Thursday,20 September, 2018
Current issue | Issue 1254, (9 - 22 July 2015)
Thursday,20 September, 2018
Issue 1254, (9 - 22 July 2015)

Ahram Weekly

Neither Grexit nor capitulation

Greece delivered a defiant “no” to its creditors in Sunday’s referendum, teaching Europe the importance of engaging with the public on the questions of the day, writes Gamal Nkrumah

Al-Ahram Weekly

European armchair doom-mongers boasting vaingloriously of giving a pink slip to Greece and booting the Mediterranean nation out of the European Union were shown to be spouting madness in the country’s referendum this week, when the Greek electorate delivered a resounding “no” to the austerity terms being offered them.

Greece had been the first industrially advanced nation to be populated by an “un-people,” to paraphrase George Orwell. By this Orwellian reasoning, Greece did not deserve the honour of being a member of the European Union and should have been catapulted out of the Eurozone.

But a “Grexit” is not in the offing. In a flurry of diplomatic bustle, German chancellor Angela Merkel paid a surprise visit to Paris earlier this week to take the floor with French President François Hollande. Merkel and Hollande among other European leaders both know that a Grexit is out of the question.

Greek Prime Minister Alexis Tsipras and his leftist Syrzia Party pose a systemic risk to the capitalist political status quo in Europe, but not to the European economy or to the Eurozone. Among the questions raised by the Greek move are whether the Eurozone is an exclusively northern European club of wealthy nations and whether the Mediterranean nations qualify as being fully-fledged Europeans.

The Mediterranean is the “South,” literally and metaphorically, of Europe. It is the nations of the European “South” – Italy, Spain, Portugal and Greece – that have faced a uniquely tough set of problems. Greece is simply the most heavily indebted of them.

Meanwhile, the German press has been rife with criticisms of the Greek choice. “With this government, Greece has reached the end of the road when it comes to the euro,” trumpeted the Suddeutsche Zeitung. “They [the Greeks] have reached a frenzy of nationalism that can only be intensified in one way: hatred, anger, maybe even violence. There is no further basis for cooperation with Greece in the Eurozone,” the paper said.

Greek government officials have been openly labelled as “terrorists and blackmailers”. “Alexis Tsipras and his government have promised their voters the impossible,” warned the Frankfurter Allgemeine Zeitung.

Greece was the last country to join the Eurozone in 2001 before the official launching of the European currency in 2002. One of the stipulations was that no member state should have a budget deficit of more than three per cent of GDP. But Greece is bound to stay within the Eurozone despite not being able to meet these criteria.

In January, the Greek government promised voters that it would end years of austerity and it appears that no power can stop it. The EU can bully Greece, but it cannot dismiss the Mediterranean nation from the Eurozone. That would be a “collective failure,” as Merkel so aptly put it.

The European Central Bank (ECB) has tightened its liquidity conditions for the Greek banking system, but a Grexit would be a failure for the Eurozone and for the European Union as a whole, as Merkel, Hollande and other European leaders understand perfectly well.

The ECB was continuing its freeze on emergency liquidity assistance to Greece as the Weekly went to press, and further talks between the Greek government and its creditors were being scheduled.

Mediterranean leaders have been less hawkish. “We should make sure in each case it is very well managed and not used as a stick to beat the others with,” Maltese Minister of Finance Edward Scicluna said.

Northern European leaders were less accommodating. “The referendum result didn’t change the economic reality in Greece,” Peter Kazimir, the Slovakian finance minister, insisted. “The situation has got to the point where a viable deal is only possible at the highest political level.”

Finnish Minister of Foreign Affairs and International Trade Alex Stubb stated that Helsinki would not support debt forgiveness or an extension of the bailout package to Greece.                                                         

Marcel Fratzscher, head of Germany’s DIW Institute, was quoted as saying that Greece was fast spiralling into “economic catastrophe.”

But leftists in Europe understand that the crisis is not simply economic, but instead is political and ideological. Tsipras had been invited by creditors to present a fresh reform programme, but had showed up to meetings not wearing a tie and in sharp contrast to the pin-striped suits of his counterparts in Europe.

The graphic divergence is glaring. And so is the body language.

Greece’s creditors want economic reforms in the country, or so they claim. The mechanisms of European monetary union mean that Greece is now trapped in an untenable debt structure, making the situation of the left-wing government in Athens impossible.

Even the Managing Director of the International Monetary Fund (IMF) Christine Lagarde conceded that there was nothing the IMF could do in the face of the resilience of the Greek electorate. “The IMF has taken note of yesterday’s referendum held in Greece. We are monitoring the situation closely and stand ready to assist Greece if requested to do so,” she said.

Berlin and Brussels are intensifying the pressure on Athens. But Greece, the birthplace of democracy, has spoken its mind. The Greeks rejected further austerity measures this weekend, and Tsipras will now speak at a special session of the European parliament in Strasbourg.

The Greek-Australian economist Yanis Varoufakis, the country’s former finance minister, resigned promptly after the referendum. “I shall wear the creditors’ loathing with pride,” he said. Euclid Tsakalotos, a civil engineer working in the shipping industry and schooled at Eton College and Saint Paul’s School in England, two of the country’s most distinguished public schools, succeeded him.

After meeting with Irish politician Gerry Adams in March 2015, Tsakalotos declared that both the Irish political party Sinn Fein and Syriza were “part of a great realignment in European politics.”

For now, Tsipras has been invited by Greek’s creditors to present a fresh reform package. The root problem, however, is that the debt is no longer just owed to the banks, investment funds and private investors. The country’s creditors claim that the hole in the country’s budget has simply grown too big to hide.

The country’s socialist government, and not the bankrupt Greek state or people, are being penalised. Europe simply does not want a leftist government in power in Greece, even as the Greek people have opted for a socialist government.

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