Among other issues, the year 2015 will continue to be marked in Europe by renewed tension between the European Union and its somewhat “problematic” Member State, Greece; tension of almost unprecedented nature, certainly long-lasting and with unpredictable consequences for everyone. At the political level, this is a tension that pits a relatively radical version of the left, which is dominant in the new Greek government, against conservative liberalism, which is little questioned by social democracy that is associated with power in Germany and Europe more generally, as a moderately influential minority partner.
To understand the roots and the nature of the now chronic crisis in these relationships, we must take into account seven important elements:
- Although sometimes it gets forgotten, despite its geographical position Greece is not a Western or Central European country but a country belonging to the Balkans, which was part of the Ottoman Empire for four centuries, and from which a large part of its historical heritage derives.
- In this context, the State, the legal and political order, and importantly the tax system, are hardly comparable with those of Western countries: corruption, cronyism, nepotism and bureaucracy are not obviously Greek specialties but in this case they clearly go to higher levels, and the economy is noticeably less developed.
- Accession to the European Community in 1981, despite substantial financial transfers in the context of regional and agricultural policy, has not fundamentally changed Greek realities in these aspects: it produced a general adoption of models of “Western” consumption without leading to any real development of the few industries, or the modernization of a State which remained highly inefficient and bureaucratic.
- This resulted in a massive debt crisis, which exploded in 2009 but should have been detected much earlier; and the erroneous acceptance of Greece within the single currency was collectively decided in 2001, ignoring this underlying reality.
- Adjustment and austerity policies imposed by the EU since then, in exchange for financial support, far from resolving Greece’s structural problems, actually exacerbated them, in part due to the failure to complete the imposed reforms, but particularly because these were mostly inadequate and recessionary, if not totally counterproductive, causing a devastating social crisis and a fall of 25% in GDP, while unemployment soared to over 25% and the debt not only was not reduced but continued to increase. Far from “saving Greece”, as was supposedly the objective, these loans scarcely even saved the foreign banks, which had given Greece credit without considering the risks involved, and furthermore, pushed Greece deeper into bankruptcy. These policies also most certainly resulted in a huge swindle for legitimate Greek interests, through ruinous privatizations and other aberrant decisions imposed by the troika, such as the financial collapse of the national health system.
- The construction errors in the common currency system bear a great deal of responsibility for these troubles, since without converging economic policies and financial transfers towards certain member states it was unlikely that this system could work effectively between countries at very unequal levels of productivity and international competitiveness.[1]
- A policy of appropriate reforms will be necessary if Greece wishes to keep the single currency and emerge from its long crisis. These reforms will be largely different from those hitherto imposed, and will also necessitate some solidarity-based transfers from the rest of the Eurozone to help the country build a more efficient economy. If Greece comes out of the euro, on the other hand, its meagre agricultural and industrial potential will bring little prospect of an “Argentina-style” recovery, while an all-out break with an excessively inflexible EU – exit from the Eurozone could also mean exit from the European Union –would certainly lead Greece, with its strategic location at the crossroads of major geopolitical tectonic plates, to seek new political and economic alliances with Russia, China and/or the Arab countries…
If in Germany and other Northern countries many believe that a Greek exit could, at the end of the day, consolidate the euro again, others think, probably more accurately, that such an eventuality would most likely mean the beginning of the end of the common currency. Although the direct dangers of “contagion” are fewer than in 2010 or 2012, the entire edifice could come toppling down, they say, because financial markets would quickly bet against the weakest countries and in favour of the strongest. It would only be a matter of time before another country fell by the wayside, and the domino effect would not end there. And finally, the shared responsibility for the Greek problem – construction errors in the common currency system, the erroneous admission of Greece to the euro, misgovernment in the country, irresponsible Northern European banks, and pathetic responses to the crisis that continues since 2009 – could end up bringing down the whole house of cards, maybe even the whole system of the European Union. Greece, the mythical and cultural foundation of the European world more than three thousand years ago, would also then have given rise to a kind of final tragedy: let us not forget that democracy, economics and philosophy, but also catastrophe, apocalypse and chaos are all notions that come from the land of Socrates and Pericles…
The outlook is therefore quite complicated and far from encouraging: the position of the new government in Athens, in favour of a radical change in policies, is up against a very rigid attitude on the part of Berlin, the engine of the “bail-out” machinery, which is not prepared to adopt a more flexible position, and others like the governments of Madrid and Lisbon which boast having swallowed the bitter pill with a success already seen on the horizon. All of them argue, not without justification, that the citizens of the other EU countries also have interests that deserve to be considered – and that a Greek default or restructuring of the debt would have major consequences for them[2] – but they usually omit that it was they themselves that nationalized Greek private debt to save the banks, instead of leaving them to pay for having irresponsibly increased their loans. This is something similar to what Domingo Cavallo did in Argentina in 1982, making life much more difficult for the governments that followed…
However, the voices against the austerity policies are getting louder and more numerous, not only of major economists such as Krugman and Stiglitz, or trade union spokesmen etc., who have spent years criticizing what they rightly see as the blindness of official positions of the EU and its hawks.[3] The latter, however, recently seem to be accompanied by more flexible gestures within crucial institutions such as the European Commission and the European Parliament. And if Obama himself advises the European Union to be flexible on this issue, it is likely that he is more motivated by the fear of seeing the EU sunk in its own contradictions than a desire to further weaken his traditional European ally…
Will we soon be witnessing a change in the neoliberal and conformist mainstream consensus that maintains Margaret Thatcher’s old adage: “there is no alternative”, against all logic and the experience of past decades that led inexorably to the crisis of recent years? One would hope so, with a certain degree of optimism. As they say, you can lie a long time to one person, or for some time to many people, but it is not so easy to make a lot of people believe in lies for a long time.
For governments today, the case of Podemos is particularly worrying, as it could, according to opinion polls, lead to a government with similar inclination to the Greek one in a country of much greater weight. For that reason also it is important to them to discredit the new Greek leadership and not give it any real opportunity to launch a policy different from the present one, which could au contraire well prove the extraordinary scale of the troika’s fiasco, providing proof that alternatives do, in fact, exist…
But even quite liberal commentaries emphasize that the government of Syriza could bring a new opportunity for a policy of rational reforms and the establishment in the Eurozone of a new system, which is more viable, both politically and economically. And even in newspapers as little anti-liberal as the City of London daily, one finds opinions such as “… the first Eurozone government with a democratic mandate to oppose a totally dysfunctional policy that has proven to be economically illiterate and politically unsustainable“.[4]
Following the failure of this policy, which at this point is no longer debatable, the new prime minister, Alexis Tsipras, and his finance minister, Yanis Varoufakis, appear at the same time pragmatic and determined -as far as possible- not to give in over what is fundamental. What they propose is a kind of New Deal for the Greek debt, ending the blind austerity –socially very unfair, economically disastrous, and politically untenable– imposed on the country for the sake of a reform policy that may truly pull the country out of recession and re-establish its ability to repay its massive debts gradually and within its possibilities. Since this is very unusual in Europe today, it should be noted that Tsipras is determined not to betray his electoral promises and that Varoufakis has been rated by independent observers as an outstanding, heterodox economist; but will it be possible, in the Europe of today, to govern against the banks and their agents?
The coming months will show whether finally a new workable compromise will be achievable between so very clearly opposite positions, overcoming the deep mistrust and animosities that have grown enormously since 2009. Far from bringing peoples together, the euro has in fact distanced them significantly, especially across a North-South divide, which was thought to have been overcome. Valéry Giscard d’Estaing who, more than 35 years ago, as President of France, played an important role in the admission of Greece to the Community, now thinks that the country should definitely leave the euro, because with the single currency it will never reach a sufficient level of competitiveness. Others believe that the EU itself should give up the euro to save itself – or what perhaps is the best idea – introduce a Northern euro and a Southern euro to reduce the enormous competitive pressure felt by countries in the South.
Many warn that leaving the euro would be catastrophic for Greece and –here there is major divergence– would cause perhaps fatal tensions for the Eurozone itself, since it would have proved its non-irreversible nature and therefore its failure. Clearly, apart from favouring tourism, which is an important factor in the Greek economy, a devalued currency would bring more problems than it would solve for this devastated country, at least in the short and medium term, given that Greece has no significant agricultural potential nor significant competitive industries, even with a strong exchange rate advantage. All in all, this is a situation far removed from that of Argentina in 2002.[5] But if the rigidity of the blind austerity Talibans continues, with no step towards reasonable flexibility, the Greeks may well end up preferring, as the Germans say, “an end with horror” to a “horror without end”…
We also have to see the much broader, complex and extremely worrying general context. The European Union is facing a whole series of existential challenges, from the war in Ukraine to the turmoil in the Arab world; from immigration and the rise of the anti-European populist right to the stagnation and mass unemployment that lasts for years and from which no way out is apparent, as well as the possible traumatic abandonment of the EU by Britain, and not forgetting the also difficult challenges of ensuring convenient cooperation ties with China and the United States. If the Union does not succeed in finally drawing the lessons from its repeated and disastrous failures with Greece, proposing not so much “more Europe” but more than anything a very different “other Europe”, there will be little hope for a bright future. This future was described a decade ago, before the avalanche of new turmoil, with clarity and sympathy, even if too optimistically, by the distinguished American observer, Jeremy Rifkin, as a “European dream”, significantly preferable to, and more efficient in many respects than the old “American dream”…
[1] Undoubtedly some kind of Finanzausgleich (financial compensation), as exists in Germany between federal states with different productivity levels, would be necessary. (Incidentally, this is also increasingly challenged nowadays by strong länder such as Bavaria.) The regional and cohesion funds should, in principle, serve precisely for this purpose, but here again there is the problem of good use of these.
[2] Thus, in Germany there is talk of nearly a thousand euros per capita in the case of total loss, and in Spain of a total of about €26 billion, and at the level of Eurogroup countries of €600 per person.
[3] For example: Steffen LEHNDORFF (Ed.) Divisive integration. The triumph of failed ideas in Europe – revisited, European Trade Union Institute, Brussels, 2014.
[4] Wolfgang MÜNCHAU – Athens must stand firm against the Eurozone‘s failed policies, Financial Times, 16-2-15.
[5] Author’s V. Greece and its Euro nightmare – what are the lessons from Argentina? Evropaiki Ekfrassi, Athens, 4th Q. 2011, and Argentina, una década después: lecciones para Europa, Alternativas Económicas No. 2, April, 2013, Barcelona.
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Viktor Sukup is analyst on European and international affairs, author of several books including Europa y la globalización (Buenos Aires, 1998), visiting lecturer at the University of Buenos Aires and former public servant at the European Commission.
