Exclusive: Greek voters rebelled against Germany and the dominant powers of Europe by rejecting demands for more austerity, but the Greek resistance also is resonating across the Continent, emboldening other hard-pressed countries tired of Depression-like conditions, says Andrés Cala.
By Andrés Cala
Despite an unprecedented fear campaign, brave Greeks plunged the European Union into a moment of reckoning with a deafening “no” to “bullying,” “terrorism,” and “humiliation” or more precisely, 61 percent voted against and 39 percent for creditors’ terms that would have condemned not just Greeks, but millions of other Europeans to another decade of austerity and hardship.
“You made a very brave choice,” Prime Minister Alexis Tsipras said in a televised address after the referendum on Sunday. He called the mandate one that will “strengthen our negotiating position to seek a viable solution,” not a “rupture with Europe.”
Greek Flag
But whatever Tsipras’s hopes and intent, the Greek referendum already has reverberated across the Continent inspiring many other Europeans tired of the German-led austerity policies that followed the financial crash of 2007-2008. Already the people of struggling economies, such as Spain and Portugal, are seeing the Greek resistance as an example to follow.
Emboldened, too, are the people of France and Italy, who are not in as desperate shape as Spain and Portugal, but are also chafing under the rigid spending constraints imposed by Germany and other leaders of northern European countries. Across the so-called periphery of Europe from Greece through Spain and Portugal to Ireland more and more voters are defying establishment leaders who accept austerity as the only economic recipe.
And like Greece, this new wave of voters will likely make itself heard in upcoming elections, transforming the next year or so into a “do or die” moment for the European project. It’s not that the European Union will split up entirely, but it risks becoming a club where countries increasingly opt out to seek their own well-being.
While disintegration is a possibility, Greece’s left-wing Syriza party and other southern European political newcomers don’t want the EU to shatter or the euro zone to shrink. But they are demanding a different future than the current upstairs-downstairs arrangement with a relatively well-to-do north and a down-in-the-mouth south.
In that sense, the Greek vote was a cry of anger and frustration over Europe’s economic disparities, which were smoothed over during the easy-money days before 2007 but reemerged with sharp, ragged edges during the global recession that followed the Wall Street crash.
Neoliberal Technocrats
The response of the EU’s neoliberal technocrats was harsh austerity to pay down debt, a policy that tended to benefit the stronger economies, such as Germany, at the expense of weaker ones, like Greece. Across Europe, the new divide put creditor nations on one side and debtor nations on the other.
Indeed, today’s emerging existential question for the EU was essentially German engineered. It was Berlin that insisted on the austerity-heavy response to protect its national interests. Periphery countries were coerced to accept unenviable and unviable terms, which slowed economic growth by forcing countries to cut their deficits at the expense of public spending, dismantling welfare states, and sending unemployment to record highs unprecedented since the Second World War.
With no spare money or jobs, southern European economies entered a vicious cycle of economic contraction and more debt, without any reprieve for the hardest-hit people. It wasn’t, as Germany proposed, a matter of tightening the belt temporarily.
Instead, even as economic growth returned through headline macroeconomic figures, the situation for the majority of Europeans has worsened. Unemployment has become a structural problem that the Continent will have to deal with for generations, further eroding public finances and tax revenue, all while corporate profits improve.
The Greek example, while perhaps the most extreme, spoke for much of the Continent. For five years the country has signed onto austerity-based agreements with Europe and the International Monetary Fund. But those schemes have not worked. In the process, Greece lost a quarter of its economy, a quarter of its population is unemployed (including half of young Greeks), and its debt has only climbed to about 180 percent of its gross domestic product.
As austerity failed to heal the sick economies of Europe, establishment leaders of the weaker nations who had agreed to swallow the harsh medicine of austerity lost credibility and support. The suffering populations began looking to more radical alternatives, such as Tsipras’s new Syriza party in Greece.
The latest showdown started in January when Syriza came to power with a democratic mandate to defy the austerity imposed by the “troika” composed of the European Commission, the European Central Bank and the International Monetary Fund. The “troika” refused multiple offers made by the Greek government that involved restructuring the debt and providing access to fresh money to slowly spur economic growth, enabling the country to pay back its debts over time, albeit a long time.
Instead, the troika insisted that Greece honor conditions that would involve ultimately more austerity. Syriza’s government said the plan was not viable in part because it would expire in five months and the cycle of negotiations would have to be resumed. Greek counteroffers involved concessions as well but mostly targeting the wealthy, while sparing the already drained population.
Austerity v. Growth
Greek Finance Minister Yanis Varufakis explained, “Greeks want to pay back our debts. But we can’t if the debt just keeps increasing while income keeps shrinking. To pay we first need to fix the economy and the way to do it is to end austerity, for the simple reasons that austerity reduces our income, which is not just ineffective but detrimental. That’s why we need to restructure our debt.”
Varufakis added, “We can’t accept what’s related to financing and debt for the simple reason that it’s not supported mathematically. If we accepted it, in a few weeks that program would prove itself absolutely unviable.”
Ironically, an IMF assessment, which European powers had sought to delay, was published last week confirming Syriza’s assessment of the Greek predicament. Since the 2010 package, which Greece was seeking to renegotiate, the country has been in recession with the economy contracting three times more than the IMF had expected.
The Greek debt is “unsustainable,” the IMF acknowledged, adding that Greece would need 50 billion euros (or about $55 billion) in fresh funds over the next three years, on top of restructuring its debt. That was pretty much in line with Greek government demands.
Still, Germany and the EU bureaucrats thought they could crush the upstarts by virtually shutting down Greek banks and pressuring the Greek voters to repudiate Tsipras and Syriza in Sunday’s referendum. The German axis backed by business and other mainstream media unleashed a propaganda campaign to paint the Greek government as radical and irresponsible.
But the Greek voters instead voted overwhelmingly to support Tsipras and Syriza, shaking the EU structure to its foundation.
“The campaign of bullying, the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office, was a shameful moment in a Europe that claims to believe in democratic principles,” wrote Nobel economy laureate and New York Times columnist Paul Krugman. “It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.”
He went on to describe “Europe’s self-styled technocrats” as “medieval doctors who insisted on bleeding their patients, and when their treatment made the patients sicker, demanded even more bleeding.” The European answer would not have worked, he said, because “austerity probably shrinks the economy faster than it reduces debt, so that all the suffering serves no purpose.”
A Growing Resistance
The troika’s hardball strategy with Greece may have emboldened other struggling European countries to follow the Greek example. Spain and Portugal are up next with Italy and France to eventually follow along with Ireland and Eastern European countries. Russia and China may get into the game, too, by offering more favorable economic terms and cooperating on major infrastructure projects.
But there is little sign that Germany, as Europe’s principal creditor nation, will accept write-downs that would cost its own taxpayers money. Though Tsipras is presenting a new offer to the 19-member euro-zone leaders on Tuesday, Germany has already refused to restructure the debt or support a new rescue.
As for Greece, in the near term at least, the economic situation is bound to worsen. Greek banks, which imposed capital controls after the ECB last week cut their emergency funding, will run out of cash within days without a new deal. While a compromise is still possible, a painful “Grexit” or Greek exit from the use of the euro currency could be just days away if Greece’s European partners choose to ignore the democratic will of the Greek voters.
Without emergency ECB support, Greece will have no choice but to fall back on another currency, the previous drachma presumably. “Grexit” will then be complete. The currency will be devalued and the economy will suffer for years, but at least under its own terms.
“There is now a strong argument that Greek exit from the euro is the best of bad options,” wrote Krugman. “If they can’t make a go of Europe’s common currency, it’s because that common currency offers no respite for countries in trouble.”
Varufakis, who resigned as Finance Minister on Monday to remove himself as an irritation to the EU technocrats and thus improve chances for a compromise, said there is no choice but to broker a deal, adding: “There is too much at stake, for Greece and Europe, that’s why I’m certain.” Many in Europe agree, including French and Italian leaders, but without Germany there is little that can be done.
Meanwhile, the political fallout in Europe is just beginning. The Syriza-like party in Spain has become a serious contender, tied in third place with the two other traditional parties. No formal anti-establishment party has risen in Portugal, but the Socialist opposition, which is almost sure to win the upcoming election, promises to stand against austerity.
And it will not stop there. If Germany and its northern European allies don’t offer a respite, the anti-austerity political contagion will spread across the Continent because a new generation is slowly taking over and it wants a brighter future than the drab predictability of never-ending sacrifice. Old technocrats will eventually be replaced.
Greeks have defied the attempts to repress their democratic will. Welcome to the new Europe, for better or worse.
Andrés Cala is an award-winning Colombian journalist, columnist and analyst specializing in geopolitics and energy. He is the lead author of America’s Blind Spot: Chávez, Energy, and US Security.
Meanwhile, in other news, The BRICS summit meeting is going on right now, in Ufa, Russia, wherein the sane, other half of the World, are meeting & co-ordinating on space, rail, and other infrastructure projects of common, universal interest to The People & life-on-Earth. We’ll probably hear nothing about this, from our “news” sources. I have to read about it on the LaRouchePac site…it seems now-a-days we only get real news from “discredited” sources…typical behavior in the Latter Days of the mad, Western Empire…our “Baghdad Bob” moment has arrived, apparently.
The “bleeding†of Greece through ill-conceived austerity measures has led to its GDP shrinking by 25 percent over the past five years; 25 percent unemployment and approximately 50 percent joblessness among its young people.
Americans should take no comfort in the fact that we’re separated by an ocean from the Eurozone. The turmoil happening there has caused a spike in the U.S. dollar which is making U.S. goods more expensive in foreign markets and thus making U.S. exports less competitive. That is now being translated into lower profits at major U.S. based corporations, forcing a reassessment of whether the U.S. stock market is overpriced based on forward earnings potential.
If U.S. bank stocks catch the contagion from downdrafts in Europe, it could also seriously tie the hands of the Federal Reserve to carry out its planned hike in interest rates. It could also have the potential for the Fed to demand more capital reserves from U.S. banks.
No one should underestimate the ripples coming across the waters from Europe.
Global Banks Tank: What Part of Financial Stability Doesn’t Germany Understand?
By Pam Martens and Russ Martens
http://wallstreetonparade.com/2015/07/global-banks-tank-what-part-of-financial-stability-doesnt-germany-understand/
People don’t generally realize it yet, but the Greek “no” vote is the shot heard ’round the World. The Revolution has begun, and “Matron Athena” has once again guided Her Greek champions to the path towards Victory, once again defending Her children and the Fruits of Civilization.
“It wasn’t, as Germany proposed, a matter of tightening the belt temporarily.” That startled me, because you made it sound like you were going to give Merkel et al a pass. But you came around. You could have just mentioned her cold respond to George Papandreou in 2010, which others (like Aditya Chakrabortty) have reminded us of (http://bit.ly/1NDQ2LK). He begged her to not force austerity on Greece and she essentially told him that she wanted to make an example of Greece.
As others, like Chomsky, have also noted, all of this chaos isn’t about different views of what kind of economics works. It’s class warfare. And Merkel’s, and her class’s, words and behavior show very clearly that we are dealing with a gang whose leaders are vicious. Why would any country, caring about it’s development and reputation, want to associate with such a gang? The EU was never democratic, as Joseph Stiglitz pointed out. I don’t know why progressives are not talking about this in those terms, because I think that that’s the right way to approach the whole situation. Would the difficulty of leaving the corrupt EU (which doesn’t mind Nazis running around killing and torturing people right now!!) be any greater than the difficulty that would attend trying to make the whole obscene endeavor work? And progressives (Anthony Barnett for example) who, amazingly, resort to calling those who advocate, or propose, Greece or any EU member leaving the EU “anti-European” really isn’t winning me over. That’s like calling those who criticize the state of Israel “anti-semites.”
I’m a non expert. Therefore, I can stand to be educated. But the positives for a European Union don’t occur to me. Some of the propaganda does though. Leftists (Ish Theilheimer, in Canada, a few years back) actually stated that there’s been no war in Europe since World War 2. When you resort to selling your product in such a fashion, Why should any conscious person assume that your product is worth buying?
German Chancellor Angela Merkel is of the firm belief that entire nations can be run like a small household (the model of the Swabian housewife, which are notorious for their penny pinching finances) when money is short: Tighten your belt, cut unnecessary expenditures and reduce costs.
That may work on a family level or for small businesses, but for nations like Greece, France and Germany the biggest costs aren’t frivolous things. It’s their own population, which is covered by social security systems, retirement funds and financial support in times of unemployment. You can streamline those costs, but cutting them would ultimately mean releasing their own population into poverty. And you can’t “fire” your population.
The Euro as a common currency may have been a blessing for some. Like Germany, which could essentially devalue its currency (Deutsche Mark) by 50% (1,98 D-Mark = 1 Euro) in the early 2000s, which made exports much cheaper. But for countries like Italy and Greece it turned out that they were stuck with a far too expensive currency, which never reflected their economic strength. It took 340 Greek Drachme to buy one Euro and almost 2.000 Italian Lira to buy one Euro.
And since the ECB in Frankfurt controlled the Euro, they were unable to devalue to their new currency to reflect their economy more accurately.
For better or worse most decisions hinge on Germany and Angela Merkel. There’s simply no way around them to make major decisions in the EU. The problem is that Angela Merkel fears a major backlash from her own constituency when she finally has to come clean with the fact that billions of Euros are gone, spent on a crazy gamble to keep the Euro-Zone from flying apart from the forces of its own inequalities and deficiencies.
If there’s one thing neoliberalism has been good for, it’s the way it exposed the truth behind the rhetoric of union. That truth was also apparent in the constitution/treaty that was rejected by the only two countries allowed to decide its fate in a referendum.
The EU was never about real people; it was designed by the elite for the elite. When times were good, it was easy to mask the truth that when banks screw up and trash the economy, the banks and corporations shall be made whole, and the people shall pay for it through higher taxes and “reforms” of the social safety net, state pensions, and labour law.
The IMF knows that more neoliberal punishment of Greece won’t work to solve the country’s economic problems — and Merkel and Hollande almost certainly know it too. But they cannot resist continuing to punish, as if only punishment can get Greece’s creditors paid back.
In general the article pretty much reflects the current situation, however there are a few more things to consider. First of all, all those years the austerity medicine was enforced upon Southern Europe the Euro exchange rate subsequently lowered in response to the crisis but it was not that much that Southern Europe benefited from it but Northern Europe, in particular Germany. Germany claims now that all the money they lent to Greece will never be repaid but in reality the low exchange rate caused the German exports to flourish tremendously and perhaps to such a degree that the money lent to Greece has already long been earned back through the export and the tax revenue created from that. The Netherlands have benefited in a similar manner but Mr. Dijsselbloem, a social-democrat, still hammers on that the Greeks have to toe the line and pay back the money we lent while in reality they helped through economic collpase keeping the Euro exchange rate low and accelerating Dutch exports and revenue. It was Dijseelbloe’ms package which the Greeks voted down and in reality it should have been him to resign and not Varufoukis. However, there are also things which dissapointed me from the 5 months of the Syriza government, namely that parts of the economy, particularly the shipping industry is still exempt from paying taxes, this exemption is part of the Greek constitution(!). That is socially unfair and needs to be corrected, if shipping is in private hands they also need to pay their fair share in taxes and Syriza has not (yet) attempted to change that. The military budget is still heavily oversized and Syriza neither made any serious attempt to change that, to lower it in exchange for keeping the level of pension was a suggestion from J.C. Juncker. Juncker appear in may ways as one of the very few in Brussels somehow sympathetic and understanding to the situation in Southern Europe but he is unfortunately a minority and has to watch his wording. Since his coming at the helm of the EU the tone towards Russia has also changed into a more constructive direction. Another disappointment of Syriza is the fact that they have not changed their policy towards their neighbouring countries, in particular Turkey, they still view them as eternal enemies but this isolation also caused some of their economic problem because they became by far too peripheral, almost an EU enclave in the Balkans. They need to change this and a trip by Tsipras to Ankara could help get out of this peripheral situation.
Thanks. A very useful intervention. It provides a rounded picture. I was also surprised to see that Greece comes second only to the UK on the European continent in terms of meeting its defence expenditure, in real terms, in terms of its NATO obligations. And Syriza needs to emulate China by mobilizing relatively wealthy and powerful Greek communities scattered across the world for its development in the time of its acute crisis. And whatever happens in the final analysis in terms of Greece and the Eurozone, Greece needs to expand its burgeoning relations and firstly Russia, and then with BRICS. But we in Africa and the developing world are enormously inspired by Tsipras and Syriza. Colonial, continental Europe will never be the intimidating bully it like to portray itself to be. With #Greferendum, everything about Europe has changed, forever.
Typical bit of leftie hot air by Andrés Cala. Lefties are interested only in parading their holier than thou opposition to austerity. As to the basic problem, namely how to deal with a loss of competitiveness in specific countries in a common currency area, lefties are just not interested. Too much like hard work that. In fact most of them haven’t the faintest idea what the basic problem is.
Ralph Musgrave:
Hey, Ralph. Bullshit! Why don’t you present your 10 best examples of how austerity produced prosperity.
Why would you be looking for prosperity if you are not capable of financing it from your own pocket. Why should you buy a car if you cannot afford to buy a bike. That is the problem with capitalism: everything is based on debt. Debt based economy is no economy; it is debt. If banks are the back bone of a country’s economy then Why have government’s let such an important institution in private hands? Why is not there a strong parallel counterpart in the Public sector? While everyone knows power always corrupts, why to give private banks so much power that even Getting you monthly wage is also bank dependent? It is time government’s start working on these questions.
A common currency area is not viable without political unification. And Europe is far too varied to accept any meaningful degree of political unification. Even now, as the unelected Eurocrats are just beginning to impose their autocratic rule, people all over Europe are stirring uneasily and supporting parties that call for putting the “European project” into reverse.
The Euro-advocates point to 70 years of peace. Yet much of that period – and the riskiest years – passed before the EU became established. Now, ironically, they are negating that argument by pressing for war with Russia – the political equivalent of swallowing cyanide.
Basic problem is relying on a system that is already dead and that is Capitalism. When public funds are used to pay for private losses then Capitalism is dead.
Out of Mario Draghi, Jean-Claude Juncker an Christine Lagarde, the three heads of European Commission, the European Central Bank and the International Monetary Fund, respectively, not one has been elected by plebiscite to the position they now hold.
Mario Draghi and Christine Lagarde have never been elected for any position beyond the doors of a boardroom, and Jean-Claude Juncker, who was elected president of the European Commission in a secret ballot, is chiefly famous for his tax avoidance laws, which allowed global companies to transfer billions to the tax haven of Luxembourg to be taxed at a mere 1%. Imagine what would happen if every country decided to solve its economic problems of by taking the path of declaring itself a tax haven. Strange the Troika didn’t suggest that solution to Greece.
Though Juncker can claim the distinction of having been elected prime minister of the small nation three times, Luxembourg has a tiny population of just over 500,000, and is smaller than many European provincial capitals. In other words, a man who was elected mayor of a small city state attempted to wrest control of a European nation by engineering a coup with two unelected fellow bankers. Athens has a bigger population than Luxembourg, and Tspiras is far more popular among Greek voters than Juncker, Draghi and Lagarde are in the whole of Europe. He is now probably more popular among a huge swath of Europeans than their own leaders.
Might some be forgiven for theorising that the behind the scenes machinations of the Troika fit the defintion of a conspracy?
The situation the Germany, France, and the conservatives of Europe have put the Greeks in reminds me of what England, France, and the US did to Germany after WWI. They left the Germans with a huge imposed debt and no way to repay for the damages caused by the dictators, and royalty of WWI. The outcome was of course the vicious dictator and war monger, Hitler!! The better solution to further war after WWII was the Marshall plan. Implemented by several liberals. Today German has to thank those deep thinking liberals for its economy and system of governance !! Let’s hope German remembers.
Don Cuin:
As you point out, the German economy languished under the austerity program (huge debts) imposed on Germany at the end of WWI. There’s no reason to think that austerity will make the Greek economy thrive. Germans would do well to remember that their own economy recovered, and Germany’s WWII war machine was built, on deficit spending, the exact opposite of an austerity regime.
Good point. The victorious allies also learned their lesson; Marshall Plan (FDR’s New Deal for other Nations) for Western Europe, and half of Germany’s debt was forgiven, by the allies in 1953…to which, BTW, Greece also agreed back then. Marshall Plan, and debt forgiveness are the basis for the German “economic miracle”. It’ll work for any Country…including Greece. This is assuming the financier Cartel is interested in seeing Countries thrive and become a smashing success. I think they’re more interested in Reigning over an Empire of broken & subjugated Nation-States…the Feudal Lords’ Revenge upon The Commoners. This is political, under color of supposedly necessary economic measures. Syriza has smoked them out…well-played.
My thoughts exactly. All that I have read regarding finance and debt since the crash of ’07/’08 has led to the notion that the damage being done is political, perhaps even intentional to some degree. And when read through those parameters, I cannot ever find anything to disprove the theory.
Why have all the perpetrators of this failed system/economic crash made out like bandits (most of them) while the majority have suffered greatly and ever since?
Exactly. And Keynes “The Economic Consequences of the Peace” remains extremely relevant.
Before the Marshall Plan the US started the Morgenthau Plan which aimed at reducing Germany to an agricultural country. This would have required a forty per cent reduction in Germany’s population.
Truman reversed course here and decided generosity was the better way. But Merkel works for the banks.
The world should boycott German products.
Like generosity, Solidarity is also needed; the Germans should boycott Merkel. They should go “Syriza” on all of their own bankster-owned political hacks, as should we.
I don’t see anything here about repatriating funds looted by Greek plutocrats. I doubt any of the world economies can rebuild after the looting of the last decades or generations. These unproductive hoarders don’t give a damn about their suffering countrymen. They should have their passports withdrawn and extradition papers sent after their money. Unfortunately democratic countries will eventually turn to such measures because of the recalcitrant greed of the looters. If conditions turn even more dire the response will grow even worse. Sadly, those who want to restructure debt will again turn to bankers and financiers to “rebuild ” the economy—leading to another cycle of looting.
Well said, Josh!
It’s not just a north/south, debtor/creditor issue. The other issue – the primary issue – here is class. Neoliberalism is all about empowering and enriching corporations at the expense of the state, and to the cost of the working class.
Save the banks by transferring their unsustainable losses to the poor.
The victory of the No side is a victory for the left and for the working class across the EU, including in Germany.