Thermopylae or Versailles? Greece deal threatens to destroy European project

By Duroyan Fertl

July 17, 2015 – Hintadupfing, submitted to Links International Journal of Socialist Renewal by the author – The promise of a peaceful integration of capitalist equals lies tattered on the floor of a negotiation room in Brussels. There, the SYRIZA-led Greek government finally succumbed to the blackmail, economic carpet-bombing and “mental water-boarding” of the institutions of European capitalism.

The final weeks of the debt negotiations culminating in a cynical political coup against Greece have laid bare the undemocratic, technocratic nature of the European Union (EU), which operates as a thieves’ kitchen to protect vested financial interests at an incalculable human cost.

For many, the brutal humiliation of the Greek government and people heralds the end of the dream that the EU could be softly nudged towards a benevolent economic and political union. For others on both the political far left and far right, it provides further justification for a perspective of exiting the EU to return social and political issues to a primarily national level.

German philosopher Jürgen Habermas, an intellectual figurehead of European integration, told The Guardian on July 17 that outcome of negotiations mean that the “European Council is effectively declaring itself politically bankrupt”.

Nobel-prize winning economist Paul Krugman described the terms of the deal as “madness” and argued that “[w]hat we’ve learned these past couple of weeks is that being a member of the Eurozone means that the creditors can destroy your economy if you step out of line”.

“This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief … it’s a grotesque betrayal of everything the European project was supposed to stand for,” he said.

Matt Carthy, MEP for Ireland’s anti-austerity republican party Sinn Féin, told Highland Radio on July 14 that the EU “has become a set of institutions which basically protects powerful vested interests at the expense of ordinary citizens and even countries".

Revelations – particularly from former Greek finance minister Yanis Varoufakis – about the one-sided and contemptuous nature of the “bargaining” process of the past five months have only served to underline the sense of political crisis in the existing European project, and the level of outrage felt in Greece and beyond.

European disunion

The EU has always been a project for capitalist stability and power. It was born – via the Euopean Economic Community – out of the post-war need to establish capitalist stability in Europe.

The process was fostered by a desire within European capitalism to prevent French and German competition from leading to another damaging and costly war. The United States also wanted a united Western Europe to act as a bulwark against the Soviet bloc, as well as “the enemy within”.

Over time, this also evolved into the project of developing a “civilised” European counterpower to US imperialism, dominated by a Franco-German bloc, and promises of economic and political stability gradually brought more countries inside into the project.

“[The] EU project was all about the gradual convergence of equal nations into an “ever closer union”. That’s finished now,” Fintan O’Toole wrote in a withering attack on the Greek deal the Irish Times on July 14.

“The whole notion was underpinned by three conditions,” argues O’Toole. “One was that the process of European integration was consensual … The second was that these incremental steps were … 'irreversible' and 'irrevocable'."

"The third," said O'Toole, "unspoken but completely understood, was that Germany would restrain itself. Each of these fundamental conditions was torched over the weekend.”

For O’Toole, the outrageous behaviour by the European Central Bank (ECB) of turning directly on one of its own members – attempting to suffocate the Greek banks and forcing the government to implement capital controls – in order to bring the SYRIZA government to heel has ripped asunder any pretence of consent.

Similarly, the demand that €50 billion of Greek public assets be placed in a fund in Luxembourg, run by a bank controlled by the German government and finance minister, as insurance against future debt defaults, was a clear statement – not just to Greece, but to other member states – that the EU is a coercive, disciplinarian institution.

Coercive, but not necessarily competent. The proposed fund is modelled on the Treuhand holding company, set up in 1990 to oversee the fire-sale privatisation of the assets of the former East Germany after reunification. Over four years, Treuhand sold off 14,000 companies but still ended up 270 billion Deutsche Marks in debt.

Secondly, the idea of a temporary “Grexit” (“Greek exit”), promoted by German finance minister Wolfgang Schäuble that a member state could be expelled – even temporarily – from the EU and Eurozone fundamentally demolished the second condition.

Even if Greece never leaves the EU, even if there is no formal legal mechanism for expelling members states from either the EU or the European Monetary Union (EMU, the Eurozone), even though other key members states rejected the idea vehemently in the press – the principle of “irreversible” and “irrevocable” membership was been done away with It is now a question of “when” and “who”, not “if”.

Finally, the role of Germany in effectively reducing Greece to an indentured protectorate of the EU (the term “ward” was actually used) through this unjust and unsustainable agreement has – for some – answered the decades-old question: “a German Europe or a European Germany”?

Followed by the likes of Finland and Slovakia, Germany led the majority hardline bloc of nations in the Eurogroup – the committee of the EU’s finance ministers – that stubbornly rejected Greece’s proposals and was most committed to forcing Greece’s utter capitulation.

The Eurozone and EU have long been dominated by Germany, whose economy is the strongest in Europe. But the effective crucifixion of Greece has created the perception within the EU of a German play for power that calls into question the democratic credentials of the EU.

This view is held in Germany as well as abroad. While the initial polls showed strong popular backing for Merkel’s handling of the Greece negotiations, the German media has been far more critical.

The Spiegel magazine accused Merkel of destroying “seven decades of postwar diplomacy on a single weekend”, while the Süddeutsche Zeitung led with an article calling Merkel “Europe’s New Enemy”.

Dietmar Bartsch, deputy leader of left-wing party Die Linke openly accused the German government of extortion. “This negotiation result is a German diktat and nothing other than blackmail,” he said.

Europe's democratic deficit

It would be a mistake to single out Germany alone for criticism, however. While the EU has taken long strides towards becoming an economic union – with a common market and common currency designed specifically to benefit capitalist interests – it has balked time and again at political integration, and a worsening democratic deficit has been the inevitable consequence.

The European Parliament itself has little influence – real power is wielded by the “eurocrats” of the various institutions, in particular the unelected European Commission and European Council, which hold executive power, and the ECB, which controls and defines fiscal policy.

Even where elected politicians wield real power, such as in the Eurogroup, openness and democracy are the first victims. In an interview with New Statesman on July 13, Varoufakis recounts his attempt to challenge the legality of a communiqué issued without Greek consent at the time of the referendum.

"After a handful of calls, a lawyer turned … and said, “Well, the Eurogroup does not exist in law, there is no treaty which has convened this group"

“So,” Varoufakis said, “What we have is a non-existent group that has the greatest power to determine the lives of Europeans. It’s not answerable to anyone, given it doesn’t exist in law; no minutes are kept; and it’s confidential."

"No citizen ever knows what is said within ... These are decisions of almost life and death, and no member has to answer to anybody.”

Another example is the Trans-Pacific Investment Partnership (TTIP), a “free” trade agreement between the EU and US, which is currently being drafted in secret. This agreement will further erode European democracy, and force measures similar to those Greece now faces on to the rest of Europe.

Of particular concern in the TTIP is the Investor-State Dispute Settlement (ISDS) mechanism – which would allow corporations to sue government for lost profit (real or imagined). While over 2.3 million Europeans have signed a petition against the ISDS, negotiations of the TTIP continue behind closed doors, and the mechanism is still on the table.

To make matters worse, the president of the European Parliament, German Social Democrat Martin Schulz, violated procedure in June by blocking the presentation of any amendments that would have rejected ISDS.

Schulz's contempt for democracy is no surprise – earlier in the month, Schulz had openly called for the replacement of the Greek SYRIZA government with a "technocratic administration" that would implement austerity measures without complaint.

This contempt for democracy in the European institutions is nothing new either. In 2001, the Irish voted against the Treaty of Nice, only to be told to go away, try again and come back with the right answer. In 2011, Greek prime minister George Papandreou was forced to resign within days of daring to propose a referendum on a course of austerity prescribed by Europe – a policy that he actually supported!

The same year, Italy's prime minister Silvio Berlusconi, mired in sex and corruption scandals, was levered out of office by European institutions that didn’t trust his ability to implement their austerity policies. He was replaced – not with an elected government – but with a “technocratic administration" that answered to Brussels, not to the Italian people.

As the Guardian’s economic editor, Larry Elliott, wrote of the European institutions in 2011, “It is as if the democratic clock has been turned back to the days when France was ruled by the Bourbons.”

Austerity is the Eurozone

This lack of democracy in the European institutions is closely connected to a policy of strict adherence to the politics and economics of austerity. The financial and economic architecture of the Eurozone has become an unflinching mechanism for driving down wages and weakening organised labour, a process that began well before the financial crisis erupted.

Since the introduction of the euro in 2001, German workers have had their wages increasingly squeezed, contributing to the surge in profitability for German industry. While the economic boom lasted, cheap credit flowed across the Eurozone, allowing investment and raising wages and standards of living for millions across the continent.

However, the crisis of profitability brought on by the Global Financial Crisis presented an opportunity to spread and deepen austerity measures across the Eurozone, cutting wages and social spending, winding back collective bargaining rights, and pushing through the privatisation of services and state assets.

These policies have now been adopted nearly universally in the Eurozone – and have been enshrined in the 2011 EU Treaty on Stability, Coordination and Governance (TSCG), which requires member states to maintain a balanced budget and near-zero structural deficits. As Paul Mason wrote of the treaty in December 2011, “the Eurozone has outlawed expansionary fiscal policy”.

The Greek working class is one of the biggest victims of this new project of further dismantling the social gains of the post-war period. Greece’s large debt – built up on cheap credit during the boom – was owed to foreign banks, in the most part ultimately based in France and Germany.

Rather than allowing the write-down Greece’s debts, or even directly bailing out the French and German banks most heavily exposed to Greek debt, as had been done in the 2008 crisis, the Troika (the Eurogroup, the ECB and International Monetary Fund – IMF), forced the Greek government to take on massive bail-out loans to pay the debts.

The conditions on these loans were the implementation of strict austerity policies, and as well as meeting unmanageable interest and repayment schedule. It goes without saying, of course, that the main beneficiary of this approach has not been the Greek people.

A Jubilee Debt Campaign (JDC) study in January found that more than 90% of the bail-out funds went directly to paying off Greece's creditors while Greece’s debt burden continued to grow, rising from 134% of GDP in 2010 to 174% by the start of this year.

According to the JDC, by April this year, the IMF had already made €2.5 billion in profit from its loans to Greece since 2010, while figures released by JDC on July 10 show that the Eurosystem banks (the ECB and national central banks) made a collective €6 billion profit out of Greek debt in 2013 alone, and are estimated to make billions more as Greece is forced to sell the family silver to repay its ever-growing debts.

JDC economist Tim Jones accused the ECB of acting “exactly like a vulture fund, buying up debts cheaply during the crisis, refusing to take part in a necessary restructuring of the debt, and demanding to be repaid at a large profit.”

“Eurozone governments said they would repay the profit to Greece, but have failed to do so since 2013. This profit should not be a tool to increase their power in negotiations. It comes from unjust trading and by rights should be unconditionally returned to its real owners, the Greek people,” said Jones.

According to a critical IMF memo released on July 14, just after the new agreement was signed, without massive write-offs, restructure or postponement, Greece’s debts are expected to top 200% of GDP in the next two years.

The IMF – which is owed €32 billion by Greece – also demolished the newly signed agreement, labeling it "unsustainable", and calling for “debt relief measures that go far beyond what Europe has been willing to consider so far.”

Despite the crippling debt burden, however, the direct reason for Greece’s ongoing economic depression are the austerity measures enforced by the Troika (and with Germany’s assistance) that have led to a catastrophic collapse in income and spending since 2008.

The Greek economy has shrunk by over 25% – a Great Depression-era like contraction – and the consequence of these harsh recessionary policies has been a humanitarian crisis. Pensions have been cut to nearly half, youth unemployment has topped 60%, and the suicide rate in Greece has risen by over 35% since the “bail-outs” began.

It is hard to see how more of the same medicine will do anything but continue to kill the patient, but as far as the European institutions are concerned, austerity is the only option available.

In interviews with New Statesman and the Australian Broadcasting Corporation’s Radio National since his resignation, Varoufakis lamented that his Eurozone colleagues showed not the slightest interest in discussing economics. Any proposal presented by the Greeks was dismissed as insufficient, but no alternatives were presented for discussion.

Instead, the entire process was political, designed to freeze SYRIZA out. It aimed to send a thunderous and threatening message to those tempted to support other anti-austerity parties – such as Podemos in Spain or Sinn Féin in Ireland – that Margaret Thatcher’s dictum still stands: “There is no alternative.”

The ascendancy of politics over economics in matters of debt is further underlined by the situation in the Ukraine. While not even a member of the EU, the Ukraine has received more than €36.1 billion in assistance from the IMF, and has recently had previous loans worth between €13.5 billion and €18 billion written off.

For the powers that run Europe, there are political reasons for propping up Ukraine as a bulwark against Russia, just as there are political reasons for teaching Europe’s dissidents that there are no alternatives to the course set out by the institutions.

A Carthaginian peace

As finance minister, Varoufakis went to Brussels with a set of moderate, rational demands for alleviating the pressure on both the Greek economy and people, and with proposals that could restore growth and prosperity in the Eurozone. In his own words, he sought to “save European capitalism from itself.” The apparent response from the guardians of European capitalism is that it doesn’t want to be saved.

Varoufakis described the new Greek agreement as a "failure" and compared it to the Treaty of Versailles – the humiliating economic and political terms forced onto Germany after World War I. While the economy recovered, the vindictive treatment created a deep resentment in Germany that helped to fuel the rise of Nazism.

Like Versaille, the new Greek agreement is unbelievably harsh – it is the economic equivalent of salting the earth. Not only unsustainable, it is likely to be dangerously counter-productive if implemented. By further crippling the Greek economy and impoverishing the working class, it gives succour to the far right – the Golden Dawn in Greece and their allies further abroad in Europe.

Some on the left – in Greece and beyond – have long seen Grexit as the only viable option. The Left Platform, a grouping within SYRIZA proposed on July 10 that unless a deal without austerity and sufficient liquidity can be reached, Greece should leave the Eurozone and radically reform the banking system.

On the other hand, Gabi Zimmer, president of the GUE/NGL group in the European Parliament, of which SYRIZA is a member, spelled out the fear among many on the European left that such a course would “also strengthen the right-wing extremists who exploit Euro-scepticism for their nationalistic and backward ideology”.

“This model is an EU for banks and big corporations … We want another Europe, we want a social Europe, but we want a united Europe where we fight for our ideas,” said Zimmer.

Opposition to Grexit in Germany is also informed by the knowledge that it has been Schäuble’s preferred option since at least 2011, and forms part of his plan to use the Eurozone crisis to reconfigure the EU with a strong, centralised political and economic authority.

Writing in German newspaper Die Zeit on July 16, Varoufakis described Schäuble’s plan as the "ritual sacrifice of a member state" and a breach "of fundamental principles of Western liberal democracy".

However, many in Greece – including Varoufakis – who were determined to take the fight to the institutions within the EU, are now beginning to wonder if the cost has finally become too high.

With SYRIZA and Greece now stuck firmly between the Scylla of an unworkable new austerity regime and the Charybdis of a bankrupt Grexit, building a strong solidarity movement with those opposing austerity is critical.

Bernd Riexinger, national co-leader of Germany’s main opposition party, the left-wing Die Linke, responded to the announcement of the deal on twitter by calling for “a rebellion of Europeans” in order to “refound the EU”.

Similarly, Marina Prentoulis, SYRIZA’s UK spokesperson, speaking to TeleSUR on July 16, called for a continent-wide movement to confront the neoliberal agenda of European leaders.

“In order to be able to resist their demands, we need a pan-European movement,” Prentoulis said, adding this was the “only way to resist this immense power” of European capital.

If Greece’s struggle with “the institutions” is to result in a modern-day Battle of Thermopylae – the heroic clash of 480 BCE where Greek forces lost a brutal battle in the face of massively overwhelming odds, but fought on to win a defensive war against the Persian Empire – then that international movement is needed more than ever.

[Duroyan Fertl is a member of the Socialist Alliance (Australia).]