Victims of austerity and their allies around the world may be placing too much hope in Syriza. Despite the demonization of the Greek party as “radical left” in the mainstream press, and the blistering reaction from the German government to its economically sound observations about the need to rethink bailouts, Syriza is no revolution-in-the-making. But because the frustration with and the human costs of the Troika’s destructive policies only continue to mount, the opposition is desperate for a champion, or at least a focal point. Syriza has thus increasingly become an object of projection of both its allies and its opponents. And that seems to be leading to some misreadings of the state of play.
Mind you, the situation is fluid, and Syriza is trying to renegotiate the shape of the table, that is the very framework under which the bailouts are conducted. Needless to say, its Eurozone paymasters aren’t prepared to go back to first principles despite the abject failure of the bailouts (save in rescuing European banks and shifting the costs onto citizens).
Moreover as we’ve outlined before, Syriza is operating against numerous constraints. First is an overly short timeframe for achieving a major shift in the foundations for negotiating. Greece has only until the end of February to secure additional bailout funds. It was conceivable that that drop dead date could have been pushed back (the rest of the Northern bloc had been inclined to go a full four months longer, which would have made that deadline roughly coincide with when Greece had a chunk of its debt due in June. Failure to secure a deal by then would produce a default on the maturing debt obligation). There have been cases where negotiators have managed to get the upper hand despite the odds; one of the most famous historical examples was the so-called father of diplomacy, Talleyrand at the Congress of Vienna in 1814, where he singlehandly outmaneuvered the rest of the Great Powers and among other things enabled France to retain her pre-Napoleonic war borders. But this was one exceptional individual pitted against the same negotiators over a protracted period of time, where personal talent, a past history with some of his interlocutors, particularly Metternich, and a keen eye for national interests enabled Talleyrand to overcome the considerable disadvantages of his position. Greece is in a vastly worse position than even a defeated France in 1814, and the gameboard is so diffuse and complex that even if Greece could manage similar negotiation ju-jitsu in narrower confines, the forces arrayed against it have long-standing relations with each other and are less susceptible to being played off against each other. And the initial Greek show of spine has stiffened German and Finnish resistance, leaving Greece with reduced odds of pushing out the critical end-of-February drop dead date.
Second is that the Germans believe that contagion risk is lower than in 2012. Thus while they continue to say they’d prefer to have Greece stay in the Eurozone, they are not prepared to brook what looks to them like defiance. Finance Minister Yanis Varoufakis said that Troika bailout monitors were not welcome, but the Greeks fully expected to continue to negotiate with the Troika:
Frances Coppola provide a fine analysis of the exchange. But the pushback was fierce. Notice the focus on the biggest bone of contention, the matter of reducing hte principal amount of debt. From the Financial Times:
Patience for Greece is running particularly thin in Germany. Chancellor Angela Merkel on Saturday ruled out the possibility of debt forgiveness for Greece’s new government, insisting that the indebted country should abide by the terms of its bailout arrangement. Speaking to the Hamburger Abendblatt newspaper, Ms Merkel said she did “not envisage fresh debt cancellation” for Greece.
Wolfgang Schäuble, Germany’s finance minister, also warned Athens on Friday against trying to “blackmail” Germany with its financial demands…
Without an extension of its EU bailout, which expires at the end of February, Greece’s banks could be cut off from ECB funding…
Erkki Liikanen, an ECB governing council member, said that the ECB would cut any further lending to Greek banks if a deal was not reached by the deadline, adding: “Some kind of solution must be found, otherwise we can’t continue lending.”…
Jeroen Dijsselbloem, chairman of the eurogroup of eurozone finance ministers, rejected the call by Athens for an international conference that would consider writing off part of Greece’s €315bn of debt, which last year amounted to 175 per cent of national output.
Tsipras beat a retreat, effectively walking back Varoufakis’ position and making conciliatory phone calls. As Ilargi put it:
Greek Finance Minister Varoufakis declares in front of a camera that Greece ever paying back its full debt is akin to the Santa Claus story. Less than 24 hours later, PM Tsipras says of course Greece will pay back its debt. Varoufakis lashed out about Syriza not being consulted on EU sanctions against Russia, but shortly after their own Foreign Minister was reported to have said he reached a satisfactory compromise on the sanctions with his EU peers.
Greece also hired Lazard to renegotiate its debt, another conservative, authority-reassuring move.
The reality is that Syriza was never as radical as many hoped. Our Ned Ludd has repeatedly pointed out that Syriza is dominated by moderates; even the feisty Varoufakis goes to great lengths to temper his acute observations about how disastrous and unworkable austerity is with emphasis of his sincere belief of the importance of the Eurozone project and the viability of getting it on track. Jacobin points out that Syriza does not have as free a hand as foreign boosters might believe, and its gains in the election came in the more conservative towns and smaller cities, and much less so in the more liberal cities of Athens and Thessaloniki.
The stealth advantage that Syriza has is that the opposition to austerity doesn’t sit just with its victims in periphery countries; quite a few Eurozone officials are deeply frustrated with the German/Northern bloc intransigence, and are deeply concerned about widening political fractures. As Ambrose Evans-Pritchard writes:
Giles Merritt, head of the Brussels think-tank Friends of Europe…said the Syriza revolt has exposed the political failure of EMU crisis strategy with refreshing clarity. “People in Brussels are losing patience with Germany. The real issue at hand is how we are going to rescue the eurozone from economic depression caused by five years of misguided austerity. Tspiras may find that he has more friends in this city than he thinks,” he said.
“We cannot possibly risk Grexit at this stage and trigger a fresh eurozone crisis, so the Commission will soon waiver. Jyrki Katainen is toeing the line for now but he is not a fool. It is Greece that really has the whip hand, and the task is to find a face-saving formula for Germany,” he said.
Prof Ashoka Mody, a former IMF bail-out chief in Europe and now at Princeton University, said hints by ECB members that they may pull the plug on Greek banks are “extremely irresponsible” and beyond the proper authority of these officials.
“They are supposed to be the guardians of financial stability. I have never heard of such outlandish threats before. The EU authorities have no idea what the consequences of Grexit might be, or what unknown tremors might hit the global payments system. They are playing with fire,” he saidThe media focused on a large anti-auserity rally in Spain that drew an estimated 100,000. The only problem is that similar large-scale protests in Spain and Portugal in 2012, when conditions were more fraught, failed to move the German officialdom. What might change their posture, say a big uptick in the anti-Eurozone parties in the Spanish regional elections, won’t come until April, too late to provide relief to the besieged Greeks.
An estimated 100,000 joined an anti-austerity rally in Spain, but large and widespread protests in Spain and Portugal in 2012 failed to move the Germans. If the regional elections in Spain in April show a big shift towards anti-Eurozone parties, that could be a wake-up call to the northern bloc, but that will likely come too late to provide relief to Syriza.
The big problem is that German leadership has come to believe deeply and viscerally that Greece and other borrowers need to be punished for their sins, when the rescues of the periphery countries were stealth bailouts of French and German banks, who have never paid for their considerable misdeeds. It’s particularly perverse since Germany has managed to forget the disastrous consequences of trying to make them meet utterly unrealistic World War I reparations. The Germans also see these negotiations in strictly economic terms. They are convince that they can dictate to Greece because its failure to comply means they can cut off ECB support to its banks, assuring a banking system collapse. But the Germans ignore at their considerable peril that the potential for contagion has moved out of the economic realm into the political, and that risk is elevated. From the Financial Times:
Until last week European leaders thought their worst nightmare was that Syriza should triumph in the Greek general elections. Now that the leftwing populist party is in government, they worry instead about what will happen if it fails…
Syriza’s victory stood not for a repudiation of Europe, but for a redefinition of it. The moral reasoning that lay behind the Greek result began from a simple insight: economic trauma of the severity that Greece has suffered is destroying society. With youth unemployment above 50 per cent, an entire generation is being consigned to the scrap heap. At the same time, the notion of the common good is being sacrificed through forced sell-offs of state-owned lands as well as businesses, with the prospect of ecological destruction as a result. This view of austerity and its impact united classes and ages, town and country.
You can understand why people would take such a stance across debtor Europe — although this is apparently beyond the comprehension of much of the creditor north. Yet the lenders should take note, because this may be the last roll of the dice. It is tempting to write the Greeks off as irresponsible whingers and show them the door. Except that others may then follow them out of the euro, or even out of the EU itself, leaving Europe somewhere close to where it was when the entire integration project began more than half a century ago.
This time, things will be worse. Worse in part because institutionalised co-operation is needed more than ever, now that globalisation has forced peoples together and the room for going it alone has vanished. Worse, too, because half a century ago people had a vivid memory of what fascism can lead to, whereas now we seem to have forgotten.
If the Greek vote was for solidarity, it displayed a virtue that too much of the continent has lost sight of. German or Finnish voters may feel they have shown enough solidarity with the Greeks. But strictly speaking they have mostly shown solidarity with their own financial institutions — which would have been among the biggest losers if Greece had not been bailed out — and that is another thing entirely.
What is the moral vision the creditor nations propose? Frugality is not a policy. And if finance is to serve Europe rather than run it, a notion of the common good needs to be restored. The alternative is an increasingly fractious continent. What Europe risks if it does not change course is the further erosion of the political centre and the rise of rightwing extremism — and perhaps the disintegration of the union itself.
Comparisons to 1914 are troublingly apt. As Karl Polanyi stressed, a century of stability and relative peace ended because the institutional framework was unable to accommodate the underlying contradiction of making a market economy the underlying organizing force of society:
Our thesis is that the idea of a self-regulating market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society. It would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way. It was this dilemma which forced the development of the market system into a definite groove and finally disrupted the social organization based upon it.
The devastation visited upon Greece provides vivid proof of Polanyi’s views. In 1944, he regarded the idea that the market economy had failed as so obvious that new social and political structures would be put in place once the war was over. Instead, the old order was largely reconstituted, with better social safety nets to take the hard edge off the merciless operation of a “free market”. But as Polyani depicted for the century that ended in 1914, the underlying social stresses produced a traumatic political rupture. And yet again, market logic dominated, stripping away the provisions meant to insulate citizens and communities from the brutalizing effects of an untrammeled market. Germany and its northern allies are locked in their belief in commercial logic over broader social concerns. They may be about to reap a whirlwind.