It is interesting to read its take on the crisis: Die Linke after all was founded at the time when the German government was pushing through its competitiveness drive. Building on the social fall-out from the SPD-Green coalition government’s Agenda 2010 policies (see earlier post), Die Linke has carved out for itself a steady 10% of electoral support. The pamphlet is therefore a good illustration of what those to the left of the SPD in Germany today have to say on the crisis.
The pamphlet is written in the form of a series of supposed fallacies concerning Greece and the debt crisis. It aims at puncturing the myths that have dominated German tabloid discussion of the issue in recent months. It is also aimed at challenging some of those myths peddled by Angela Merkel in her public statements. It challenges most of these myths convincingly. On the causes of the debt crisis, it notes how debt alone is not necessarily a problem. What matters is the interest paid on it. As markets begin to speculate on the likelihood of a Greek bankruptcy, its borrowing costs soar. We have seen this in the case of Greece and we are seeing today with Italy. The pamphlet also comments on the zero-sum nature of German growth within the Eurozone over the course of the 2000s, a point made on this blog. “The German success”, writes Stephan Kaufman, author of the pamphlet, “was… merely the inverse image of the failure in the Euro periphery, because Germany would not have gained surpluses if it had not been for the deficits in Greece, Spain and Portugal” (pp9-10). The pamphlet attacks some of the popular myths around work shy, holiday happy Greeks. In fact, the average working week for Greeks is longer than for Germans (44.3 hours in Greece; 41 hours in Germany – p5). Greeks retire on average a little later than Germans (at 61.9 years of age according to the OECD, cf. 61.8 years of age for Germans). The pamphlet also makes the good point that German loans to Greece are not paid for by the German taxpayer straight out of national income: they take the form of loans raised by the German governments in international markets, at a low rate of interest (p18). They are not ‘gifts’ or subsidies, they are investments which the German government calculates will earn them a healthy rate of return.
The pamphlet itself is limited by its own format as an attack on reigning myths. Identifying the fallacies is a starting point but the pamphlet says little about what it thinks should be done. On that point, it is laced with a curious Euro-chauvinism. It believes that any Greek default or write-down of its debt will do more harm than good as it might spread contagion and would lead to significant losses for European banks. The pamphlet cautions against contagion as it might spell the end of the Eurozone, “which is the backbone of the Germany economy” (p14). It goes on to argue in favour of the Euro on the grounds that it aspires to be “a world currency that can compete with the US Dollar” (p15).
Such arguments contain their own myths. The Euro is hardly the backbone of the German economy: Germany has used it to its advantage and has exploited the imbalances of the Eurozone. But its export-led boom does not depend on the Euro as such. It depends upon the containment of wage growth in Germany relative to its export markets. It seems perverse for the German left to defend the Eurozone in the interests of German labour when the Euro has been used as one the main justifications for the government’s growth model that excludes the possibility of wage rises for workers.
The pamphlet also fails to address one of the key problems: a lack of political leadership in Greece. One of the reasons why the crisis seems so intractable is that the Greek government cannot contemplate leaving the Eurozone. The ability to re-issue its currency, introduce capital controls and win the population to a long-term national project of economic renewal, is evidently beyond the Papandreou government. It sees no future outside of the endless negotiations in Brussels. Those out on the street in Athens, fed-up with the ongoing austerity measures, do not seem to believe in political solutions at all, preferring to dismiss both their own leaders and those of the EU and the IMF. The pamphlet itself fails to see this problem, reiterating instead the common view that the problem lies in the power of the markets. Yet the markets are divided: some argue for a Greek default and exit from the Eurozone; others suggest this would be the beginning of an unmitigated economic meltdown in Europe. Both can’t be right. The best option for Greece would be to default on its debts and leave the Eurozone. Yet few, if any, in Greece seem to believe in a re-issued Drachma. Until that changes, the impasse will continue.