The Greek Left

Attention has turned back to Greece. The results of the May 6^th elections have made it difficult for any party to form a coalition. The pro-EU/IMF bail-out parties lack a majority, as do the anti-austerity parties. After attempts by the first three parties in last Sunday’s poll to form a coalition, new elections look most likely. And as polls give the radical left party, Syriza, around 27% of the vote, making a Syriza-led coalition possible, many have begun to look in detail at the modalities of a Greek exit from the Eurozone. The Financial Times is running a series of articles this week on the topic of “If Greece goes…”.

In a thoughtful piece, Paul Mason recounts the emergence of Syriza from the fragmentation of the traditional Greek left. After a definitive split between Stalinists and Eurocommunists in the early 1990s, Syriza has emerged from the combination of the latter wing with a bundle of other groups and interests. Benefiting from the radicalisation of young people during the anti-globalisation heyday of the late 1990s and early 2000s, Syriza has managed to sustain its momentum. It mobilized around anti-government protests in Athens in 2008 but its main gain has come from the crisis itself. The mainstream centre-left party in Greece, PASOK, committed itself to the EU bail-out in a way that opened up space on the left for Syriza. Something in between PASOK and Syriza was formed two years ago: the Democratic Left, a small parliamentary group that had been supported by some PASOK members and which won 19 seats in the recent elections. However, as the split between pro and anti-bailout positions deepens, Syriza is picking up the most votes.

Given this history, Syriza’s position on the current crisis is a curious one. It seems that Syriza leader, Alexis Tsipras, is not advocating a Eurozone exit for Greece. Rather, he claims that what is being demanded of Greece by its creditors is unacceptable and should be replaced with far more lenient terms. His criticism is of the austerity measures and his position does not extend to a wider criticism of the Eurozone as such. As Mason notes, many Syriza supporters are in fact strongly attached to the idea of a “social Europe”; what they are unhappy about are the measures being implemented in Greece today. Tsipras’s strategy is in essence one of calling Merkel’s bluff: rather than letting Greece leave the Eurozone, he thinks the Eurozone’s main creditors would rather soften their austerity demands and cut Greece some slack.

As a political position, there is a lot to criticize. For a start, it seems curious to be vehemently against the EU/IMF bail-out agreements and yet to support Greece’s membership of the Eurozone. The bail-out agreements are after all consistent with the underlying philosophy of the Eurozone: balance budgets, maintain competiveness through internal devaluations when necessary, and achieve long-term harmonization of the Eurozone economies through structural reform. The bail-out for Greece is thus a concentrated and speeded up version of the Eurozone’s basic principles. Secondly, there is something spineless about Tsirpas’s position. It seems that if Syriza were to come to power and form a coalition, and if it were then to fail to renegotiate the bail-out terms with the EU and the IMF, it would eventually oversee an exit from the Eurozone. But this would appear – from Syriza’s point of view – as evidence of their hand being forced. They didn’t want to leave the Eurozone but their hand was forced by evil creditors. Equally, from the side of the remaining Eurozone member states, the story would be one of Greece being given all the chances of remaining within the single currency zone but choosing in the end to jump. The Greeks would say they were pushed; the Eurozone members would say they jumped. Greek exit would thus happen rather in the manner of the Czech-Slovak divorce of the early 1990s: accidentally, with no one claiming responsibility for what happened. Or as the FT puts it, “In a game of brinkmanship, neither Athens nor the rest of the Eurozone would want to take responsibility for a Greek exit from the single currency. Recriminations would fly”.

A more consistent position for Syriza would be for it to assume fully its criticism of austerity policies. This means arguing for a Greek exit from the Eurozone and proposing a clear growth plan after the exit. At the moment, Tsirpas is playing a dangerous game of assuming that Greek membership of the Eurozone is important enough to the country’s creditors to force a revision of the bail-out terms. There is little in that position beyond opportunism and Tspirpas may find himself presiding over the consequences of his own miscalculation.

Europe’s implementation problem

In recent days, we have seen an unravelling in the political foundations of the Eurozone’s fiscal compact. The most recent casualty was Mark Rutte’s government in the Netherlands. Precarious at the best of times, the government’s proposed budget cuts of up to 16 billion Euros failed to win over the Freedom Party leader, Geert Wilders. Wilders withdrew his support for the government, leaving it to rely on a spattering of small parties across the Dutch parliament. Rutte claims that the country must pass the new budget by the 30^th April, the deadline given to the Hague by the European Commission, the latter donning its hat as agent of budgetary approval for national governments. Many in the Netherlands disagree and any election is likely to be cast as a referendum on the Euro.

In France, the success of the far right National Front in the first round of the Presidential elections last Sunday has put France’s role in Europe under the spotlight. One of Marine Le Pen’s most publicized demands was that France leave the Euro. Turning their attention to National Front supporters, both second round candidates – Nicolas Sarkozy and François Hollande – have taken the anti-EU sentiment on board. Hollande promises to redesign the fiscal compact so that it focuses more on growth and job creation. Sarkozy has begun to speak about politically controlling the European Central Bank and has taken a tough line on Europe’s immigration laws.

In Ireland, as a referendum on the fiscal deal approaches, a large part of the population is undecided. Recent polls suggest that up to 40% of the population is unsure how it will vote on the 31^st May. And in Greece, the forthcoming elections may well challenge the political consensus built up behind the country’s deal with its creditors.

This unravelling of political support for Eurozone agreements is not just a product of a far right surge across Europe. Many of the criticisms of the austerity measures reflect divided opinion at the very top of public life. That more austerity only leads to lower growth, which in turn leads to higher debt levels and thus a need for even more austerity, is recognized by many as a downward spiral associated with extreme cost-cutting by governments. The IMF has for a long time warned against draconian cuts in government budgets that could stifle rather than encourage growth. In Greece, we have heard this argument coming from the opposition for some time and in the UK the Labour and Conservative Parties agreed in the run up to the 2010 election on the need for balanced budgets but disagreed about how quickly budgets should be brought back into balance. Elite opinion lacks consensus on the modalities of austerity policies and today’s disagreements reveal some of the problems with the deficit-reduction assumptions of the EU’s fiscal compact.

It is also clear that implementation problems are an inherent feature of European governance. Taking the case of the Eurozone, the fiscal compact reflects the way in which political decision-making has become separated from the ugly business of implementing unpopular policies. EU crisis management concentrates policymaking powers within the hands of executives. In the form of agreements between heads of state, brokered behind closed doors and in ways that are intended to mutually support each other in the difficult task of ruling in uncertain times, these policies are then passed down to the level of national ministries where the cuts and belt-tightening takes effect. And it is not coincidental that the focus at the EU level is on government spending. The far more difficult and longer term task of raising competitiveness is left up to national governments.

Such a radical separation between the decisions made and their implementation is evidence of the weak authority national governments command across Europe. They hope that by presenting at the domestic level something that has already been agreed by most member states, implementation will be made easier. The pan-European nature of the deal thus reflects the crisis in authority felt by national governments. They need this separation of policymaking from implementation in order to make implementation easier at the national level. We are seeing today that it does not always work.

A note on the first round of the French elections

With one of The Current Moment editors based in Paris, it is difficult not to post on last night’s first round of the French presidential elections. And after the unedifying spectacle of different politicians talking over each other for hours on end on French TV, a few ordered thoughts will not go amiss.

François Hollande, the Socialist Party candidate, has come out on top, as most people expected. With 28.63% of the vote, he was a little ahead of Nicolas Sarkozy, the outgoing president, who secured 27.08% of the vote. What is surprising is how close these two scores were. There is some variation in the scores, depending on how you round them off, but there is little evidence of Hollande having pulled away dramatically from Sarkozy. Hollande’s victory in this round is far less decisive than Sarkozy’s was in 2007. Back then, Sarkozy won the first round with more than 31% of the vote, the socialist Ségolène Royal winning just under 26%. Watching the speeches each candidate gave after the announcement of the results, there was no obvious sense of victory either way. Sarkozy even appeared to upstage Hollande by challenging the socialist to three presidential debates over the next two weeks. A typically pugnacious gesture on Sarkozy’s part, Hollande seems to have refused which puts him in a defensive position vis-à-vis the ever combative Sarkozy.

At this stage, it is difficult to tell whether the anti-Sarkozy sentiment in France will be strong enough to sweep him out of power. The results suggest that contrary to many other elections that have taken place in Europe in the course of the crisis (e.g. here on the Spanish elections), the incumbent has managed to hold on to a good deal of support. Given the apparently ubiquitous dislike of Sarkozy, his score appears rather high. We are also seeing at this stage the limits of the Socialist strategy. Their slogan – Le Changement, C’est Maintenant (Change is Now) – highlights how much they have relied upon anti-Sarkozy feeling. Their claim to incarnate change is a weak one. Figures such as Laurent Fabius – a young prime minister under François Mitterand in the 1980s – hardly incarnate change. Rather, there is in the Socialist Party a sense that it is their turn to rule: out of power since the mid-1990s, their rightful place was usurped by a victorious Sarkozy in 2007. Now, their turn – long overdue – has come. It is this kind of sentiment – less evident in Hollande than it is in his entourage – that helps fuel support for the more marginal parties.

The first round result was noteworthy perhaps above all for the high scores of the far-right Front National and the left-of-the-left party, the Front de Gauche.  Much of the campaign had been taken up by this struggle between Marine le Pen and Jean-Luc Mélenchon, the populists of the right and of the left. Polls had credited the Front de Gauche with up to 15% of the vote but Mélenchon obtained on the night 11.13%. Marine le Pen, who had often been pushed back to fourth place in the polls, came a powerful third with 18.01%. It is difficult to assess what this means for the next round. Le Pen is expected not to give any clear sign that her supporters should vote for Sarkozy and many may not vote in the second round. Mélenchon called on his supporters to vote against Sarkozy, but held back on the night from openly calling on them to support Hollande – a tortuous position to hold if ever there was one. If we judge from the feeling that prevailed on the Sarkozyste right that “all is to play for”, there is no doubt some of that bullish sentiment comes from the hope that they can win over most of Le Pen’s supporters in the second round. Sarkozy’s speech last night – making much of patriotism, strong borders and economic protectionism – was an obvious pitch to Front National supporters. And the Socialists may find themselves in an uncomfortable position of trying to secure the votes of the virulently anti-FN Mélenchon supporters whilst at the same time sending conciliatory messages to the FN vote about understanding those who are suffering in the economic downturn. Here we see the problems of the Socialist Party: both a centrist and pragmatic (and largely middle class) electoral machine, and a party with a few remaining roots in the French working class.

It is unlikely that either Hollande or Sarkozy will upset the European crisis boat after one of them has been elected on May 6^th. Hollande’s main policy on the Eurozone crisis is to reorient macro-economic governance in a pro-growth direction. This is a very general claim, easily satisfied by cosmetic measures such as affixing the term growth to new European agreements much as was done with the Stability and Growth Pact. It is unlikely that the Socialists would rock the Eurogroup boat by denouncing all existing measures and demanding a return to the drawing board. It is likely that the curious way in which Brussels-based policymaking is able to insulate itself from domestic political currents will continue. What will happen within France, however, is far from clear. The success of the FN might also spell the end of its marginal existence and its transformation into a more mainstream party. There is talk of changing the party’s name, for instance, part of a wider and longer-term exercise in rebranding. But for the moment, the focus will be on what will happen on May 6^th.

Interview with Hillel Ticktin

Following up on last year’s Current Moment interviews, today we are publishing an interview with Hillel Ticktin, Emeritus Professor of Marxist Studies at the University of Glasgow. An internationally renowned Marxist scholar, Professor Ticktin co-founded in the early 1970s the journal Critique.  He has published numerous books and articles over the years. In 2010, Critique published a special issue on the current crisis to which Ticktin and others contributed.

Eurozone leaders are going on record saying that the worst of the sovereign debt crisis is over. Are they right to be so optimistic?

No. But then, the Eurozone country politicians are not going to tell the truth as to what they think, as it would spook the markets. Without growth, it will be impossible to solve the indebtedness problem, and Germany is insisting on harsh terms for giving loans, so harsh that there will be negative growth. This is clear in the case of Greece, where the newspapers are talking of the need for a future Third Bailout. But in reality it is highly likely that other countries will require further substantial loans. While Portugal will not be too much of a problem, a Spanish or Italian bailout cannot be financed on present Eurozone funds.

Yields have fallen on sovereign debt as the European Central Bank (ECB) has injected over 1 trillion Euros of liquidity into the European banking system in the form of longer-term refinancing operations. How has the crisis changed the ECB and has the ECB been the saviour of the situation?

The ECB has clearly put off the day when the crisis will have to be faced down. Banks have acquired sufficient liquidity to avoid problems and have invested money in their governmental bonds. The rational solution would have been the issuance of sufficient Eurobonds which would be used to fund the various countries involved. Since the Eurobonds would be backed by the successful Eurozone countries, investors will buy them. The ECB has produced a temporary measure but the amount of money involved is insufficient. Until the ECB can act as the Central Bank of an independent country in order to issue as much liquidity as it sees fit, and can help to issue Eurobonds, it is not fit for purpose.

The European approach has combined the backdoor provision of liquidity to its banking system with a frontdoor assault on government budget deficits and on national labour markets. What is your assessment of this approach overall?

Crazy. It is not really a European approach so much as a Conservative policy supported by the UK Conservative party, the Christian Democrats and Free Democrats in Germany, the Republican Party in the USA etc. It is not supported by the social democrats in France or Germany. Hollande has made that very clear. Of course in practice the social democrats do not live up to their promises, but they would ease the situation and might be pushed further by popular pressure. The question is why such a policy is being adopted at all, given that it cannot possibly work, and indeed is not working. It looks as if a section of the bourgeoisie has decided to take the opportunity to attack the working class so far that they would end up with a 19^th century approach to social relations. That, in turn, would ultimately destroy the social democratic parties and replace them with revolutionary left wing parties. Whom the Gods would destroy they first make mad.

A feature of the politics of the Eurozone crisis has been the replacement of democratically-elected governments with technocrats. This occurred in both Italy and Greece. Does this signal a trend of some kind, that economic imperatives are being placed above political ones for instance? And does it suggest that European integration today is really about preserving the Euro?

This is an inevitable feature of the present. Once the majority of the population began to turn to the left, as in Greece, the capitalist system itself began to be threatened. The use of the army is not possible at the present time. Nor is a far right popular movement based on the so-called ‘middle class’, So they have had the ingenuity to invent a new undemocratic category of a non-political government,  which makes a mockery of the Parliamentary system.  This is much like the idea that US judges of the Supreme Court are above politics when they pronounce on political measures, even though they have been specifically appointed for political reasons. It does not fool the working class but people may be grateful that it is not worse. Since it will not work, there will have to be even more undemocratic solutions. In the UK during the Great Depression, there was a National Government. In effect a coalition of all the large parties. The fact is that the Parliamentary system was already cracking, so this is another stake in its heart.

There is no question that ‘economics is being placed above politics’. The only rational way to run a union with a common currency is to accept that the richer areas will help fund the poorer areas, in order both to help them catch up but also to maintain cohesion, based on principles of human rights. European countries usually accept such obligations, unless they accept that parts of their country will break away. After all, Germany taxed the West Germans to help the absorption of East Germany. Today, however, the ruling parties in Germany, the Netherlands and Finland appear to reject such an approach. The reason ultimately lies in the fear of instability in those countries. So, economics is not really being placed above politics, depending on one’s definitions of politics and economics. Instead one politics is replacing another. The reason is discussed in the answer to the next question.

Is there an alternative to this approach of national budgetary austerity combined with a pan-European fund intended to offset any threats to Europe’s banking system.

As the current approach is being widely applied and is widely distrusted, and can only fail, there has to be another alternative if humanity is to survive, whether in or out of the Eurozone.

We are in a downturn of depression proportions. The last Great Depression only ended with the World War. War, on that scale, is however, excluded at the present time. The only way out of the present impasse is for a rationally planned economic reconstructive process, with governments playing a leading role. As the ruling class supports small government and the extension of private enterprise, it will oppose any such move. On the contrary, it is afraid that any attempt to go for reflation with government participation will lead to a political upheaval. In my view, they are right that the population will demand increased economic and political participation under conditions of full employment. That is in effect the immediate alternative, which is why the ruling class wants to take the opportunity, instead, to achieve a defeat of the working class of epochal proportions. Looked at this way, the policy of austerity is a defensive measure to preserve capitalism. Seen this way the policy is not crazy but rational, even if its application is mad.

The future is not as apocalyptic as it might seem from that last sentence, since the most likely result for the present is that the austerity policy will be pulled back, even if only by social democrats. Growth will be low, poverty increasing and discontent rising. Ultimately there will be a denouement, but when is not yet clear.

A European approach to the crisis

Largely because of electoral reasons, French President Nicolas Sarkozy has suggested recently that Europe is “turning the page” in its financial crisis. At a European summit at the beginning of March, he declared that it was the first summit since August 2011 not to have been a “crisis summit”. A few days ago, he declared the financial crisis over.

There is certainly a sense that the urgency and the gloom of 2011 has lifted in early 2012. The risk premium demanded by investors to hold the government bonds of countries like Italy and Spain has fallen considerably and stories of bank runs and Eurozone atrophy have fallen away. It is worth asking then what has been Europe’s approach to its crisis and whether we right to think it has been an adequate response.

Two features stand out. The first is the emphasis – policed by European institutions and formalized in the EU fiscal pact – on budgetary austerity and labour market reforms. Cutting government spending has become the prime goal of national governments across Europe, closely followed by reforms of national labour markets. Budgetary austerity runs across all the Eurozone: from the Netherlands where pressure to cut budgets looks like it will bring down Mark Rutte’s coalition government, to the UK, France and elsewhere, not least in Greece where it has been the basis for a fundamental assault on the country’s social fabric. National labour market reforms have been pushed mostly in the southern European countries: Greece, Italy, Spain, Portugal. There has been some change in Northern Europe: in France the retirement age was raised and the Sarkozy government has argued for shifting the burden of social security contributions from employers onto taxpayers in the form of a “social VAT”. Elsewhere, labour market reform is deep and painful and may yet lead to an unravelling of the alliance between national technocrats and EU-backed reform. But the sense in Italy, where Monti is fighting the unions, and in Spain where Rajoy faced down a general strike yesterday, is that changes will go through.

The second feature is the backdoor use of taxpayer Euros to prop up the continent’s financial system. Whilst the public assault on spending programs and on labour market regulation is an explicit policy of European governments, this latter feature is more hidden. It is nevertheless a key element in the European approach to resolving the Eurozone crisis. It has two elements to it. One is the commitment to European sovereigns in the form of the “bailout bazooka”. In an angry letter to the Financial Times last Wednesday, Klaus Regling, chief executive of the Luxembourg-based European Financial Stability Facility, took issue with the description of his Facility as a “toy gun”. He pointed out that in fact the sum of the bailout provisions provided by European governments is considerable: almost 1 trillion Euros in total has been disbursed since the start of the crisis. This includes the two bailout packages for Greece, the write-down of Greek debt (the so-called Greek private sector involvement operation), the Irish and Portuguese bail-outs, the European Central Bank’s secondary market purchases, 250 billion Euros of uncommitted EFSF resources and promise of 150 billion Euros to the IMF.

The second element is something Regling didn’t include in his list, namely the ECB’s longer-term refinancing operations (LTRO). These operations have been in two stages, first last December and again in February of this year. In essence, LTRO has involved the ECB in providing cheap three year loans to banks. This was intended as a way of injecting liquidity into the European banking system so as to avoid any bank collapsing altogether. Over time, the hope is that this liquidity will work its way into the real economy in the form of bank loans to business. The amount of liquidity provided by the ECB is huge: 1.019 trillion Euros in total.

Taken together, the European approach to the crisis has been to mix frontdoor assaults on government spending and labour laws with a backdoor taxpayer-funded bail-out of banks and of embattled sovereigns. There are two, deeply troubling elements contained within this approach. The first is the hypocrisy: a focus on austerity on the one hand and the provision of largesse on the other. The only way to understand this is as a massive wealth transfer away from taxpayers. It isn’t as simple as saying that cuts to social security provision are being used to fund the bail-out of banks since some the bail-out money has gone to pension funds who have faced serious losses on investments in southern European countries. But there is a wealth transfer at work that reflects a balance of forces within society and the transfer is not towards European labour.

The second is the doubt about whether throwing more money at the financial sector can really solve a more endemic problem. Debt-fuelled growth was a characteristic of the years leading up to the crisis: either government-debt in the case of southern European societies or private debt in places like the UK. The idea that issuing more debt can lift Europe out of the crisis seems ungrounded. More likely is what we are seeing: banks that have taken up the offer of the ECB’s loans have parked them back at the ECB rather than using them as a basis for a renewed round of lending to business. The economics of the European approach seem naïve, the politics are just plainly anti-labour.

Hoist with your own petard

Back in September 2011, we posted on an opinion piece published in the Financial Times by the Dutch prime minister, Mark Rutte, and his finance minister, Jan Kees de Jager. Entitled ‘Expulsion from the eurozone has to be the final penalty’, the article was a hard-line take on dealing with the Eurozone sovereign debt crisis. It urged the creation of a commissioner responsible for budgetary discipline and suggested that as a final penalty for non-compliance, profligate member states could be thrown-out of the Eurozone.

At the time, the Dutch were riding high in the league tables of Eurozone economies: unemployment was very low, the country enjoyed a trade surplus and it seemed free of some of the concerns weighing down troubled economies like Spain, Greece, Italy and even France. In debates about transforming the EU into a “transfer union” the Dutch took as hard a line as the Germans. Pushed by the far right party that was propping up its coalition, the government made clear that subsidies to work-shy Greeks were out of the question. Countries should not live beyond their means and the EU should ensure that those governments unable to control their spending should be made to pay.

Events have taken a turn for the worse in the Netherlands and the government risks being hoist with its own petard. Unexpectedly, the Dutch economy has fallen into recession and if growth continues to stall, it will overshoot the 3% of GDP budget deficit limit that is formally enshrined in the new fiscal pact agreed by the Netherlands and most of the EU’s other member states. As The Economist reported, a deficit of 4.5% is currently being forecast if no cuts are made to government spending. The government has to find 9 billion Euros of savings in 2013 in order to avoid incurring the very sanctions Rutte and de Jager were calling for back in September of last year. Given the weak position of the present government, there is a good chance that it won’t be able to push through the required cuts. Yesterday, one MP of the far right Freedom Party (PVV) resigned from his own party, claiming that the PVV is a one-man Geert Wilders show rather than a proper political party. Given that the government’s minority coalition relied on the PVV for a majority in parliament, this defection threatens to bring the whole fragile edifice tumbling down. The opposition is calling for new elections.

At the time of Rutte and de Jager’s original argument, we criticized it for assuming that that Eurozone crisis was purely the result of overspending by national governments. What gave their article its rhetorical force was the notion that fiscally conservative “Northern” governments, safe from the choppy waters of the Eurozone crisis, were well-positioned to lecture their profligate Southern partners on the merits of good housekeeping. These national stereotypes have given the Eurozone crisis its chauvinist edge. The troubles of the Dutch government today suggest that falling growth, rising deficits and the political costs of austerity measures, is a pan-European problem. Evidently, there is more to the Euro-crisis than just the misplaced largesse of Southern European governments. With a bit of luck, the Dutch difficulties will have the effect of pushing forward the debate around the Eurozone crisis.

 

 

 

 

Guest Post: Europe’s Soft Coup d’Etat Part 2

Editor’s Note: This is the second of a two part analysis of the politics of the euro-crisis by James Heartfield. Part 1 found here.

In this current moment some of those who are standing up to the EU’s austerity packages have shouted about the attack on democracy. They think that the EU is attacking democracy so that it can push through its spending cuts. So it is. But much more so it is using the debt crisis to push through the abolition of national sovereignty. So often it has.

Two and a half years ago a very prescient sociology professor Ulrich Beck wrote ‘The crisis cries out to be transformed into a long overdue new founding of the EU’. Beck went on: ‘until now there has been no joint financial policy, no joint industrial policy, no joint social policy – which, through the sovereignty of the EU, could be pooled into an effective response to the crisis’. The only real barrier, thought Beck was ‘the national self-delusion of its intellectual elites’ who ‘bewail the faceless European bureaucracy’. (Guardian, 13 April 2009)

December’s Brussels summit, drawing its moral imperative from the sovereign debt crisis, ended with a commitment to create a much-greater coordination of economic and financial policy. Under the agreement national governments must submit balanced budgets, and face ‘automatic penalties’ if they do not. The thesis behind the agreement is that the southern European countries’ spending and indebtedness has undermined confidence in them and because of that in the Euro.

Shifting the blame onto Greece, Spain and Italy for the Euro crisis twists the truth. Throughout the buoyant years of the noughties the success of the European periphery was cited proof that the European Union was working. More, exporting countries, including Germany, were glad that easy credit boosted Greek and Spanish buying of their goods.

Apart from the economics, though, the important shift is towards ‘stronger economic union’. When the crisis began Greece’s troubles suggested to many that the European Union would ‘fall apart’.Professor Beck’s intuition that the crisis would drive the greater integration of economic policy proved to be as insightful as the fears that the whole thing would fall apart. Where he misleads us is in portraying this movement as a greater democratisation ofEurope. On the contrary, the trajectory is towards a much-diminished role for democratic oversight, and a much enhanced role for unelected officials dictating terms to elected governments. ‘Automatic penalties’ is European code for ‘not subject to political negotiation’.

The reason for the ‘automatic penalties’ is that as national elites European governments do not have the authority to see through tough measures. For many years now, governments have leaned on the European Union as an extra-national source of authority. Governments that are not willing to make the case for tighter budgets honestly in their own terms, have hid behind the claim that they must make adjustments to meet the external restraints imposed by Europe.  That is what Italian Minister Guido Cali meant when he said that ‘the European Union represented an alternative path for the solution of problems which we were not managing to handle through the normal channels of government and parliament’.

Not just Italy or Greece, but Britain and Germany sought again and again to ‘tie’ or ‘bind’ themselves into European Union rules that would limit the political temptations of excessive spending. Quite why sovereign states should choose to bind themselves and their successors in obligations that they cannot change or renegotiate is a conundrum for students of international relations. The answer to the puzzle is that these elites no longer derive the same authority that they used to from national electorates or constituent assemblies that once they did. Instead it is in the international summits, most notably the European summits that leaders feel secure, bound together in their mutual fear of the unruly electorates.

Fear of economic crisis is driving the integration of European policy, and it is not being consolidated as a democracy, but as a technocracy, where officials follow procedures, rather than make policies. Six years ago the voters of France and Holland voted down the centralisation of Europe under its then proposed constitution – which was abandoned soon after. Now, using fear of economic collapse, European elites have talked themselves into submitting to a more onerous set of impersonal and bureaucratic rules.

Guest Post: Europe’s Soft Coup d’Etat Part 1

Editor’s Note: Mainstream commentators for the Financial Times, like Wolfgang Munchau, are now giving titles to their op-eds like ‘Greece must default if it wants democracy.’ Meanwhile, ECB bankers argue that you have to scare democratic publics into sado-monetarist bailout packages. And finance ministers, like the Netherlands’ Jan Kees de Jager, want to radicalize Europe’s democratic deficit: “I am in favour of more control, more supervision … Money is the thing we can control Greece with.” The conflict between democracy and technocratic management is becoming increasingly clear. Today and tomorrow we run a two part analysis of these developments by James Heartfield, who argues that this tension is embedded in the logic and political structure of the European Union itself, not just the euro and monetary union. James Heartfield is a writer based in London. His most recent book is The Aborigines Protection Society: Humanitarian Imperialism in Australia, New Zealand, Fiji, Canada, South Africa, and the Congo, 1837-1909 (Columbia University Press).  

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Europe’s Soft Coup d’Etat Part 1

Winter 2011/12. The Greek parliament is besieged from without by angry protestors. They riot burning down banks and government buildings. The Italian government, too, faces mass opposition – a general strike in protest at government €450 billion spending cuts. InIreland,Spainand many other European countries there are angry protests. But the Greek and Italian governments are not only under pressure from the public. They are answerable to other masters than the electorate.

Greek Prime Minister Lucas Papademos took office on 11 November 2011, though he stood in no election. Before becoming Prime Minister Papademos had been a senior official at the European Central Bank, and an advisor to the outgoing PM George Papandreou. Italian Prime Minister Mario Monti was appointed on 12 November 2011, having been made a life senator three days earlier by President Giorgio Napolitano. Before becoming Prime Minister Mario Monti had been an economics professor and a member of the European Commission. On the face of things, both Papademos and Monti draw their authority from their own parliaments – but everyone knows that is not so. Both of these unelected experts came to power in a ‘Soft Coup’; both deals were brokered by the European Union, in the middle of a harsh public debt crisis.

In the case of Greece, the European Union had been dealing with Prime Minister George Papandreou, leader of the largest, and best-polling political party in the last democratic elections, PASOK, twisting his arm to agree spending cuts. Talks were held between the Greek government, and the ‘Troika’ of the International Monetary Fund, the European Central Bank and the European Commission. Having agreed one round of cuts after another, Papandreou baulked at just how unpopular these were, and in October said that he would let the people vote on more cuts in a referendum. The European Union was outraged at the idea that the voters should be asked.

‘The announcement has surprised the whole of Europe,’ said French President Nicolas Sarkozy. ‘Giving the people a way to express themselves is always legitimate, but the solidarity of all the euro-zone countries cannot be exercised unless everyone agrees to make the necessary efforts.’ In a parliamentary session in The Hague, Dutch Prime Minister Mark Rutte called the threatened vote a ‘very unfortunate development’ and said ‘we have to do everything to prevent it.’ (Wall Street Journal Europe, 2 November, 2011) After crisis talks Papandreou agreed to cancel the public vote and to suspend normal party politics in favour of a government of ‘national unity’, and to stand down as Prime Minister in favour of Papademos. Robbed of a voice Greek people were more willing to protest and even to riot. German Finance Minister Wolfgang Schäuble wants the Greeks to cancel future elections and have a government without any politicians, only ‘experts’.

Around the same time another European leader – of the right in this case – was forced to stand down. Silvio Berlusconi had often been attacked by the European Commission, charged with corruption. But each time the question was put to the polls the wily Berlusconi won over voters. In November 2011, though, the debt crisis gave the Commission the lever it needed to prize Berlusconi out, and he resigned. European Council President Herman van Rompuy told Italians on 11 November 2011 that ‘the country needs reforms, not elections.’ Mario Monti was appointed Prime Minister and, in turn, appointed a ‘Professors’ Cabinet’, or ‘technocratic government’. Monti’s first reforms were to cut spending and to attack trade unions.

In a single week the elected governments of two of Europe’s democracies had been swept aside. At the very moment that Italian and Greek people needed to deal with the problems they faced, they were robbed of the chance. Before they could see their own political representatives argue out the best outcome on party lines, with the parliamentary contest mirroring the contest for votes. The party political system was a lever for ordinary people to push their goals right into the centre of government. But without it, public administration stopped being democratic, or even political. It was called ‘technocratic’ – government as technique, not as a negotiation; mechanical, not through dialogue. Instead of leaders there were experts. Instead of a contest ‘national unity’ was imposed (though many outside did not feel they were a part of it).

The events of November 2011 were called a ‘Soft Coup’, or a ‘coup without tanks’. But what Junta was taking over? Even the angriest protestors were not sure who to blame. If there were no tanks, where was the confrontation?

It would be hard to avoid the role that private financiers played appearing at every corner to warn against any backsliding on cuts. The ‘technocrats’ were not experts in juggling or medicine, but in finance. Mario Monti has been an advisor to Goldman Sachs, Coca Cola and the listing agency Moody’s as well as European Commissioner responsible for the Internal Market, Financial Services and Financial Integration, Customs, and Taxation. Massachusetts Institute of Technology graduate Papademos taught economics at Columbia University and even served as senior economist for the Federal Reserve Bank of Boston in 1980, before taking up positions at the National Bank of Greece and the ECB. Not surprisingly the anti-cuts protestors have been outraged to learn that Monti is a member of the secretive Bilderberg Group – all of which adds to the sense that government has been subverted by a secret coup led by high finance. Still, pointing the finger of blame at ‘capitalism’ or finance seems too vague. Down with capitalism, for sure, but does that really tell us any more about the forces arraigned against democracy?

Greek protestors have seen a German hand behind the changes, and they are not wrong. Chancellor Angela Merkel has called loudly for tighter rules on government spending, and for wayward governments to be reined in. In Athensthe protestors have even burned the German flag (and alongside it the Swastika flag to heap on the insults) while the newspaper Demokratia reports the new austerity agreement with a parody of the sign over the gates at the Auschwitz Concentration Camp ‘Memorandum macht frei’. Greeks talk more often of the wartime occupation when the German Wehrmacht starved the country. Pointing the finger at Germanyseems to make sense, except that Angel Merkel is not alone in her demands for Greek probity. Nicolas Sarkozy (whose country was also occupied by Germanyin the Second World War) is so close to Merkel that the press have coined a collective noun Merkozy. Just before he was bundled out of office, Silvio Berlusconi, too was lecturing the Greeks on the need to stick to their promises. Greek protestors wish that their enemy was justGermany’s leaders.

The Coup d’État against democracy inGreeceandItalydoes have a shape, however soft it looks. Its shape is the European Union. The pressure brought to bear on both countries came through the European Union. The ‘Troika’ of the European Central Bank, the European Commission and the International Monetary Fund brought pressure to bear on the Greek government to change its policies and make-up. Though an ad hoc body, the Troika is reported to be renting an office inAthensto keep an eye on spending there.

The Troika does not just oversee Greek spending. There is a Troika looking at Portugal’s budget, too. Jürgen Kröger, Head of EC mission, Rasmus Rüffer for the ECB and

Poul Thomsen of the IMF visited in May 2011, returning in February 2012 to spend two weeks looking at the budget there before deciding whether to release the latest batch ofPortugal’s €78 billion rescue loan.

In January 2012 all but two of the 27 heads of state at the European Summit agreed to German Chancellor Angel Merkel’s new fiskalpakt with binding limits on budget deficits and quasi-automatic sanctions on countries that breach deficit and debt limits enforced by the European Court of Justice. ‘The debt brakes will be binding and valid forever,’ said Merkel: ‘Never will you be able to change them through a parliamentary majority.’ (Guardian, 31 January 2012). From the European Union viewpoint to put questions of government beyond democratic control is a great success. Binding limits, with automatic sanctions, policed by unelected officials is what they want. ‘Parliamentary majorities’ overriding the expert officials is what is to be avoided.

Nor is it always the case that the enemy is the left. In the same month that the European Council was cooking up the fiscal compact, the European Commission wrote three separate letters of warning to Hungarian President Orban charging him with bringing in ‘undemocratic’ laws. By ‘undemocratic’ they meant that the new constitution put the Central Bank under the control of the democratically elected government, instead of leaving it in the hands of the expert technocrats, while threatening, too, that judges and information commissioners would be subject to the rule of parliament. Step through the looking glass into the EU-world where the rule of the people is dictatorial, but the rule of unelected experts is democracy.

Ex-sixties radical Daniel Cohn-Bendit stood up in the European Parliament to demand that Orban’s constitution be investigated for breaching the EU’s Lisbon Treaty. The man once known as Danny the Red ranted on that the Hungarian leader was striving to beEurope’s equivalent of Hugo Chávez or Fidel Castro (Guardian, 18 January 2012).

Cohn-Bendit as a student radical wrote

“The emergence of bureaucratic tendencies on a world scale, the continuous concentration of capital, and the increasing intervention of the State in economic and social matters, have produced a new managerial class whose fate is no longer bound up with that of the private ownership of the means of production.” (Obsolete Communism, the Left Wing Alternative, London, Penguin, 1969, p 249)

It was far-sighted indeed to spot the very trend towards bureaucratic-managerial rule for which Cohn-Bendit himself would become a spokesman. The only thing he did not foresee was that the bureaucracy that was emerging would be transnational, not just national.

“In a democracy you have to push people to do things by scaring them”

This past Tuesday, at a roundtable on ‘the future of the euro’ at Harvard University, we heard Lorenzo Bini-Smaghi utter these exact words. His Royal Smaghi-ness was a member of the ECB executive board until last November, and was advising his audience on more than his personal political views. He was giving us a glimpse deep into the technocratic vision that predominates in Europe at the moment, and the particular techniques in play to manage the situation. What stood out in the banker’s comments was, first, an extraordinary ideological commitment to the euro and, second, a somewhat delusional vision of social control.

The context for the banker’s comments was a discussion of the austerity measures being rammed down the throats of the Greek public. The measures are but one of the preconditions for a bailout package that will include other disciplinary measures, like international monitors of Greek spending decisions. The ‘people to be scared’ that B-S had in mind were, most immediately, the Greeks. They were to be scared into believing that there was one way and only one way to resolve their debt crisis, and that if everyone did not get in line, the withdrawal of European help would lead to even worse consequences. But it became clear that Bini-Smaghi’s comments applied to more or less the whole European public, perhaps minus the ‘sensible’ Germans. At another choice moment, LBS said “The Italian situation is different from the Greek one, but don’t tell the Italians. That is only something you say outside Italy. Inside, you say the opposite.” In other words, you want them to be scared, even if you have to lie to them.

Why? Because otherwise two things will happen. For one, the majority of Italians or Greeks might get the crazy idea that they don’t have to screw themselves in order to save themselves. There might be alternatives to massive austerity and a bailout of the banks. For another, the greater the fear the greater the limits on political outrage, or at least, the more the local ruling political parties will feel pressure not to attend to local outrage.

Bini-Smaghi’s comments speaks volumes both about a certain technocratic vision or political method and its limits. The method is based on the thought that central bankers and related technocrats possess the technical expertise and know-how to know what the rational response is to an economic crisis. This knowledge is supposedly value-free, and a matter of pure economics. However, most people not only lack this knowledge, they take to the streets in a mistaken, irrational pursuit of their own interests. BS dismissively called this ‘politics.’

So far, so familiar. But the most striking thing about Lorenzo’s BS is that the technocratic vision of control is far more expansive. It is not an attempt simply to apply expert economic knowledge to economic policy. It is a more radical ideological project. The delusion is that the political domain can be subject to the kind of fine-tuned control ‘at the margins.’ It is not just that technocrats ought to run national governments, or at least monitor their spending, but that national publics themselves can be pushed, pulled and cajoled with precision. Bini-Smaghi was talking about incremental doses of austerity until public outrage boiled over, and then stepping off the gas. And if outrage becomes too threatening to the background project, then more and more fear of a withdrawal of bailout funds to scare political leaders into imposing budgets and repressing unrest. One almost wonders if there isn’t some model floating around technocratic circles in which the relevant variables are ‘fear’ ‘austerity’ ‘bailout money’ and ‘outrage.’ The policy strategy being a kind of optimization function in which the aim is to get as close to ‘outrage’ without it boiling over into revolution.

Of course the dream of total social control is nothing new. It rattles around in the mental recesses of any expert claiming a monopoly on the legitimate possession of pure knowledge. But it is in play here in a substantial way. The coyness of the troika – demanding one package of reforms one day, another the next, promising money then imposing more terms, softening stances when protests get too dicey but putting the screws to national leaders, and above all playing a long game of amorphous indecision so as to maximize the space for deception – is all part of this managerial political approach.

Aims are not the same as success. The aim of total social control, especially when it becomes ideological, and especially when it sees politics exclusively as a domain of irrational, emotional behavior that has to be manipulated by various techniques, is its own foolishness. For one, it leaves actors without the ability to acquire actual political knowledge – there appears to be no knowledge to acquire, beyond that of the techniques of manipulating irrational publics. For another, the social world simply is not amenable to that kind of technical, fine-tuned control. Tweaking with the margins of outrage in relation to doses of austerity and fear is not just a creepy and outrageous political project, it is a fool’s game.

The problem with a Sarkozy-Hollande stand-off

By the end of this week, Nicolas Sarkozy will most probably have announced his decision to run for a second term as French president. The campaign itself has been running for number of weeks and some candidates, such as the Green’s Eva Joly, are already struggling to make themselves heard.

As already commented on this blog, the current crisis in Europe has pushed political life towards both technocracy and populism: more technocracy at the national and the European level, with large swathes of policymaking bound up with pan-European rules and regulations, and more populism at the national level as charismatic individuals rally against the loss of national sovereignty and the seeming capitulation of mainstream parties to the diktat of markets and private investors. National leaders in Europe tie their budget-setting powers to increasingly complex European deals: excessive spending becomes the concern of the European Court of Justice and governments expose their fiscal policies to a kind of pan-European naming and shaming exercise. Governments also inscribe into their constitutions rules about what they can and cannot do with the national purse and technocratic administrations rule in Italy and in Greece. At the same time, populist claims about challenging this hegemonic pan-European consensus proliferate at the national level. From the street violence and protests in Athens and Madrid to the anti-Euro rhetoric of the French National Front, the political fringe is growing in volume.

Greece is the extreme example of how the crisis is transforming national political life. The most recent vote on reforms intended to guarantee the next chunk of EU bail-out money has pushed political parties into freefall: around 40 MPs were thrown out of their parliamentary group because they refused to tow the party line on the vote. According to one report in Le Monde (15/02/12), the two main Greek parties – the rightwing New Democracy (ND) and the centre-left Pasok party – are splitting down two lines: support for the technocratic government on the one side, and a rejection of the whole bail-out/austerity package on the other. Legislative elections in April have been the focus of the ND leader, Antonis Samaras, whose criticisms of the EU package in the past have annoyed EU officials and other European governments. Samaras has moved from opposing the EU deal to supporting it in the most recent vote, his calculation being that this would be most likely to help him win the next elections. But it has cost him the support of many of his close collaborators and the party is deeply split.

A key question in France is to what extent any of these trends and pressures will reshape electoral politics. As already commented upon on this blog, the current economic crisis is having an uneven and erratic impact upon national politics and upon national electoral outcomes. Before the campaign kicked off in France, there was some suggestion that the real contest would be fought between Jean-Luc Mélenchon and Martine Le Pen: the populist of the Left versus the populist of the Right. With the main parties indistinguishable in their fight for the political centre-ground, attention would turn to more colourful figures. In 2002, the surprise result of the first round was the success of the far Right National Front and the marginalisation of the Socialist Party. In 2007, it was the success of the centrist candidate Françcois Bayrou, who with over 18% in the first round, promised a radical shake-up of traditional French party politics.

In the end, the surprises of the elections did not translate into any fundamental change in the nature of the party system: the eruption of new faces was short-lived. So far, in 2012, a striking feature of the campaign has been return of traditional bipartisanship. This, of course, is the wish of Hollande and Sarkozy: they both want the campaign to become a two-horse race where from the start voters have to choose between their different programmes. A more varied landscape only makes their job more difficult. But the dominance of the Socialists and Gaullists thus far owes itself to more than campaign strategy. A feature of the current crisis has been the way it has struggled to give rise to fundamentally new political ideas or movements. 2011 was a year of protest in Europe: demonstrators filled the streets of Athens, Madrid, London and Amsterdam. But the electoral results have empowered mainstream figures and parties.

This is unfortunate give that neither side will really engage with the key questions of our time. Neither Hollande nor Sarkozy challenge the dominant reading of the European crisis as a problem of deficit spending. The Socialists want more focus on growth and to combine austerity programmes with a measure of Keynesian pump priming. Their justification, however, is tied to deficit reduction: only growth can cut government deficits, not austerity. The Gaullists are using the crisis as an opportunity to reform France’s labour market and to shift the burden of social contributions from the employer to the general taxpayer (Sarkozy’s famous “social VAT” proposal). Their commitment to the pan-European deficit reduction deal is demonstrated by Chancellor Merkel’s support for Sarkozy’s re-election.

At The Current Moment, we’ve argued that the debt problems faced by Western European and North American governments are not just problems of government profligacy, to be solved either by imposing more stringent rules on elected representatives or by trying to stimulate the economy through some kind of neo-Keynesianism. These problems express a particular set of social relations that form the basis of contemporary society, one rooted in both public and private debt. Debt is a relationship between individuals and collectivities, not just an amount that can be measured and quantified in an impartial way. Focusing merely on debt reduction policies leaves us none the wiser about how and why debt has become such a fundamental feature of contemporary capitalist societies. A Hollande vs Sarkozy election is unlikely to shed much light on these issues.