German Finance Minister, Schäuble talks to students, 2013. Demotix/Goncalo Silva. All rights reserved.On July 5 Europeans will witness an extraordinary event. A sitting government will ask its people to decide on a major policy issue that lies outside its electoral mandate. It is difficult to exaggerate the radical nature of the coming referendum in Greece. In January 2015 the Syriza Party platform committed to ending austerity and remaining in the euro zone.
Now in July it faces the black and white choice of more austerity or Grexit. The Syriza government has not mocked democratic principle by invoking the cliché that "circumstances have changed" to justify doing what it promised never to do. Rather, it asks those who will be most affected, the people of Greece, to decide.
The Greek government faces inflexible demands for austerity from "the institutions", demands unchanged in essence from those imposed upon and accepted by the right-wing Samaras regime. Previously known as The Troika, the "institutions" consist of Wolfgang Schäuble (aka Eurogroup of finance ministers), Maria Draghi (European Central Bank), and Christine Lagarde (International Monetary Fund), each in his/her way more intransigently neoliberal than the other two (see hyperlinks).
There will be no Syriza concession in a closed door meeting in Brussels nor an attempt to push through an austerity vote in the Hellenic Parliament. The Syriza government will grant Greek citizens the almost unprecedented opportunity to decide directly the economic policy for the country, through a referendum to accept or reject the austerity regime designed in and demanded by its creditor overlords and ladies.
The assertion in Greece of the principle that a government governs by the consent of the electorate has come as a profound shock to not only the Troika (see statement by the nominal head of the Eurogroup) but all politicians and bureaucrats entangled in the web of EU mis-governance.
This principle, famously stated by John Locke in An Essay in Human Understanding, represents the antithesis of the neoliberalism of the European Union. An anonymous member of the Eurogroup is quoted as saying that the austerity package designed by the Troika is "complex", and "so technical to explain that a normal citizen, not people like us, would find it hard to form a view" (my emphasis).
It would be difficult if not impossible to find a quotation that better encapsulates the anti-democratic nature of the Troika and EU pro-austerity politicians in general: economic and social policy are technical matters. Consulting citizens about them is worse than a waste of time. It is a foolish attempt to seek wisdom from the ignorant.
Since the early 1990s and perhaps before that, the guiding principle of the ‘European Project’ has been neoliberalism, with its inherent constrains on democratic accountability. The creation of the "independent" European Central Bank in 1998 represented a major step to disarm democracy in the countries of the European Union, though its anti-democratic effect would not begin to manifest itself until the introduction of the euro a year later.
The ECB is for all practical purposes unaccountable to any democratic process. On the ECB website one finds a statement of its accountability, which consists of reporting to the EU parliament, monthly publications and ‘regular press conferences’. By comparison the US Federal Reserve looks good with its cosmetic inclusion of ‘representatives of the public’.
But the true horror of EU governance appears in the various ‘pacts’ that constrain fiscal policy. The best known of these are the Maastricht Criteria that specify limits to national fiscal balances and public debt ("convergence criteria" in EU-speak). These rules have gone from being technically incompetent (they contradict IMF guidelines for "sound fiscal management") to draconian and authoritarian by the addition of subsequent restrictions on national policies.
The infamous ‘Fiscal Pact’ (Treaty on Stabilisation, Coordination and Governance) requires governments to amend their constitutions to prohibit budget deficits greater than 0.5% of gross national product. The non-accountability of the ECB ensures that the national governments of the countries of the euro zone--and therefore the citizens of those countries--have no control over monetary policy. The Fiscal Pact goes far to doing the same for public sending and taxation. National budgets must be submitted to the neoliberals in Brussels for approval (see Article 3 of the Treaty).
The outrage in Brussels and among the members of the Eurogroup (minus Yanos Varoufakis) towards the Greek referendum is easily understood. The Syriza government has the impertinent audacity to submit economic decisions to democratic decision making, to allow "common citizens" to influence decisions that should be left to neoliberal technocrats.
Greeks in the vanguard
Even the day after the referendum vote in the Hellenic Parliament the mainstream press continued to report on the non-existent probability of a Greek-Troika "deal". No doubt the nonsense reports of new and imminent "deals" will continue until and after the referendum on 5 July.
The failure of all but a few commentators and reporters to recognize and/or accept the reality of the Greek government choosing to leave the euro zone indicates a lack of imagination (the outstanding exception is Wolfgang Munchau of the Financial Times). Or, perhaps, the media seeks to preserve until the last minute the shock value of the headline "Greece Out". A media outlet with any insight would have declared Grexit a month ago (at the latest).
It should have been obvious to all that Grexit was imminent once the Syriza government announced postponement of its June payment to the IMF. Yet almost all commentators in the English language media kept to the fiction of negotiations by interpreting this de facto default as a "bargaining chip". In the league of euphemisms it is hard to beat Lawrence Summers venturing his opinion that it "seemed likely" that "Greece financially separates itself from Europe". By contrast, Michael Moore would say, "hey-dude, it's over".
Summers is far from alone in thinking that defaulting on public debts and abandoning the euro for a national currency represent the end of the world as he knows it. His shock at the impropriety of default leads him (and others) to identify Greece as "a failed state in the waiting". This epitomizes the neoliberal world view--when a government fails to service the public debt it transforms its country into a "failed state" (i.e. just like Somalia now, and Liberia and Sierra Leone in the 1990s and 2000s).
The reality is quite different. We find a well-documented history of default on public debt by governments never accused of presiding over "failed states". Argentina provides a relatively recent example of default leading to almost a decade of economic prosperity not "failure".
The Greek government and people face not a "failed state in the waiting" (whatever that may mean), but further economic collapse within or without the euro zone. The prospects for recovery from collapse within the euro zone are zero. Recovery after Grexit will be extremely problematical, but with a probability greater than zero.
The Syriza government is the first in the European Union to challenge the continent-wide institutionalizing of neoliberal economic policy. What began as an insurrection against the misery of austerity policies has through the referendum of 5 July become a revolt of the citizenry against an anti-democratic and authoritarian process of deciding economic and social policy. That revolt is real whatever the outcome of the referendum.
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