In September 1788, a drunken brawl broke out among different regiments of the Austrian army. The army had been put together to repel the invading Ottomans, but confusion and bad communication made the soldiers open fire on each other, killing and wounding 10,000 of their own troops. It’s one of the biggest mistakes in military history and one that made the Ottoman conquest of the now-Romanian town of Karánsebes that the Austrian army had set out to protect a walk in the park.
For a continent with such a rich history of strategic mistakes, Europe’s political class seems to have learned very few lessons indeed. After the Eurogroup reconvened this weekend to discuss the Greek crisis, Syriza and Prime Minister Alexis Tsipras were forced to accept a deal that not only is in opposition to to his pre-electoral pledges to end austerity, but intensifies it and cedes more of Greece’s sovereignty to the European Union.
The “agreement” handed to Syriza was reached, as one EU official put it, after a “mental waterboarding" session. It was struck after Greece voted “No” by 61 percent to the proposal drafted by European Commission President Jean Claude Juncker a week earlier.
Rather than paying attention to what the Greek people — the ostensible recipients of the bailout — thought, the country’s creditors decided to come up with an even harsher bundle of measures that included labor-market reforms and deregulation, and also the harsh pension cuts and tax hikes that Syriza characterized as “red lines” after it was elected.
Let’s be clear: This isn’t a “cruel to be kind” kind of deal. This is cruelty for cruelty’s sake. The alternative, officially spelled out in a document leaked by German Finance Minister Wolfgang Schäuble for the first time, was for Greece to leave the euro “temporarily” for five years, sort itself out, and then come back into the fold.
With this in view, it’s no longer a stretch for someone to wonder: Why is Europe so keen to fire upon itself?
For a brief moment, the result of the most recent Greek referendum rejecting austerity was a triumph, if an unexpected one, for Syriza and its coalition government. Prime Minister Alexis Tsipras believed that the result would strengthen his hand in the negotiations. More importantly, it could showcase Syriza’s political power, challenging those looking to undermine and potentially replace them with a “national unity” government under a technocrat prime minister (as certain members of the European Commission would have liked.)
But Syriza ultimately caved to a proposal that looked an awful lot like the one forwarded by Juncker a week earlier. As per the terms of the bailout, a fund will be created to sell off 50 billion euros of Greek state assets such as the national energy grid, regional airports and ports. If you look at the revenue generated by previous sales, the figure seems to be entirely in the realm of fiction. From the revenue they hope to generate, 50 percent will go towards debt repayments, 25 percent for bank recapitalization, and the rest, toward reviving the real economy by way of direct investment, the nature of which is yet to be defined.
The undemocratic way in which governments are coerced into more austerity may give rise to extreme, nationalistic parties across Europe.
Tsipras, unbelievably, presented this result as a victory, because the fund will be based in Athens, and not in Luxembourg as the creditors suggested. Never mind that the development fund in question is owned by German bank KfW, whose chairman is none other than German Finance Minister Wolfgang Schäuble.
The stripping of Greek national assets will thus proceed.
The message this move sends is that Greece’s creditors and the European Central Bank, a supposedly neutral institution that has long since abandoned its apolitical pretenses, were determined to gut Greece’s economy, rather than to publicly back down. Syriza’s wager that Merkel & Co would blink in the face of their very strong mandate to end austerity back home was proven wrong.
Greek sovereignty, viewed from Germany, is virtually non-existent: “Laws were passed that we didn’t allow to be passed” said German Chancellor Angel Merkel, referring to Greece’s re-hiring of laid off public sector workers, and the re-opening of ERT, the state broadcaster controversially shut down overnight in 2013. Both these causes had strong support in Greek society; both were vehemently opposed by the Germans in spite of their dealing with national policy because they were perceived as unilateral actions, despite the fact that in the case of ERT, it made clear social and financial sense. (ERT was a profitable organization pre-closing.)
We are now facing an outcome that creates more problems than it solves. For starters, the deal reached means little to the real Greek economy, which is entering a new recessionary cycle, especially with the new cuts and tax hikes. This means that we’ll be looking at a repeat scenario in a few months’ time — and at that point, the Grexit option will come back with a vengeance.
As Ed Conway of Sky News wrote: Sunday 12 July: “The moment the euro became reversible.” The legacy of this move will pervade every crisis the EU will face from now on, and will likely have a domino effect with the British referendum on EU membership in two years time.
This reversibility signals a major shift in the spirit of the European Union. The political side of the European project was once one of unity and solidarity; today Germany calls the shots, and anyone who pushes against the plans of its finance minister (probably the most unpopular politician in the union) will be facing much the same wrath as Greece.
Look two or three years down the line. If Italy’s economy fails to pick up despite Prime Minister Matteo Renzi’s reform program, will Italians accept being strong-armed in the same fashion? And will France stand by as the currency union turns into a hard pegging system in which everyone must adapt to German plans?
In the coming months and years, the state of the eurozone will depend on how the situation unfolds inside Greece. The fear is that the undemocratic way in which governments are coerced into more austerity will give rise to extreme, nationalistic parties across Europe. By negating the mandate of the Greek government to end austerity in the country not once but twice, Europe is signing up for its own worst nightmare.