July 06, 2015
Kudos to Greece!

The outcome of the referendum in Greece seems to me an event for which the word remarkable is inadequate, but earth-shattering is too strong. Perhaps it will do simply to call it a turning point in modern history. Not one equal to the demise of the Soviet Union, true, but like that event the implications of the referendum are likely to be many, varied, and unpredictable, unrolling over a period of years or even decades. This is one of those times people look back on and say, Yes, that was the moment when the wave started to take shape. At such moments I feel a bit like an observer of the Big Bang, seeing in real time the making of distinctions, often by the barest of margins, that will determine the shape and behavior of the universe.

One major remaining question is what, precisely, Greek voters meant by their overwhelming No vote. In part this is because the ballot was framed, as you’ve no doubt read, in technical jargon and referred to an agreement whose offer had lapsed before the referendum took place. But this was not entirely an effort to obscure on the part of the Syriza government in Greece, who tied their own political success to that of the No side and thus had clear incentive to thumb the scales. Blame must be shared, perhaps even in a manner analogous to progressive taxation, by those who stood to profit from failure of negotiations with the current government in Greece, whether by forcing Syriza out of power to demonstrate that democratically elected governments must bow to the overarching authority of the troika or by valuing the assets of the wealthy over the lives of those impoverished by the accumulation of that very wealth. Issuing an ultimatum that includes the opponents’ red-line items is equivalent to walking out, but even less acceptable (much less admirable) when the issuers hold the power to cut off food and medicine to the other side’s backers. To do so in such circumstances seems a calculated ploy to force the opponents to walk out in protest and disgust, at which point the ultimatum-givers can give self-righteous statements at press conferences and decry the profligacy of those Southerners. That those opponents had the gall to subject the actual terms of the ultimatum to a national referendum was even a greater irritation, once again bringing the pesky problem of democracy into the discussion.

So the Greeks couldn’t really know exactly what Yes and No meant. In the end, Syriza’s view that the troika would have to renegotiate after a No vote gave Greece a stronger hand probably seemed more hopeful, or at least less permanently bleak, than the prospect of returning to the EU fold when that very embrace has caused the devastation of the Greek economy, with some commentators calling it equal to or worse than the Great Depression here in the US considering proportions of unemployed workers and so on. But there was support from specialists in the field as well, with Joseph Stiglitz and Paul Krugman, Nobel laureates both, recommending No votes with very cogent arguments.


Despite the muddiness of the situation with respect to implications, some things are clear. One is that the ball is now in the troika’s court: if there’s anything the Greeks have communicated, it’s that they want to stay in the euro but they won’t accept further austerity, the effect of which has been to move wealth from Greece north, to Germany in particular, rather than to make the economy healthy enough to grow again. Since there’s no existing mechanism for expelling member nations from the common currency, the European Central Bank will either provide liquidity for Greek banks immediately or essentially show Greece the exit. That possibility being unpalatable to even the most diehard debt-repayment hawks, it appears the cash will be forthcoming.

In the end, I’m betting that the biggest hurdle to an agreement is finding some sort of concession from Greece that will be sufficiently face-saving for the Germans, especially Angela Merkel, whose mentor Helmut Kohl was a strong supporter and booster of the EU. According to The Guardian, she:

has dominated the crisis management through her insistence on fiscal rigour and cuts despite a huge economic slump, soaring unemployment and the immiseration of most of Greek society.

“The failure of the euro means the failure of Merkelís [10-year] chancellorship,” said the cover of the latest issue of Der Spiegel, the German weekly. It depicted her sitting atop a Europe in ruins.

I’m not a fan of Merkelism, but it’s impossible not to be impressed with her ability to solve political problems she sets her mind to. I’m guessing she doesn’t want to be remembered as the leader, particularly the German leader, whose intransigence began the dissolution of the union her mentor championed. After all, a big part of the rationale for the EU was for Germany to demonstrate the coöperative spirit it manifested in the wake of the two world wars, turning the continent into interlocking pieces that could no longer afford to go to war against one another. Financial bullying, as Thorsten Veblen pointed out over a century ago, is the modern equivalent of a punch in the nose or an ambush at night; and if Germany bullies Greece out of the euro, I can’t see the common currency lasting more than ten years or so. The next downturn comes, and immediately everyone will brand the weakest economy “the next Greece”. The EU will no longer aim for “ever closer union” but will be exposed as a sophisticated pyramid scheme. And why would any country want to join, subjecting itself in principle to the same treatment Greece has just received?

According to Guardian reports “the hard left and the neo-fascist right” promoted No votes, while the “centre-left and centre-right” favored Yes. This would indicate that Syriza and its allies combined with the neo-Nazi Golden Dawn constitute nearly two-thirds of Greek voters, a surprising statistic that seems to have drawn little notice. In a context where the concerns of bankers were not paramount, this unsettling calculation would draw notice and perhaps induce action. But not here. In German, as has been noted many times over the past “eight days that shook a continent”, the word for debt is also the word for guilt. But this is not a moral issue in which the German banks are moral and the Greek government libertine. As Giles Fraser described the situation:

… corrupt German companies bribed corrupt Greek politicians to buy German weapons. And then a German chancellor presses for austerity on the Greek people to pay back the loans they took out (with German banks) at massive interest, for the weapons they bought off them in the first place. Is this an unfair characterisation? A bit. It wasnít just Germany. And there were many other factors at play in the escalation of Greek debt. But the postwar difference between the Germans and the Greeks is not the tired stereotype that the former are hardworking and the latter are lazy, but rather that, among other things, the Germans have, for obvious reasons, been restricted in their military spending. And they have benefited massively from that.

If the EU were a real union, it would attempt to help the weakest and most vulnerable, and would not inflict punishing austerity year after year simply to enforce a moral law. Merkel, the troika, and the EU have some hard choices to make. Here’s hoping they realize that democracy is not simply a means of achieving power for individuals, but is also a path to mass empowerment. Yes, that threatens the status quo, and thank goodness for that!

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Posted by Chuck Dupree at July 06, 2015 12:40 AM
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Yes, the Greeks didn't cave in in spite of all efforts by European bureaucrats to intimidate them! Maybe there still is hope ...

Posted by: Peter on July 6, 2015 5:37 AM
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