German Hegemony, Greece and European Democracy

The Eurozone’s economic policies failure is only one side of the coin. The most serious outcome is the disregard of the democratic principles which the postwar European project – and German social partnership - sought to enshrine.  

Greece is in a head-to-head dyadic confrontation with Germany, on a narrow front, not dissimilar to that which it faced at Thermopylae when not only Spartans but other Greek states opposed then assumedly hegemonic power, Persia.

The success of Alexis Tsipras and Syriza in the Greek elections of January 25th has triggered the eurozone’s first political crisis since its foundation, fifteen years ago. But this is not only a crisis for Greece. It also is a crisis for the principles and practice of democracy that the postwar European project was supposed to assure rather than suffer from German Diktat.

The short-term prospects for Greece are dire. In Gramscian terms the head-to-head between German finance minister Wolfgang Schäuble and Greek finance minister Yanis Varoufakis is a strategy of position, with Greece initially disadvantaged with a gigantic debt: 320 billion euro at 175 per cent of GDP.

Most economists are convinced that, given its size, the debt is not refundable. Alan Greenspan was brutally plain on the impossibility for Greece to repay the debt and, eventually, on its exit from the euro: "I believe [Greece] will eventually leave… it is just a matter of time before everyone recognises that parting is the best strategy” (Interview to BBC, 8.2.2015).

The Tsipras government is aware of the difficulties, but it is moving in a direction opposite to that predicted by Greenspan. The programme of the new government is on two main lines: the first concerns the conditions of debt reimbursement; the second is centered on the review of the economic and social policy imposed on the country by the European authorities.

On the first point, the Greek government proposes restructuring debt based on indexing it to the GDP growth. It also submits that the primary surplus - the share of the budget setting aside longer term interest payments - should be limited to 1.5 percent of GDP, against a powerfully deflationary 4.5 per cent as demanded by the Troika, to leave room for investment and collective consumption needed to boost growth, which is a nonsense if the economy itself is in depression.

The second point of the programme is less financial, more social and more political. Itfocuses on domestic measures. The Troika - the technocratic group representing the European Commission, the ECB and the IMF - has caused huge economic disruption and provoked a social catastrophe. Greece’s so-called “sovereign debt” – over which it has little to no sovereignty -has increased from 110 percent of GDP, at the beginning of the crisis, to the current 175 percent. Meanwhile, the GDP fell by a quarter, and unemployment has exceeded 25 percent of the workforce.

The Tsipras government wants to define a bridge programme of few months, as the basis of a new overall accord. In this intermediate stage, the European Financial Stability Facility (FEFS) would stick to its commitment to deliver the last tranche of 7.2 billion euro tied to the bailout.

With a compromise at the eleventh hour, a four month respite has been gained. But in the intention of the European authorities is to concede little more. The balance of power remains uneven. Nevertheless, Wolfgang Münchau writes in the Financial Times: "My advice to Yanis Varoufakis would be to ignore the exasperated looks and veiled threats and stand firm. He is a member of the first government in the eurozone with a democratic mandate to stand up to an utterly dysfunctional policy regime that has proved economically illiterate and politically unsustainable. Athens must stand firm against the eurozone’s failed policies" (Financial Times, 15.2. 2015).

Regardless of the final outcome, the Greek challenge clarifies key issues. The central one is not about debt, but the other side of the coin: structural reforms. In regard to the debt, as we have seen, the Greek government has presented a comprehensive proposal, and is ready to negotiate its terms. Instead, structural reforms, the dark side of the austerity.
The Eurozone’s authorities claim full control of the economic and social policy of the member states. And the very heart of the infamous structural reforms is made up by privatizations, cuts of welfare systems and radical market deregulation that, essentially, is freedom to fire and wage cuts.

A gigantic privatization plan is being demanded by the European Commission in return for the bailout might bring 50 billion euros into the coffers of the state. The most intriguing aspect is that its revenue would have been used to repay the debts incurred by Greek private banks towards a number of German French and Dutch banks. A typical way of passing on private debts to the public budget.

The Economist, although traditionally in favor of privatization policy, has written: “With a target of €50 billion ($72 billion) by 2015, Greece's privatisation plan aims to raise more cash as a share of GDP than any OECD government has managed before… The timetable to design a regulatory environment for privatised utilities is absurdly tight” (The privatisation illusion, 15.7.2011).

In any case, the core of the structural reforms is not so much the privatization, but the labour market and welfare system reforms. Here the eurozone’s ideological fundamentalism is evident. The main proposals for Greek government intervention directed to relieve conditions of poverty of a large part of the population are shot down, or otherwise put under the strict verification of compatibility with the budgetary constraints imposed by the European Commission.

Structural reforms, in the specific version of the European institutions, are of a strategic nature. Before or after, the austerity measures will have exhausted their task, structural reforms would introduce a radical change in the pattern and balance of social relationships - the reforms' long term goals being the drastic reduction of state intervention in the economy, the compression and progressive privatization of welfare systems and the marginalization of the trade unions and collective bargaining.

In the past, this politics would have been judged reactionary. But has become the dominant paradigm in the eurozone. In the postwar past in all European countries this policy had a rightwing connotation. In Germany it contrasts with the Sozialmarktwirtschaft of Erhard and the co-determination of Mitbestimmung. But with the Hartz reforms of Schröder and the pro-market rather than pro-labour policies of Blair the difference between right and left dissolved.

A dominant response is that the eurozone lacks political governance. This statement is partially true, if we specifically refer to foreign and defense politics. But it is groundless if one refers to economic and social policies. With the gradual modification of the European treaties and their interpretation, the initial “surveillance procedures” of debt and deficits by European authorities has been extended to all aspects of economic and social policy, that now are totally subject to prior scrutiny, and sanctions a Brussels technocracy and unelected Troika.

It is worth to keep in mind this framework, to fully grasp the "subversive" feature of the Tsipras government. Not coincidentally, the Greek government remained alone in front of the German Finance Minister Schäuble assault. In effect, the opposition to the Greek government has put together all the eurozone's governments with some more tactical then substantial differences. Indeed, all agree on the need to bring back Greece within the stringent framework of the collective discipline. Showing a minimum tolerance towards Tsipras government would risk contradicting their own deeply unpopular policy choices.

The single currency was implemented also to strengthen the area in dealing with the globalization dynamics. The task has miserably failed. Neoliberal policies adopted to respond to the global crisis have resulted in a striking eurozone economic regression in comparison to all other developed regions of the planet.

The economic failure is, however, only one side of the coin. The most serious consequences affect its hidden face: that is the deep damage inflicted on the democracy which the postwar European project of Adenauer and Brandt. Syriza has exposed what hitherto was masked. No government can claim its own political autonomy. The popular and democratic consensus is considered outmoded, essentially useless. The essential political agenda is that one established at the center of the euro-empire under a German ideology of austerity and German political hegemony. Member states have less autonomy and internal adjustment options on some relevant economic and social features than those of a small state in the United States of America. They are provinces of a new neoliberal imperium.

Greece cannot, even gradually, bring the minimum wage to the pre-crisis level of 750 euro that, incidentally, would still be less than half of the German, French or Belgian ones. It cannot restore a normal collective bargaining of wages and working conditions; neither decide what services to yield to the national and international private speculation, and so on. In short, a caged government.

Eurozone's progressive sliding towards a covered authoritarian regime, which has its center in Berlin and its executive arm in Brussels, has created a context of deep deterioration of the democratic rules in which the right wing movements easily gain space, as is shown by Marine Le Pen’s Front National in France and the old Northern League in Italy.
The eurozone politics has deeply frayed the fabric of democracy in member countries. In this context, economic and financial elites have used the combination of austerity and structural reforms to advance neoliberal policies, which in a number of European countries had hovered for many years without finding a stable anchorage. They found a way to lead an overall class struggle without any ideological advocacy, but using the mediation of the European technocracy, performing its politically and ideologically oriented, even though technically abstruse and obscure, neoconservative policies.

On 25 January 2015, with the victory of Syriza, the whited sepulchers of the eurozone have been violated. The Syriza government cannot with one shot strike down the “Dark Force” of eurozone imperial politics. Yet, it has challenged the arrogance and assumed invincibility of its leadership. The unusual claim to open a negotiation is, in itself, a heresy that challenges eurozone's fundamentalist diktat theology.

Over the next months, weeks or even days many things can happen. There may be a Grexit and a debt default which even British finance minister George Osborne has warned could mean a serial collapse of the Eurozone and a global financial crisis.

But the Tsipras government has taken a stand that may mobilise a Gramscian strategy of manoeuvre on many fronts, including Spain, where Podemos has good chances to win end-year general elections. Which is what eurozone's governments most fear. For, much as at Thermopylae, on a narrow front, and vastly outnumbered, Greece has taken a stand that may in the short term result in defeat but can inspire the rest of Europe to reverse what otherwise threatens to be the defeat of democracy.

Antonio Lettieri and Stuart Holland

Antonio Lettieri,Editor of Insight.He was National Secretary of CGIL; Member of ILO Governing Body, and Advisor of Labor Minister for European Affairs.(
Stuart Holland Formerly adviser on European affairs to Harold Wilson, Jacques Delors and Antonio Guterres. Currently Visiting Professor in the Faculty of Economics of the University of Coimbra. His new book "Europe in Question – and what to do about it" is published as an eBook by Spokesman Press and available on Amazon.