Costas Douzinas writes: A man visits the Australian consulate in Athens and asks for a work visa. ‘Why do you want to leave Greece?’ asks the official. ‘I am worried that Greece will leave the euro’ answers the man. ‘Don’t worry’ responds the consul ‘I was talking to my German colleague yesterday who assured me that Greece will stay in the euro.’ ‘This is the second reason why I want to emigrate.’
The story expresses the impossible dilemma facing the Greeks. On one side, a continuation of the catastrophic austerity that has destroyed the country. On the other Grexit, a prospect that will further hit, for an unpredictably long period, the living standards of a people who have seen their income halved. Premier Alexis Tsipras’ announcement, early on Sunday, that the people will be asked to vote on the final proposals of the Europeans and the IMF is an attempt to divert this typical aporia (lack of passage) towards a more manageable question: Do the people back the government’s rejection of the worst effects of austerity while accepting its commitment to keep the country in the Eurozone? The stakes are high: besides the Greek destiny, the future of the European Union and of democracy is on the line.
The immediate context of the referendum is the behaviour of the European partners in the last few months. The Syriza government was elected with a clear mandate to put an end to austerity policies. These policies were carried out on two fronts, fiscal austerity and internal devaluation. Fiscal austerity was pursued through the reduction of public spending, the privatisation of key state assets and the increase of tax revenues. Large numbers of civil servants were dismissed, the social services were slashed with the health service in particular unable to meet basic needs. The humanitarian crisis that followed is well documented and there is no point in detailing it again. The creditors’ logic aimed to generate primary budget surpluses, which would not be used to restart the stalled economy but to repay the escalating debt. The previous governments had accepted the obligation to create annual surpluses of up to 5% of GDP in the next seven years, something that no government since Ceaușescu’s Romania has either attempted or achieved.
The internal devaluation was carried out through the repeated reduction of private sector wages and the abolition of the bulk of labour law protections, such a collective bargaining. At the same time, the repeated increase of taxes, including the regressive tax on real estate, meant that the bleeding of the economy reached unprecedented levels. The pauperisation of the working people, the IMF argument goes, would improve competitiveness and help economic growth. But the result was abject economic failure. The economy shrank by 26%, unemployment jumped to 27%, youth unemployment went up to 60% and more than 3 million people on or below the poverty line. The IMF admitted a couple of years ago that it had under-calculated the adverse effect of austerity on the economy – the so-called fiscal multiplier – by a factor of three.
It is against this background that the Greeks elected in January 2015 the Syriza government committed to reverse these policies. A period of negotiations followed. But these were not proper negotiations. The huge gap between the two parties in power resources and ideology made the talks brutally asymmetrical. I have called these ‘negotiations’ a European coup, an attempt at ‘regime change’ using banks and not tanks. The economic stakes for the lenders are relatively small – the Greek economy is only 2% of European GDP – and does not justify the risk of a breakdown in relations. The precautionary principle of risk theory, inscribed in the European DNA, demands that the unpredictable effects of Grexit on the European and world economy should be avoided. If the collapse of Lehman Brothers created such a huge crisis, even the consideration of Grexit is more dangerous. [Continue reading…]
