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The Greek Surge against Austerity: A Blessing or a Curse for the Eurozone?

Panagiotarea, Eleni (2015) “The Greek Surge against Austerity: A Blessing or a Curse for the Eurozone?“, Heinrich-Böll-Stiftung – European Union, 08 April 2015.

 

Syriza’s advent of power was supposed to seriously challenge the eurozone’s austerity orthodoxy and put an end to an economic adjustment programme, which saw Greece’s GDP fall by 25 per cent and unemployment rise by 26 per cent. The radical-left populist party was instrumental in exploiting the social fallout from the harsh austerity experiment conducted in Greece; its leader, Alexis Tsipras, came up with an electoral mantra, ‘hope begins today’, which captured the mood of the nation and beyond. Forming an improbable coalition with the right-wing, nationalist Independent Greeks, he set out to shut down the harsh EU-IMF-mandated policies; this newfound ‘sovereignty’, however, shipwrecked on the country’s debt repayment obligations and growing liquidity squeeze. It feels more like a return to Groundhog Day: after bitter negotiations, Greece achieved, with the Eurogroup agreement of 20 February, an extension of its second bailout programme. This is to be monitored by the so-called ‘institutions’, or ‘Brussels Group’, formerly known as the ‘troika’. And although Greece insists – and its partners agree – that its goal is to stay in the euro, a ‘Grexit’ is now firmly back on the table. Perhaps the only thing distinguishing this Groundhog Day from the one of 2012 is the addition of a new concept, ‘Grexident’ or ‘Graccident’, signifying the possibility of an accidental exit from the euro.

The view from the ground is disheartening. There are no easy payoffs in the chaotic equilibrium of terror Greece finds itself in. The country is running out of money, the Eurogroup agreement seems to be under constant re-negotiation, the measures tabled are continuously deemed ‘unsatisfactory’ and the real economy is in the pause mode, if not in shock. There is a break-down of trust between Greece and its partners, and a level of public political anger never witnessed before – an anger that, in fact, is trickling down to the European people. Either the Greek Prime Minister and his eurozone partners can reach a so-called ‘honourable compromise’, with both sides suffering losses which are nevertheless manageable, or a rift opens up, where losses are most probably not manageable.

Is it too early to suggest that the new government has wasted the chance to lead the anti-austerity surge in the eurozone? Before coming to power, Syriza was certainly instrumental in riding the anti-austerity wave, which grew bigger and bigger, as senior academics and international organisations drew attention to the way austerity throttled the continent’s economy and ushered in deflation. Then there were the protesting voices of the European people, in core and periphery, struggling with high levels of unemployment, poverty and social exclusion. More importantly, Syriza was adept at capitalising on the plight of the Greek people. Even if the Greeks had been living beyond their means during the good EMU years, now their lives had come crushing down.

The three mistakes of the Greek government

Creating a firm anti-austerity narrative would have certainly helped Syriza build ‘the broadest possible alliances in Europe’. After all, no one could disagree that austerity was excessive in the Greek case; or that the programme failed: fiscal consolidation came at an impossible social cost, debt skyrocketed to 175% (whether it is ‘sustainable’ is anyone’s guess) and Greece has yet to re-access the markets. Once in government, however, the party has stumbled into three pitfalls: those of reasoning, of strategy and of rule-following.

First, while a lot can be said about programme design and the way IMF conditionality was implemented on the ground, the government failed to acknowledge Greece’s lack of ownership and the role that the entire political order played in presenting the programme as ‘an unwelcome imposition from above’. Poor results cannot be dissociated from a collective denial to implement long overdue reforms. The cutting of pensions and wages and the tax hikes became the only available ‘solutions’ by default. The government has also demonstrated limited knowledge of how institutions work – for example by pressuring the ECB to lift the cap on the amount of T-Bills the banks can buy – or how rules constrain.  When one member state insists that its popular will and its clear mandate ought to be respected (which is as such a fair point), it prompts the other eighteen members of the union to talk about their popular will and how that should also be respected. Finally, the negotiating strategy of leaks, hostile commentary, constant U-turns in rhetoric as well as policy substance, quickly distanced Greece even from potential allies, burning bridges rather than building them.

These mistakes in reasoning, strategy and rule-following have gone hand in hand with a serious miscalculation. The government used programme failure and the effects of austerity as a platform in order to make claims and to roll back measures: it wants to secure debt relief and fiscal space to re-energise public spending, to unravel any structural reforms previously implemented, to freeze the few privatisations that were taking off and to announce that the troika and the memorandum no longer existed. In terms of substance, what it has delivered so far is a re-working of good old Greek statism, with a radical left flavour. In this way, it has tripped up, messed up and lost a lot of legitimacy. The Greek surge against austerity is hollow; it lacks credibility, has no plan and offers no alternative narrative. This certainly undermines the leadership role that the Syriza-led government sought in waving the anti-austerity flag; it is more than likely to affect the success or failure of other anti-austerity and populist parties elsewhere. The ultimate irony of course is that, if the state-expanding policies announced materialised, fiscal profligacy would make the adoption of another round of austerity measures mandatory.

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