overground scene

I decided to write this post after having come across quite a bit of misinformation and idle talk on the issue of the Greek crisis and its adventures with the European Union and international financial institutions such as the IMF. My aim is not to address the way in which different actors and media frame the crisis. What I want to do with this post is to clarify some points regarding the character of the EU, the role of Greece within the EU and the EMU, and, finally, to express my support for the campaign against austerity measures in Greece and explain why I think that the Greek government should continue resisting.

Some background information on the European Union, the Economic and Monetary Union and their ideology

I want to start this account with a brief discussion on keywords of the crisis which are being used in everyday parlance in a catachrestic way, and, by doing so, provide some basic information on the way that Greece is implicated in the European Union and the Euro Area. Starting with the very basics, the European Union and the Euro Area (Economic and Monetary Union) are not one and the same. The European Union (EU henceforth) is a peculiar organisation which combines intergovernmental and supranational elements. While it is being constituted by nation states through the signing of international treaties (intergovernmental element), those same states transfer part of their sovereignty to the EU, giving it power over its constituent parts (supranational element). In simple words, the EU has been invested with powers that in ever-expanding areas are superior to national laws.

The EU evolved over more than half a century into what it looks like today. Important treaties in the history of the EU include the Treaty of Rome in 1957, the Single European Act in 1986, the Treaty of Maastricht in 1992, the Amsterdam Treaty in 1997, the Treaty of Nice in 2000 and the Treaty of Lisbon in 2007. During these 50 years what we call today the EU evolved from a simple trade union that allowed the tariff-free movement of goods among European countries, to a much more complex organisation comprising a common market and endowed with significant political and judicial powers. The Economic and Monetary Union (EMU henceforth) represents one stage of EU’s evolution. This stage, however, is a stage in which not all countries that belong to the EU participate. The EU member-states that participate in the EMU are characterised by an integration of institutions not only as far as their economic policies are concerned, but also includes their monetary policy.

There is a wealth of debate on the driving forces behind European economic and political integration, namely the EU. Many scholars make sure to emphasise that the EU was a project whose primary aim was to secure peace among European nation-states. The way these political elites envisioned peace was through interdependence. The idea was that if the prosperity of nation-states depends on one another then there would be no war. This rationale reveals a lot about how these political elites perceived the world. It is a rationale underlain by a realist approach to international relations, whereby nation-states are selfish actors within an anarchic system. But it is also a rationale underlain by the belief that economic liberalisation is the key to growth and prosperity; a belief that by removing economic barriers across nation-states everyone would benefit. That would happen, according to orthodox economics, either through each country specialising in the industries in which it has a comparative advantage (so one country would produce food, another country would produce cars, etc.) or even specialising in goods that are complementary (one country would have the expertise in producing cars, but it would import the raw materials from other countries). In any case, each economically liberalised country would end up with sectors in which it has a comparative advantage whilst all countries would be organically glued together because they need each other, hence prosperity and interdependence. The EMU represents one of the final stages of this plan, a stage where even monetary barriers are abolished.

The problem with this master plan, to begin with, is that economies are not rational entities. As Karl Polanyi would say, economies are formed by people and other factors of production such as the earth and weather that are irrational. The even bigger problem, in my opinion, is that this plan has always been a capitalist one. When the EU political elites think of prosperity they think of the prosperity of their class and of the classes that own them, that is, the economic elites. Never in the European dream there has been the desire to abolish exploitation, alienation and human suffering. The political and economic elites, of course, would once again resort to economics and argue that when industry thrives then conditions of labour improve. Again, even if we ignore false consciousness or the existence of ideological state apparatuses controlled by elites which stifle any prospect of resistance, and even if labour conditions are improved, nobody ever suggested that prosperity would be equally distributed among the people. The European dream has always been the capitalist dream of the political and economic elites.

Accordingly, the EMU is part of this capitalist dream. It is the dream of those who possess economic capital to further capitalise on a strong currency, the dream of bankers for whom increased competition with fewer rules implies the endless creation of new financial products, the dream of politicians whose friends (the economic elites) are satisfied, and the dream of service providers and manufacturers to capitalise on ever-expanding mindless consumerist masses carefully produced discursively over centuries of ideological control.

The EMU and Greece

In order for the EMU to succeed in making the political and economic elites even richer and the masses even more docile and destitute, it had to be created very carefully. The question that European technocrats had to answer was, “How do we create a strong currency that has credibility?”. When the EMU was designed in the Treaty of Maastricht it included considerations regarding monetary prudence of member-states. Later on in the Treaty of Amsterdam the Stability and Growth Pact was introduced and has been reformed over the years. According to this, member-states should keep their government deficit and debt low and in check (3% and 60% of GDP respectively). These conditions mirrored the belief in European political and technocratic elites that a prudent macroeconomic policy was the bedrock of a strong currency.

In order for member-states to be able to abide by the guidelines of the Stability and Growth Pact they should fulfill certain conditions. The debate on this issue has been brilliantly summarised by Nikos Koutsiaras (2005) in his textbook Understanding Economic and Monetary Union. At the heart of this debate is the need to avoid asymmetric shocks within a single currency area like the EMU. Some scholars emphasised the importance of mobile labour, so that if one country’s economy is declining and there’s surplus labour this labour could move to another country whose economy is contracting (migration). This is how cynically people’s lives are viewed by economists and technocrats. Other scholars emphasised that a single currency union should be formed only by countries who have similar business cycles. Other scholars mentioned the desirability of a centralised fiscal authority that would distribute wealth among countries. Finally, some argued that the more countries engage in economic relations the more their economies adapt to one another, rendering asymmetric shocks less likely.

In other words, if there is free mobility of labour among countries who want to form a monetary union, if there is a centralised fiscal authority, or if the economies among countries are similar, or there’s evidence that over time different economies start to converge, then the conditions for an optimum currency area exist. The reason why these conditions should be fulfilled is that problems in one part of the monetary union can infect the entire union, hence the credibility of the euro which threatens the profits of European big corporations and those political elites that support them.

Greece, as well as other European economies such as Spain and Portugal, represent these asymmetric shocks. Greece is an economy in trouble that despite being peripheral can compromise the entire Euro area. A big government debt creates difficult dilemmas for the European Central Bank. To begin with, EMU members should not owe much to markets because then it creates simultaneously the need for a the Central bank to print more money in order to reduce the debt, increasing inflation and hence the value of money over time, reducing the incentive for investments (and increasing incentive for consumption). At the same time, the intervention of the European Central Bank in the Greek economy creates what has been termed as “moral hazard”. This refers to the idea that other EMU members will think that if one country’s politicians can be non-prudent with their spending so can they (since they want to increase their votes), because the European Central Bank will eventually step in and save the day. At the same time, if the ECB does not intervene it gives the impression of instability, scaring away investors and harms the credibility of the euro.

EU’s defeat as a blow to the neoliberal doxa

In the present case, however, if the EU gives in to the requests of the Greek government is risks something even bigger. If Greece gets away with resisting austerity it means that it succeeds in pushing back the boundaries of the neoliberal doxa. If the Greek people support with their “NO” the Greek government’s efforts to alleviate suffering by spending money on the unprivileged and taking money from the economic elites, they resist an ideology which glorifies extreme inequality and the extermination of the masses. The EU’S political and economic elites cannot allow this to happen. They refuse to allow a dissenting voice, such as this of the Greek government, to shape the discourse on capitalism. What is at stake is the neoliberal doxa. Syriza is a radical party only within the context of extreme neoliberalism. Syriza is not against capitalism. It just wants a different capitalism, one with a more humane fac(ad)e, endowed with all those characteristics which give the impression of fairness. Still, within the present context Syriza’s efforts are noble. If Greece wins this small battle the power configuration changes. More people and political parties around Europe might be inspired. The more supporters this movement gathers the more dissenting voices will start contributing to the discourse on neoliberalism and social and economic inequality. Voting “NO” to austerity is not a panacea and the long-term effects are unknown, but it is a form of resistance which is necessary. Voting “YES” to austerity means acquiescence in the enslavement of the non-privileged, it is complicity in the further establishment of a system whereby the economic and political elites cause the pain, suffering and destruction of the lives of millions.