The alternative to austerity takes shape

Last night’s vote in the Greek Parliament rejecting the government’s candidate for the presidency for the third time now opens the way for a snap general election on 25 January which could well bring the Syriza party to power (it has a regular 4-7% lead in the polls over the current right-wing government).   If so, it will be because the Greek electorate adamantly refuses to accept any more austerity (shades of Britain, 2015?) and despite the risks is determined to break with the EU orthodoxy which has rocketed unemployment to 40% and laid waste the country with nearly half the population driven below the poverty line.

The significance of this moment cannot be exaggerated.   It is the first time that a political party anywhere in Europe with a real chance of gaining power has repudiated austerity as the central instrument of economic policy.   Fundamentally it is therefore a challenge to the right-wing ideology that has ruled the Western economies ever since 1980, producing the biggest financial crash since the 1930s and the longest and deepest depression since the 1870s, yet still clung to by the EU Commission, the ECB, and the IMF as the source of their power.   If however Syriza succeeds, it will have consequences that ricochet across the EU, not least Portugal, Spain, Italy and perhaps Belgium.   From that point the unravelling of austerity will gather momentum.

There are real ironies in this.   So far from Greece being a basket case, its recent econoimic performance has been encouraging.   The economy is (at last) growing, unemployment is down, and even its debt to GDP ratio has improved.   But instead of allowing these positive forces to develop further, Merkel (the classic Bourbon figure throughout this long-drawn-out crisis – learnt nothing and forgotten nothing), the Juncker EU Commission and the ECB are insisting that Greece swallows another dose of austerity and is still kept under surveillance by the IMF.   To impose a fresh round of deep cuts at this juncture exposes the rigidity and authoritarianism of Eurocrat thinking which was bound to lead to an explosion.   They have only themselves to blame.

There is another tragic irony in all this.   Germany has painted itself as a virtuous creditor, while Spain and Ireland have been vilified as ‘profligate’, yet Spain and Ireland both entered this crisis with government debt way below the German level.   This fantasy of German virtue can also only be maintained with a high degree of German historical amnesia.   At the postwar London Debt Agreement in 1953 Germany emerged as the biggest beneficiary of debt forgiveness in recent memory.   German external debt was substantially written off or deferred, and Tsipras on behalf of Syriza is now asking the international community for something similar.   It is an ugly truth that his main opponent today is Merkel who has inherited from long back the West German economic miracle that was enabled by the Allies to be launched from a clean balance sheet.


6 thoughts on “The alternative to austerity takes shape

  1. That being the case Michael, why did you support the Scottish branch office’s campaign with the Tories and deny Scotland the ability to reject the Neo-Con austerity agenda? Double standards.

  2. If the anti-austerity party wins this election it’ll be Greece v EU/Germany, which could have repercussions throughout Europe and affect us too. Should they convince the EU that more austerity would have a detrimental effect, then if constraints are relaxed there, other countries such as Italy would also have a case for relaxing austerity.

    If this happens and the European economies improve, then that’ll be good news for us, as they are the biggest market for our exports.

    Also, it’d be good if Greece could take the EU (aka Germany) down a peg or too, as I feel they have become too dictatorial. This could well be due to a certain amount of self interest, as Germany benefits from holding down these Southern economies:

    Quote: “The “olive oil countries” now import more than they export, which has contributed to a depreciation of the euro. This allows Germany – a country with higher exports than imports – to offer its products at better prices in US dollars or Chinese renminbi. In the area of industrial policy, Germany substituted traditional Southern suppliers with Polish and Chinese partners.”

    “In this context, austerity exerts multiple effects. Austerity policies prevent countries from increasing their debt, thereby preventing a situation in which a Southern European deficit perennially sucks up German savings. Those savings are invested in Germany instead. Moreover, the austerity-induced recession has led to a transfer of foreign savings to Germany, thus stimulating Germany’s growth as well.”

    “Austerity also means that the investments of German banks in the PIGS countries (Portugal, Italy, Greece and Spain) are relatively safe – the burden will instead fall on the shoulders of the tax-paying citizens from Europe’s South.”

    “Austerity has rendered reforms impossible (since reforms would cost money in social assistance and industrial aid, as Germany knows well from its own reform attempts between 2002 and 2007), and it has prevented a return to competitiveness in Italy and Spain, which remain unfit for global exports. This is at least partially in Germany’s interest: competition from the South would lead to an appreciation of the common currency and increase the competitive pressure on the German Mittelstand. Austerity has also reduced the cost of the German energy bill: As oil and gas consumption in the PIGSs falls, energy prices fall, and Germany’s energy-reliant industry stands to benefit.”

    “Austerity is a slam dunk for Germany. It guarantees that debts are paid, it avoids that international competitors emerge, keeps the euro low, keeps energy prices low, keeps savings in Germany and attracts funds from abroad. The German choice to sacrifice Southern Europe for the sake of exports to China is based on the belief that European markets are beyond maturity, and that it should be Germany’s priority to establish a reliable presence in the emerging BRICS. Giving up austerity would allow the re-emergence of markets, in Spain and Greece, that have always been secondary for Germany. Berlin prefers a slow decline or a stagnation of the PIGS if it means that Germany can proficiently enter China and other booming markets.”

    By Stefano Castano, in The European “Germany has won the Euro War” 8/5/13

    So, it’ll be very interesting to see what happens after these elections.

    “…a high degree of German historical amnesia” isn’t all that surprising, as I believe the history taught in German schools has been “edited” since WWII.

  3. If this if that none of this wil matter if ttip is signed we all be under the yanky yoke if only untill the britush people’s rise and show this corrupt lot the door then more cuts and ttip to follow jeff3

  4. If there was special award for sheer bunk the piece above, (written by the same MP whose recent book, The State We Need, both eulogizes the German industrial/financial model and also contains, or not that I can recall, even a single reference to socialism anywhere in it,) would win it by a country mile.

    The notion that there might any common interest or ideological or otherwise between the desperate elements, (genuinely left, far left and even communist,) that comprise the Greek Syriza political alignment, (or French socialism/communism,) and the tired and grubby joke that the British labour party, (post Blair,) has become; in practice, policy and rhetoric, now completely indistinguishable from all the other Tories, is in fact is extraordinary funny.

    And I’m quiet certain that Syriza would have just as much difficulty as rest of us do in distinguishing between Dodgy Dave’s far right, neo fascist, conservatives and Miliband’s far right, neo fascist, Conservatives, (formerly known as the British labour party,) sticky fingered, poor bashing, war mongering, public school educated, even down the close family connections, (Ball’s brother, for example) to merchant banking.

    In fact any pretense that their might be some kind of solidarity with genuine socialism is as trite, dishonest and unconvincing as Milliband’s silly and utterly self indulgent posturing in support of the Palestinians, (for whom, along with the Israelis I’ve met who live with gun under their beds, I nonetheless still have every sympathy, ) is completely risible.

    British socialism, (“you can hire an MP the same way you’d hire a London Taxi,”) has long been sold on to the corporations, commercial public service groups and to various high profile charitable, “rackets,” and standing next to a few real and genuine socialists, as it were, doesn’t doesn’t fool anyone; in fact it’s patently ridiculous .

    Also the other point about TIPP, hits the nail squarely on head.

  5. Professor Mark Blyth pointed out in this video that Germany held the highest levels of Debt in Europe, due to German Banks being overexposed in the Sub Prime Scam, Britain of course came second. Link:

    The Neo-Liberal agenda rolls on. The only way to stop it, is to stop voting for it.

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