Thursday, July 2, 2015

Greece Again

I take another crack at the Greek crisis, which grows more worrisome by the hour.

13 comments:

Mitch Guthman said...

Yet another great commentary on the Greek situation.

The real question is the future of the European project. If Greece decides on Sunday to surrender unconditionally, then two things will be very clear: Individual member nations have no control over their own political choices and they will be punished if they attempt to make choices that conflict with the current orthodoxy and the decision to adopt the euro basically doomed the EU as a union of democracies. It's now basically a collection of Potemkin democracies ruled by unelected technocrats to whom the "elected" heads of member states are accountable and who are themselves accountable in turn to Germany.

Art Goldhammer said...

Mitch, I deeply disagree with you. The demos of Europe does not consist solely of the people of Greece. There is democratic legitimacy on both sides of this negotiation. Furthermore, if you were to put the question to a vote across Europe, the likely outcome would not favor Greece. The *democratic* solution is to find a compromise between two positions. Your formulation--the crushing of Greek democracy by the EU--is precisely what the extremist parties of the left and right claim. If majorities embrace that view, it means the end of the EU and a retreat into hostile nationalisms and beggar-thy-neighbor economics. It would mark a serious regression for Europe. I understand your passionate desire to help those who are suffering in Greece, but there are legitimate claims on the other side.

Anonymous said...

The IMF just weighed in to support a No vote on Sunday basically by endorsing Syriza claims that Greek debt is unsustainable and a partial debt jubilee is crucial. Its assessment must surely be a game changer and a body blow to the troika's position?
Must say I agree entirely with Mitch. German politicians have been demanding "regime change" in Athens before debt talks can resume, idem the Dutch Eurogroup leader, idem Martin Schulz the German president of Europarl. The bully boys it appears, are out in force encouraged by their criminal bankster allies. Art says an EU vote would likely not back Greece, but that ignores Podemos in Spain, Beppo in Italy and others lining up to demand the IMF now classify their debt as equally unsustainable, not to mention Madame 'Frexit' le Pen's promise that France too will exit.

Mitch Guthman said...

Art,

You and I may both believe that a compromise of some sort would be the best outcome but the chances of a genuine compromise are vanishingly small. As I understand it, Athens asked for terms but Merkel is demanding an unconditional submission to all of Germany and the Troika’s demands. So it would seem that your reply goes right to the heart of the problem with the European project, namely, whose demos counts?

If Greece is the functional equivalent of an American state and the EU is the federal government, then it makes sense to say that the collective will of the “United States of Europe” must override the preferences of the Greek people. But, if the EU is instead a union of sovereign democratic countries, then why should the the choices made by non-Greeks trump the ability of the Greeks to make choices about what kind of a country they want? Why should the institutions of the EU be so heavily influenced by Germany?

For example, as you mention, the current government did agree to the austerity measures demanded by the Troika preferred to reduce corruption and raise taxes on the rich instead of inflicting further punishment on the poor and helpless. What is the source of Berlin and the Troika’s power to tell the Greeks that the rich are sacrosanct or that Greece must sell its birthright cheaply to the superrich instead of raising taxes on them? Let’s call this what it is: Germany and the Troika are demanding obeisance to their ideology in preference to the choices of the Greeks. Greece must submit because it doesn't have its own currency.

In effect, whichever ideology or nation controls the ECB will dominate the supposedly sovereign members of the EU. A nation that does not control its currency controls nothing. Whoever controls the currency will control everything. The most fundamental choices will be made not by the people of any member state or even by the people of many of the members states but will be dictated by whoever controls the ECB. That's why many people (myself included) have argued for years that the euro is fundamentally incompatible with democracy.

Again, it seems to me that the very heart of the problem are the amorphous structure of the EU and the completely unsustainable burden of a common currency being shared by nations with very different economies. Thanks to the euro and the inflexibly of the ECB and Germany, Europe has already returned to the beggar-thy-neighbor economics you decry—the only difference being is that now the economy of Europe is being to meet the needs of the German economy at everybody else’s expense.

The other consequence of the euro is that the progress that’s been made in achieving what I personally regard as the real objective of the European project is rapidly being eroded by the demands of Germany and the imposition of radical austerity by the EU’s technocrats. I have always thought that the point of the EU and its predecessors was to stop the struggle to be the European hegemon by so densely and intricately intertwining the societies of the principal competitors (Germany and France) that a war in Europe would be impossible. I believe that is what De Gaulle and Adenauer began in Colombey and it is what the political class has lost sight of today.

DavidinParis said...

I side with Mitch in this discussion. Greece has certainly been profligate, but the debt burden has never been restructured in a way to allow their economy to grow. The distance between France and Germany is also rather great. I find it ironic, to say the least, that Merkel is exercising an almost fascist regime change towards Greece despite protestations from her weak-kneed fellow EC members.

Alexandra Marshall said...

Yes I too find Mitch very convincing here. And the IMF's admission yesterday, which echoes DSK's proposal a few days before, is an encouraging sign. (Not to mention for DSK. With his newfound popularity among French voters, I wonder if "Jack is Back" means he's actually thinking of running. Until this week I'd have laughed that off, but even diehard feminist me would consider giving him a go... as long as he had non-pimp chaperones in the room at all times. Parity laws have never felt so dangerous...)

But I digress. The fine toothed comb that Germany (among others) is being allowed to rake over the Greek proposals feels very out of place. Let us not forget they benefitted from 30 years to pay back their own debts. Hopefully the IMF's new admission will steer the negotiation in that direction for Greece, but Angela--who has ENTIRELY too much power in this situation--is sure to veto it. This does not feel like democratic legitimacy either. I really, really fear for Greece. Debt relief is the only way. And as much as we'll all feel the blow of that, as DSK said, and you mentioned too, Art, risk has to be shared among creditor and debtor.

Crossing my fingers that some sense of justice and logic prevails but I fear the eurocrats just want to spank the upstart lefties.

brent said...

Art is surely right that the viability of the EU depends on its ability to forge a compromise between the positions of, roughly, southern indebted Europeans and northern --what to say?--self-righteous? intolerant? ones. But to promote the Troika as the agent of that compromise is to concede Mitch's point: the EU has lost all pretense of democratic process. Would an EU-wide referendum settle the question? Not a fine-tuned method for resolving technical and complex issues. I like Piketty's proposal for a Eurozone legislative chamber with zone-wide fiscal authority and proportional representation from the 19 Eurozone states. The European Council has utterly failed--and for reasons that feel ego-driven and personal, as the other heads of government seem to find Tsipras and Varoufakis unworthy of being in the room with themselves. Maybe a more broadly based body could accommodate more diversity of opinion, which would be useful, as the roomful of Council members and their Troika friends seem determined to march Europe off a cliff--with Schäubel calling the cadence.

Art Goldhammer said...

Brent is quite right about the dynamics, but Piketty's proposal would not solve the problem. There is absolutely no guarantee that EU-wide proportional representation would produce a result favorable to Greece. If you want democracy, you have to accept that democracy sometimes yields results you do not want and do not think are rational. To Americans I say, "Look around." I do not like what is happening in Europe, but I don't think it's right or helpful to say it's undemocratic. It is the result produced by Europe's democratic institutions as currently constituted. The constitution needs to be changed, but substituting the will of the Greek people for the will of the European people is not democracy. And please note that I use the phrase "will of the people" with full awareness that it is a convenient fiction for describing what Tocqueville called "the dogma of popular sovereignty."

DavidinParis said...

But substituting the will of the Greeks with the single will of Germany isn't democracy either. I used to think the messiness of American politics, even with the rude GOP tactics to Obama were destructive, but at least, in the form of a Republic, the most recalcitrant of states finally accepts the proverbial law of the land. For the EU, Greece's voice is falling of deaf ears...Merkel is essentially stating to Greece to do it her way or get out. This cannot bode well for forging stronger ties between member states.

Art Goldhammer said...

I can't spend all day answering comments, but to David, Germany has NOT been the most inflexible party in the talks. The finance ministers of the new member states from the East, which are poorer than Greece, along with Finland and Portugal, which have made adjustments of their own, and Spain, whose gov't fears Podemos and does not want to make concessions to Syriza, have been far more intransigent. Read my piece. It's just far too simple to say it's Germany against Greece. There are many cross-currents and conflicting agendas, as in any genuine democracy. Those who think the problem can be settled by accepting the verdict of the Greek referendum (which may in any case go against Tsipras) mistake the nature of the coalition that has formed against Greece. That's politics. It ain't pretty.

bernard said...

Your piece is very good and well balanced.

Greece was taken into the EC in 1981 for reasons other than economic and it was common knowledge even then that Greek administration was dysfunctional and the economy uncompetitive.

Allowing Greece - there are several other present members in this case - into the Euro was ridiculous economically (has anyone ever thought that Greece could compete with advanced industrialised countries such as Germany?), but probably made sense on a geo-political level (look North, you had former Yugoslavia, 10 years of massacres at that time, look East, you had the delights of the Middle East). But, in the Euro it is. Had it never been in is a very different case from the present issue of leaving the Euro: there are so-to-speak sunk costs, never to be recuperated.

And so Greece exploited every opportunity to borrow and extend further clientelism, having joined the paradise of low interest rates that the Eurozone was. The loans and the bonds issued were not forced onto poor Greece by avid lenders, they were sucked avidly by Greece from avid lenders. Greece is responsible, the banks are responsible, all the usual idiots are responsible.

It is obvious that the Greek government is trying to shamelessly exploit the situation, it is equally obvious that the creditors are seeking regime change. Everyone is right and everyone is guilty.

Once we admit this, the issue is where do we go from here. To me, the answer is in a way simple and well encapsulated in DSK's proposal. The creditors should respect Greece and the reality that its debt burden is unsustainable and thus reschedule again and forgive part of it, instead of seeking regime change as they apparently do. And whatever democratically elected government Greece has, its their choice, their country, their future, and therefore they should be able to make their sovereign choices without depending on handouts from the rest of European citizenry, thus have to balance their budget (and balance of payments) or borrow strictly domestically: French, German, Martian citizens clearly do not want to pay any further for Greek pensions, but if the 16-55 Greek age group wants to pay the Greek 55+ pensions, that is fine. If not, the Greeks should be sovereign in devising some other domestic social contract. And if they want to try socialism in one country, it's their business and their good luck, on their money.

FrédéricLN said...

+1 Bernard ! A great and insightful paper. Blends the broader picture with attention to salient details. Hat tip is not enough: thanks.

DavidinParis said...

Perhaps you are right Arthur, but if Merkel is not to blame in large part, she is doing a bad job letting it be known...

http://www.spiegel.de/international/europe/merkel-s-leadership-has-failed-in-the-greece-crisis-a-1042037.html