Can Europe Make It?

Referendum and democracy: putting the demos on stage

The referendum takes the lesson of the squares to the heart of politics. The stakes are high: Greek destiny, the future of the European Union and of democracy is on the line.

Costas Douzinas
27 June 2015

Greek workers march against austerity in Athens. Demotix/Nicolas Koutsokostas. All rights reserved.A man visits the Australian consulate in Athens and asks for a work visa. ‘Why do you want to leave Greece?’ asks the official. ‘I am worried that Greece will leave the euro’ answers the man. ‘Don't worry’ responds the consul ‘I was talking to my German colleague yesterday who assured me that Greece will stay in the euro.’ ‘This is the second reason why I want to emigrate.’

The story expresses the impossible dilemma facing the Greeks. On one side, a continuation of the catastrophic austerity that has destroyed the country. On the other Grexit, a prospect that will further hit, for an unpredictably long period, the living standards of a people who have seen their income halved. Premier Alexis Tsipras’ announcement, early on Sunday, that the people will be asked to vote on the final proposals of the Europeans and the IMF is an attempt to divert this typical aporia (lack of passage) towards a more manageable question: Do the people back the government’s rejection of the worst effects of austerity while accepting its commitment to keep the country in the Eurozone? The stakes are high: besides the Greek destiny, the future of the European Union and of democracy is on the line.

The immediate context of the referendum is the behaviour of the European partners in the last few months. The Syriza government was elected with a clear mandate to put an end to austerity policies. These policies were carried out on two fronts, fiscal austerity and internal devaluation. Fiscal austerity was pursued through the reduction of public spending, the privatisation of key state assets and the increase of tax revenues. Large numbers of civil servants were dismissed, the social services were slashed with the health service in particular unable to meet basic needs. The humanitarian crisis that followed is well documented and there is no point in detailing it again. The creditors’ logic aimed to generate primary budget surpluses, which would not be used to restart the stalled economy but to repay the escalating debt. The previous governments had accepted the obligation to create annual surpluses of up to 5% of GDP in the next seven years, something that no government since Ceaușescu’s Romania has either attempted or achieved.

The internal devaluation was carried out through the repeated reduction of private sector wages and the abolition of the bulk of labour law protections, such a collective bargaining. At the same time, the repeated increase of taxes, including the regressive tax on real estate, meant that the bleeding of the economy reached unprecedented levels. The pauperisation of the working people, the IMF argument goes, would improve competitiveness and help economic growth. But the result was abject economic failure. The economy shrank by 26%, unemployment jumped to 27%, youth unemployment went up to 60% and more than 3 million people on or below the poverty line. The IMF admitted a couple of years ago that it had under-calculated the adverse effect of austerity on the economy - the so-called fiscal multiplier - by a factor of three.

A European coup

It is against this background that the Greeks elected in January 2015 the Syriza government committed to reverse these policies. A period of negotiations followed. But these were not proper negotiations. The huge gap between the two parties in power resources and ideology made the talks brutally asymmetrical. I have called these ‘negotiations’ a European coup, an attempt at ‘regime change’ using banks and not tanks. The economic stakes for the lenders are relatively small - the Greek economy is only 2% of European GDP - and does not justify the risk of a breakdown in relations. The precautionary principle of risk theory, inscribed in the European DNA, demands that the unpredictable effects of Grexit on the European and world economy should be avoided. If the collapse of Lehman Brothers created such a huge crisis, even the consideration of Grexit is more dangerous

The perceived threat of a Syriza success and of a haircut of the Greek debt, repeatedly declared unviable by the IMF, is political not economic. The European elites fear a contagion throughout Southern Europe of the anti-austerity stance of the Greek people and government. The result in the Spanish local elections, the Scottish anti-austerity vote and the Sinn Féin opinion poll results indicate that the people hit by austerity have started stirring. The Syriza government is leading the attack on the ‘there is no alternative’ neoliberal mantra. Even a limited success would show that the only fight that cannot be won is a fight not joined.

The fear of political contagion is the only credible interpretation of the actions of Europeans and the IMF. The aim is clear. Either overthrow the government, if it does not accept the onerous conditions imposed on it, or humiliate it so much as to make it impossible to keep party and government together. There are many signs of this attempted ‘regime change’. Every time the Greek government presented to the European leaders a political proposal solving the long-term problem of debt sustainability, it was asked to go to the technocrats and cost it. When the Greeks returned with a detailed costing, the lenders would challenge the political framework behind it. The IMF insists on imposing the internal devaluation but asks for a debt haircut to make it viable. The Europeans are more sensitive to the democratic mandate but totally unwilling to negotiate the easing of debt. Caught between the Scylla of a permanently increasing debt where new loans are used to pay the earlier debt and the Charybdis of escalating austerity, Syriza ran out of negotiating road.

The endgame moves are characteristic of the impasse. On Thursday June 18, while Premier Tsipras was in Russia, Reuters reported a leak from a member of the ECB Board according to which the high street banks might not open the following Monday. It was a clear sign to people to withdraw their savings on Friday, a self-fulfilling warning that could amount to a criminal offence. I was having dinner with senior Syriza members in Athens when the news broke. I was surprised and delighted by their calm, cucumber-cool response. They decided not to give much emphasis to the leak and play down the continuing attacks. There was no bank run on Friday morning and while the withdrawals were greater than earlier in the week no threat to the banking system was posed.


Alexis Tsipras and Yanis Varoufakis. Demotix/Panayiotis Tzamaros. All rights reserved.On June 25, Greece submitted a new set of fully costed proposals. They were a major retreat from the Syriza manifesto. They were going a long way towards the lenders position by accepting their fiscal demands by cutting public spending and increasing taxes to a total of 7.9 billion euros. On the other hand, the new burden was distributed in a more just way. 70% of the new taxes was placed on the shoulders of the richer part of society by increasing corporate tax from 26% to 29% and imposing a 12% one-off tax on corporations with profit over half a million. For the first time, the proposals were welcome by the lenders who stated that they would be the basis for agreement. But immediately afterwards, the lenders comprehensively rejected what a few hours earlier was the ‘basis’ for agreement. Four days before the end of the current financial programme, the lenders increased the amount to be further bled from the economy to over 11 billion euros and reversed priorities by imposing the bulk of the new demands on the poorer part of society.

This deal was presented as a final ‘take it or leave it’ proposal. Angela Merkel called it ‘generous’, while Donald Tusk, the President of the European Council, said that, ‘the game is over’. It became clear that the ‘negotiations’ would conclude only if the government accepts the blackmail and abandons its ideology, its promises to the people and the hopes it has created for both Greek and European people. In this context, Tsipras has called the referendum asking the people to decide whether they accept the position of the lenders.

The stalled tango between democracy and capitalism

The post-WWII compromise between capitalism and democracy was expressed in the most authoritative way in the foundation of the European Union. Capitalism and democracy operate different principles of distribution of the social output. As Wolfgang Streeck puts it in his book Buying Time, in market or legal justice, distribution is carried out according to market decisions and property entitlements, including debt obligations, and is expressed in prices. Those who fail in the market place become targets of philanthropy and police repression if they resist. Social justice, on the other hand, is determined by cultural norms and collective ideas of justice, fairness and solidarity. It ensures that everyone enjoys a minimum livelihood and recognition of civil and human rights irrespective of economic performance or productivity. Social justice is expressed in decisions of formal and informal institutions including elections. It acts as a corrective to the market distribution system.

Syriza has made it clear that the future of Greece is in the Eurozone and the EU. The government’s negotiating position, armed with the recent electoral mandate, was a desperate attempt to retain the co-habitation of democracy and capitalism despite the hostility of neoliberalism towards elections, people and their decisions. Late capitalism depends on the neutralisation of democracy. Technocrats decide all major policy decisions while bankers and finance capital appear as one constituency fighting with the people for scarce resources.

The Greek proposal could change the political landscape. ‘Referendum’ is a dirty word in the Brussels corridors. The elites have been traumatized by popular rebuffs in France, the Netherlands, Ireland and Poland among others and they cancelled the Papandreou proposal to hold a referendum in 2012. The European elites, who have felt unassailable since 1989, are sensing the popular anger and cannot comprehend it. The Tsipras proposal brings back the fear elites feel when the people momentarily enter onto the political stage. The referendum will be an encounter with the anti-austerity resistance of the Greek people and in direct contact with the occupation of Syntagma Square in 2011. It places the people at the centre of politics and prefigures an institutional framework in which direct democracy becomes a permanent supplement to its representative part.

An amazing experiment in direct democracy took place in Syntagma and the many other squares of the world. The Syntagma multitude both mimicked and creatively subverted the principle of representation and state organization. In daily assemblies and an elaborate network of working groups, Syntagma offered a microcosm of a future democratic state operating under a strict axiom of equality. The Syntagma multitude was not a suffering and victimized population. It was an active and creative people performing radical democracy and taking their fate in their own hands. After Syntagma, the Syriza victory and the radical change of Greek politics was destined.

The referendum takes the lesson of the squares to the heart of politics. The people are asked to decide directly their future. Syriza and the Greek opposition will be judged in the next few days. At a Guardian debate last Wednesday and in various interviews I was asked ‘Can Greece be saved’. The breathlessness of the reporting gives the impression of a pending apocalypse. It may be useful to the media but it has nothing to do with reality. The sun will rise over the Acropolis again tomorrow, the owl of Athena will fly at dusk as Hegel noted. Despite the doomsayers the people remain calm, stoical, aware of the significance of the historical moment. The longevity of the Hellenes is much greater than that of most doubters.

But the referendum puts the European elites too before a major dilemma: do they respect the democratic decisions of people or are the demands of banks, financiers and their political and media friends the holy writ of new Europe? The Greek people give the European Union a chance to restate its commitment to the values of the Enlightenment – equality, freedom, solidarity – and the principles of its own foundation. In a strange way, the place where democracy was born gives us a chance to re-commit to its ideals in the 21st century.

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