Illustration for Aesop's fable of The Lion's Share: for the 1501 edition of Steinhowel. Wikicommons. Some rights reserved.According to a well established narrative in 2010 and 2011 Greece was ‘saved’ by a multi-billion euro ‘bail-out’ provided by a ‘troika’ of institutions, the EC, ECB and the IMF. As a condition for the ‘bail-out’, Greece had to implement an ‘economic adjustment programme’ designed by the ‘troika’ which had come to be known as the ‘austerity’ strategy.
It had three components: fiscal consolidation, internal devaluation and structural reforms. All three elements were expected to promote growth and ultimately reduction in indebtedness. Fiscal consolidation by restoring sound public finances can improve confidence and stimulate business investment and growth. This is known as the theory of ‘expansionary fiscal contraction’. Internal devaluation can also promote growth by improving competitiveness and therefore resulting in an increase in exports, which could potentially offset the deflationary impact of the internal devaluation. Finally, ‘structural reforms’ by modernizing the economy and creating a business-friendly environment can create the conditions necessary for a private sector-led growth.
The austerity strategy, however, is not without its critics. There are many powerful and cogent theoretical and empirical arguments against it. Indeed a credible and persuasive case can be made that it has failed in achieving its objectives, the principal one being the reduction in indebtedness that caused the crisis in the first place. After five years of austerity a majority of Greek people, especially those who were at the receiving end of a savage 1930s style economic depression, have come to believe that the strategy was counter-productive, self-defeating and had failed to deliver what it promised. In January 2015, Greece elected a government with a mandate to try to win hearts and minds in Europe not only about ending austerity in Greece but also about the need to reform a malfunctioning and dysfunctional monetary union.
In early February 2015 a charismatic young Greek Prime Minister and a brilliantly eloquent but ‘unconventional’ Greek Finance Minister arrived in Brussels ready to present to their colleague in the Euro-group the ‘counter-narrative’ of the eurozone crisis which had four major elements: beginning with the premise that indebtedness in Greece and in other eurozone peripheral countries had similar underlying causes: a malfunctioning monetary union. Secondly, that the ‘rescue’ of Greece in 2010 resulted in the rescue of European banks and prevented ‘contagion’ in the eurozone. Thirdly, it was the implementation of savage austerity rather than the non-implementation of the ‘troika’ adjustment programme that produced the collapse of the Greek economy. Lastly, that the Greek debt was unsustainable in 2010 and 2012 and that it is even more unsustainable in 2015.
The euro-group meetings were not, of course, academic seminars in which the relative merits of alternative ‘narratives’ of the crisis in the eurozone could be debated. Greece was told in no uncertain terms that in the eurozone compliance with the rules and commitment to the undertakings of previous governments has precedence over recent electoral mandates. The German finance minister reportedly stated: “We cannot change the rules every time there is an election in the eurozone”. The only concession that could be afforded to the new government was a five month period during which an alternative means of achieving the targets agreed by the previous government were to be worked out and presented. There would be no ‘debt forgiveness’ and no reversal of austerity.
Thereafter, eurozone policymaking was transformed and entered the strange world of ‘constructive ambiguity’ and game theory. The games of ‘chicken’ and ‘high-stakes poker’ and scenes from Hollywood movies from Dirty Harry to Rebel Without a Cause were the most popular journalistic references for what was going on between Greece and its partners in the eurozone negotiations after January 25, 2015. Eventually Syriza did blink first; it went ‘all-in’ with a rubbish hand; its car fell off the cliff and as far as Clint Eastwood was concerned, they did ‘make his day’.
Following the humiliating crushing of Syriza on July 12, 2015, the pertinence of an Aesopian fable may not have been lost on Tsipras and Varoufakis, both well versed in Greek mythology, and called, The Lion’s Share.
A Lion, a Donkey and a Fox agreed to go hunting together. At the end of the day the lion asks the donkey to divide the spoils. Meticulously and fairly the donkey divides the spoils in three equal parts. So enraged and offended is the lion that he kills and devours the donkey. He then asks the fox to divide the spoils. The fox creates a huge pile in front of the lion, leaving a tiny piece for herself. The lion is very impressed and asks the fox how she learned to divide so fairly and properly? The fox replied: the donkey’s predicament.
Greece’s ‘predicament’ will reverberate around Europe and no doubt will become a salutary and painful lesson for millions of citizens in the eurozone: they must not vote for parties that promise to end austerity and hope to remain in the eurozone. It is better to act like the fox than the unfortunate donkey in the Aesopian fable.
What stands out as a central message of the story is not the savagery and brutality of the lion but the idiotic miscalculation of the donkey in assuming equality of status with the lion. Similarly with regard to the negotiations between Greece and the Euro-group the bulk of the criticism is of Tsipras and Varoufakis for their serious miscalculation of power relations in the eurozone while not so much criticism is directed at the brutality in the use of power in the Eurozone, which is not too dissimilar to the one prevailing in the jungle.
It is the same old story and same old message since the eurozone crisis erupted in 2010. All indebted economies must accept austerity or ‘end up like Greece’. Except that in 2010 the image of ‘ending up like Greece’ was that of a Dickensian debtors’ prison. In 2015 it is that of hell. The agreement is vindictive and has been compared to the Versailles Treaty of 1919. Ambrose Evans-Pritchard uses much stronger language. He argues that comparing the terms of the euro-group agreement to the Versailles treaty does not quite capture the ‘depravity’ of these terms. He writes: “What Greece is being asked to do is scientifically impossible. Almost everybody involved in the talks knows this. Yet the lie goes on because the dysfunctional nature of EMU politics and governance makes it impossible to come clean. The country is dishonestly kept in a permanent state of crisis”
The euro-group led by Germany was not in the least interested in the Varoufakis ‘counter-narrative’ any more than the lion was interested in the donkey’s notions of fairness and justice. What mattered above all was that Syriza and other political parties that have similar aspirations must be crushed. Following the Syriza capitulation and humiliation of July 12, no one is interested in the ‘counter-narrative’ any more. On the contrary the dominant narrative and its central message are now propagated and re-iterated not only by the ‘usual suspects’ of Merkel, Schaeuble and Dijsselbloem but also by new political players from Finland and the Baltic states.
Greece having broken the rules of the eurozone and lied about it was shown leniency and solidarity through a generous ‘rescue’ package and a ‘reform’ program that could have lifted the country out of the crisis. Greece not only failed to implement the agreed strategy but also elected a government of inexperienced amateurs who believed they could change hearts and minds in Europe and start the long overdue process of completing the European project. If Greece wants to stay in the eurozone it must be prepared to abide by its rules. The Greek people were given a final chance on July 12, 2015 to decide what they really wanted. They must fully implement the new agreement, regain their lost credibility and come to terms with the ‘reality’ of eurozone membership: it is ‘austerity or bust’. Moreover the ‘amputation’ option is still available.
There is a glimmer of hope among those who continue to believe in the ideal of a united Europe that the ‘counter-narrative’ of the eurozone crisis so brutally dismissed and ridiculed by the policymaking elite of the euro-group is beginning to find resonance among many anti-austerity citizens of the eurozone.
Whether the humiliating crushing of Syriza in Greece for daring to challenge the dominant narrative of the crisis would help or hinder the emergence of a movement for the long-awaited political reform of Europe remains to be seen. The only ‘contradiction’ that remains in the eurozone is the utopian expectation that a monetary union will work under German hegemony without political union. The centrifugal forces unleashed by the eurozone crisis are unlikely to be halted by this sorry episode. Germany’ insistence of holding on to the ‘Lion’s share’ of decision-making power in the eurozone is not only regrettable but dangerous. With ‘Grexit’ still on the table what next, ‘Brexit’? ‘Muddling-through’ like the Euro-group ‘a-Greek-ment’ of July 12 is no substitute for rational policymaking in the eurozone, the second largest economy in the world.