John Buell

Trashing Greece — and Europe?

For some prominent US commentators, not surprisingly the Greek vote to reject the troika’s (European Commission, European Central Bank, International Monetary Fund) final bailout offer—even with its draconian terms—was an irrational act. Greeks had petulantly expressed and hoped to recapture their national pride. CNBC’s neoliberal [free-market] ideologue, Joe Kernen, wondered if national pride would be able to feed the Greek people. It takes blood, sweat, and tears to keep an economy going.

Kernen to the contrary, the appeal to nationalism during this controversy hardly started with the Greeks nor was it confined to them. Germans had long imbibed a modern version of the fable of the ant and the grasshopper. Their version has it that sober, hard working Germans save a lot. With the inauguration of the euro, German savings were then lent to Greeks. These Greek grasshoppers borrowed more than they could ever pay back to live a life of luxury, and now the Greek grasshoppers expect hard working ants to bail them out.

If this charming tale of ants and grasshoppers has accomplished anything it has intensified nationalist hostility to Greece on the part not only of Germans but also of many other Eurozone states.

The crisis has also revealed the intellectual and political bankruptcy of the major social democratic parties. These parties had from the beginning accepted the logic of the euro, the belief that membership in a monetary union would enable substantial capital inflow and promote development.

That financial bubbles were also very likely was seldom acknowledged. In a recent Foreign Affairs article, Brown University political economist Mark Blyth points to the role that major European banks and their high risk leverage strategies played in fostering a bubble: “European banks’ … (loans and other assets) expanded massively throughout the first decade of the euro, especially into the European periphery. {W)hen the crisis hit, French banks held the equivalent of nearly 465 billion euros in so-called impaired periphery assets, while German banks had 493 billion on their books. Only a small part of those impaired assets were Greek …Greece made up 2% of the eurozone in 2010, and Greece’s revised budget deficit that year was 15% of the country’s GDP—that’s 0.3% of the eurozone’s economy … the Greek deficit was … not a reason to panic. Unless, of course, the folks holding Greek debts, those big banks in the eurozone core, had, over the prior decade, grown to twice the size (in terms of assets) of—and with operational leverage ratios (assets divided by liabilities) twice as high as—their ‘too big to fail’ American counterparts. In such an over-levered world, if Greece defaulted, those banks would need to sell other similar sovereign assets to cover the losses. But all those sell contracts hitting the market at once would trigger a bank run throughout the bond markets of the eurozone that could wipe out core European banks. Clearly something had to be done to stop the rot, and that something was the troika program for Greece.“

Perhaps the saddest aspect the current crisis is the unwillingness of established Left parties, including especially the Socialist Party of France, the Social Democratic Party of Finland, and the Social Democratic Party of Germany (SPD), even now to come to the defense of Syriza. Having accepted the harsh austerity as the remedy for financial crises — and absorbed the consequence of near catastrophic unemployment — these parties joined in condemning Syriza’s resistance to the troika’s demands.

If the crisis has had any salutary effect, it has been to expose the dark side of neoliberalism. For public consumption neoliberals often refer to markets as natural outcomes of political and economic modernization. They know — and act — differently. Paul Krugman argues that the pension and tax changes the troika is demanding of Greece are ones they know he cannot accept politically: “The purpose must therefore be to drive him from office.”

Mark Weisbrot, Co-Director of the Center for Economics and Policy Research, adds: “There is considerable evidence that this has been the European authorities’ strategy since Syriza was elected on January 25. Just 10 days later … the ECB cut off its main line of credit to Greek banks, even though there was no obvious reason to do so. Shortly thereafter, the ECB put a limit on how much Greek banks could lend to the government – a limit that the previous government did not have.”

Angela Merkel and her allies also want to send a signal to all Eurozone governments that in the face of crisis any attempt to defy mandated austerity programs will be met by efforts to completely derail its economy.

Kernen might want to consider an alternative narrative, one that exposes the real beneficiary of the bailout. Columbia University’s Bruce Robbins points to a fact almost universally neglected by corporate media both here an in Europe: “90% of the so-called bailout money merely passes through Greece, ending up back in the pockets of the European banks. He adds:” the citizens of Europe should not be on the hook for bad investments made by financiers, just as Greek taxpayers should not be held responsible for shady deals cut by corrupt politicians in cahoots with Wall Street. The banks made an investment they knew to be risky. It must be nice to lose money on a visit to a casino and then make the locals pay for your losses.”

That Greek government is corrupt was also widely known, but this stigma also had a class tint added to it. The varieties that corruption can take are hardly exposed in mainstream media. Nikolas Katsimpras, a lecturer at the negotiation and conflict resolution graduate program of Columbia University and a Senior Fellow at the Hellenic American Leadership Council, has said: “It would be hubris to equate the traditional “baksheesh” to speed up a transaction, to the injurious norm of public officials’ bribery in exchange for detrimental terms in contracts with the state; or the de facto culture of elite contractors inflating costs for public contracts,… It would be equally false to equate the majority of the Greek pensioners, civil servants and employees in the private sector who could never avoid paying taxes -since it was deducted from their salaries- with the corrupt elites and oligarchs who criminally evaded taxes. “ And the remedies for this corruption also have a slant with emphasis placed on regressive sales taxes rather than taxes on the rich. The troika has claimed that wealth taxes deter growth, but given the results of austerity plans that even IMF economists acknowledge won’t work, they are hardly in a position to give advice on this subject.

If Kernen is concerned about nationalism, he might consider the political fall-out from years of austerity in Europe. If, as is likely, established Left parties continue to endorse austerity, the real winners of the Greek referendum may be the ultra right nationalist parties, which have opposed not only the common currency but all other forms of political collaboration. Following the referendum, Reuters reported: “Eurosceptics around the EU were jubilant at the rejection of what French far right National Front leader Marine Le Pen called “the European Union oligarchy.”

“It is ‘No’ vote of freedom, of rebellion against European ‘diktats’ of those who want to impose the single currency at any price, through the most inhuman and counter-productive austerity,” she said in a statement.

Whether Greeks can or should accede to the Troika’s latest demand is up for debate as I write this column. To accede to the demands is almost certain to entail intensification of the already deep depression. Exit from the euro, which may soon be forced anyway, might turn Greece into a failed state.

One other thing is certain. The troika’s rigidity has put at risk the entire European experiment, both at the level of finance and culture. For now activists might well pass the word both at home and abroad that banks, deregulation, and private sector overreach are the causes of this crisis. And banks, not private citizens, are the main beneficiaries of the bailout.

One ray of hope may lie in new left parties and movements in Europe, such as Podemos in Spain. They may both pressure their own governments and support Syriza in dealings with the troika. Debt relief channeled through ordinary citizens rather than banks could well catch on throughout the Eurozone. These new loans to Greece will never be paid back, and citizens of other Eurozone members will foot the bill.

This result, however, is not because Greeks are lazy and irresponsible. The terms are unreasonable, and the Troika’s austerity agenda undermines any prospect of growth that would fund repayment. Building alliances across borders while pressing for greater domestic equality is a gargantuan task that will entail many hardships and blind alleys. Can Syriza and its allies proceed with less hubris and more democracy than its opponents have demonstrated? In other words can the birthplace of tragedy and democracy find some sustenance from both?

John Buell lives in Southwest Harbor, Maine, and writes regularly on labor and environmental issues. Email

From The Progressive Populist, August 15, 2015

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