The roots of the Greece crisis in European integration and what this means for the future

euro-373008_640As the simmering crisis between Greece and the institutions formerly known as the Troika heats up again, it’s a good time to look once more at the roots of the European crisis and what they mean for the possibilities open before Syriza at the present juncture. Greece is being squeezed by Europe: it’s cash is about to run out, they’ve been limited from raising new funds on bond markets and are being asked for ever greater concessions in terms of the reforms. Indeed, the red lines for compromise are right under Syriza’s feet and it’s possible that Greece will be pushed out of the euro. More likely, however, Greece may attempt to issue some kind of quasi-money while staying in the Euro if the institutions do not back down. Regardless of what happens, it is important to understand the last few decades of European integration to fully grasp the costs and dangers of exit from the Euro and imagine a solidarity that could join workers across Europe.

To these ends, I’ve interviewed Riccardo Bellofiore and Ingo Schmidt this week. Riccardo teaches economics at the University of Bergamo in Italy. Ingo, on the other hand, teaches at Athabasca University here in Canada but maintains close ties with Germany, writing frequently for the press there. Both Riccardo and Ingo have written extensively about the nature of contemporary capitalism, the process of European integration and the crisis of social democracy. I’m happy to have had a chance to speak with both of them.

Ingo discusses the German economy, Germany’s role in the European crisis and the possibilities for Europe-wide solidarity. My conversation with Riccardo focuses on European integration, the roots of the Greek crisis and the costs of Euro exit — a strategy Riccardo cautions against pursuing deliberately based on an economic analysis of the degree of European integration and the tremendous social costs and risk facing a country choosing to leave.

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Syriza buys four months of breathing room

Belatedly, here is an article I wrote on Greece’s agreement with the Eurozone for Ricochet. It focuses on the next four months with their opportunities and pitfalls. Given that the list of reforms authored by Yanis Varoufakis looks to get the approval of the Eurogroup member states, the article remains relevant, the breathing room actually in place.

Assuming its plan of reforms is accepted by the Eurogroup on Monday, Greece’s Syriza government has gained four months of breathing room — albeit in the same stuffy space, already full of the nauseating fumes of austerity, the window barely cracked.

No one was humiliated in Friday’s compromise between Greece and the Eurogroup. Nevertheless, Syriza had to concede much, most painfully the continued involvement of external observers from the Troika. In return, Germany’s no-compromise hard line was finally broken. Friday concluded but the first skirmish in a long battle.

If anything, the resulting agreement demonstrates the weakness of Syriza’s position. Syriza has inherited an economy and financial system in tatters — years of economic depression compounded by sadistic austerity. Yet its leaders, for now, calculate that change outside the bounds of European institutions, including the euro, would open the gates to something far worse. Whatever the precise distribution of gains and losses, which will only come to light as the agreement is implemented, the fact remains that Syriza has four months to act.

Four months to stop the bleeding

First, of course, there is the pressing need to start enacting change in state policy. Existing austerity measures will be hard to dislodge for the time being. But breathing room means that Syriza will be able to spend more, even run a smaller primary surplus this year than stipulated in the old program, perhaps by up to 3 per cent of GDP. It can also start breaking the old oligarchy’s grip on the Greek economy and go after the unpaid taxes of the rich.

Beyond this, there is space for creativity. One Greek journalist tweeted that he’d already overheard Greece’s delegation at the Eurogroup talking about creative ways to raise the minimum wage. Though a far cry from simply raising the minimum wage, such creativity would be a testament to Europe’s intransigence.

Altogether this amounts to a program that can stop the bleeding and subtly fortify the patient before the next round of negotiations. (more…)

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Leo Panitch on Syriza and Greece

 

Update: the transcript of this interview has now been published in Jacobin.

This week I’ve devoted the entire show to discussing the most recent developments in Greece. While there is a great deal of day-to-day drama at the level of the ongoing negotiations between Greece and European institutions, I wanted to take a broader strategic and political look at what the election of Syriza both for Greece and more broadly for the left around the world, including in Canada. To that end, I’m happy to present an extended conversation with Leo Panitch. Leo is professor of political science at York University, author most recently of The Making of Global Capitalism: The Politcal Economy of American Empire, written with Sam Gindin, and knows Greece well.

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Creditors enabling rapprochement within Syriza?

I’m starting to cautiously think that the Varoufakis and Lapavitsas “approaches” to the crisis might end up not too far away from each other even though the strategic direction they have advocated is very different. The situation, especially after today’s hardening of the creditors’ stance at the Eurogroup, may simply force it. The other option is that this is the intense posturing phase just before a bridging agreement, in which case the following would be less applicable for the time being. Like Paul Krugman, however, I’m inclined to think that the EU is serious in possibly forcing a crisis — with creditors and “Northerners” having the upper hand in the camp facing Greece.

In fact, reading Lapavitsas and Flassbeck’s very recent e-book on the European crisis (recommended), I’m struck with how much of the structural analysis of the causes of the crisis the authors share with Varoufakis. Both use Keynes to similar effect; both have Marx in the background. Both ascribe the debt crisis to current account imbalances across the EU driven largely by wage repression in Germany. Of course, this is not to collapse the two approaches. Crucially, they draw very different conclusions in terms of what the analysis of the causes of the crisis mean for political possibilities.

wpid-wp-1424137430154.jpegBut look at how things are playing out. I think Varoufakis is honest when he says he doesn’t have a complex, game-theory-based bargaining strategy. It was a smart strategic choice on the part of Syriza to place him at the helm of the negotiations simply in order to have the EU force the issue in the face of this “naive” goodwill — one that, let us hope, will nevertheless not accept further austerity. The one thing Varoufakis isn’t saying is that behind “I don’t have a Plan B” lies the fact that the creditors may simply force a Plan B.

(more…)

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