Why the battle between Athens and Brussels matters to all of you
There is a lot being written about the current negotiations between the Syriza government in Greece and the EU/IMF. The distance of most journalists from the Greek reality and atmosphere and the sheer volume of competing information, makes for a lot of white noise. I want to filter much of it out and boil the issues down to some very basic points. This is by no means a definitive list, but it is one which I think captures a number of “big ticket items” which I have not seen made clearly and explicitly.
1. The crisis is not an economic, but a political one. In the grand scheme of things, the sums which are the totality of the difference between the government’s proposal and the EU/IMF’s counterproposals are tiny and risible. Stripped of their political significance, they would not even show up as a blip on the European, let alone the global economic radar. A solution has not been achieved, because the EU/IMF are defending austerity in general. To concede, would be to accept they got it wrong.
2. The measures being counter-proposed by the EU are undeliverable and punitive. One only has to look at the proposals on VAT to realise that the EU is either clueless or not interested in a deal. Proposed VAT rates of 11% on staple food and 23% on electricity/water are not only regressive and unaffordable, but would plunge Greece into an inflationary death spiral, discouraging tourism, encouraging illegal trade and costing many times more than they raise in lost revenue. The proposal to scrap the relief to islands shows a lack of understanding of basic economic realities regarding the cost of shipping goods to thousands of small, remote islands. It is blindly trying to apply German policies. The proposals are not economically realistic; they are a punishment beating for having elected the “wrong” government.
3. The entrenched position of the players has to do with domestic rather than international policies. The battle between Merkel and Schäuble behind the scenes for leadership of their party before the next German election; the threat Rajoy faces in Spain from Podemos, underlined by recent municipal results; resistance to Dijsselbloem’s programme of ultra-right-wing economic policies in the Netherlands within his own Labour Party; the failure of Renzi to stimulate a stagnating Italian economy; – all these factors, and many besides, play a much bigger part in shaping players’ position towards the Greek crisis, than anything to do with the Greek crisis.
4. A fundamental misjudgment of Syriza in general and Tsipras in particular. There was a catastrophically widely held belief among the European establishment that, once elected, Tsipras would “play ball”. There is still palpable shock at his sticking to his election commitments, often expressed as the accusation that he is being unreasonable. Every statement out of EU institutions for the last five months has been practically underlined by the subtext “shit, he wasn’t bluffing”.
5. A Grexit would be disastrous for the EU. Tsipras understands this. Given current geopolitical circumstances, Putin’s expansionism, the powder keg that is North Africa, the Middle East on the brink of all-out war – strategically, Europe could afford to lose practically any single country from the Union, except Greece. Greece is the geographic and military key to all those conflict zones. Greece slipping by default into a China/Russia alliance would be nothing short of a global game-changer.
6. There was an underestimation of popular support for Syriza and misunderstanding of the mood in Greece. The EU/IMF clearly expected support for the new government to ebb away, as fruitless negotiations protracted. The opposite has happened. Support is significantly higher now than in the January election. Tsipras’s personal ratings are sky high. After living on the brink of disaster for so many years, I sense a que-sera-sera attitude in most people. This is not to say they don’t fear capital controls, the threat of Grexit, austerity, hunger, poverty and degradation. It is to say that they have lived with them for so long, they have become an ordinary part of the landscape.
7. Greeks are busiest in the summer. Everyone is busiest during the summer months. Everyone is richer during the summer months. It was a fundamental miscalculation by the EU/IMF to try and win a PR battle of fear during this period. The country is too light, too warm, too beautiful and too busy to take notice.
CONCLUSION: The EU/IMF have played their hand badly. By calling a bluff that wasn’t a bluff they have played themselves into a situation in which they have no win scenario and no exit strategy. They will lose. The only question now is whether they lose badly or not and whether they take Greece down with them.
If this intransigence is played out, they force Greece into a new election, possible Grexit, instability, and plunge the entire continent back into recession. If they back down, Greece is seen as victorious, Podemos wins in Spain and they start the same negotiations with Iglecias, only the sums involved are larger and a resistance front in Southern Europe pushing back against imposed market liberalisation and austerity becomes a serious challenge.
They have, I think, realised this, but are still locked in a self-destructive raising of the stakes. Merkel and Hollande have noted this, which is why they have taken charge of negotiations increasingly away from the Eurogroup.
The reason this matters to all is twofold. First, it forces out into the open and brings into sharp contrast the increasing divergence between the wellbeing of markets and the wellbeing of populations. Second, it marks a clear act of economic blackmail by a global de facto establishment – let’s call it “The Davos Set” – unhappy at a democratic people opting for an alternative to neoliberalism.
How these tensions resolve themselves will determine whether national elections remain meaningful in any way; whether democratic change is possible or violent revolution is in fact the only effective option.