
of the inter-war period, such as Xenophon Zolotas, Beloyiannis also observes
how foreign loans increased the tax burden on the Greek citizen.
5. For instance, this is the case with John Mearsheimer (2001) The Tragedy of
Great Power Politics (New York: Norton).
6. Karl Marx (1857–58/1973) Grundrisse (Harmondsworth: Penguin) p. 90.
192
Notes 193
7. A typical example of positivist methodology in the field of International Rela-

tions (IR) is the work by Stephen Van Evera (1997) Guide to Methods for Students
of Political Science (Ithaca: Cornell University Press).
2 The Sinews of Capital and the Disintegrative Logics of

Euro-Atlanticism
1. V.I. Lenin (1917/2008) Imperialism. The Highest Stage of Capitalism (New York:
International Publishers), pp. 96–7. The methodological similarities of
Lenin’s forms of thought with realist IR scholarship are striking. We discuss
these similarities in more detail later.
2. Of paramount importance here is the work by Richard Peet (2007) Unholy
Trinity (London: Zed Books).
3. The paternity of hub-and-spoke (informal) American neo-imperialism, as
opposed to the formal European empires before World War II, can be traced
back to the famous NSC-68 document put together by Paul Nitze’s national
security team in March 1950. For a thorough discussion on how Paul Nitze
and Dean Acheson outflanked George Keenan’s notion of ‘containment’ of
the Soviet threat with the idea of US primacy within the capitalist world based
on hub-and-spoke arrangements, see Vassilis K. Fouskas and Bülent Gökay
(2005) The New American Imperialism; Bush’s War on Terror and Blood for Oil
(Connecticut: Praeger), Chapter 2.
4. Josef Jossef (1997) ‘How America does it’, Foreign Affairs, v. 76, n. 4,
September–October, pp. 16–17, 21.
5. From this perspective, the debate between John Mearsheimer and Zbigniew
Brzezinski reads with interest. See, ‘Clash of the titans’, Foreign Policy, 5 Jan-
uary 2005 www.foreignpolicy.com/articles/2005/01/05/clash_of_the_titans
(accessed on 1 July 2012). Brzezinski takes sides with the historians’ claim ‘we
cannot predict the future’, whereas Mearsheimer takes sides with ‘offensive
realism’s’ typical thesis that war is unavoidable not just when the balance of
power is destroyed (a claim put forth by ‘defensive realists’, such as Kenneth
Waltz), but because great powers want always to maximize their power in
the system – he makes a case about the unavoidable rise of China in global
affairs, a rise that is bound to be translated into military power in the not
too distant future.
6. Nicos Poulantzas (1978), L’Etat, le pouvoir, le socialisme (Paris: PUF), p. 24.
7. Leo Panitch and Sam Gindin (2012), The Making of Global Capitalism: The
Political Economy of American Empire (London: Verso) p. 3.
8. The key text on the fiscal crisis of the state in the 1960s and early 1970s is by
James O’Connor (1973), The Fiscal Crisis of the State (New York: St. Martin’s
Press). O’Connor refers basically to the US state, but its relevance to all other
states of the capitalist core is evident.
9. It is precisely class analysis that is lacking in certain variants of construc-
tivism that discuss the agency/structure binary in IR theory via Anthony
Giddens’ ‘structuration’ theory – see, for instance, Alexander Wendt (1987),
‘The agent-structure problem in international relations theory’, International
Organisation, v. 41, n. 3, pp. 335–70.
194 Notes
10. The term ‘globalization/financialization’ applies, primarily but not exclu-

sively, to the external environment of the state. The term ‘neo-liberalism’
applies, primarily but not exclusively, to the domestic environment of the
state. For further analysis, both historical and theoretical, and definitions see
Vassilis K. Fouskas and Bülent Gökay (2012), The Fall of the US Empire; Global
Fault-lines and the Shifting Imperial Order (London: Pluto Press), Chapters 1–4.
11. Karl Polanyi (1944/2001), The Great Transformation: The Political and Eco-
nomic Origins of our Time (Boston: Beacon press), pp. 145, 147. In the event,
this is Polanyi’s very notion of ‘double movement’. Capitalism, according to
Polanyi, is constituted along two opposing movements: the liberal/free mar-
ket movement and the state-led movement that resists the disembedding
of the economy from politics, religion and social relations. This is, in our
view, erroneous, because the state, whether liberal or Keynesian, is always
embedded in the social/technical division of labour. The state as such does
not possess power to embed or disembed into the economy; it draws power
from the social relations of production and the social/technical division of
labour. Arguably, then, Polanyi does not possess a political theory.
12. David Harvey (2010), The Enigma of Capital and the Crises of Capitalism
(London: Profile Books).
13. The best theoretical discussion on the ‘state of emergency’ comes from
the works of Carl Schmidt and Giorgio Agamben – see, Carl Schmidt
(1922/1985), Political Theology (Cambridge: MIT Press); Giorgio Agamben
(2005), State of Exception (Chicago: The University of Chicago Press).
Agamben discusses perceptively Schmidt’s position that sovereign is the one
who can create a state of emergency, not the one who is said to be so in the
state’s Constitution.
14. Nicholas J. Spykman (1938), ‘Geography and foreign policy II’, The American
Political Science Review, v. xxxii, n. 2, April, p. 236. Spykman’s ‘rimland
theory’, which argued for a control by the United States of Eurasia’s rim-
lands (Western Europe, Middle East and South-East Asia), so that it can
maintain its global mastery given to it naturally by its geography of the
two oceans, had eventually been embraced by key US policy makers and
advisers to US presidents. Spykman’s ‘rimland theory’ can be found in his
classic America’s Strategy in World Politics. The United States and the Balance
of Power, published in 1942 by Harcourt, Brace and Company Inc. On the
issue of appreciation of Spykman’s work by Franklin Delano Roosevelt, see
Neil Smith (2003), American Empire: Roosevelt’s Geographer and the Prelude to
Globalisation (Berkeley: University of California Press).
15. One could argue, for example, that Greece did in fact have a greater geo-
strategic significance during the Cold War, which was lost soon after the end
of it. As we shall see in detail below, this is not the case.
16. Pantelis Pouliopoulos (1934/1980), Democratic or Socialist Revolution in
Greece? (Athens: Protoporiaki Vivliothiki), p. 69. Pouliopoulos was the first
translator of the first volume of Capital. Expelled from the party due to his
Trotskyist beliefs, Pouliopoulos was executed by the Nazis and fascist troops
at Nezero, near Athens, in June 1943.
17. In Capital, Marx defines the relation M-C-M’ as representing a sum of money
used to buy a commodity that is resold to obtain a larger sum of money (M’).
The relation M-M’ means money lent out at interest to obtain more money,
Notes 195
or one currency or financial claim traded for another. The relation C-M-C’
represents a commodity sold for money and buying another, different com-
modity, with an equal or higher value (C’). Commodities are repositories of
value, which are a crystallization of socially necessary labour time. Value is
always social.
18. Karl Marx (1857/1973), Grundrisse (Middlesex: Penguin), p. 852.
19. David Harvey (1982/2006), Limits to Capital (London: Verso), p. 425.
20. Drawing from the work of Joseph Schumpeter, many economists and het-
erodox political economists disagree with this claim. Broadly speaking,
the argument goes as follows. Schumpeter pioneered a theory of eco-
nomic development and value creation through the process of technological
change and innovation. Disequilibrium results from innovation. According
to Schumpeter, innovation means value creation and the notion of ‘creative
destruction’ denotes that, because of technological change and innovation,
certain rents become available to entrepreneurs, which later diminish as
innovations become established practices in economic life. See, for exam-
ple, Raphael Amit and Christoph Zott (2001), ‘Value creation in e-business’,
Strategic Management Journal, v. 22, pp. 493–520.
21. ‘The smaller the portion exchanged for living labour becomes’, Marx says
in the Grundrisse, ‘the smaller becomes the rate of profit. Thus, in the
same proportion as capital takes up a larger place as capital in the pro-
duction process relative to immediate labour, that is, the more the relative
surplus-value grows – the value creating power of capital – the more does
the rate of profit fall’ (emphasis by Marx); Karl Marx (1957/1973), Grundrisse
(Harmondsworth: Penguin), p. 747.
22. Further comments on this by Alex Callinicos (2009), Imperialism and Global
Political Economy (Cambridge: Polity Press), pp. 53 ff. A number of key works
by Marxisants since the 1950s has focused on this aspect of Marxist theory to
explain economic crises. See, especially, Philip Armstrong, Andrew Glyn and
John Harrison (1984), Capitalism since World War II (London: Fontana), Fred
Moseley (1992), The Falling Rate of Profit in the Post-War United States Economy
(New York: St Martin’s Press); Robert Brenner (2006), The Economics of Global
Turbulence (London: Verso); Andrew Kliman (2007), Reclaiming Marx’s Capi-
tal; A Refutation of the Myth of Inconsistency (Lanham, MD: Lexington Books).
We discuss these works in detail in The Fall of the US Empire.
23. Nikolai Bukharin (1915/2003), Imperialism and World Economy (London:
Bookmarks), p. 99. From this purely theoretical perspective, every capital-
ist country is part of an imperial chain and is, potentially, imperialistic. This
is, of course, historically and empirically, inaccurate. The fact that Greece
exports sheep yogurt to the USA does not make her an imperialist country.
Bukharin and Lenin refer to the imperial chain composed of the great pow-
ers of their time and Lenin is especially careful in examining the degree of
dependency of subaltern states upon core capitalist states in both his book
Imperialism, quoted above, and his Notebooks on Imperialism. Yet such theo-
retical formulations can be misconstrued and interpreted as if all capitalist
states are, in reality, the same. See, for instance, the, otherwise significant
work, by John Milios and Dimitris P. Sotiropoulos (2009), Rethinking Imperi-
alism: A Study of Capitalist Rule (New York: Palgrave-MacMillan). See also our
review of this work in Vassilis K. Fouskas (2010) ‘Imperialism – again?’ The
196 Notes
Political Quarterly, v. 81, n. 4, pp. 634 ff (the book is reviewed jointly with
Alex Callinicos’ Imperialism and Global Political Economy).
24. See, Leo Panitch and Martijn Konings (2008), American Empire and the Polit-
ical Economy of Global Finance (New York: Palgrave); Greg Albo, Sam Gindin
and Leo Panitch (2010), In and Out of Crisis (Oakland: PM ress).
25. Rudolf Hilferding (1910/1981), Finance Capital: A Study of the Latest Phase of
Capitalist Development (London: Routledge). Bukharin, far more than Lenin,
adopts entirely Hilferding’s concept to define imperialism as finance cap-
italism; see Nikolai Bukharin (1917/2003), Imperialism and World Economy
(Sydney: Bookmarks publications), esp. p. 144, where he defines imperialism
as ‘the policy of finance capitalism’. Lenin, however, wrongly saw this as
the ‘latest’ stage of capitalist development, pointing out global capitalism’s
irreversible decay.
26. Kautsky’s classic 1914 text can be found in www.marxists.org/archive/
kautsky/1914/09/ultra-imp.htm (accessed: 2 July 2012). Aspects of the
important theoretical work on US imperialism produced in the journal,
Monthly Review, have clear Kautskyan features. After the fall of the Soviet
Union, many Marxists and Marxisants saw a triumph of Kautsky over
Lenin’s and Trotsky’s theory of uneven (and combined) development; see,
for instance, Peter Wollen (1993), ‘Our post-Communism: the legacy of Karl
Kautksi’, New Left Review, p. 202, November–December. Paradoxically, Leo
Panitch’s important work has also the tendency to overestimate the abili-
ties of US capital today to shape developments around the world in ways
that serve the interests of the US imperial state. Panitch tends to under-
play the different forms of neo-imperial strategies and structures that prevail
between the Western core and the global South, as opposed to the arrange-
ments that prevail in core-core relations. This transpires in Panitch’s most
recent co-authored work, The Making of Modern Capitalism and, importantly,
in his conversation with Peter Gowan in a rare gathering at SOAS, University
of London, on 9 July 2001; see Peter Gowan, Leo Panitch and Martin Shaw
(Autumn 2001) ‘The state, globalisation and the new imperialism’, Histori-
cal Materialism, n. 9, www.historicalmaterialism.net (accessed in December
2001).
27. Many writers, such as Lapavitsas, speak of an ‘increased autonomy of the
financial sector’. See, Costas Lapavitsas (2008), Financialised Capitalism: Direct
Exploitation and Periodic Bubbles (London: SOAS University of London),
www.leftlibrary.com/lapavitsas1.pdf and ‘Financialized capitalism: Crisis and
financial expropriation’ (2009), Historical Materialism, v. 17, pp. 114–48.
Lapavitsas’ definition of financialization was challenged by such authors as
Ben Fine and Alex Callinicos; see Ben Fine (2010), ‘Locating financialisation’,
Historical Materialism, v. 18, pp. 97–116 and Alex Callinicos (2010), Bonfire of
Illusions (Cambridge: Polity Press), Chapter 1 and pp. 149–50.
28. ‘Volcker shock’ comes after the name of the Chairman of the US Federal
Bank, Paul Volcker, who is widely credited with beating the stagflation of
the 1970s with an interest rate spike up to 20 per cent (the prime rate rose
by 21.5 per cent in less than two years). Volcker was appointed the Fed’s
Chairman by Carter in August 1979 and re-appointed by Reagan in 1983.
Against the neo-liberal orthodoxy, Panitch and Gindin argue convincingly
that Volcker’s real aim was not inflation, but the labour movement; see Leo
Notes 197
Panitch and Sam Gindin (2005) ‘Finance and the American empire’, Socialist
Register (London: Merlin Press). For a perceptive critical analysis of the entire
‘Volcker period’ by an investigative reporter, see William Greider (1987),
Secrets of the Temple: How the Federal Reserve Runs the Country (New York:
Simon & Schuster).
29. Richard Duncan (2012), ‘A new global depression?’ New Left Review, v. 77,
September–October, pp. 13–14. Duncan then goes on to outline the main
characteristics of ‘creditism’, which are (a) an expanded role for the state;
(b) the centrality of central bank, which creates money and manipulates
its value; (c) a reverse in the way growth happens: under capitalism busi-
ness persons invest, make profit and accumulate, and then all over again.
But, Duncan’s argument goes, under ‘creditism’ the growth dynamic of the
American economy and even of the world economy has for some time now
been driven by ‘credit creation and consumption’. Our point here is not
that these arguments are completely false. Rather, we contend, first, that this
is not the case in a large part of the globe and, second, that this form of
US supremacy is, in the long run, unsustainable.
30. See, Robert Brenner (2003), The Boom and the Bubble: The US in the World
Economy (London: Verso).
31. John M. Keynes (1936/1993), The General Theory of Employment, Interest and
Money (Cambridge: CUP), p. 159. The previous quote is from p. 378.
32. David Harvey (1982/2006), The Limits to Capital (London: Verso), p. 272.
33. Ibid., p. 269.
34. See also, Alex Callinicos (2010), Bonfire of Illusions (Cambridge: Polity Press),
pp. 44 ff., who much appreciates Harvey’s contribution to the debate over
financialization and crises.
35. Joseph Schumpeter (1961), The Theory of Economic Development (New York
and Oxford: OUP), p. 126.
36. One of us has examined the notion of Germany’s ‘variable geometry’ strat-
egy in the 1990s; see, Vassilis K. Fouskas (1997), ‘The Italian Left and
the enlargement of the European Union’, Contemporary Politics, v. 3, n. 2,
pp. 119–37.
37. Martin Wolf, ‘The riddle of German self-interest’, Financial Times, 29 May
2012, p. 11.
38. But even then, Gideon Rachman argued, ‘many were sceptical. One top
EU official scoffed that “France needs Germany to disguise how weak it
is; Germany needs France to disguise how strong it is”,’ Gideon Rachman,
‘Welcome to Berlin, the new capital of Europe’, Financial Times, 23 October
2012, p. 13.
39. V.I. Lenin (1917/2008), Imperialism, op.cit., p. 29.
40. On the definition of imperialism as appropriation of international value,
see the important contribution by Guglielmo Carchedi (2002), ‘Imperial-
ism, dollarisation and the Euro’, in Leo Panitch and Colin Leys (eds) Socialist
Register, pp. 154–73. However, Carchedi fails to explore the complexities of
contemporary imperial structures, which involve not just economics and
politics, but also geo-politics, especially in the orbits of the Euro-Atlantic
area and the greater Middle East after the collapse of the Soviet Union.
41. The concept of uneven (and combined) development was first formulated by
Trotsky and further elaborated by George Novack, Ernest Mandel and Michel
198 Notes
Löwy. The best contemporary exponent of this concept is Justin Rosenberg;

see, for example, his exchange of letters with Alex Callinicos (2008), ‘Uneven
and combined development: the social relational substratum of “the inter-
national”: A exchange of letters’, Cambridge Review of International Affairs, v.
21, n. 1, pp. 77–112, March. We are following here the arguments developed
in Fouskas and Gökay (2012).
42. Preface (2009) to the Spanish translation of The Economics of Global Turbu-
lence, mimeo, p. 2.
43. The Boom and the Bubble, pp. 14–15.
44. Ernst Mandel (1972/1976), Late Capitalism (London: New Left Books), p. 85.
45. See, for example, his rather forgotten essay ‘On the slogan of a United States
of Europe’ (1915) www.marxists.org/archive/lenin/works/1915/aug/23.htm
If one brushes aside some sloganeering expressions, Lenin’s argument makes
perfect sense: ‘Of course, temporary agreements are possible between capital-
ists and between states. In this sense a United States of Europe is possible as
an agreement between the European capitalists [ . . . ] but to what end? Only
for the purpose of jointly suppressing socialism in Europe, of jointly protect-
ing colonial booty against Japan and America, who have been badly done out
of their share by the present partition of colonies, and the increase of whose
might during the last 50 years has been immeasurably more rapid than that
of backward and monarchist Europe, now turning senile. Compared with the
United States of America, Europe as a whole denotes economic stagnation.
On the present economic basis, that is, under capitalism, a United States of
Europe would signify an organisation of reaction to retard America’s more
rapid development. The times when the cause of democracy and socialism
was associated only with Europe alone have gone forever’. This is a signif-
icant statement and parallels can and must be drawn with today’s global
dynamics of a stagnation of the US and European economies and the relative
economic power-shift to the ‘global East’ (China, India, Russia, Brazil, etc.).
46. Imperialism and World Economy, op.cit., p. 145.
47. Classic statements in this field come from Joseph Nye, Robet Keohane,
John Ikenberry and others; see, for instance, Robert Keohane (1984), After
Hegemony: Cooperation and Discord in the World Political Economy (Princeton:
PUP). The bibliography on this subject is vast. On cosmopolitanism and the
‘global democracy’ thesis, see also the more recent collection of texts in
Daniele Archiburgi (ed.) (2011), Global Democracy: Normative and Empirical
Perspectives (Cambridge: CUP).
48. Apart from the classic works by Thucydides, E.H. Carr, Raymond Aron and
Hans Morgenthau, we would distinguish here Kenneth Waltz (1959/2001),
Man, the State and War (New York: Columbia University Press), which pro-
vides the best theorization for the realist school. In the field of IPE, we would
include the work of Robert Gilpin and Stephen Krasner. See, for instance,
Robert Gilpin (1981), War and Change in World Politics (Cambridge: CUP);
Stephen Krasner (1983), International Regimes (Ithaca: Cornell University
Press); for a critique from a Marxisant perspective, see Benno Teschke (2003),
The Myth of 1648: Class, Geo-politics and the Making of Modern International
Relations (London: Verso). The bibliography is immense.
49. This is one of the most perceptive criticisms Peter Gowan advanced against
the ‘offensive realism’ of John Mearsheimer in reviewing his work, The
Notes 199
Tragedy of Great Power Politics, see Peter Gowan (2010), A Calculus of Power
(London: Verso), esp. pp. 111–32.
50. The Limits to Capital, p. 428. Constructivist theorizing has recently used
the notion of ‘crisis displacement strategies’, but without any reference or
acknowledgement to Harvey’s work; see, for instance, Colin Hay (1999) ‘Cri-
sis and the structural transformation of the state: interrogating the process
of change’, British Journal of Politics and International Relations, v. 3, n. 1,
pp. 317–44.
51. The Limits to Capital, ibid.
52. The classic source on Open Door imperialism remains the seminal work by
William Appleman Williams (1959/1972), The Tragedy of American Diplomacy
(New York: Norton).
53. On this issue, see the interesting comments by Christopher Layne (2006),
The Peace of Illusions; American Grand Strategy from 1940 to the Present (Ithaca:
Cornell University Press), Chapters 1–5.
54. Karl Marx, Capital, v. 1, op.cit., p. 748.
55. See, Immanuel Wallerstein (2011) ‘Dynamics of (unresolved) crisis’, in Craig
Calhoun and Georgi Derluguian (eds) Business as Usual: The Roots of the
Global Financial Meltdown (New York and London: Social Research Council
and New York University Press), pp. 69–88.
56. Karl Marx, Capital, v. 1, op.cit., p. 580.
57. Ibid., p. 786. Nikolai Kondratieff, a Russian economist writing in the
1920s, observed certain cyclical regularities in advanced capitalist economies
(USA and UK). He looked at prices over long periods and since the 1790s,
which led him to conclude that the existence of long waves was quite proba-
ble. He saw the capitalist world economy as evolving and self-correcting and,
by implication he denied the notion of an approaching collapse of capital-
ism, which at the time prevailed among Marxist economists. In the 1930s,
Schumpeter endorsed this concept. In the 1970s, in one way or another,
the ‘K-waves’ concept began to be used by ‘world system’ theorists, such
as Immanuel Wallerstein. But one of the most erudite and rather unknown
attempts at theorizing Kondratieff waves through, as he called it, a theory of
conjuncture is the work of the young Soviet economist Pavel Maksakovsky,
The Capitalist Cycle: An Essay on the Marxist Theory of the Cycle, which he
wrote in 1927–28. His premature death in 1928 at the age of 28 prevented
him from seeing his work published by the Communist Academy and the
Institute of Red Professors in 1929. His essay was published in English in
a book-form in 2009 by Haymarket books, and with a very good introduc-
tion by Richard B. Day. Many arguments advanced here can also be found in
Fouskas and Gökay (2012).
58. We are referring to: Giovanni Arrighi (1994/2009), The Long Twentieth Cen-
tury: Money, Power and the Origins of our Times (London: Verso); Giovanni
Arrighi and Beverley Silver (eds.) (1999) Chaos and Governance in the Modern
World System (Minnesota: University of Minnesota Press); Giovanni Arrighi
(2007), Adam Smith in Beijing: Lineages of the 21st Century (London: Verso).
59. See Arrighi’s ‘Postscript to the Second Edition of The Long Twentieth Century’
(March 2009), published by Verso in 2010, and his joint text with Beverly Sil-
ver, ‘The end of the Long Twentieth Century’, in Craig Calhoun and Georgi
Derluguian (eds), Business as Usual, op.cit., pp. 53–68.
200 Notes
60. We do not wish to re-launch here the old, but always relevant, discussion
about the definition of capitalism in history. For the unaware, we would
like to remind you of an old debate between Wallerstein and Frank, on the
one hand, and Ernesto Laclau on the other, which dwells precisely on this
issue – see, Anthony Brewer (1980), Marxist Theories of Imperialism (London:
Routledge) Chapters 8, 9 and 10.
61. Fouskas and Gökay (2012), Further criticism of Arrighi’s work by Benno
Teschke (2003), The Myth of 1648: Class, Geopolitics and the Making of Mod-
ern International Relations (London: Verso). A big question here is the extent
to which the shift of material production to China is accompanied by
Chinese control of the distribution of values, especially in the emerging
economies. It seems to us that this is not the case, as the US still pos-
sesses significant advantages in technology (read also: military technology),
nanotechnology, biotechnology, etc., while at the same time enjoying pri-
macy in the currency markets due to the dollar’s role as world money.
This makes even more urgent the wide recognition of the concept of
‘global fault-lines’, which shows precisely the complexity of transition from
US hegemony to a multi-polar world, centred more and more on China and
India.
62. We contend that ‘global fault-lines’ is not a post-structuralist concept.
We embrace the concept of Hegelian totality but in a structuralist man-
ner in which the instances of that totality are discursively articulated in
time and space with the economic instance being prominent only in the
‘first’ but not in the ‘last’ analysis. Put differently, and in disagreement with
post-structuralist and post-modern theorists, we accept binary oppositions
and argue that structures are not self-sufficient precisely because they are
determined by social struggle.
63. We say ‘partly’ because the price of paper claims over value do not always
reflect the amount initially borrowed, inasmuch as they circulate according
to their own ‘logic’. We are thankful to Joseph Choonara for his comment
on this issue.
64. David Harvey (2003), The New Imperialism (Oxford: OUP), p. 135. It would
be wrong to suggest that Harvey was the first who extrapolated a pattern
of recurrence from Marx’s analyses on primitive accumulation. Marxists and
value theorists, such as Werner Bonefeld and Massimo de Angelis, had drawn
similar inferences well before Harvey; see, for instance, Werner Bonefeld
(1988), ‘Class struggle and the permanence of primitive accumulation’ Com-
mon Sense, 8; Massimo de Angelis (2001), ‘Marx and primitive accumulation;
the continuous character of capital’s enclosures’, The Commoner, 2.
65. Christine Lagarde (25 May 2012), interview with The Guardian www.
guardian.co.uk/world/2012/may/25/payback-time-lagarde-greeks (accessed
on 2 July 2012).
66. This is a point Harvey makes repeatedly in his The Enigma of Capital, op.cit.,
and in his more recent work on Rebel Cities.
67. The best critical appraisal of ‘shock therapy’ and Sachs’ agenda comes from
Peter Gowan (1995), ‘Neo-liberal theory and practice for Eastern Europe’,
New Left Review, p. 213, September–October, pp. 3–60. This work builds on
Gowan’s earlier contributions to problems facing Eastern European societies
that appeared in Labour Focus on Eastern Europe.
Notes 201
68. Capital, v. 1, op.cit., p. 777. We say ‘in theory’, because in reality resources
depletion and the cost of access to natural resources influence the rate of
profit, thus increasing the vulnerability of the capitalist system as a whole.
69. Benno Teschke (2003), The Myth of 1648, op.cit., p. 264.
70. Office of International Security Affairs (1995), United States Strategy for the
Middle East (Washington DC: Department of Defence), May, p. 6.
71. Further discussion on these points in Vassilis K. Fouskas (2003), Zones of
Conflict (London: Pluto press) Chapter 2. See also, The New American Impe-
rialism (2005), Chapter 1, and The Fall of the US Empire (2012), pp. 23 ff.
The second work, in particular, brings into discussion the defence/security
dimension, by way of critically discussing Jonathan Nitzan’s and Shimshon
Bichler’s notion of ‘petro-dollar/weapon dollar coalition’ that can be found
in their The Global Political Economy of Israel.
72. Alec Rasizade (2005), ‘The Great Game of Caspian energy: ambitions and
realities’, Journal of Southern Europe and the Balkans (renamed into Journal of
Balkan and Near Eastern Studies), v. 7, n. 1, pp. 3–4, April.
73. The crisis in Dubai is directly linked to oil and other geo-political factors;
see, for instance, Mina Toksoz (2010), ‘The Gulf Cooperation Council and
the global recession’, Journal of Balkan and Near Eastern Studies, v. 12, n. 2,
June, pp. 195–206, and David Jones (2010) Manpower Challenges in the Middle
East (Singapore: Hewitt) http://www.iesingapore.gov.sg/wps/wcm/connect/
fb7fff00442f7ed78f208f1191531275/iadvisory1oct10_5_v2_Manpower_and_
Recruitment_Challenges_in_the_Middle_East_-_Mr_David_Jones.pdf?MOD=
AJPERES (accessed: 27 July 2012).
74. Gowan (1999), conducts a masterful geo-political and geo-strategic analysis
in his The Global Gamble, Chapter 12, ‘The enlargement of NATO and the
EU’, pp. 292–320.
75. One of the few comprehensive accounts that consider the Greek/Eurozone
crisis within Marx’s own value theory is that by John Tolios (2011), op.cit.
Unfortunately, this extremely useful work is available only in Greek.
76. See, among others, Nicos P. Mouzelis (1986), Politics in the Semi-Periphery:
Early Parliamentarism and Late Industrialisation in the Balkans and Latin
America (London: MacMillan).
77. We are basically referring to Christopher Chase-Dunn (1998), Global For-
mation. Structures of the World Economy (Boston and Oxford: Rowman &
Littlefield), Andre Gunder Frank (1998), ReOrient: Global Economy in the Asian
Age (Berkeley: University of California Press).
78. Nicos Poulantzas, Classes in Contemporary Capitalism, London 1975, p. 71.
79. Capital, v. 1, op.cit., p. 261.
80. Cf., Gavin Kitching (1989), Development and Underdevelopment in Historical
Perspective: Populism, Nationalism and Industrialisation (London: Routledge);
Gino Germani (1975), Autoritarismo, fascismo e classi sociali (Bologna: il
Mulino); Vassilis K. Fouskas (1995), Populism and Modernisation, op.cit.
81. We draw here from the superb work by Leonardo Paggi and Massimo
D’Angelillo (1986), I comunisti Italiani e il riformismo (Torino: Einaudi),
pp. 60–70, passim. The Italian case of ‘trasformismo’ the authors argue,
should not be seen as a phenomenon that replaces modernity in Italy, but as
a strategy of the dominant elites to circumvent the rise of the labour move-
ment to power. One of us has examined these issues in the Italian context in
202 Notes
detail; see, Vassilis K. Fouskas (1998), Italy, Europe, the Left: The Transformation
of Italian Communism and the European Imperative (Aldershot: Ashgate).
82. This is, for example, the point of view developed in the, otherwise signifi-
cant, work by Giulio Sapelli (1995), a Professor of political economy at the
University of Milan, Southern Europe since 1945: Tradition and Modernity in
Portugal, Spain, Italy, Greece and Turkey (London: Longman), and our review
of Sapelli’s work in Vassilis K. Fouskas (1996), ‘Review of G. Sapelli Southern
Europe since 1945’, Modern Italy v. 1, n. 2, Autumn.
83. The bibliography on this issue, especially sources from the 1970s and 1980s,
is vast. We confine ourselves here to point to Gramsci’s work itself: Antonio
Gramsci (1996), Selections from Prison Notebooks (London: Lawrence and
Wishart), pp. 257 ff., passim, and also Perry Anderson’s superb (1976),
‘The antinomies of Antonio Gramsci’, New Left Review, p. 100, November–
December.
84. See, Poulantzas (1978), L’Etat, le pouvoir, le socialisme, pp. 225 ff.
85. Ibid., p. 919.
86. Among others: Leo Panitch and Sam Gindin (2012).
3 The Vassal and the Lords

1. Geo-cultural aspects were also present, as Greece was being considered by
Enlightenment philosophers as the ‘cradle of Western civilization’. Witness
the large number of ‘philhellenists’ across Europe and England, with Lord
Byron as a prominent example.
2. Angelos Angelopoulos, Governor of the Bank of Greece (1974–79), claimed
that ‘between 1821–1893, 34 per cent of the proceeds never reached Greece
because they were absorbed by commissions, fees, discounts etc’. Also, some
15–30 per cent of all the foreign bonds were held by expatriate Greeks;
quoted in Andrew F. Freris (1986) The Greek Economy in the 20th Century
(London and Sydney: Croom Helm), p. 28.
3. ‘The example of Andreas Syngros’, George Dertilis writes, ‘and his society is
very instructive. His profiteering and speculative activities with the bonds
of the 1867 loan were achieved and transacted, according to his words,
‘under the nose of the National Bank of Greece and with its own money’;
George Dertilis (1980) The Question of Banks (1871–73); Economic and Political
Debates in Greece during the 19th Century (Athens: Educational Foundation of
the National Bank of Greece), pp. 61 ff.; Stefanos Tzokas (1998) Development
and Modernisation in Greece during the Last Quarter of the 19th Century (Athens:
Themelio), pp. 53 ff.
4. George Dertilis (1984, no editor) ‘Comparison and relations of the Greek
economy with Western Europe’, in Themes in Modern Greek History (Athens-
Komotini: Sakoulas), p. 291.
5. As we saw earlier, on 3 September 1843 the Bavarian regency, following a
serious budgetary crisis – the country effectively defaulted on its debt obli-
gations for a second time – and growing popular discontent, was forced by
the army to concede a Constitution. Elites embraced nationalism in order
to divert the public’s attention away from the debt crisis and pushed for an
Notes 203
increase in defence spending. During the parliamentary debate discussing

the articles of the new Constitution, pro-French Vlach politician, Ioannis
Kolettis, integrated officially the irredentist notion of the ‘Great Idea’ into
the nationalist political project of the new state. In a speech that, in some
of its parts, resembles the geo-political discourse that was to be exhibited
by Communist party leader, Pantelis Pouliopoulos, nearly a century later,
Kolettis said: ‘As it stands geographically, Greece has the West on its left
and the East on its right. Its fall is destined to enlighten the West, while
its regeneration is destined to enlighten the East. The first has happened in
the past and was carried out by our ancestors. The second is a requirement
assigned to us. In the spirit of this oath, in the spirit of this Great Idea,
the representatives of the nation should from now on be convening not in
order to discuss the destiny of the Greek state, but the fate of the Greek
race’; quoted in Constantine Dimaras (1994) Greek Romanticism (Athens:
Ermis) pp. 405–6; also, Paschalis Kitromilides (1996) The Greek Enlighten-
ment (Athens: Educational Foundation of the National Bank of Greece),
pp. 487–88.
6. The pioneering work on this subject is that by Lefteris Papagiannakis (1982)
The Greek Railways, 1882–1910 (Athens: Educational Foundation of the
National Bank of Greece).
7. See, Thanos Veremis (1997) The Military in Greek Politics; From Independence
to Democracy (London: Hurst and Co.) p. 33.
8. Among others, George Dertilis (1980) passim, Spyros Tzokas (1998) pp. 132
ff.; Constantine Tsoukalas (1985) Dependence and Reproduction; The Social Role
of Educational Apparatuses in Greece, 1830–1922 (Athens: Themelio), p. 232.
9. For example, a business society headed by Andreas Syngros and Evangelos
Baltatzis bought the mines at Lavrio and sponsored the railway network
Athens-Lavrio, in view of facilitating their profitable trade transactions.
10. See, Tsoukalas (1985) pp. 91 ff.; Costas Vergopoulos (1975) The Agrarian Ques-
tion in Greece (Athens: Exantas) passim. To this expansion, the annexation of
Thessaly and Ionian islands played a significant role.
11. This is an issue which is directly linked to the so-called question of ‘National
Lands’. A total of over 10,000,000 of land (in square metres) (cultivated,
forestry or barren) possessed by the Ottoman state, Muslim individuals
and charitable institutions, were expropriated without compensation by the
newly founded state. The issue turned out to be of critical significance for the
development of both public finance and land property relations, because at
least until the reforms of Koumoundouros in 1871 – when a first serious
attempt for land distribution was made – the ‘National Lands’ were being
conceded as a warrant for internal and external borrowing by the Greek state.
This had prevented de jure distribution, although de facto violation and cul-
tivation of lands had begun well before 1871. Wealthy diaspora Greeks were
keen on purchasing land but without bothering very much about its produc-
tive use. Moreover, poor peasants cultivating ‘National Lands’ were heavily
and anachronistically taxed. These developments discouraged large farm
production for the market while the amount of the ground-rent finally reach-
ing state hands was minimal. Moreover, dependence on borrowing meant
that the Greek governments could not sell land by auction, something which
204 Notes
would have extended landowning elites with possible export-led capacities

and large-scale agricultural production. In fact, large farming properties were
the exception in the agricultural system of Greece, not the rule. Only after
the annexation of Thessaly did large estate property begin to be of impor-
tance. At any rate, the state appeared to mismanage the resources of the
country’s most productive sector. We draw here heavily from George Dertilis
(ed.) (1988) Banquiers, Usuriers et Paysans: Réseaux de Crédit et Stratégies du
Capital en Grèce, 1780–1930 (Paris: La Découverte); W.W. McGrew (1984)
Land and Revolution in Modern Greece, 1800–1881: The Transition in the Tenure
and Exploitation of Land Reform from Ottoman Rule to Independence (Ohio: Kent
State University).
12. See, George Dertilis (1984) The Greek Economy and Industrial Revolution, 1830–
1922 (Athens: Sakoulas), p. 36.
13. Costas Papathanassopoulos (1984) ‘The Greek merchant shipping: from sail
to steam’, in Dimitris Tsaoussis (ed.), Aspects of the 19th Century Greek Society
(Athens: Estia), pp. 79–106.
14. George Leontaritis (1987) Greek Merchant Shipping (Athens: Mnimon)
pp. 63–4; Papathanassopoulos (1984) pp. 86–90.
15. An objection can be raised as to what contribution leading Greek shipowners
made towards productive investment in Greece. Contrary to the British
example, George Dertilis argues that Greek productive sectors received lit-
tle, if any, support from Greek shipping capital. In this context, we cannot
consider shipping capital as part of the total Greek capital – a thesis put
forth, for example, by John Milios (1988) The Greek Social Formation (Athens:
Exantas), pp. 236–42, 389 ff.; see, Dertilis (1984) pp. 35–6. We cannot go
into this problem in detail, although it is important to note the economic
significance of sailors’ income transferred into Greece. This form of invis-
ible revenue, together with the remittances of emigrants, has constituted
an important source of income for Greece for the greatest part of the 20th
century.
16. Among others, Papagiannakis (1982) pp. 88 ff., 205. Trikoupis also paid
lip service to modernization, when he raised import tariffs to protect the
large landowning elites whose key production was concentrated on wheat.
It proved a total failure. As Andrew Freris noted, ‘instead of encouraging the
expansion of domestic production and reducing imports, the tariffs led to
an increase in the latter. Taking 1885 as the base year for 100, by 1911 the
volume of wheat imports had grown to 176 and that of domestic output to
132’, Freris (1986) p. 22.
17. Angelos Angelopoulos quoted in Freris (1986) p. 27.
18. Tsoukalas (1985) pp. 298–301.
19. Ibid., p. 281.
20. Quoted in John Kordatos (1958) History of Greece, 1900–1922, v.XII (Athens:
Twentieth Century Publishing), p. 527; this statement by Lloyd George and
his full rationale can also be found in Winston Churchill (1929) The World
Crisis: The Aftermath (London: Macmillan), pp. 390–2.
21. Quoted in Ioanna Pepelassi-Minoglou (1988, no editor) ‘Venizelism and
foreign capital’, in Symposium on Eleftherios Venizelos: The Minutes (Athens:
Association for the Study of Greek Literature and Historical Archives, Benaki
Museum), p. 148.
Notes 205
22. It is interesting to note that the King enjoyed not only the electoral support
of the old tzakia elites, but also of the newly born Socialist anti-imperialist
groups, who tended to see a defeat of Venizelos as an anti-imperialist and
anti-liberal victory. Also, for obvious reasons, Muslim and Turkish elements
within the Greek Kingdom were fierce opponents of Venizelos’ politics.
Regional rifts too played a major role in the politics of the Schism: Greeks
residing in the so-called ‘old Greece’ tended to support the King, whereas
those living in the territories liberated during the Balkan wars were over-
whelmingly behind Venizelos. In this context, the remark by Seraphim
Maximos (1899–1962) – a prominent Communist leader and Marxist dur-
ing the inter-war period – that the National Schism was, in the final
instance, a class conflict should be taken seriously, Seraphim Maximos (1975)
Parliamentarism or Dictatorship? (Athens: Stochastis), p. 14, passim.
23. Michael L. Smith (1998) Ionian Vision; Greece in Asia Minor (London: Hurst),
pp. xii–xiv, 35–61. Shortly after Venizelos stepped down as Prime Minis-
ter, and when it became clear that Bulgaria would not be won over by the
allies, Cyprus, on 16 October 1915, was promised to Greece again together
with western Thrace and Dedeagatch (Alexandroupolis). But ‘the Germans
had already offered Cyprus to Greece and so the Greek Royalists, who
believed that the Germans would win the war, declined the British offer’, see,
Joachim G. Joachim (2000) Ioannis Metaxas; the Formative Years 1871–1922
(Mannheim und Mohnesse: Bibliopolis), p. 225.
24. Joachim (2000) pp. 170–72, 178–79, 203–10.
25. For Metaxas’ full rationale, see Alexander A. Pallis (1937) Greece’s Anatolian
Venture – and After (London: Methuen), pp. 20–25.
26. Metaxas’ rigorous analysis came later to coincide with the view of the
Chief of Imperial Staff, Sir Henry Wilson, and many others, including Lord
Curzon and Harold Nicolson, when the Anglo-Greek engagement in Asia
Minor had begun politically (1918–19). By then, however, it was clear
that the Turkish question had been settled only on paper. The allies, with
their armies demobilized and with Britain facing severe domestic difficul-
ties (a contracting empire in economic crisis, the Irish issue), was not in
a position to enforce the partition of Anatolia. In the event, however, the
Entente powers and Bolshevik Russia came progressively not only to aban-
don the partition plan, but also – with the partial exception of Britain – to
support overtly the nationalist movement of Kemal Ataturk, whose diplo-
matic skills and military ability since the Gallipoli campaign were beyond
question.
27. Smith (1998) pp. 279–80. France’s objection apart, the British rationale
was chiefly based on the correct assumption that a Greek occupation of
Constantinople would have strengthened the alliance between Kemal and
Lenin. This can also be seen from the instruction sent to the Greek Royalist
government by Lord Curzon as early as 21 April 1921, which recognized
no rights to the Greek government to intervene either in the Straits or
Constantinople. This was even more of an absurdity, if one takes into
account the fact that Greek warships were in full action in the Black Sea
intercepting sea reinforcement missions sent to Kemal by the Bolsheviks.
28. Churchill, The World Crisis; The Aftermath, op.cit., p. 377.
29. Among others, Freris (1986) p. 64.
206 Notes
30. Freris (1986) p. 39 and Tsoukalas (1985) pp. 263 ff; See also, Spyros Tzokas
(2002) Eleftherios Venizelos and the Experiment of Bourgeois Modernisation
(1928–1932) (Athens: Themelio), pp. 99 ff.
31. Mazower (1991) Greece and the Inter-War Economic Crisis (Oxford: Clarendon
Press), p. 251.
32. Nicos Mouzelis (1986) Politics in the Semi-Periphery. Early Parliamentarism and
Late Industrialization in the Balkans and Latin America (London: Macmillan)
pp. 39 ff., passim.
33. A counter-argument to this has been that big landowning elites used their
power to keep wheat production low in order to keep domestic prices high,
while also concentrating on letting the land out for pasture and grazing
(Freris, 1986, p. 46). But this is besides the point. Precisely for this reason,
the state policy should have been the mechanization of those farms in order
to increase productivity and employment and the placement of farms under
modern forms of management and administration, not the fragmentation
and distribution of the land to jobless peasants. Our thesis basically is that
the chosen policy was politically motivated in order to deter the rise of social-
ist and communist forces. As a result, the entire social economy had also
been irreparably damaged for decades to come.
34. Among others, Mazower (1991) p. 152, Table 6.2.
35. Freris (1986) p. 65.
36. Mazower (1991) pp. 140 ff.
37. Britain returned to gold in 1925. Gold convertibility was essential for the
Europeans to fight inflation. In fact, countries that had experienced hyper-
inflation were the first to adopt gold convertibility, such as Germany (1924),
Austria (1923), Poland (1924) and Hungary (1925).
38. We are relying here heavily on Costas Costis (1986) The Banks and the Crisis,
1929–1932 (Athens: Commercial Bank of Greece).
39. Mazower (1991) p. 146.
40. The ‘troika’ of the time subverting national sovereignty was the League of
Nations Financial Committee (LNFC), the Refugee Settlement Commission
(RSC) and the International Financial Commission (IFC). In his wide-ranging
work on the impact of the Great Depression on Greece, Mazower notes that
Venizelos, unlike Kemal Ataturk, pursued ‘a policy of reconstruction which
involved relying heavily on foreign loans’; Mazower (1991) p. 179.
41. Michael Hudson (2003) Super Imperialism; the Origins and Fundamentals of
US World Domination (London: Pluto Press), p. 2.
42. Ibid., p. 76.
43. Mazower (1991), p. 140.
44. Mazower (1991) Chapter 7 and Costis (1986) provide a detailed examination
of the 1929–33 conjuncture in Greece.
45. See in particular, George V. Leontaritis (1979) The Greek Socialist Movement
during the First World War (Athens: Exantas).
46. Cf., Nicos Mouzelis (1986) passim; Costas Vergopoulos (1978) Nationalism
and Economic Development (Athens: Exantas) pp. 92–3.
47. Beth A. Simmons (1994) Who Adjusts? Domestic Sources of Foreign Eco-
nomic Policy During the Interwar Years (Princeton: Princeton University Press),
pp. 141–42.
Notes 207
4 Passive Revolution and the ‘American Factor’, 1940s–70s

1. This was not captured even by acute observers of the organization of
US hegemony in Europe, such as Nicos Poulantzas. In one of his key
writings on USA-EEC relations, while debating Ernest Mandel’s position
on the decline of American supremacy after the end of Bretton Woods,
Poulantzas argues that the power of US capitalism turns all states into its
relays: ‘The states themselves assume responsibility for the interests of the
dominant imperialist capital in its extended development actually within
the “national” formation.’ That is why Europe, according to Poulantzas,
cannot (or could not at the time) become a real rival to the USA. In order
to compete, Europe must outstrip the power relations and technical orga-
nization of production developed by the dominant US capitals operating
in Europe. By accepting the domination of US capital, Poulantzas argued,
Europe disorganizes its own class and productive structure. Two comments
here are necessary. First, at the time that Poulantzas was writing in France
(early 1970s), US capital was indeed dominant in Western Europe, especially
in France and (West) Germany, something which is not the case today. Sec-
ond, Poulantzas does not consider applying his remarks to the periphery of
Europe and the peculiar form(s) in which the Greek state ‘assumed respon-
sibility for the interests of the US capital’ within Greece. In fact, as we shall
see, US capital and aid agencies organized directly post-war Greek capital-
ism and the Greek state apparatus; see, Nicos Poulantzas (1974/78) Classes in
Contemporary Capitalism (London: New Left Books), pp. 50–67, passim.
2. Among others, Alexis Papachelas (1997) The Rape of the Greek Democracy: The
American Factor, 1947–1967 (Athens: Estia), pp. 121 ff., Makarios Droussiotis
(1996) Junta’s Invasion of Cyprus (Athens: Stachy).
3. The best account in this vein is by Mark Mazower (1993) Inside Hitler’s Greece
(New Haven: Yale University Press).
4. Rouhollah Ramazani (1966) The Northern Tier: Afghanistan, Iran and Turkey
(Princeton: Princeton University Press), pp. 8–10; Howard Jones (1989)
A New Kind of War: America’s Global Strategy and the Truman Doctrine in Greece
(Oxford: OUP), pp. 13 ff., 58 ff.
5. Bruce R. Kuniholm (1980) The Origins of the Cold War in the Near East: Great
Power Conflict and Diplomacy in Iran, Turkey and Greece (Princeton: Princeton
University Press), p. xv. We are drawing here from Fouskas (2003) Zones of
Conflict. US Foreign Policy in the Balkans and the Greater Middle East (London:
Pluto press).
6. Ibid., p. 380.
7. Constantine Tsoukalas (1969) The Greek Tragedy (London: Penguin Press),
p. 100. The partisans were aided by Marshall Tito but the rupture between
Tito and Stalin in June 1948 undermined the collaboration between KKE
and the Yugoslavs. Since June 1948, the KKE became increasingly dependent
on Tito’s representative in Macedonia, Svetozar Vulkmanovic-Tempo, who
never kept secret Yugoslavia’s intention to have access to the Aegean Sea. It is
in this context that Zachariades re-opened the ‘Macedonian question’; see,
Peter J. Stavrakis (1989) Moscow and Greek Communism, 1944–1949 (Ithaca:
Cornell University Press), pp. 128–29, 179 ff., 214. Tito also wanted to annex
208 Notes
Italy’s Friuli-Venezia-Giulia area, creating problems for Palmiro Togliatti’s

Italian Communist Party (PCI). Stalin broke with Tito, not only because of
his commitments to Yalta and elsewhere, or because he did not want to see
Tito expanding his realm, but also because he – quite rightly – never believed
that the USA and Britain would ever relinquish control of Italy and Greece;
the best work on this issue is by Ivo Banac (1988) With Stalin against Tito
(Cornell: Cornell University Press); see also, Jones (1989) pp. 63 ff.
8. There were no ethnological grounds to raise politically such an issue, even
by resorting to extreme ideological forms of ‘proletarian internationalism
and solidarity’. Ever since the settlement of Asia Minor refugees in Greek
Macedonia after 1922 and the various exchanges of population that took
place, the ethnic composition of Greek Macedonia has been overwhelm-
ingly Greek; see, among others, Evangelos Kofos (1964) Nationalism and
Communism in Macedonia (Salonica: Institute for Balkan Studies); Evangelos
Kofos (1991) National Heritage and National Identity in 19th and 20th Century
Macedonia (Athens: ELIAMEP).
9. Cemil Bilsel (1944) ‘International Law and Turkey’, American Journal of
International Law, v. 38, p. 553, quoted in Harry J. Psomiades (1968) The
Eastern Question; the Last Phase – A Study in Greek-Turkish Diplomacy (Salonica:
Institute for Balkan Studies), p. 58.
10. Dean Acheson (1969) Present at the Creation: My Years in the State Department
(New York: W.W. Norton), p. 219.
11. James Chase (1999) Acheson: The Secretary of State that Created the American
World (Cambridge, MA: Harvard University Press), p. 166. All previous
quotations are from the same source.
12. For a detailed analysis of US aid to Greece, see George Stathakis (2004) The
Truman Doctrine and the Marshall Plan: The History of American Aid to Greece
(Athens: Vivliorama).
13. In 1943–44, the ‘Big Three’ (Churchill, Roosevelt, Stalin) were instrumental
in dividing the Balkan states into spheres of influence. Yugoslavia, unlike
Greece (10 per cent pro-Soviet, 90 per cent pro-Western), Romania and
Bulgaria (both: 10 per cent pro-Western, 90 per cent pro-Soviet), were bro-
ken down equally between the West and the East; see, Gavin Scrase (2000)
‘The Balkans and international politics in the 1940s: on the Eden-Gusev
pre-percentages agreement’, Journal of Southern Europe and the Balkans, v. 2,
n. 2, November, pp. 163–76. What an irony of history that the pro-Soviet
KKE’s electoral power hardly went above 10 per cent of the total vote since
it became legal in 1974.
14. Freris (1986) The Greek Economy in the 20th Century (London and Sydney:
Croom Helm), p. 130.
15. Bruce R. Kuniholm (1984) The Near East Connection: Greece and Turkey in
the Reconstruction and Security of Europe, 1946–52 (Massachusetts: Hellenic
College Press), p. 16.
16. Mazower (1991) Greece and the Inter-War Economic Crisis (Oxford: Clarendon
press) p. 202.
17. Ibid., p. 237.
18. Most secondary sources and even some statistics confuse weaves with
textiles. The former is unfinished material for export, the latter is a devel-
oped/finished brand for export. Greece, basically, exported weaves rather
Notes 209
than textiles. Many analysts, even sharp ones, such as Mazower (1991)
or Freris (1986), make that mistake although this does not affect their
inferences, which are almost identical to ours.
19. ECA’s mission was replaced in 1952, the year Greece and Turkey became
officially members of NATO, by the Mutual Security Agency (MSA). Dean
Acheson was directly involved with this.
20. Freris (1986) p. 130.
21. Among others, Paul Ginsborg (1990) A History of Contemporary Italy: Society
and Politics, 1943–88 (London: Penguin Books).
22. The best account here is by Alan S. Milward (1984) The Reconstruction of
Western Europe (London: Routledge), pp. 56 ff. See also, Michael J. Hogan
(1987) The Marshall Plan (Cambridge: CUP) especially Chapter 1 (pp. 26–53).
23. Before the war, tourism was unimportant. After the war, due largely to
improved standard of living in the West and the creation of a robust middle
class, as well as the improvement in air travel, tourism became an important
source of income for Greece and other South European countries.
24. Freris (1986) p. 91. His main opponent in the economic and banking circles
of Greece at the time, Kyriakos Varvaressos, insisted from very early on that
Greece should abandon the gold standard and turn to autarky. In the early
1950s, Zolotas opposed Varvaressos’s plan, which tried to postpone plans for
the country’s industrialization in view of reduced US aid.
25. Stathakis (2004) and especially George Stathakis (1995) ‘US economic poli-
cies in post-Civil War Greece, 1949–53: stabilization and monetary reform’,
The Journal of European Economic History, v. 24, n. 2, Fall, pp. 375–404.
In March 1952 Acheson announced the formation of an inter-departmental
group, the Welldon Group, that was to be sent to Greece and, following
consultation with the Embassy and the Mutual Security Agency (MSA),
the Group would produce policy recommendations that were acceptable to
US policy-makers. Stathakis is right when he argues that US policy in Greece
‘was transformed immediately after the war from Wilsonian to colonial prac-
tices’ – the quote from Stathakis (1990) ‘Approaches to the early post-war
Greek economy: A survey’, Journal of Modern Hellenism, n. 7, p. 178.
26. It should be noted that in 1946 the US government sold to Greek shipowners
100 ‘Liberty’ ships under a scheme backed by loans guaranteed by the
Greek state. All Laws introduced and approved by right-wing Greek govern-
ments from 1950 to 1974 were very favourable to shipping capital. By 1960,
Greek-owned ships were the third largest category in world shipping, with
glamorous families such as Onassis and Niarchos dominating global sea
trade.
27. Anna E. Bredima (1991) ‘The shipping sector’ in Speros Vryonis Jr. (ed.)
Greece on the Road to Democracy: From the Junta to PASOK (New York: Aristide
D. Caratzas), p. 235.
28. See, in particular, Takis Fotopoulos (1985) Dependent Development; the Greek
Case (Athens: Exantas).
29. See especially, Yiannis Theotokas and Tzelina Harlauti (2007) Greek
Shipowners and Shipping Business (Athens: Alexandria), pp. 150 ff.
30. Freris (1986) p. 149. These monies, according to the Statistical Yearbook of
1957 and during the bloody decade of 1946–56 were distributed as follows:
3458.8 million drachmas were given gratis for military assistance, 75 million
210 Notes
drachmas were loans to serve military needs and services, 203.1 million
drachmas were given gratis for welfare purposes, 1966.5 million drachmas
were given gratis for investments and public utilities, 336 million drachmas
were given gratis for earthquake victims and 1300 million drachmas were
given gratis for economic stability purposes.
31. Among others, Michele Salvati (1984) Economia e politica in Italia dal
dopoguerra a oggi (Milano: Grazianti); Augusto Graziani (1972) ‘Introduzione’
in his L’economia italiana, 1945–1970 (Bologna: il Mulino). For further dis-
cussion and comparisons, see Donald Sassoon (1986) Contemporary Italy
(London: Longman) and Vassilis K. Fouskas (1998) Italy, Europe, the Left
(Aldershot: Ashgate).
32. Time and again, this should not be considered a Greek peculiarity. Anti-
Communism reigned supreme in all of Western Europe. Characteristically,
we should be reminded here of (West) Germany’s Berufsverbot, a Law dis-
qualifying radical democrats and Communists from becoming civil servants.
What was peculiar about Greece and other countries in the periphery was
the degree of exclusion as it comes to be incorporated into different institu-
tional socio-political and cultural settings (weak institutions and disobedient
cultural norms in the periphery, robust ones in the core).
33. il Gattopardo is a remarkable Italian novel written by Tomassi in 1956 and
published posthumously in 1958. The most remarkable line in the book is
by Don Fabrizio’s nephew, Tancredi, who tries to convince Don Fabrizio to
abandon his allegiance to the collapsing ‘Kingdom of the two Sicilies’, push-
ing him instead to ally with Garibaldi: ‘Unless we take matters on our hands,
they will foist a Republic on us. If we want things to remain the same, things
will have to change’.
34. ‘Interpellation’ and ‘direct contact of charismatic leadership with the peo-
ple without the mediation of party bureaucratic organisations’ are some of
the key features of what social theorists, such as Ernesto Laclau and Nicos
Mouzelis, have defined as populism. Laclau’s theorization draws from the
work of Louis Althusser, whereas Mouzelis’s own draws from Max Weber.
We do not wish to enter into a discussion with this problematic, which
has already been presented and critiqued in our earlier work; see, Vassilis
K. Fouskas (1995) Populism and Modernisation. The Exhaustion of the Third
Hellenic Republic (Athens: Ideokinisi). However, we would like to point out
that all political agencies, to a certain degree, present populist characteris-
tics, not least because they cannot deliver on their programme once they
assume power. This is not happening because their politicians and leaders
are ‘demagogues’, whether charismatic or not. This is happening because of
the insuperable structural constraints they are facing once in power.
35. Cf., Jean Meynaud (1966) Political Forces in Greece (Athens: Bayron), pp. 123
ff., passim; Christophoros Vernardakis and Yiannis Mavris (1991) Parties and
Social Alliances in Greece before the Dictatorship (Athens: Exantas), pp. 218 ff.
36. Meynaud (1966), pp. 181 ff., passim.
37. Quoted in Stan Draenos (2012) Andreas Papandreou: The Making of a
Greek Democrat and Political Maverick (London: I.B. Tauris), p. 72. Andreas
G. Papandreou expressed clearly his pro-Keynesian views in his (1962)
A Strategy for Greek Economic Development (Athens: Centre for Economic
Research).
Notes 211
38. See, among others, Dimitris Charalambis (1985) The Army and Political Power:
The Structure of Power in post-Civil War Greece (Athens: Exantas).
39. In fact, Article 16 of the Lausanne Treaty of 1923 reads as follows: ‘Turkey
thereby renounces all rights and titles whatsoever over or respecting the ter-
ritories situated outside the frontiers laid down in the present Treaty and
the islands other than those over which her sovereignty is recognised by the
said Treaty, the future of those territories and islands being settled by the par-
ties concerned’. Although this wording seems to be favouring Greece’s point
of view, ‘it left the door open to subsequent debates between Turkey and
Greece concerning which nations could legally be regarded as “parties con-
cerned” with reference to the fate of Cyprus’, see, James A. McHenry (1987)
The Uneasy Partnership on Cyprus, 1919–1939 (New York: Garland Publishing),
pp. 48–9.
40. The best works on this British policy of ‘divide and rule’ are by Robert
Holland (1998) Britain and the Revolt in Cyprus (Oxford: Clarendon), esp.
pp. 64–70, 72–5; William Mallinson (2005) Cyprus: A Modern History
(London: I.B. Tauris); Diana Weston Markides (2001) Cyprus 1957–63: From
Colonial Conflict to Constitutional Crisis: The Key Role of the Municipal Issue
(Minnesota: Minnesota University Press).
41. Any time Makarios made any public reference to enosis in the 1960s and early
1970s, this was in view of appeasing mainland Greek and Cypriot nationalist
elements, who wanted to eliminate him as they perceived him as being a
traitor to the ‘patriotic cause’.
42. On these issues, Vassilis K. Fouskas and Alex O. Tackie (2009) Cyprus: The
Post-Imperial Constitution (London: Pluto), pp. 21 ff.
43. See in particular, Suha Bolukbasi (1993) ‘The Johnson letter revisited’, Middle
Eastern Studies, v. 29, n. 3, July, pp. 505–25.
44. Draenos (2012), p. 102 and Chapter 7.
45. Ibid., p. 140.
46. Le Monde (4 October 1964), quoted in Draenos (2012), p. 104.
47. Ibid., p. 78.
48. See, Andreas G. Papandreou (1972) Paternalistic Capitalism (Minnesota:
University of Minnesota Press).
49. Quoted in Draenos (2012), p. 248.
50. Draenos (2012), pp. 227–8.
51. Ibid., p. 269.
52. This was one of the most famous propaganda slogans of the junta: patris
(fatherland), thriskeia (religion, meaning the Christian orthodox religion),
oikogeneia (family).
53. On this issue, see the pioneering article by Van Coufoudakis (1976–77)
‘US foreign policy and the Cyprus question: an interpretation’, Millennium:
Journal of International Studies, v. 5, n. 3, Winter, pp. 245–68; cf. also, Vassilis
K. Fouskas (2005) ‘Uncomfortable questions: Cyprus, October 1973–August
1974’, Contemporary European History, v. 14, n. 1 and William Mallinson
(2011) Britain and Cyprus (London: I.B. Tauris), esp. Chapters 4 and 5.
54. The continental shelf issue of the East Aegean islands arose in 1973, when
oil was discovered off the island of Thassos in the Northern Aegean.
On 1 November 1973 Turkey announced in its official Government Gazette
licence rights to its oceanographic ships to search for oil in the Aegean
212 Notes
in areas Turkey delimited unilaterally. The ships went indeed out in 1974,
before the fall of the junta and the operations in Cyprus in July. At the
same time, Turkey began challenging the area of responsibility of Athens’s
FIR (Flight Information Region), arguing instead that it should be subject to
Istanbul’s FIR.
55. Andreas G. Papandreou argues exactly the same in his book Democracy at
Gunpoint: The Greek Front, published in 1970 by Andre Deutsch. Contempo-
rary historical research confirms Papandreou’s claims. Apart from Draenos’s
work, see especially the historical account by Papachelas (1997).
56. Draenos (2012), p. 307.
5 Kampfplatz-4 and the ‘European Factor’, 1974–89

1. Further discussion and critical analysis on these points in Fouskas and Gökay
(2012); see also Chapter 2 of this book.
2. See especially, The National Security Archive at www.gwu.edu/∼nsarchiv/NS
AEBB/NSAEBB66/ (accessed on 2 January 2013).
3. Leo Panitch and Sam Gindin (2005) ‘Finance and the American empire’,
Socialist Register (London: Merlin Press), pp. 46–80; also their The Making of
Global Capitalism, op.cit.
4. Louis Althusser (1994) The Future Lasts a Long Time (London: Vintage).
5. On this issue, see Peter Gowan (2000) ‘The Euro-Atlantic origins of NATO’s
attack on Yugoslavia’, in Tariq Ali (ed.) Masters of the Universe? NATO’s Balkan
Crusade (London: Verso), pp. 18–19.
6. ELSTAT (2000), Annual Statistical Yearbooks: Revenue on the Basis of State
Budget by Category of Source, 1959–1999 (Athens: ELSTAT). Our statistics
on Greece’s public finances are based on a compilation of aggregate data
from ELSTAT’s Yearbooks. We also account for changes in methods used in
ELSTAT’s calculations.
7. See, Nicos Poulantzas (1976) ‘The transformation of the state today, the polit-
ical crisis and the crisis of the state’, in Nicos Poulantzas (ed.) The Crisis of
the State (Athens: Papazissis), pp. 11 ff.
8. Careful analysts of European and Greek politics did realize this aspect of
Greece’s post-1974 predicament. For instance, in examining PASOK’s first
austerity programme in 1985–87, Loukas Tsoukalis wrote: ‘The adverse
change in the international economic environment, which started in
1974–84, coincided with the Cyprus crisis and the restoration of parliamen-
tary democracy in Greece. This had a very simple consequence, namely that
political consolidation took precedence over economic adjustment’, Loukas
Tsoukalis (1991) ‘The austerity program: Causes, reactions and prospects’ in
Speros Vryonis, Jr. (ed) Greece on the Road to Democracy: From the Junta to
PASOK (New York: Aristide D. Caratzas), p. 195.
9. The bibliography on this subject is immense; the best representative exam-
ples are: Juan J. Linz and Alfred Stepan (1996) Problems of Democratic
Transition and Consolidation (Baltimore: John Hopkins University Press);
Richard Gunther, P. Nikiforos Diamandouros and Hans-Jürgen Puhle (eds)
The Politics of Democratic Consolidation: Southern Europe in Comparative Per-
spective (Baltimore: John Hopkins University Press); Richard Clogg (ed.)
Notes 213
(1993) Greece, 1981–89: The Populist Decade (New York: St. Martin’s Press).
For attempts at going beyond this discourse, although terms such as ‘clien-
telism’, ‘democratic transition’, ‘consolidation’, etc. still dominate their
field of inquiry, see, Yiannis Voulgaris (2001) Greece after the Junta, 1974–
1990 (Athens: Themelio), as well as Christos Lyrintzis’s work, such as his
(1987) ‘The power of populism: The Greek case’, European Journal of Political
Research, v. 15, n. 6, pp. 667–86.
10. Fouskas (1995) Populism and Modernisation. The Exhaustion of the Third
Hellenic Republic, 1974–1994 (Athens: Ideokinisi).
11. The best analyses on this theme derive – via Michel Foucault – from Nicos
Poulantzas in his last theoretical statement (1978), especially pp. 135 ff.
12. According to Stephan Leibfried (1991) the Greek welfare state is a ‘rudimen-
tary’ one, in his Towards a European Welfare State? (Bremen: University of
Bremen), pp. 23 ff., See also, Gosta Esping-Andersen (1990) The Three Worlds
of Welfare Capitalism (Cambridge: Polity Press).
13. The ‘First Hellenic Republic’ refers to the years of the war of independence in
the 1820s until 1832 when King Otto with his entourage arrived in Greece
from Bavaria; and the Second Hellenic Republic corresponds to the inter-war
years from 1922 to 1936.
14. KKEes (Communist Party of Greece-interior) followed the Italian Communist
Party’s line of Eurocommunism. Although lacking the dogmatic and rigid
character of the pro-Soviet KKE, the KKEes did commit serious political mis-
takes. For instance, it attempted an instrumental application of Berlinguer’s
‘historic compromise’ notion in totally different socio-political and histor-
ical conditions by claiming an alliance with the ND in the 1977 general
election, because, according to the ruling group of the party, the danger for
a fascist coup in Greece was possible (the so-called line of ‘National Anti-
dictatorial Unity’, in Greek EADE). This notion had been utterly defeated
both electorally and politically. It is worth noting that many Greek intel-
lectuals at the time, such as Nicos Poulantzas and Sakis Karagiorgas – the
latter being a major contender for PASOK’s leadership in 1974 – had opposed
EADE’s political line. Santiago Carillo’s PCE in Spain made the same blunder
when it tried to outdo even the socialist Gonzáles in extolling the Moncloa
Pact (institutional negotiations with the UCD Right of Soares) as a formula
for a government of ‘national concentration’, in which ‘the Communists
would work shoulder to shoulder with the UCD’; see Patrick Camiller (1994)
‘Spain: the survival of socialism?’, in Perry Anderson and Patrick Camiller
(eds) Mapping the West European Left (London: Verso), p. 246.
15. See, Paul Dunne, Eftychia Nikolaidou, Dimitrios Vougas (1998) ‘Defence
spending and economic growth: a causal analysis for Greece and Turkey’,
paper presented to the ERC/METU International Conference on Economics,
Ankara, 9–12 September.
16. Svi Yehuda Hershlag (1988) The Contemporary Turkish Economy (Routledge:
London), p. 86.
17. Tassos Giannitsis (1991) ‘Transformation and problems of Greek indus-
try; the experience during the period 1974–85’, in Speros Vryonis, Jr. (ed)
op.cit., p. 216.
18. For a radical explanation on the issue of the collapse of Yugoslavia that fac-
tors in the IMF intervention in the country in the 1970s and 1980s, see
214 Notes
Susan Woodward (1995) The Balkan Tragedy (Washington DC: The Brookings
Institution). Woodward argues that, in the 1970s, Yugoslavia borrowed large
amounts of money from the IMF in order to finance growth and industry
via exports. But the Western economies entered into the long stagflation and
blocked Yugoslav exports. From then on, a vicious cycle of borrowing began
with the IMF asking for fiscal consolidation and discipline, including Con-
stitutional reform and moving away from the quasi co-federal settlement
of 1974. To this imposition – which, it should be said, Slobodan Milosevic
was happy to implement – there had been fierce opposition by the wealth-
iest of the Yugoslav republics, such as Slovenia and Croatia, which would
have carried the fiscal burden of the IMF-imposed neo-liberal reform pack-
age. Nationalism, Woodward argues, became a political force when leaders in
the republics sought popular support as bargaining chips in federal disputes
over constitutional centralization. From this perspective, the disintegration
of the country was not primarily the result of internal ethnic conflict, but
the unintended consequences of the IMF’s intervention.
19. Giannitsis (1991), p. 216.
20. Ibid., p. 224.
21. Poulantzas (1974/1978) p. 57. It should be noted, however, that Poulantzas
saw Germany (and Western Europe as a whole) as a vehicle for the supremacy
of US capitalism in Europe, so the more US capital goes to Germany the
more dominant Germany becomes within Europe – a position with which
we disagree, as it does not take into account the antagonism between US and
European capitals.
22. Quoted in the original research conducted by Aris Kalafatis, Ilias Koliopoulos
and George Maroussis (1990) Redundant Working Population in Lame-Duck
Enterprises (Athens: OAED), p. 11.
23. This is the view, among others, of George Alogoskoufis (2009) Greece after the
Crisis (Athens: Kastaniotis); George Pagoulatos (2003) Greece’s New Political
Economy (London: Palgrave-Macmillan). From 2004 until 2009, Alogoskoufis
served as Minister of Economy and Finance in the cabinet of Constantine
Karamanlis Jr.
24. Giannitsis (1991), pp. 221, 227.
25. For a detailed account see, among others, Stelios Alexandropoulos (1990)
Collective Action and Representation of Interests Before and After 1974, unpub-
lished PhD dissertation, Panteion University, Athens.
26. However, one should not underestimate the legislative work of PASOK espe-
cially during its first term in office, which were long overdue legal reforms
the Greek political system and society badly needed. From this perspective,
the political programme and deeds of PASOK and the ND were two worlds
apart. But dwelling on this subject falls behind the scope of this book.
27. The generosity was especially pronounced for those working in public utili-
ties and the Ministry of National Economy, but not for the average employee
of the public sector, let alone the worker in the private sector, or the majority
of the elderly.
28. OECD Economic Surveys, Greece 1993, Paris 1993, p. 45, passim.
29. Credit for this empirical term, which nevertheless captures successfully the
social milieu of the 1980s and early 1990s, belongs to Constantine Tsoukalas
Notes 215
(1993) ‘Free-riders in the wonderland of Greece’, Greek Review of Political

Science, v. 1, n. 1, January, pp. 39 ff.
30. The austerity programme came as a result of the failure of a ‘five-year
plan’ (1981–85) mainly administered by Economy Minister, Gerassimos
Arsenis. It achieved neither socialism, nor improvement of capitalist malaise
(inflation, unemployment, debt problems, etc.). In 1983, Arsenis, in order
to improve the country’s international competitiveness, also devalued the
drachma by 16 per cent but no meaningful positive outcome had been
accomplished; see Gerassimos Arsenis (1987) Political Testament (Athens:
Odysseus).
31. Andreas Papandreou did not hesitate to sack his then economy minister,
Costas Simitis, when Simitis, backed by the pro-monetarist economic asses-
sor of the Bank of Greece, and later Governor, Nicos Garganas, wanted to
continue to deepen the austerity programme. The programme, of course,
failed not because of Simitis but because of the reasons we explain below.
Papandreou, essentially, used Simitis as a scapegoat.
32. We are drawing here on the excellent long essay by James Petras, Evangelos
Raptis and Sergio Sarafopoulos (1993) ‘Greek socialism: the patrimonial state
revisited’ in James Kurth and James Petras (eds) Mediterranean Paradoxes: The
Politics and Social Structure of Southern Europe (Oxford: Berg), p. 195, passim.
33. Ibid.
34. Among others, Marc Lombard (1995) ‘A re-examination of the reasons
for the failure of Keynesian expansionary policies in France, 1981–1983’,
Cambridge Journal of Economics, v. 19, n. 2, pp. 359–72.
35. See also, European Commission (various years) http://ec.europa.eu/
economy_finance; cf. also, Donald Sassoon (1997, 2nd ed) Contemporary
Italy: Politics, Economy and Society since 1945 (London: Longman).
36. The national accounts published from the statistical services of Greece offer
data about the level of wages the government pays but say nothing about
the number of people receiving salaries/wages, and what sort of wages, from
the state per se.
37. Constantine Tsoukalas (1986) wrote marvellous essays on these issues
that one can find in his State, Society, Labour in Post-War Greece (Athens:
Themelio). Tsoukalas’s contribution is the introduction of the concept
of ‘polyvalence’ in understanding employment structures in Greece.
Polyvalence refers to the unassailable economic activities of all sorts of peo-
ple making income from a number of professions, while at times even being
employed by the state (e.g., a civil servant having ‘rooms to let’ to tourists
on a Greek island).
38. Fouskas (1995) and Fouskas (1997) ‘The Left and the crisis of the Third
Hellenic Republic, 1989–97’ in Donald Sassoon (ed) Looking Left. European
Socialism after the Cold War (London: I.B. Tauris).
39. Virtually, this is the concern of all bourgeoisies in the periphery and even in
the core, although it takes on different forms in the core. From Latin America
and Africa, to the Balkans, Turkey and Eastern Europe, the list is endless. The
best exposition of this argument, as we have cited it in the first part of our
work, can be found in the splendid work by Leonardo Paggi and Massimo D’
Angelillo (1986).
216 Notes
40. Claus Offe (1984) ‘ “Crisis of crisis management”: elements of a political

crisis theory’, in J. Keane (ed.), Contradictions of the Welfare State (London:
MIT Press), pp. 35–65. In this essay, Offe concludes that state regulation has
a self-obstructing character and can provide the conceptual framework for a
political crisis theory going beyond the sphere of production relations. Offe
says: ‘This theory enlarges the field of vision of traditional economic crisis
theories in so far as it no longer traces the origins of crises exclusively to the
dynamics of the sphere of production. Instead, it explains crises with refer-
ence to the inability of the political system to prevent and compensate for
economic crises. This inability results from the self-contradictory imperatives
of state policy: while it must organize the dysfunctional social consequences
of private production, state policy is not supposed to infringe on the pri-
macy of private production. If state policy is not to be adequate, however, it
is forced to rely on means which either violate the dominant capital relation
or undermine the functional requirement – the legitimacy and administra-
tive competence of state regulation itself’, p. 61. The Greek version of the
‘crises of crisis management’ regards the continuing inability of the ruling
coalition of power to reformulate their class interest as a coalition in power,
mediating between political power and international capital via traditional
strategies of political recruitment, such as clientelism and nepotism.
41. Arsenis (1987), pp. 123 ff., passim.
6 Debt and Destruction: The Making of the Greek and

Euro-Atlantic Ruling Classes
1. This news item was on the front page of almost every British newspaper on
10 January 2013.
2. Chinese textiles and stores have also penetrated the Greek market and
Athens has now a small China town. Importantly, since 2008, the Chinese
company Cosco Pacific Ltd. has acquired the exclusive right of use of two
piers in the port of Piraeus.
3. See, China Daily, 9 November 2012, www.chinadaily.com.cn (accessed on
14 January 2013).
4. Cf., Zbigniew Brzezinski (1997) The Grand Chessboard. American Primacy and
its Geo-strategic Imperatives (New York: Basic Books); Fouskas (2003) which
discusses critically Brzezinski’s positions, and especially Chapter 2 (‘The new
geo-politics of oil and gas’) with direct reference to Greece, Balkans and
the Near East/Turkey; Salavrakos Ioannis-Dionysios (1999) The Black Sea Eco-
nomic Cooperation (Athens: Kritiki). Interesting research on the topic of Black
Sea Cooperation was also produced by the Centre for Research and Docu-
mentation in the 1990s, directed by John Dragassakis, a prominent political
economist of the Greek Left of Syriza; see, John Dragassakis (1995) ‘European
integration, trans-Balkan and Black Sea cooperation’, Balkan Review, n. 3,
pp. 11–15. For a full-fledged report produced by the research group under
Dragassakis, see Report on the Black Sea (1995) Kerdos, May (special insert).
5. See Gowan’s last interview in Peter Gowan (2009) ‘The ways of the world’,
New Left Review, n. 59, September–October. Gowan draws from his empirical
Notes 217
work on Europe’s eastward drive and the way in which the so-called ‘tech-
nical assistance programs’, such as Phare and Tacis, had been used; see also
Gowan (1999) Chapter 9.
6. Fouskas and Gökay (2005).
7. Further comments and analysis on these points in Fouskas (2003) Chapter 3,
and Ronald Steel (1998) ‘Instead of NATO’ The New York Review of Books,
15 January. See also Christopher Layne (2006) The Peace of Illusions (Ithaca:
Cornell University Press).
8. To the best of our knowledge, the only work, at least in Greece, that places
the issue in a similar analytical framework – although makes no reference
to ‘global fault-lines’ nor deepens that insight – is that by Nikos Kotzias
(2012) The Politics of Salvation against the Troika (Athens: Livanis) especially
Chapter 2.
9. On the concept of neo-revisionism, see Donald Sassoon (1996). Sassoon
operates within a Bernsteinian framework, which suggests that when cap-
italism changes itself the strategy of socialist parties should also adapt and
change. In this respect, Jospin’s, Blair’s, Occhetto’s and Shroeder’s attempts
to adjust to the new capitalism of financialization and free markets were,
under certain conditions, welcomed as adaptation and survival strategies of
the Left. The strength of this argument lies less in what these neo-revisionist
parties ended up becoming today, and more in the fact that Sassoon sees
socialist party renewal as a conditio sine qua non for the success of socialism.
Socialism is thus a historical and structural project becoming a continuous
historical reminder/threat and shadow of capitalist development per se. This
is an aspect of his work his reviewers worldwide have so far failed to grasp
and analyse.
10. Martin Wolf (2012) ‘Will the Euro-zone survive the crisis?’ Lecture given
at Richmond University, The American International University in London,
3 October [mimeo].
11. Costas Lapavitsas et al. (2011) Breaking Up? A Route Out of the Euro-zone
Crisis (London: SOAS, Research on Money and Finance) pp. 34–5, passim.
Also, Costas Lapavitsas et al. (2010) ‘Euro-zone crisis: beggar thyself and thy
neighbour’, Journal of Balkan and Near Eastern Studies, v. 12, n. 4, December,
pp. 321–73. This approach is dear to Keynesians and Marxisants.
12. George Pagoulatos and Christos Triantopoulos (2009) ‘The return of the
Greek patient: Greece and the 2008 global financial crisis’ South European
Society and Politics v. 14, n. 1, March 2009, pp. 34–5. Similar views by
the Brussels-based think-tank, ‘Bruegel’, see, for instance Zsolt Darvas, Jean
Pisani-Ferry and André Sapir (2011) ‘A comprehensive approach to the euro-
area debt crisis’ Bruegel Policy Brief, Brussels, February. In the main, this
approach is common to neo-liberal economists.
13. Harris Dellas and George S. Tavlas (2012) ‘The road to Ithaca: the gold stan-
dard, the Euro and the origins of the Greek sovereign debt crisis’, Working
Paper 149 (Athens: Bank of Greece), pp. 6–8; George Moschovis and Mateo
Capo Servera (2009) ‘External imbalances of the Greek economy: the role of
fiscal and structural policies’ ECFIN Country Focus, v. 6, n. 6, 10 July, pp. 3–4,
passim.
218 Notes
14. Editorial (2012) ‘Greece on the spot’, Financial Times, 11 February, p. 12.
Being fully aware of this, however, the troika, with the second Memoran-
dum of February–March 2012, imposed on the ruling parties the creation of
an escrow account in which all revenues raised by the state will be deposited
there first in order to serve the debt. Thus, even this hope of a possible
budgetary independence, which was to have been achieved after so many
sacrifices on the part of the people, was lost.
15. See, John Milios and Dimitris P. Sotiropoulos (2010) ‘Crisis of Greece or
crisis of the Euro? A view from the European “periphery” ’, Journal of
Balkan and Near Eastern Studies, v. 12, n. 3, September, p. 232, passim.
For a similar view at that level of discussion, see also Loukas Tsoukalis:
‘There was systemic failure: the surveillance mechanism set up at Maastricht
clearly did not work. The stability and growth pact was inadequate in its
conception and poorly implemented. And when the crisis came, we all
discovered (or were just reminded) that the EU had no mechanism to
deal with it’, Loukas Tsoukalis (2012) The Political Economy of the Crisis:
The End of an Era? Dahrendorf Symposia Series at http://www.dahrendorf-
symposium.eu (accessed on 12 January 2013); in a similar vein also the
papers presented to the conference ‘Lessons from the Euro-zone crisis’, UCL-
University of London, London, 2 June 2011 (speakers included Edmond
Alphandery, Giles Merritt, Yiannos Papandoniou, Wendy Carlin and Sir John
Gieve).
16. On this, Milios is in total accord with Leo Panitch, Sam Gindin and other
scholars, such as Ray Kiely; see Fouskas and Gökay (2012).
17. See, Spyros Lapatsioras, Leonidas Maroudas, Panayotis G. Michaelides, John
Milios and Dimitris P. Sotiropoulos (2009) ‘On the character of the current
economic crisis’, Radical Notes, 10 April http://radicalnotes.com (accessed on
4 November 2012).
18. John Milios and Elias Ioakimoglou (1990) The Internationalisation of Greek
Capitalism and the Balance of Payments (Athens: Exantas).
19. Ibid., p. 172.
20. Ibid., pp. 213–15.
21. Milios and Sotiropoulos (2010), p. 230.
22. Ibid., p. 236.
23. Also, this view refutes as ‘mythical’ that the EMU is exclusively the servant
of the ‘insatiable’ and imperial schemes of Germany as the most competitive
economy within the EU.
24. See especially the article by Michel Husson (2011) ‘A European strategy for
the Left’, International Viewpoint, 28 January, http://internationalviewpoint.
org/spip.php?article1981 (accessed on 5 November 2011); see also the
response by Costas Lapavitsas (2011), ‘A Left strategy for Europe’ International
Viewpoint 13 April, http://internationalviewpoint.org/spip.php?article2091
(accessed on 5 November 2011). Especially important to understand this
point of view is the collective work edited by Elena Papadopoulou and
Gabriel Sakellaridis (2012) The Political Economy of Public Debt and Auster-
ity in the EU (Athens: Nissos), especially the interesting contributions by
John Dragassakis, George Stathakis, Euclid Tsakalotos, John Milios and Yanis
Varoufakis.
Notes 219
25. Savas Robolis (2012) Economic Crisis and the Welfare State (Athens-Salonica:
Epikentro) pp. 186–204; INE-GSEE (2012) Annual Report on the Greek Economy
and Employment (Athens: INE-GSEE).
26. See, Athena Belegri-Roboli, Maria Markaki and Panayiotis Michaelides (2010)
Inter-branch Relations in the Greek Economy (Athens: INE-GSEE).
27. In the end, this is the view that came to dominate Syriza’s leading
group. However, this perspective downplays the role of international/social
and technical division of labour, as well as of geo-politics, as a determining
framework mapping out the possibilities for the country’s sustainable devel-
opment. Moreover, this programme presupposes a total overhaul of political
and social structures of the country, not to mention the broader issue of
social agency and culture, which are issues that this perspective passes over
in silence.
28. See, Yanis Varoufakis (2012) ‘Of debts and fault-lines: Greece and the Euro-
zone crisis in a global context’ http://yanisvaroufakis.eu/2011/02/28/of-
debts-and-faultlines-greece-and-the-euro-crisis-in-a-global-context/ (accessed
on 12 January 2013). Varoufakis’s main argument is that the real cause of the
sovereign debt crisis has been the lack of, what he calls, ‘Surplus Recycling
Mechanism’. But this can exist only in the framework of a sovereign state
and the EU is not a (federal) state. What he says, therefore, is right, but it is
rather common sense.
29. One of the most perceptive analyses of the crisis of the EMU comes from
Phillip Arestis and Malcolm Sawer, which show the deficiencies of the
so-called ‘Stability and Growth Pact’ as ‘not being fit for the purpose’. These
deficiencies are: the independence of the ECB and its inability to produce
fiscal policy, coupled with the absence of mechanisms to resolve patterns
of current account deficits and surpluses. See, Philip Arestis and Malcolm
Sawyer (2010) ‘The problems of the economic and monetary union: is there
any escape?’ Journal of Economic Analysis, v. 1, n. 1, pp. 1–14.
30. A role, not entirely insignificant, in the ASE’s ascendance was played by the
social security funds. Until the mid-1980s the goose with the golden eggs
had been the stocks of social security funds locked into the Bank of Greece
on an interest-free basis. In the main, these funds were used to provide cheap
loans to the public and private sectors, the funds themselves receiving no
significant returns. As these funds matured and the number of pensioners
increased rapidly in the 1990s – Greece has a large ageing population – the
ASE became an important outlet for capitalization and speculation (it should
be noted, however, that social security funds cannot invest more than 20 per
cent of their funds in the stock market); see, Panaghiotis Petroulas, Savas
Robolis, Evangelos Xydeas (1990) Social Insurance in Greece. The Case of IKA
(Athens: INE-GSEE).
31. It should be noted that all the privatizations that occurred from 1991 to 2010
brought only 20 billion euros to the state, mainly used to sustain borrowing
and the remaining lame-ducks.
32. Union of Greek Banks (2011) ‘The Greek banking system’ (Athens: UGB),
pp. 14 ff.
33. Bank of Greece (1998) Annual Report of the Governor (Athens: Bank of Greece),
pp. 273–7, 274.
220 Notes
34. Constantine Manolopoulos (2011) ‘The Greek economy and the banking
sector’, (Athens: Marfin Investment Bank), February, pp. 21–27, also avail-
able at http://elearn.elke.uoa.gr/ppetrakis/dialexis/2012/trapeziki/dialexi02.
pdf (accessed on 12 January 2013).
35. Bank of Greece (1998) Report of the Governor (Athens: Bank of Greece) p. 279.
36. In this respect, we disagree with the rather rushed conclusion by Lapavitsas
et al. (2011), that the ‘Greek banks drew closer to the state’ seeking pro-
tection, implying that nationalization of the banking sector in Greece is
imminent. What is observed here is a rather conjunctural phenomenon of
Summer-Fall 2011 during which time the ECB was reluctant to re-capitalize
periphery and other European banks, tempting Lapavitsas to foresee a
breaking-up of the Euro-zone.
37. According to the Union of Greek Banks (2011), 45 per cent of their share
value is owned by foreign and Greek institutional investors, 37 per cent
are individuals, 13 per cent are owned by the state and 5 per cent by var-
ious insurance funds. According to a top assessor of the Alpha Bank, George
Michalopoulos, some 70 per cent of the investors in the Greek banks are
from Central and Northern Europe, and 59 per cent belong to EU banks;
see George Michalopoulos (2012) ‘Financing Greek banks during the cri-
sis’ (Athens: Alpha Bank) pp. 233 ff., http://62.1.43.74/5Ekdosis/UplPDFs//
syllogikostomos/12-c%20Michalopoulos%20229-246.pdf (accessed on 12
January 2013).
38. Interestingly, and when the Commercial Bank was in full neo-liberal swing,
its managing director from 2000 to 2004 was Yiannis Stournaras, Minister of
National Economy since June 2012.
39. See, Kerin Hope (1998) ‘A big market close to home’ Financial Times Special
Survey of Greece, 8 December, p. 2.
40. Ibid.
41. Greek shipping capital, a prime international force in world seaborne trade
with no substantial base in Greece, should also be brought into this equa-
tion. Also, part of the Greek merchant fleet is listed in the shipping register
under flags of convenience, so no substantial tax income can be raised by
the Greek state. This loss of income becomes even more significant in the
1990s and 2000s, as the world share of the Greek merchant fleet – under
confirmed Greek ownership – which was 1 per cent in 1947 and 12 per
cent in 1970, soared to 17.4 per cent in 2000. Unlike other nationalities,
Greek ship-owners are under no legal compulsion to enter or remain on
the Greek registry and they do so only in periods in which favourable
tax regimes – such as laws 2687/1953, 89/1967 and 378/1968 – come into
force. Most Greek shipping is ‘tramp’, rather than ‘liner’ shipping. The for-
mer is conducted by vessels, which go like taxis wherever the charterer
wants, with freight rates fixed in a free global market. The latter is con-
ducted by vessels/liners, which run like buses on regular schedules and
according to predetermined routes and tariffs. Having said this, the only
significant contribution of Greek shipping to the Greek economy is its net
contribution to invisible earnings and employment. See, among others,
John Theotokas and Gelina Charlauti (2007) Greek Ship-owners and Maritime
Business (Athens: Alexandria) pp. 33 ff., Anne E. Bredima (1991) ‘The ship-
ping sector’, in Speros Vryonis Jr. (ed.) Greece on the Road to Democracy;
Notes 221
from the Junta to PASOK, 1974–1986 (New York: Aristide D. Karatzas),

pp. 233–45.
42. An effort to estimate the size of tax evasion of the new bourgeoisie is made by
George Stathakis (2011) ‘The fiscal crisis of the Greek economy’ in a volume
edited by the Scientific Association of Greek Political Economists, Economic
Crisis and Greece (Athens: Gutenberg), pp. 193–205.
43. Even in the middle of the debt crisis in September 2011, Athens daily
press reported that Mytilineos S.A. buys from the state electricity company,
DEI (PPC S.A.), energy at 41 Euros per MegaWh, only to sell it back to
DEI for Euros 55 per MegaWh. How is this possible? Mytilineos, who runs
an aluminium business, received a licence by the Greek state to buy cheap
electricity for his aluminium business. But he had set up a separate energy
unit for himself, ending up selling back energy to DEI at a higher price. This
type of domestic comprador activity against the very interests of the public
at large is not just damaging to state performance; it is insulting. None of
the press reports about it have been denied or contradicted.
44. On these issues, see the analysis by Christoforos Vernardakis (2011) Political
Parties, Elections and Party System. The Transformations of Political Representa-
tion, 1990–2012 (Athens-Salonica: Sakkoulas), pp. 38 ff., 333 ff.
45. Among others, John Tolios (2011), pp. 67–8.
46. www.sipri.org/databases/armstransfers (accessed on 2 November 2011).
47. An Athens-based think-tank dealing with offset and procurement par excel-
lence is ‘Epicos’, with a very revealing website, www.epicos.com/Portal/Top/
ContactUs/Offices/Pages/default.aspx.
48. A comment here is necessary. In the 1980s, as we saw earlier, the EEC tried
to bridge the gap between core and periphery with various Mediterranean
programmes and other forms of aid. It failed. Later, it tried to do virtually
the same by creating the so-called structural and cohesion funds. Coun-
tries whose per capita income was below 75 per cent of Europe’s average
were classified as ‘Objective 1’ countries; countries whose per capita income
was below 90 per cent of Europe’s average were the so-called ‘Cohesion
countries’ for whom a Cohesion Fund was set up in order to assist con-
vergence between core and periphery. Portugal, Ireland, Greece and Spain
(PIGS) became organic parts of this programme, which failed in its entirety
to bridge the economic and technological gap between core and periphery.
Interestingly, all post-2004 new EU members of East-Central Europe and the
Balkans became part of the same failed programme.
49. In the wake of Yugoslavia’s disintegration, its southern republic, Macedonia,
claimed international recognition under the name of Macedonia, the name
of a northern province of Greece. Obviously, Greece opposed the name
and the issue remains unresolved to the present day. In 1995 the PASOK
government under Andreas Papandreou imposed an embargo on FYROM,
prohibiting embarkation of commodities to the Greek port of Salonica whose
final destination was FYROM. In the main, Andreas, primarily, and Antonis
Samaras, who broke away from ND over the Macedonian issue, were respon-
sible for the unacceptable slogan ‘Macedonia is Greek’. Andreas launched
this slogan in order to be re-elected in 1993, which he was. But the other
three issues (Imia/Kardak, S-300 and Ocalan) are directly related to Turkey.
Imia/Kardak: in January 1996, and soon after Simitis succeeded Andreas in
222 Notes
office, Turkish commandos challenged Greek sovereignty over the uninhab-

ited islets of Imia/Kardak removing the Greek flag there – the crisis was
defused only after the intervention of US President, Bill Clinton. S-300:
In January 1997 the president of the (Greek Cypriot-led) Republic of Cyprus,
Glafkos Clerides, announced the purchase of a system of S-300 missiles from
Russia. Turkey immediately threatened Cyprus (and Greece) with war and
destruction of the missiles on their way to Cyprus. As a consequence, the
Republic of Cyprus decided to send the missiles to Crete. The Ocalan affair:
late in 1998, Ocalan, the Kurdish leader of PKK (Kurdistan’s Workers Party)
leading the secession of Kurdish-populated areas in South-eastern Turkey,
was forced by Syria to leave his operational base in northern Syria (Turkey
amassed a lot of pressure on Syria to stop protecting Ocalan). Apparently, and
after Russia refused to grant asylum to the PKK leader, Ocalan was assisted
by a network of Greek nationalists who brought him to Nairobi, Kenya (the
Greek government of Simitis and his Foreign Minister, Theodoros Pangalos,
were fully aware of what was going on). Eventually, Turkish special forces
captured Ocalan in Nairobi and brought him to Turkey. Ocalan was sen-
tenced to death, but has not been executed to date. Turkey then launched a
big campaign against Greece harbouring terrorists (PKK was officially listed
by the USA and a number of EU states as a terrorist organization). All these
cases damaged Greece in a variety of ways: The Imia/Kardak crisis created
a disadvantageous precedent for Greece in the Aegean, demarcating ‘grey
zones’; the S-300 crisis failed to serve the purpose for which they were bought
(defence of the Republic of Cyprus); Greece’s Macedonian policy, profoundly
nationalistic and self-serving, was deemed as unacceptable by the EU and the
USA alike; and the Ocalan case humiliated Greek nationalism acting behind
the scenes, while damaging the Simitis government ‘who knew what was
going on but it did not deliver’ (Pangalos was forced to resign after his fail-
ure to manage the case). Some of these themes are tackled well by Takis
Tsakonas (2010) The Incomplete Breakthrough in Greek-Turkish Relations. Grasp-
ing Greece’s Socialisation Strategy (New York: Palgrave-Macmillan). Tsakonas
(pp. 6–65) also discusses the Greek foreign policy of rapprochement (official
from 1999, but informally in operation since 1995, when Greece allowed
Turkey to enter into a customs union agreement with the EU in return for
Turkey’s concession to allow a divided Cyprus to begin accession negotia-
tions. For a Turkish perspective, see the comprehensive account by Ahmet
Davutoglu (2010) Strategic Depth. Turkey’s International Position (Athens:
Poiotita).
50. Bank of Greece (2010) Report of the Governor of the Bank of Greece for 2009
(Athens: Bank of Greece); Association of Greek Banks (2011) The Greek Bank-
ing System in 2010 (Athens: Association of Greek Banks); Richard Milne and
Gerrit Wiesmann (2011) ‘ECB ready to reject Greek downgrade’ Financial
Times, 5 July, p. 1. Despite the fact that the Report of the Governor, George
Provopoulos, presents the banking system as a problem-free financial area,
he does not fail to mention the degree of dependency of the Greek banks on
euro-zone capitals, esp. pp. 171–200.
51. Similarly, the value of imports from France is 3.1 billion euros, whereas the
value of Greek exports to France is down to 0.7 billion euros. For Italy, the
Notes 223
numbers are 6.9/1.8 against Greece. See, ELSTAT (2009) Concise Statistical
Yearbook (Athens: ELSTAT), pp. 168–72.
52. Lapavitsas et al. (2010), p. 344.
53. As opposed to the continental shelf, Exclusive Economic Zones have to be
declared by a state. Recent discoveries of gas south of Cyprus, prompted
the Republic of Cyprus to declare its EEZ with the support of Israel, tak-
ing advantage of bad relations between Israel and Turkey. But Greece has
not delimited its EEZ yet. Joint delimitation of Greek EEZ with the Repub-
lic of Cyprus would have been advantageous in asserting sovereignty over
the newly discovered hydrocarbons south of Crete and Cyprus (see also the
following footnote).
54. We do not wish to expand significantly on this subject, because it would
require a separate book. However, it is worth mentioning the large quanti-
ties of gas found in the Cypriot continental shelf (South) and the interest
registered by a number of companies and states, including Israel and Russia,
as well as the large quantities of hydrocarbons south of Crete. Reliable reports
(see, Ta Nea, 5 December 2012) indicate that gas reserves south of Crete
may be over 3.5 trillion of cubic metres with a value of up to 427 bil-
lion euros. A kind of ‘new great game’ seems to be taking place here, the
main protagonists being the current Greek government (ND, PASOK and
Democratic Left [DIMAR]) and the troika. The Russians and the Chinese
seem to be sidelined. The Second and Third Memoranda have established
an escrow account to be funded by Greek revenues to service the Greek
debt obligations. Thus, any revenue reaching Greek state energy compa-
nies will go directly to the escrow account, which will be swallowed up by
the troika. In case, however, the state energy company, Hellenic Petroleum,
enters the new privatization programme imposed by the troika (something
which has been announced in the Third Memorandum), then the income
can again be appropriated via the majority shares that foreign interests
will have in Hellenic Petroleum, whereas any other income will have to
go to the escrow account. In an interview with SKY TV, the director of
the Institute for Hydrocarbon Research, Vassilis Karkoulias, argued that the
exploitation of the new gas deposits south of Crete must include all major
oil multinationals, such as British Petroleum (BP), Exxon Mobil etc, adding
that the real extraction of gas for Greek interests will begin between 2021
and 2024. But that is when it is deemed by the troika that the Greek
debt would be viable and manageable, assuming of course that the cur-
rent austerity brings about a successful outcome. Why should all this be a
coincidence? At any event, all the real assets of the country are mortgaged
to the imperial undertakings of the troika and its bankers. Thus, Greece
has entirely sold out one of its most important bargaining tools, that is
its crucial geo-political position. See the interesting interview by Karkoulias
in www.skai.gr/tv/show/?showid=65140; see also the Institute’s webpage
www.elliny.gr/.
55. Vassilis K. Fouskas (2011) ‘A Greek tragedy: the making of the Greek and
Euro-Atlantic ruling classes’ www.opendemocracy.net, 5 December.
56. We do not employ any particular theory concerning the definition of social
class. Instead, we use one or two ‘rules of thumb’. The first is what we have
224 Notes
already implied above and was grasped as long ago as 1852 by Marx: never
mind the power the bourgeoisie can draw from being the dominant class in
the sphere of production and finance, its political regime will be shaken if
it fails, via its political representatives, to enlist the political and ideological
support of middle and lower middle classes. Having the immediate producer
of real value, that is, the working class, as a permanent class opponent is
something that the bourgeoisie can get away with. But it cannot afford los-
ing the support of the middle classes, which is paramount in the exercise of
its hegemony. One way of losing the support of middle classes is by having
something going terribly wrong in capitalism as a social system, such as the
inability of the system to redistribute part of the value (whether real or ficti-
tious) for the cause of extended reproduction of the middle and lower middle
classes. In other words, capitalism should be doing well as a social system
and produce enough wealth and money to sustain not just the reproduc-
tion, but the extended reproduction of middle social strata over long periods
of time. But this is not always the case, because the greatest misfortune of
capitalists is that they cannot control capitalism, that is, its contradictions.
Crises and downturns occur which undermine the social contract between
the ruler and the ruled, the bourgeoisie and the middle classes (we make the
theoretical assumption that the immediate producer is always confronta-
tional and ‘at war’ with the bourgeois, the non-producer of value). The
second ‘rule of thumb’ we use here is that we prefer to ‘catch’ social class in
action rather than providing a static definition of it, however comprehensive.
After all, neo-liberalism and financialization keep displacing the productive-
material base of the Euro-Atlantic core, outsourcing material production to
the ‘global East/South’, whereas unorthodox patterns of migration, espe-
cially from/to/within the EU, social mobility and population movements
make any rigid or abstract definition of class a rather precarious theoretical
undertaking.
57. Bank of Greece (2012) Annual Report of the Governor (Athens: Bank of Greece),
pp. 102 ff.
58. Migrants in Greece from the former Ottoman and Soviet space number more
than a million and, as expected, statistics fail to capture their employment
records and impact on the social economy of the country. But racist feelings
in Greece have taken on a disturbing turn over the last two years, as racist
groups across the country find easy scapegoats in the migrants, especially
Albanians and Muslims. This is political raw material for the pro-Nazi party,
Golden Dawn.
59. According to the Pan-Hellenic Union of Public Works (PESEDE), public
works contractors number more than 6200 businesses, half of which are run
by one individual. Again, the fragmentation of the sector pertains to the
clientelistic-corporatist nature of the party and state system, creating polit-
ical clientele by contracting out public works to individuals of unknown
technical ability and skill.
60. The analyses by Peter Gowan on this issue are superb, see Gowan (1999),
pp. 187–248. See also, Tolios (2011), pp. 86–93; Vassilis K. Fouskas (2011)
‘Dealing with sovereign debt crises today: Lessons from Eastern Europe and
the Balkans’ Debatte; Journal of Contemporary Central and Eastern Europe, v. 19,
n. 3, December, pp. 633–48.
Notes 225
61. Ralph Atkins et al. (2013) ‘Greece over worst of crisis, says Provopoulos’,
Financial Times, 30 January, p. 5.
7 By Way of a Conclusion: Greece’s Debt Crisis Today and

Some Normative Reflections
1. Antonio Gramsci (1973) ‘The modern Prince’, in Quentin Hoare and Geoffrey
Nowell Smith (eds) Selections from the Prison Notebooks (London: Lawrence and
Wishart), p. 151.
2. Nationalism and historical inaccuracies mar many ideological analyses on the
current crisis; see, for example, Stathis Kouvelakis (2011) ‘The Greek caul-
dron’, New Left Review, v. 72, pp. 17–32 (for Kouvelakis, the ‘extreme-right
LAOS party returns to office for the first time since the fall of the military
dictatorship in 1974’ (an example of inaccuracy); or ‘the Greeks may find
themselves once more at the forefront of historical developments’ as in ‘1821
when they were the first continental country to win national independence’
(an example of both historical inaccuracy and patriotic triumphalism).
3. Very close to our argument, Tsoukalas, in his last book, connects the problems
of post-World War II Greece with its geo-strategic significance for NATO and
the USA in Cold War conditions. More concretely, he makes a master anal-
ysis of ideological and moral aspects of the current crisis, arguing that their
causes can be traced back to the consequences of the Civil War (1946–49)
and the choice of US neo-imperialism to reconstruct Greek micro-capitalism
as a dependent and parasitic appendage in order to use it against the Soviet
bloc. Tsoukalas, however, parts company with us when he argues that Greece’s
geo-strategic position was downgraded, and not re-ordained – as we argue in
this book – after the end of Cold War. Thus, Greek parasitic micro-capitalism
was bound to collapse after adopting forms of extreme financialization in
EMU conditions and having lost the protection of the ‘American factor’.
See, Constantine Tsoukalas (2012) Oblivious and Truthful Greece: From the Long
Puberty to Forceful Maturity (Athens: Themelio).
4. Martin Wolf (2013) ‘A perilous journey to full recovery’, Financial Times,
30 January, p. 11.
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Index
Note: Locators followed by ‘n’ refer to notes
accumulation by dispossession, 19, social agencies and, 170

37, 40 under capitalism, 24
Acheson, D., 84, 86, 92, 100, 102–3, under communism, 77
105, 107, 134, 167 Austria, 69–71
Adalya, 70 autarky, 77, 80, 88, 89, 145, 150
Adam Smith in Beijing, 36, 37 authoritarianism, 49, 50, 54, 79
Afghanistan, 41, 43, 52, 84, 187
AGET-Hercules, 152 bailout, 47, 139, 164, 190
Aegean Sea, 18 Balbo, Cesare, 3
AIG insurance, 185 The Balkans, 37, 43, 61, 68–70, 77,
Albania, 83, 161, 183 79, 81, 82, 84, 100, 117, 137–9,
Alexandria, 68 146, 152, 155, 157, 161, 166, 167,
Alpha Bank/Group, 154, 156 173, 185
Althusser, L., 110 Bank of Greece, 153
Anatolia, 70–1 bank recapitalisation, 12
Argentina, 48 Banks and banking capital, 12, 22, 65,
Armstrong, P., 29 67, 122, 129, 161
Arrighi, G., 4, 35–7, 49, 135 Belgium, 3, 73, 126, 151
Arsenis, G., 133 Belgrade, 157
Asia Minor, 5, 64, 70–2, 74, Beloyiannis, N., 91
85–6 Bichler, Shimshon, 42
Aspida (Shield) case, 99 Black Sea Economic Cooperation
Association of South East Asian (BSEC), 137
Nations (ASEAN), 31 Blair, Tony, 151
ATE Bank, 154 Bobbio, N., 3
Athens, 68–9, 72, 77, 87, 91, 96, 98, Bobolas S.A., 156
105, 108, 148, 151, 155–7, 166, Bolshevik revolution, 67, 79
181, 183, 189 Bonapartism, 4, 168
Athens Stock Exchange (ASE), 151, borrowing (internal and external), 63,
161 79, 123, 133, 161, 165
austerity programs Brazil, 11, 48, 135, 137
banking benefits, 145 Brenner, R., 4, 19, 24, 29–30, 36,
in the core-periphery, 15–17 109, 166
by IMF and ECB, 182 Bretton Woods system, 23, 51, 92
crisis and, 150 Britain, 64–76, 78, 84–6, 100–3,
in Germany, 164 110, 115, 118–19, 126, 134, 158,
harsh measures, 148 168, 187–8
middle classes, impact on, 168 British Petroleum (BP), 223n54
PASOK announcement, 123–6 budget deficit, 66, 79, 93, 120, 133,
by pro-bailout cabinets, 139 156, 162, 182
237
238 Index
Bukharin, N., 12, 21–2, 31 credit

Bulgaria, 69–71, 73, 83, 85–7, credit default swaps (CDS), 149
157, 161 ECB credit line, 165
expansion, 92
Cairo, 157 flows in peripheral countries, 166
Cameron, David, 134, 168 institutions in Greece, 171–2
capital goods, 5, 27, 95, 111, 129, 1929 crunch, 77, 79
135 paper, 186
capitalism to peasants, 73
core characeristic of, 52, 54, 114 Credit Default Swaps (CDS), 149,
European, 113, 149 185
credit system, 20, 24, 28, 40, 50
in globalization era, 110
creditism, 23–4
regular return of crises, 34, 51
‘crisis of crisis management,’ 6, 131
role of state, 45–9
cyclical crises, 16, 34–7, 42, 45, 146–7,
structural fault-lines, 42
149
Caspian Sea, 42–3, 137, 138, 185
Cypriot banks, 157, 164
Catalonia, 3
Cyprus, 18, 26, 38, 43, 53, 63,
caudillos, 54
70, 73, 81–3, 87, 93, 98,
Cementamica USJE, 157
100–7, 112, 115–16, 119–21,
Central Intelligence Agency (USA),
131, 134, 137, 157–9, 161, 164,
82, 104, 105
182–3, 185, 190
Chase-Dunn, C., 46 Cyprus issue, 5, 73, 82, 83, 98, 100–1,
Chase, J., 86 107, 115
China, 1, 38, 11, 13, 33, 37, 45,
51, 54, 110, 159, 184–5 Damascus, 157
Churchill, W., 70, 72 debt
civil society, 32, 48, 49, 167–8 cancellation, 189–90
Civil Transportation Organization of creation, 19, 26, 37, 42, 44, 46, 50,
Athens (OASA), 121 52, 125, 130, 178, 189
Civil War, 47, 83, 106 destruction and, 134–85
clientelism, 49, 55, 128, 144 mechanism, 62, 182
political clientelism, 48, 112, 114, public, 53, 126, 136, 147, 151, 158,
130, 133, 146 159, 182
Clinton admininstration, 29, 30, 110 structure, 151, 158
Cold War, 44, 81–3, 87, 100, 104–7, see also Greek debt
111–12, 116, 137–8 debtors, 11, 27, 59, 144, 145, 189–90
commercial banks, 93, 119, 121, dependency, 13, 32, 45, 47, 51, 53–4,
152–3, 178, 182 62, 82, 87, 96, 106–7, 111–12,
commodification, 40, 44, 46 132, 144, 146, 148, 158, 167
comprador bourgeoisie, 7, 46, 52, 96, dependent/subaltern position, 59, 76,
107, 118, 129, 132, 161 97, 132, 162, 188
comprador capital, 48, 49, 63, 107, deténte, 104–5, 109–11
111, 121, 157, 189 dictatorship, 6, 47, 72, 77, 82, 83, 88,
Constantinople, 67, 68, 70, 71 92–3, 98–9, 106–7, 111, 118, 190
containment, 83, 86 di Lampedusa, Giuseppe Tomasi, 96
core-periphery, 30–1, 39–40, 45, 146, disintegrative tendencies, 1–3, 11, 19,
150, 189 26, 45, 132, 144, 186, 188
Credi Agricole, 154 Division of Offsets (DO), 159
Index 239
dollar (as reserve currency)/dollar shock therapy, 15, 23, 40

hegemony uneven and combined
British pound and, 74 development, 20–34
devaluation, 109, 135 Euro-merchant Balkan Fund, 157
during war periods, 75 European Central Bank (ECB), 26, 39,
-euro relation, 190 147, 150, 155, 165, 182, 190
exchange rate, 46 European Community (EC), 123, 124,
as geo-political commodity, 42 131–2, 160
in global market, 13, 51 European Currency Unit (ECU), 125
gold and, 24 European Economic Community
USA’s imperial primacy and, (EEC), 6, 53, 99, 106, 111, 113,
83–4 116–19, 121, 124, 129, 131, 132,
Drachma, 65, 72, 74, 76, 79, 111, 121, 188
123–4, 155 European Financial Stability Facility
goldern age of, 88–100 (EFSF), 164
Dubai, 157 European Monetary Union (EMU),
Duncan, R., 23 145–6, 149, 156, 169–70, 188–9
European Union (EU), 31, 39–40,
Economic and Financial Affairs 43–4, 53–4, 106, 131–2, 134–5,
Council (Council of the European 149–50, 159–66, 182–84, 190
Union, ECOFIN), 124 Exchange Rates Mechanism (ERM),
Economic Cooperation 155
Administration (ECA), 90 exchange value (stock), 42, 53, 151,
Economic Research Department 157–8, 166, 177
(ERD), 147 Exclusive Economic Zone (EEZ), 166
economies of scale, 1875, 107, 118 Exxon Mobil, 223n54
EFG-Eurobank, 154, 157
Egypt, 86
fascism, 49, 59, 80
Enosis (union of Cyprus with Greece),
100–1, 103 fictitious capital, 20–34, 35, 38–9, 49
Euro (the Euro-zone) fictitious commodities, 54, 175, 185
-dollar relation, 190 financial capital, 12, 23–4, 34, 50–1,
exchange rate, 149 68, 144, 151, 156, 182, 184, 189
monetary base, 26–8 financialization
role in Europe’s political unification, 54 crisis theory, 11, 25, 36, 53–4
Euro-Atlanticism (Euro-Atlantic core) empirical categories, 110
comprador bourgeoisie, 46, 52 extreme, 23, 26, 40, 44, 51
comprador capital, 48, 49 gloabalization and, 135, 137
cycical crises, 16, 34–7, 42, 45 Greek geopolitics and, 178, 185
disintegrative tendencies, 11, 19, international trends of, 133, 174
26, 45 neo-liberal, 135, 139, 154, 162,
extreme financialization, 23, 26, 40, 169–70, 189
44, 51 ‘first-cut’ crisis theory, 19, 20, 35
fictitious capital, 20–34, 35, fiscal/budgetary crisis, 15, 24, 79, 139,
38–9, 49 144, 147
global fault-lines, 12, 19, 21, fixed capital, 33, 95, 120
34–45, 50 Flight Information Region (FIR),
offensive realism, 32 211–12n54
Open Door policy, 33, 50–2 Fordism, 49
240 Index
foreign capital, 46, 66, 75, 96, 104, Greece

107, 121 capitalism in, 60–1, 65, 68, 78, 81
Foreign direct investment (FDI), 29, exports in, 89–91
92, 107, 165, 166 tobacco market, 65, 66, 73, 89,95
Former Yugoslav Republic of unemployment rate, 94
Macedonia (FYROM), 157, 161 see also specific entries
France, 13, 30, 59–62, 64, 68–70, 73–8, Greek bankruptcies, 167, 185
86, 91, 109, 125–6, 130, 132, 135, Greek banks, 152–3, 155–6, 165, 183
156, 158–9, 165, 183 Greek Communist Party (KKE), 18, 84
Frank, A.G., 35, 37, 46 Greek Communist Party Interior
Friedman, Milton, 110 (KKEes), 115
FYROM, 157, 161 Greek debt
banking sector and, 164
General Armaments Directorate current account deficit, 147, 165
(GAD), 159 Eurozone entry and, 139
General Armaments Directorate haircut strategy, 134, 164, 166, 172
(Greek Ministry of Defence, internal and external sources, 66,
GAD), 159 73, 79, 108, 113, 166, 167
General Confederation of Greek investment portfolio, 153–4, 157
Workers (GSEE), 219n25, 219n26, main holders of, 158
219n30 in 2009–2010, 138
Genetically Modified (GM) food, The Greek Ministry of Defence, 159
157 Greek Postal Services, 154
geo-culture, 37, 186 Gross Domestic Product (GDP)
geo-strategy, 41, 67, 84 black economic sector (Greece), 175
geopolitics China, 159
Cold War, 81 defense budget (Greece), 95, 116,
of Cyprus crisis, 98, 182 158
in Euro-Atlantic area, 11–55, defense spending (selected)
186 Countries, 122
in Greek nationalism, 61, 78, 166, economic indicators, 122
185 in EEC countries (public debt), 127
national security and, 103 European (selected) Countries, 95
Germany, 11–14, 26–30, 59–61, external debt (Greece), 171
131, 135, 147–9, 155–6, 158, income tax and, 123
182–3, 185 inflation and, 119, 156
Gindin, S., 14, 23 lending and borrowing, 127
‘global East/South,’ 2, 7, 135, 136, Metaxas policy, 89
139, 184 Mutual funds (Greece), 155
global fault-lines, 2–4, 12, 19, 21, 1977–1991, 124
34–45, 50, 109, 187–8 1994–2009, 161
globalisation/financialisation cum in PIGS countries, 160
neo-liberalism, 41, 110 public debt and, 126, 147, 149, 162,
Golden Age of capitalism, 29–30, 182
81, 88–91, 94, 96–7, 112, public sector (Greece), 116
116, 120 Scandinavian, 130
Gowan, P., 41, 43, 137 Sectoral composition, 94, 117
Gramsci, A., 49, 80, 187 2002, 2007–2012 (selected
Great Depression, 73, 76, 79, 80 countries), 136, 184
Index 241
Gross National Product (GNP), 137 inflation, 1 56, 26–7, 30, 92–3,
Grundrisse, 21 110–11, 113, 118–19, 121,
123–6, 150
Harvey, D., 4, 16–20, 22, 24–5, 28, 33, interest rates, 26, 27, 110, 125, 145,
35, 37, 39–43 147, 165, 181
Hayek Friedrich, 110 International Commission of
Hay, John, 33 Economic Control (ICEC), 66
Hellenic Industrial Development Bank International Financial Commission
(ETVA), 152 (IFC), 206n40
Hellenic Statistical Services (ELSTAT), International Monetary Fund (IMF),
95 31, 39, 40, 83, 118, 155, 182
heterodox theory of money and International Political Economy (IPE),
finance, 186 31, 42, 109
Hilferding, R., 12, 22–3 International Relations (IR), 12, 31,
Holland, S., 150 108, 109
hub and spoke Intracom Holding S.A., 156
imperialism/arrangements Iraq, 41, 52, 187
in Euro-Atlantic area, 11–13, 18, 43, Ireland, 12, 126, 155, 168, 169, 190
47, 51, 54 Italy, 12, 28, 60, 61, 70, 80, 86, 109,
in France, 91 126, 130, 146, 151, 155, 181, 190
in Germany, 190
in Greece, 107 Japan, 26, 30, 32, 33, 37, 81–3, 89, 93,
in Italy, 91 109, 130, 138, 198
in USA, 138, 168, 188 Johnson, Lyndon, 102, 103
in Western Europe, 91
Hudson, Michael, 75 Kampfplatz
European factor and, 109–33
ideational (elements), 37, 43 fault-lines and, 97–100
Idionymon (Law), 88 Greek Depression and, 80
il Gattopardo, 96 19th century exit, 64–6
imperial(ist) chain, 21–2, 31, 46 post-war political regime, 82
imperialism/neo-imperialism 20th century exit, 67–8
in Euro-Atlantic area, 11, 18, 19, 31, Kautsky, K., 22, 31
37, 47, 51, 52 Keynes, J.M., 24
geopolitics and, 53 Keynesianism, 24, 129, 166, 188
in Great Britain, 50, 67 Kolko, Gabriel, 138
in Greece, 68–70, 72, 107 Kosovo, 43, 52, 157
Marxist theorization of, 31, 35 Koumoundouros, Alexander, 65
in USA, 52, 138, 168, 186, 188 Kuniholm, B., 88
Western European, 67 Kurdistan Worker’s Party (PKK),
world system theorists on, 45 221–2n49
see also hub and spoke
imperialism/arrangements Labour Institute-General
import-substitution Confederation of Greek Workers
(industrialisation), 48, 77, 79, 89, (INE-GSEE), 219n25, 219n26,
92, 121 219n30
India, 2, 5, 7, 11, 51, 67, 68, 135, labour-power, 20, 21, 39, 40
137, 159 LaFeber, Walter, 138
Indonesia, 11, 135 Lagarde, C., 40
242 Index
laissez-faire, 16, 88 Middle East, 13, 42, 44, 52, 59, 68, 70,
Lapavitsas, C., 144, 145, 147, 165 84, 99, 105, 134, 137, 138, 167,
Latin America, 51, 74, 77, 80, 82, 88, 173, 194
126, 136 MIG, 156
Latsis, 157 migration, 95, 96
law 281, 77 Milios, J., 148
law 509, 91 M-M’ (money begetting money’), 20,
law 2687, 92 24, 110
law 3433, 159 mode of production, 36
law 4171, 92 monopoly capital, 64, 67–8, 72, 99
law 4229, 77 Moscow, 157
League of Nations Financial Mutual Security Agency (MSA), 92
Committee (LNFC), 206n40 Mytilineos, 156–7
lenders, 26, 39, 62, 66, 156, 171, 190
Lenin, V.I., 12, 22, 28, 31, 114 National Bank of Greece, 153
Levant, 61, 70 National Health System (NHS), 122
liberal democracy, 4, 17, 33–4, 45, nationalism, 17, 61, 96, 101, 105, 109,
83, 114 138, 150
The Limits to Capital, 20 National Organisation of Cypriot
Lloyd, George, 69, 70 Fighters (EOKA), 100–1
loans, 62, 64, 66, 74–5, 81, 107, 111, National Radical Union (ERE), 97, 98
121, 124, 135, 149, 162, 178, 181 ‘National Schism,’ 69
Near East, 11, 61, 67, 69, 100, 139,
London, 38, 54, 75, 100–1, 144–5, 157
152, 155, 156, 161, 166, 185
London-Zurich agreements, 101–2
neo-liberalism
financialization and, 23, 41, 44,
Macedonia, 67, 73, 85, 157, 161, 166 51–2, 54, 110–11, 113, 119,
Mandel, E., 30 128, 132
Manolopoulos, C., 153 globalization and, 35, 44, 110, 135
Manpower Employment Organisation The Netherlands, 165
(OAED), 214n22 New Democracy (ND), 111–13, 115,
Marphin Bank, 156 128–33, 139, 151, 158, 160–61,
Marshall Plan, 47, 81, 83, 87, 134 167–68, 172–73, 176, 178, 183–85
Marx, K., 8, 12, 14, 16, 20–2, 24, 33–5, Nitzan, Jonathan, 42
40–1, 47, 49–50, 53, 110, 113, Noble (US energy company), 182
165, 168, 184 North Atlantic Treaty Organisation
Marxism/Marxisant, 14, 17, 24, 31, (NATO), 32, 40, 44–5, 51, 53,
34–5, 37 82–3, 95, 97, 101–5, 111, 115–16,
Mazower, M., 73, 89 121, 131, 137–38, 186
M-C-M’ (Money-Commodity-Money’), Northern Tier programme, 100
20, 110
Mearsheimer, J., 32, 37 Offe, C., 6, 131
Mediterranean, 59, 60, 65, 67–9, 72–3, oil and gas pipelines, 137
78, 82, 84–6, 88, 105, 116, 183 Olympic Airways, 152
Megali Idea (Great Idea), 64, 67–8 Open Door policy, 33, 50–2, 74, 81,
Mesopotamia, 5, 70 83, 91
Metaxas, Ioannis, 69–72, 77, 88–9 Organisation of Economic
middle classes, 15, 83, 113, 126, 151, Cooperation and development
161, 166, 168–85 (OECD), 123
Index 243
OTE, 156 Poulantzas, N., 15, 30, 46, 49, 118, 184
over-accumulation (crisis), 16, 21, 36, Pouliopoulos, P., 18
50, 51, 116 power-shift, 1 38, 11, 34, 37, 72, 135,
184, 186
Palestine, 69, 70, 100 primacy, 13, 36, 45, 51, 83–4, 86, 138
Pan-Hellenic Socialist Movement primitive accumulation, 40, 53, 165,
(PASOK) 182, 184
crisis management, 121–31 Prison Notebooks, 80
economic environment, 116, private sector, 96, 145
119, 121 public debt, 53, 126, 136, 147, 151,
eurozone entry, impact on, 155 158–9, 182
first term, 133 Public Electricity Corporation
geopolitical issue and, 113 (DEI), 91
vs ND, 108, 111, 132, 139, 151, 158,
160, 161, 167–68, 172, 173–76, Rare Earth Elements (REE), 136
178, 183–85 Rasizade, A., 42
second term, 112 rate of growth, 164
Simitis, 144, 159 rate of profit, 20–2, 30, 52, 112,
see also Papandreou, Andreas, G.; 119, 132
Papandreou, George real capital, 20–34
Pan-Hellenic Union of Public Works realism and neo-realism in IR,
(PESEDE), 224n59 31–2, 69
Panitch, L., 14, 22, 23, 110 re-cycling of financial surpluses, 26
Papandreou, Andreas, G., 48, 82–3, 97, Refugees, 73, 74, 75, 77, 85
99–100, 106, 108, 115–16, 119, Refugee Settlement Commission
121, 128, 129, 144, 152 (RSC), 206n40
Papandreou, George, 82, 97–9, Robolis, S., 150
103, 112 Rom Telecom, 157
Partito Comunista Italiano (PCI Italian Romania, 86, 87, 157
Communist Party), 207–8n7 Russia, 11, 13, 43, 51, 61, 70, 84–5,
passive revolution, 49, 80, 81–108, 135–8, 182, 184
116
petro-dollars, 42, 109 Sacred Bond of Greek Officers
PIIGS (Portugal, Italy, Ireland, Greece (IDEA), 99
and Spain), 221n48 Salonica, 68, 69, 77, 92, 96, 98,
Piraeus, 65, 72, 77 108, 181
Piraeus Bank, 153 Schmidt, C., 3
Poland, 157 Schumpeter, J., 26
political phenomenology, 6, 63, 82–3, Scotland, 3
97, 100, 108, 112, 132, 185 SC Somerta Copsa Mica, 157
Popular Orthodox Rally (LAOS), ‘second-cut’ theory, 20, 35
225n2 seisachtheia, 137, 187–91
populism Serbia, 43, 70–1, 157
communist influence, 128 Sfakianakis Group, 156
democratic consolidation, 114 Silk Road Strategy Act 1999, 42
modernization of, 130, 144 Silver, B., 35, 36
state’s role, 45–55 Sinews of capital, 11–55
Portugal, 6, 12, 26, 53, 111, 112, 116, see also Euro-Atlanticism
124, 126, 155, 158, 168, 190 (Euro-Atlantic core)
244 Index
Smith, M., 71 Turkish-Greek War 1897, 66

Smyrna, 67, 68, 70, 71 Turkey
socialism, 7, 49, 52, 125, 139, 146, British hegemony, 74
173, 184 Cyprus issue, 101, 112, 116,
social struggle, 21, 44, 77, 113, 158, 161
133, 150 decline of US hegemony, 135, 137
socio-economic system, 16, 35, 50, 54, as geo-strategic bloc, 81, 82, 84–8
106, 107, 132, 160 Germany, supporting, 69
Sofia, 157 Greek labour market, 172
South Africa, 11, 135, 137 hub-and-spoke arrangement, 47
Sozialdemokratische Partei NATO’ presence, 44, 100, 102–4,
Deutschlands (German Social 106, 121
Democratic Party SPD), 80 pipeline option, 183
Spain, 12, 40, 53, 111, 112, 116, 124, proxy war, 72
126, 132, 155, 158, 168, 169, 181, Tzakia/nea tzakia, 65, 67, 123
185, 190
Spykman, N., 18
Ukraine, 137, 157
spatial/temporal fix, 17, 19–21, 28, 33,
ultra-imperialism, 22, 31
37, 39–40, 49
uncommitted capital, 23
stagflation, 30, 109, 112, 118, 120,
unemployment, 21, 76, 94, 96, 122,
131, 148, 184, 186
128, 170, 172, 182–3
State (capitalist state), 15–19, 21, 30,
uneven and combined development,
41, 45–9, 54, 86
20–34
State Information Service, Greece
(KYP), 104 crisis theory of debt, 49–50
Stathakis, G., 92 in global periphery, 45, 53
Steel, R., 92 United Democratic Left (EDA),
Stockholm International Peace 97, 98
Institute (SIPRI), 159 United Kingdom (UK)
surplus value, 20–4, 54, 61, 65, domestic economy in1990, 161
77–8, 89 housing mortgages, 181
sustainable development/growth, 5, over-accumulation crisis, 36
93, 107, 131, 139, 148, 150–1, property bubble, 40
160, 165, 190 United Nations (UN)
Suez Canal, 5, 43, 63, 68, 100 as global regulatory institution, 31
Syros, 65 resolution 186, 102
US, USA (United States/United States
terminal crisis, 19, 36 of America)
Teschke, B., 41 aid to Greek economy, 111, 121,
Theories of Surplus-Value, 21 134
The Times, 75 decline and fall, reasons, 36, 49,
‘third-cut’ crisis theory, 19, 20, 25, 28, 109, 135, 187
37, 39 Federal Reserve, establishment
‘Third Hellenic Republic’, 115 of, 74
Thirteen Constitutional Amendments geopolitics, 42
(1963), 102 hub-and-spoke system, 47, 51, 54,
Troika, 47, 91, 134, 139, 148, 155, 138, 168, 188
168, 170, 172, 183–84 military capabilities, 44
Tsoukalas, C., 123, 175 Open Door policy, 33, 50–2
Index 245
passive revolution (1940–1970), Wallerstein, I., 34, 35

81–108 Weimar Republic, 77
profitability, non-financial Welldon Group, 92
corporate sector, 29 Williams, W.A., 138
stagnation effects, 30 Wolf, M., 144, 147, 191
technological aid, 157 World Bank, 83
total debt (1964–2007), 23–4 World Trade Organization
treasury, 182 (WTO), 31
USSR (Union of Soviet Socialist World War I, 50–1, 59, 69, 187
Republics), 84, 85, 102, 106, 110, World War II, 59, 80, 83, 85, 95, 99,
136, 137, 138, 185 108
Value Added Tax (VAT), 183 xenophobia, 183

variable capital, 18, 19, 50
Varoufakis, Y., 150 Ýnönü, Ýsmet, 102
Venizelos, E., 18, 67–73, 76, 77, 89,
115, 181 Zolotas, X., 81, 92, 103
Vietnam, 52, 109 Zavitsianos, Constantine, 77

Greece Financialization and The EU The Political Economy of Debt and Destruction

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Greece Financialization and The EU The Political Economy of Debt and Destruction

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The Palgrave Macmillan

Greece, Financialization and

Series Editor: Timothy M. Shaw, Visiting Professor, University of Massachusetts

An indispensable resource for scholars and researchers, the series examines a

Vassilis K. Fouskas and Constantine Dimoulas

International Political Economy Series

Timeline of main events in Greece and Europe (October

List of Abbreviations xxiii

Part I Financialization and European ‘Integration’:

Part II Greece’s Fault-lines and the Political

4 Passive Revolution and the ‘American Factor’, 1940s–70s 81

4.2 Miracles and mirages: the ‘golden age’

5 Kampfplatz-4 and the ‘European Factor’, 1974–89 109

6 Debt and Destruction: The Making of the Greek and

7 By Way of a Conclusion: Greece’s Debt Crisis Today and

3.1 Foreign loans and bankruptcies of the modern Greek state

6.4 Proﬁtability of Greek banks as a percentage of their assets,

6.1 Percentage of employment in agriculture, hunting and

If this collective anguish shows anything it is that the world is truly

Historically speaking, defaults are not that unusual: a number of

a comparative perspective. Being anxious about catching up with the

ﬁnance through taxation. As it is, major projects such as railway con-

We acknowledge a very special debt of gratitude to Constantine

We thank Jairo Lugo for many enlightening conversations on the

September–October Untold austerity measures by PASOK (public

PASOK and ND needed time to discuss

November 2012 Greece’s ‘domestic troika’ (ND, PASOK, DIMAR)

ABS Asset-Backed Securities

FDI Foreign Direct Investment

PASOK ανελλήνιo oσιαλιστικó Kίνημα (Pan-Hellenic Socialist

in wider geo-political, geo-cultural and security contexts, as if political

power. Thus, we see the Greek state as an amalgamation of many class

At the dawn of our parliamentary system, Cesare Balbo, the ﬁrst

public squares and bring them to parliamentary rooms, he went on

But an important qualiﬁcation needs to be made here. In periods of

World War II in 1939–40. It becomes evident that Greece was born as

(Greece) presents an elevated strategic value in Cold War conditions, yet

East; the way in which Greece entered the constellation of neo-liberal

We advance here a crisis theory of ﬁnancialization and imperial

be delayed. This shift is dangerous because, as Lenin noted almost a

2.1 Preliminary remarks

Let us make some further preliminary comments on the structure

economy – i.e. the centrality of the dollar in global currency markets

Imperial Britain’s strategy was to capitalise on its great advantage of

at the Euro-Atlantic level. Germany’s effort is becoming hopeless not

[political economists working within a historical-materialist frame-

Impossible to be absorbed or regulated by the state machine, debt and

solve them. Today’s harsh austerity policy, for example, especially in

in periods of austerity and abrupt downturns, sapping resilience and

manage the transition from simple to extended reproduction of capi-

‘barbarism’: the former is ‘uncivilized’, the latter is too much ‘civi-

2.2 ‘Real’ capital, ‘ﬁctitious’ capital and uneven

Capitalism is susceptible to crises. When the prevailing forms of politi-

seeking investment outlets in various parts of the globe, then capital,

an overproduction of capital in that country, an over-accumulation of

proﬁteering through paper and bond trading, currency speculation, real

$1 trillion in 1964 to over $50 trillion by 2007. Credit growth on this

Furthermore, ﬁnancialization/creditism’ occurs in conditions of neo-

Speculators may do no harm as bubbles on a steady stream of enter-

All in all, ‘the credit system internalises the contradictions of capitalism

that is, the personiﬁcation of capital, migrate to ﬁnance to make up

technological base. Yet it cannot survive without a state regulating the

What could be considered as periphery in 1960 – weak industrial and

PASOK ανελλήνιo oσιαλιστικó Kίνημα (Pan-Hellenic Socialist