Three depressing lessons from the Greek debt negotiations

It is difficult to write anything new about the endless negotiations between Greece and the troika, or as they are called now, the institutions. The daily vicissitudes of the negotiations leave everyone who tries to follow them and draw conclusions wrongfooted — so quickly does one piece of news get contradicted by the next. Moreover, the institutions negotiating with Greece about its debt (the International Monetary Fund, the European Union and the European Central Bank) are becoming a real troika in the sense that each of the actors seems to be playing its own game. And behind them, there are other actors (the German Ministry of Finance, the right wing of Germany’s ruling Christian Democratic Union party, the left wing of Greece’s ruling Syriza party) that, while not formal parties to the negotiations, are at times more important than those who sit around the table.

So I will instead parse the three long-term implications of the Greek drama.

Loss of trust among EU member states. The longer the crisis lasts, the more the trust among EU members will fray. For any association of countries or regions to function at least tolerably, a certain amount of trust, compromise and, in the economic sphere, redistribution of wealth from richer to poorer members is necessary. If states follow only their interests, to the disregard of everybody else’s, a union is impossible. For a political union to function, the amount of compromise required increases with the importance of the member state.

Translated in EU terms, this means that Germany should offer a disproportionate number of concessions. This was, for historical reasons, the case for most of the postwar period. But it has clearly come to an end with the Greek crisis. The largest member is offering the least in concessions. This, by itself, weakens the union, because it stimulates an equally uncompromising stance from the others and sends the message that the EU is based solely on relations of power. But then, other members may wonder about the meaning of a union in which everything is decided as if the states were not bound to one another by deeper ties. It also engenders the fear of stronger members’ domination of weaker ones. 

This disintegrating process is always accompanied by stereotyping, a popular response to the high politics that take place around the negotiating table. The process of stereotyping in the EU is fairly advanced, with pictures of German Chancellor Angela Merkel in a Nazi posture, accusations of tactless and arrogant behavior by the northern countries, counteraccusations of laziness and mooching by the Greeks and other southern members further poisoning the atmosphere. The fear and loathing then descends to the popular level. It is naive to believe that, even if the negotiations are successful and, even more miraculously, the crisis were solved today, the stereotypes will be forgotten. Once they start being used in political discourse, moving from the netherworld of the Internet to discussion in ostensibly respectable quarters, the genie cannot be easily pushed back into the bottle. Every action by every actor will be judged and interpreted in that new light.

Impossibility of leftist polices under global capitalism. The second lesson is the continuation of what François Mitterrand’s France learned in the early 1980s: One cannot pursue an even moderate left-wing policy in a system of global capitalism. Syriza never got a chance to apply any of the leftist policies that it says it favors, because it was busy negotiating with the creditors and because it had no genuine freedom of economic decision-making, since basically all its policies were dictated by the troika. Even if it had a margin for maneuver, it is hard to see how its moderately leftist policies (halt to privatization, higher taxation, greater role for the public sector) could be implemented. Notice that we are talking here not of some radical anti-capitalist program but of just broadly leftist policies that try to limit somewhat the unimpeded invasion of the market and private interest into all social spheres. Such policies are obviously unacceptable not only to the mainstream EU but also to many individual governments, which fear Syriza-like movements in their countries.

It is reasonable to believe that some of the troika’s more inflexible demands had the objective of — in addition to bending the will of the Greek government — clearly demonstrating the inability of any left-wing government to exist and prosper within the current system and ultimately making the Greek people either pay dearly for having elected Syriza or oust the government. When Prime Minister Alexis Tsipras spoke of “humiliation,” he was saying the troika wanted to teach Syriza the lesson that it cannot rule from the left and stay in the eurozone. Or, to put it in graphic terms, bring Syriza to the pan-European table but wearing a jacket and tie.

The ghosts of Europe’s past are winning. What does the European Union stand for? Until 10 or 15 years ago, one could see the EU as a shining example of economic and political integration among erstwhile foes that brings to the members — and potentially to those around it — higher income (through convergence of poorer and richer members’ income levels), social protection and peace. But now, with the EU in disarray, it can hardly project that optimistic image to the rest of the world.

Moreover, through its incompetence and hubris, it is responsible for major external mistakes that have brought war and chaos to its southern and eastern edges, in Libya and Ukraine. Internally, the EU is becoming disunited and hence weaker; externally, it has turned into an exporter of instability.

Unless things radically change — and it is hard at this point to see how they can — it may lead a grandiose European project to a sad ending, in which the ghosts of the European past triumph over the best intentions.