Saturday, 23 May 2015

Greek Myths

"Pantomime villain" Wolfgang Schauble, the German Finance Minister, with German Chancellor Angela Merkel



A cheap title, I know. But how else to label this typically storied European drama? The Greek people voted for an anti-austerity government of the left in January, and European leaders have been grappling with this alien concept ever since. In secret, I imagine, they see it as the primest vulgarity. But of course nicety prevents them saying that. So how have European leaders chosen publicly to address their Greek "partners"?

Thus far the Syriza government in Greece has made every payment it promised. It has been honest about the fact that its upcoming June payments are simply unaffordable under current conditions. It has stated clearly its intention to put Greek salaries and pensions ahead of debt repayments. This is a fairly straightforward, practical commitment that Syriza leaders have made repeatedly. Little they have done has suggested uncertainty on this and other red-line issues. And indeed what creditor could reasonably expect otherwise?

Why, then, do magazines like the Economist so love to report Syriza's apparent flightiness and naivety. "They are living in cloud cuckoo land," one typically anonymous Brussells official lamented. Having damned them from the start, the Economist now relishes Syriza supposedly throwing their chance away. The stated problems are always inexperience and the supposed misplaced idealism of radicals: "A few years ago many of the men now in charge spent their time discussing the contradictions of capitalism over coffee and cigarettes. Few had ever run anything, let alone a government." This assumes experience of past Greek governments should somehow recommend you be allowed anywhere near a new one. 

European Central Bank head Mario Draghi - the humane face of the Troika - often pops up to remind us how unbearable the situation has become for Greece and how dangerous events are for the world economy. Draghi refuses to contemplate a Greek default, whilst reassuring us it is "up to Greek leaders to do as they want." Meanwhile, the world largely forgets it was his organisation that disabled the cash to finance Greek borrowing a few weeks after Syriza's election victory (leaving the state reliant on more expensive emergency liquidity). By what interpretive flourish can the central bank of a currency union opportunistically strangulating liquidity in its most troubled country be conceived as unbiased? And this at the very moment ECB liquidity became free to slosh around the rest of the deflationary eurozone in the form of much-belated quantitative easing. No such monetary laxity for Greece though: they were cut off from these funds, as they are forcibly cut off from markets by eurozone policy in general. The virtues, then, of a famously "rule-bound" system are somewhat undermined when those rules happen to be deeply unfair.

Syriza's leadership has occasionally pinned its hopes on German Chancellor Angela Merkel, who, it was hoped, might intervene like some benign monarch against her petty technocrat-courtesans and for the wronged Greeks. In pre-political life Finance Minister Yanis Varoufakis once hoped Merkel would look to her legacy as a Kohl-like unifier. Instead she spins homely truisms about compromise when she does not stay silent altogether. “It was a very friendly, constructive exchange, but it’s clear that there is still a lot of work to be done with the three institutions,” Merkel said recently of a "gate crashing" Alexis Tsipras, the Syriza Prime Minister. “France and Germany are always willing to give help…but the agreement must be sealed with the institutions and some very, very intensive work has to be done.” What intensive work can possibly be left? Syriza has ditched its promises on debt a write-off - the very thing that supposedly represented such a threat to European order. The effective remainder of its Thesaloniki program amounts to not re-firing 4,000 civil servants and continuing to make pension and wage payments at current rates. Perhaps it would be worth asking the partners if they could live on a Greek pension at the present rate, let alone following the cuts they are determined to inflict.

France and Italy, meanwhile, were meant to be left-of-centre allies. Here, I will admit, is evidence of Syriza's naivety: Europe is a continet that has long since proved that, on questions of basic human welfare, it speaks with one stern voice. Some things - an ever broadening spectrum, in fact - go "beyond left and right." Initially there were murmurs from French President Francois Hollande about Syriza's "unique responsibility." Not one to buck dwindling trends, however, Hollande fell quickly back into line. “We all have the same stance which is that Greece must stay in the eurozone," Hollande recently said. 

Here really is the rub. Greece must stay, as much for the total humiliation of Syriza the staying implies as any commitment to eurozone stability. For if anybody currently leading the eurozone was really committed to the Ordoliberal-lite that passes for common sense, the whole farce would have choked itself to death a long time ago. Instead their commitment is to the preservation of the peculiar domination European monetary union gives them. This, in the end, is all about politics.

The pantomime villain of the piece has to be German Finance Minister Wolfgang Schauble, a rabid and unreconstructed austerian who considers the thrift of Swabian housewives the model of macro-economic prudence. Schauble has the nasty whiff of a man totally unused to authority being questioned; the type to fight unexpectedly dirty when he sense the tables turning. The viperous, cloak-and-dagger air of negotiations - especially towards Yanis Varoufakis - seems to have come especially from him. The ennobled technocrats of European order may have a cruel streak, but few are so bullish with it. "Elections change nothing. There are rules," Schauble once said. Why, then, does Germany get to undercut the ECB inflation target year after year, while its trade surpluses run dangerously high? The truth is Schauble could not give a damn about any rules that do not suit his view of German success. Elections will indeed fail to change anything if he is allowed to continue punishing whole countries for the actions of his own banks. 

"The Greeks will have a hard time explaining this to their people," Schauble scoffed after the February deal, ever the diplomat. The problem, of course, was that this was a bridge agreement to buy the parties more time. A classic European fudge, energetically spun by both sides. The surprise was simply that Schauble was so blatantly using the deal not to sell compromise - or indeed an honourable defeat of his Greek "partners" - but as pure humiliation. If anyone is sanguine about Greece getting off his back, it is Schauble. But we should nevertheless conclude, given the tolerance of his antics by the Europeans, that his aggression fits well enough with the over all strategy.   

In response to Schauble's constant maneuvering, Vaorufakis deftly opted for a statement of the obvious: "[He] has told me I have lost the trust of the German government, I told him I never had it. I have the trust of the Greek people."  

The list of villains goes on. European Commission Jean-Claude Juncker warned the Greeks there could be "no democratic choice against the European treaties." Thus the default of position of European elites towards integration - past and present - was baldly stated. Later he remonstrated with them: there was more than one democracy in Europe to consider. Not if this career-long devotee not only of the high architecture of EU treaty-formation but of Luxembourg's power to make economies less equal and more secretive has anything to do with it. Juncker spent much of his tenure as Luxembourg's prime minister ensuring its became Europe's foremost tax haven, fit even for the likes of Bernie Madoff. Juncker is in no position to lecture anybody about the balance of democratic interests. Let us say, however, that if it is Greeks who are asked to bear the burden of extortion over debts they never asked for, their democratic voice might count for more than, say, the priggish, surplus-endowed Dutch.

The crux of the matter has something to do with surpluses. For it is neither European Union principle nor cold economic reality that repudiates Syriza's efforts. In a past age the Greek plan to cheapen government borrowing by the central bank; to encourage private activity via public investment; and to lessen the load of recovery through tax cuts would not simply have been acceptable but expected. To not follow such basic economic common sense would have been thought madness. But times change. 

The eurozone is a product of the peculiar position of Germany in the global economy, a position that combines both elements of subservience (to the dollar and to the whims of American consumption) and of dominance (in the form of the power of its exports, its low inflation and now long-term balance of trade surplus). In the end the German position forces German workers to bear the brunt of wage repression while private firms benefit from the lowering of transaction costs across the currency union and the boon to exports that is a gift not of productivity growth but of "internal devaluation." Germany systematically undercuts ECB inflation by repressing wages. The results are profits that can be retained and recycled into poisonous forms of credit, subsequently dumped on the periphery. French banks have long since been active in this too. Hence it was these banks that needed bailing come 2008; and they who stopped lending, drying up liquidity to vulnerable countries like Greece, who were now trapped in the single currency and could not devalue to regain competitiveness.

This arrangement - especially for the surplus countries of northern Europe, but also for France - has cemented the position of a very stable power bloc. German medium and big capital and its political wing - Merkel's Christian Democratic Union - have had an unprecedented run of stability and profitability. Financial capital, meanwhile, benefits from the toll taken on debtors by the deflationary eurozone and the strict rules it imposes on borrowers. Germany exports not only goods and services, but the German export-competitive model - a harrowing neo-mercantilism - to the periphery, whether they want it or not.

Syriza's position in the negotiations has faded not because of their inexperience, but because of a failed war of attrition in which the other side will not budge. Meanwhile, European leaders and their phalanxes of officials and media acolytes call for further compromise from the Greeks. However, it is not the Syriza position that is beset by contradictions. They have made a very simple moral and practical argument: the debt is unpayable under present conditions and they will not forcibly starve their own people. It is in fact the worldly-wise and supposedly disillusioned Europeans who are full of fantasy and, underlying this, contradiction. For in their efforts to export the model by which they have tightened their grip around Europe's throat, they are destroying their own "rules-based order." This along with countless lives. In the end, their attempts to keep power will be revealed for the class warfare they are.

They may yet strangle this challenge; but Europe will not return to normal.              

No comments:

Post a Comment