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Greece’s Left Party Proposes Following Icelandic Model

GreeceThe Left Syriza Party in Greece proposes nationalization of the country’s banking system and defaulting the way Iceland did as it feels that discussions with European creditors are fruitless.

The party says that a proposal has been drafted to establish a central bank that can control a brand new financial system and to introduce capital control. Since this new structure would no longer allow the country to continue as an EU member state, it would have to re-introduce the drachma.

These proposals have the support of around 30 members of the parliament and others in the Syriza party. Reportedly, the ANEL Party is also willing to sever ties with European creditors if required.

A Syriza MP said:

This goes well beyond the Left Platform. We are talking serious numbers. We are all horrified by the idea of surrender, and we will not allow ourselves to be throttled to death by European monetary union.

The Left’s militant views indicate that it will be very difficult for Alexis Tsipras, the prime minister of Greek, to get the support of his party for any agreement that doesn’t comply with the Syriza Party’s red lines for labor rights, debt reliefs, and pensions. Simultaneously, it makes his position stronger as ongoing talks with European creditors lead nowhere.

He recently urged the country’s creditors not to pressurize him more than needed as their

only criterion is an end to the ‘memoranda of servitude’ and an exit from the crisis. If Europe wants the division and the perpetuation of servitude, we will take the plunge and issue a ‘big no.’ We will fight for the dignity of the people and our sovereignty.

Currently, the residents of Greece are withdrawing money from the banks. As much as €400 million is being withdrawn from the banks at present A Syriza MP said that banks have to be nationalized and restrictions imposed on cash withdrawals.

The Syriza Party has made a very good study of the way Iceland defaulted. Late in 2008, the country had nationalized its large banks—Kaupthing, Glitnir, and Landsbanki. It defaulted to its Dutch and British creditors and eliminated all shareholders. The country then built its internal banking system from scratch and introduced complete capital control. It prosecuted certain executives and sacked entire boards of directors.

Although Iceland’s banks retained their old names, they continued as totally new institutions. The country not only recovered, but also displayed impressive financial growth.