I have been silent on the solvency crisis of Greece for years because I did not have a clear opinion on it. This weekend I finally took the time to read the statements of the Eurogroup and the conditions offered to the Greek government; I watched the televised address by Greek’s Prime Minister Alex Tsipras; and I had a look at the economic data on the Greek economy. My final opinion is also largely informed by a series of articles I read, most notably those of the Guardian. So this is what I think.
1. Austerity is harmful. It is now obvious that the Greek economy won’t benefit from another round of austerity. The stated intention at the start of the austerity package in 2010 was to restore order and balance in the accounts of the country in the long run. Since the imposition of austerity, however, the Greek GDP has fallen by 25% and unemployment rate has gone up to 25%, with youth unemployment over 50%. Happiness measures has also collapsed and now the Greeks are the most miserable in the Organisation for Economic Co-operation and Development. Austerity has badly harmed Greece: this is an economic fact.
2. The troika has waged a moral crusade against Greece. So the question is twofold: (1) why does the troika insist with austerity and (2) what is the point of reducing this country to rubble? Nobel economics laureate Joseph Stigiltz has written about Greece for Project Syndicate. He believes “it is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned“. However, although austerity does not work for the economics of Greece, it has served as a collective punishment of the Greeks. Indeed, with austerity the troika have been offering not an economic solution but a political narrative: the Greeks are in this situation because they were lazy, selfish bastards. Austerity is the instrument to discipline them and inflict some punishment for their misconduct. Ask people in the street and they will likely support this narrative.
3. The Greek government had no choice but to reject the last bout of austerity. A few months ago Syriza won the elections under a specific commitment: ending austerity. The new government’s promise to the Greek people was to speak truth to the troika plainly to convince them to drop austerity. If the government were simply fulfilling its campaign promises, it would already have rejected the proposal. Now it is clear that they failed: the EC/ECB/IMF’s final offer to Greece is pure neo-liberal austerity based on new taxes, higher VAT, cuts on pensions, privatizations. No wonder the Greek government opposed it. On Saturday the Eurogroup broke with its tradition of unanimity, issuing a statement “supported by all members except the Greek member”. As reported by the Guardian, the Greek finance minister Yanis Varoufakis sought legal advice on whether the group was allowed to exclude him and received the extraordinary reply: “The Eurogroup is an informal group. Thus it is not bound by treaties or written regulations. While unanimity is conventionally adhered to, the Eurogroup president is not bound to explicit rules.” Or, to put it another way: “We never had any accountability in the first place, sucker.” So now it is also crystal clear that the Greek concern for popular legitimacy is incompatible with the politics of the eurozone. At this point, with the Greek government unable to dismiss austerity, it is my opinion that had a clear political mandate by the people who put them in power in the first place to reject the last austerity bout.
4. How things could have gone differently. We all know that if Greece were outside the euro, the advice of external institutions would be different. Most people would be telling Greece to devalue its currency and stuffing investments. While the former option was not a possibility in this context, the latter option has not been made available to Greece either. Why? A reform agenda for Greece could have emulated the kind of public sector reform and investment strategy that characterizes many of the competitive powerhouses of northern Europe – including Germany. The Guardian suggests that “Greece should not do what Germany says it does (austerity), but what Germany actually does (invest)”. In practice, negotiations should have focused on stuffing an investment strategy to kickstart public investments rather than more cuts. Unfortunately they have not: now Greece represents an existential crisis for the eurozone. I will once again quote another Guardian’s article for a rather apocalyptic ending punch: “It will be said in response that Greece is a small, insignificant country and that the single currency has much better defences than it had at the last moment of acute trouble in the summer of 2012. Diplomats in Europe’s capitals took very much the same view in late June 1914”.