The Real Case for Greece

Published by Policy Network, 22 April 2015. 

In coalition with the far right and propagating a false notion of national victimhood, Syriza is pushing an anti-reform agenda and missing the opportunity to promote progressive change in the eurozone

 OXFORD - Syriza advocates an end to austerity, but is not an anti-austerity party. When it was a small protest party, its main message was that of anti-‘capitalist’ and anti-globalisation resistance.

Its basic documents were replete with Marxist denunciations of ‘capital’ and calls for class struggle. They presented a dystopian worldview which was sceptical of European governments and institutions and rejected the single market. Markets and competitiveness were things endorsed only by ‘neoliberals’.

Pavlos_Policy_Network.PNGSince 2010, Syriza’s positions have hardened into a story of national victimhood. This narrative is practically indistinguishable from that of the far-right parties and from that of the old-style Communist party. It suggests that the cause of Greece’s crisis was not the Greek government’s disastrous deficits of 2004-09, but the hated ‘memorandum’ of austerity, which was – they say – imposed on Greece by conspiring European elites in order to crush the Greek people and plunder its assets through ‘barbaric’ neoliberalism (something which these ‘elites’ apparently do all over Europe). This is why Syriza chose as its government partner the far-right Independent Greeks party, with whom it shares these ideas, and rejected the new pro-European party To Potami (which won more seats in parliament than the ‘Independent Greeks’). The new government often now speaks of Europe as the ‘enemy’, with which Greece is at ‘war’.

For Syriza and the Independent Greeks the Greek political parties that agreed the two bailout deals were not saving Greece from financial meltdown. Since exit from the eurozone is not really possible, they argue, the threat of financial meltdown was only a fig leaf. Those who signed the ‘memorandum’ were thus at best ‘neoliberals’ and at worst Germany’s paid servants, traitors and quislings, hence Syriza’s name for them is ‘Merkelists’. For this worldview, Greece’s partners were not helping Greece by lending it €240bn at a moment of mortal danger, but were instead taking the opportunity to conduct a ‘neoliberal experiment’. When Syriza took power in January, Alexis Tsipras said in his victory speech that democracy had been “restored”.

This vitriolic rhetoric is not entirely of Syriza’s own creation. It has been ever present in the influential private television channels, from which most people receive their news. Greek private television is unregulated and controlled by business oligarchs. The public is suspicious of them, but watches them nevertheless. Because many channels exist only as a source of influence and are losing money, they do not want to pay for serious news programmes. So they use the denunciation of foreigners as a way to fill air time with cheap sensationalism. The more outrageous the claim, the better it is for ratings.

As a consequence, these television shows cultivate fear, anger and hatred, without any actual grounding on the way Europe actually works. This intellectual undercurrent of paranoia is in my view one of the reasons why Greek public opinion is often so much at odds with the European mainstream. It is also why so many populist parties do well. The former prime minister, Antonis Samaras, borrowed exactly these same themes when he vociferously opposed the bailouts from 2010 to 2011 against European “error”, thus giving the idea of the ‘barbaric’ memorandum whatever credibility his own party carried at the time.

As a result, many Greeks still do not understand how the eurozone works. Syriza and its allies never mention the fact that the treaties impose fiscal responsibility on all member states; that former prime minister Kostas Karamanlis flouted the stability and growth pact; that the commission has the task of monitoring everyone; that the European Central Bank is prohibited from lending to governments by the treaties or that the inflation target is two per cent and requires strict rules about deficits. Greece’s austerity is presented instead as an invention of the troika and the ‘memorandum’, secured only through trickery and blackmail.

This narrative of victimhood has persistently undermined the case for structural reforms. Such reforms could boost competitiveness and restore Greece’s position as an equal member of the eurozone, but many Greeks do not believe in them. They doubt that by reforming the civil service, bringing about tax reform, strengthening investor protection, eliminating corruption and opening up the economy Greece would become a richer and better place. They fear that these reforms are ‘neoliberal’ and that they will work only for the benefit of foreigners and the already rich. This fear is understandable but entirely misplaced, because openness will have precisely the opposite effect: it will weaken the stranglehold of special interests and oligarchs in the economy. Yet, this fear is being used by the public sector trade unions and by the powerful professional groups – now fully aligned with Syriza – as an effective way to block any attempt to remove their privileges (eg in the state funding of their pensions or in their tax liabilities). Syriza is not the anti-austerity party. It is the anti-reform party.

It is a tragically missed opportunity. A progressive new government in Greece could have made a powerful case for change for the whole of Europe. It could have done so, if it addressed the real problems with the eurozone’s design and architecture. If it said that all member states of the eurozone are responsible for the eurozone’s original architecture, since they all approved its creation. But the project has been a dismal failure, especially for the peripheral and smaller economies, which are now going through painful adjustment. In the past five years five member states have needed assistance of one kind or another (Greece, Portugal, Ireland, Spain and Cyprus) and others are waiting in the wings. This shows that the problem is systemic, not particular to each one of them.

The problems are well known. The eurozone lacks a common fiscal power and it also lacks the automatic stabilisers that other currency unions apply among their various regions, such as federal unemployment and housing benefits, shared healthcare costs, the pooling of bank risks and deposit insurance and the availability of a lender of last resort. The eurozone also lacks, mostly due to language and regulatory barriers, the easy movement of workers across state borders seen in the United States.

The eurozone is thus a highly unfair economic and monetary union. It exposes its member states to great flows of finance and trade that can easily destabilise them. It then magnifies disproportionately the consequences of failure, by preventing states from using monetary or fiscal policy for a soft landing when they need it.

The winners, by contrast, have enjoyed extraordinary benefits. Germany has enjoyed low interest rates and a fixed exchange rate between itself and its major European markets, with whom it trades freely because of the institutions of the internal market. This means that its export boom has not been offset by a rise in its currency. If Germany had been outside the euro, currency appreciation would have hurt its exports dramatically. But this cannot happen inside the eurozone.

Germany’s political class seems happily oblivious to the unfairness of the eurozone. It refuses to play its part in correcting the trade imbalances with its partners and appears committed to the fiction that fair competition exists between firms in Germany and firms in the periphery that have no access to banking finance nor the economic or political stability that could bring them any investment. The German constitutional court has even declared (in its 2014 outright monetary transactions judgment) that ignoring the consequences of Germany’s policies outside Germany is some kind of ‘constitutional duty’. It has dressed up conservative policy as legal doctrine.

The real case for Greece is a claim for justice in the eurozone. The legacy of the euro in many of the peripheral states is economic implosion, rising inequality, widespread corruption and dramatic loss of trust in democracy and the EU. This is not the result of isolated domestic failures, although these are real enough. It is also a result of collective decision-making that completely misjudged the eurozone’s design and its possible effects. We have created a trade and monetary union where the risks, burdens and benefits of our cooperation are distributed very unevenly among members. This collective problem can only have a collective solution.

A progressive Greek government must speak for the need to combine efficient markets with social justice in a newly designed euro area, with many more institutions of burden sharing, more emphasis on jobs, stronger support for the poor and much stronger institutions of democratic accountability. Relaxing austerity for the benefit of working people and the unemployed throughout Europe is not just a matter of sound economics. It is also an urgent matter of justice. Syriza’s empty rhetoric is diverting attention from this simple truth. It is ignoring the most powerful argument for change.

Pavlos Eleftheriadis is associate professor of law and a fellow of Mansfield College at the University of Oxford and a barrister specialising in EU law in London. He was a candidate with the new party To Potami in the Greek elections of January 2015. This article was first published in Berliner Republik