If Greece PM Tsipras had more seriously developed a detailed plan for the option of an exit from the Euro system, the situation would have been much different. It could have been an opportunity for his socialist Government to get out and organise a society for the people rather than for Europe’s political leaders
Greece has borrowed much more than it can repay — it is the sort of problem you and me probably have had at some point. Now as next steps the country first has to find a way out of its enormous debt, and then become economically competitive without taking any new borrowing. This is tough and the main complication preventing this from happening is that Greece is part of the Euro system.
It had struck me during the early years of this millennium when I used to work at the Elysee with President Jacques Chirac in Paris, and later at the European Commission in Brussels, that complex political problems, such as that of European unity, were often solved by conversations amongst a handful of political leaders. At the Elysee, the rose garden right next to the Hall d’Argent occupied by the President’s Chief Counsellor with whom I used to interact most often, was the prime venue for this activity. France, Germany and Italy were driving the Euro project. The Euro itself was a unique experiment, created and negotiated by politicians especially from this Northern European elite. Even at that time, most of the decisions in their experiment had little to do with Europe’s people.
And so this week as a Frankenstein case of Euro now becoming the main complication in Europe vs Greece vs the International Monetary Fund (IMF), why should it matter what the people of Greece in a referendum vote forIJ Just a week ago, Greece’s voters had overwhelmingly rejected a bailout offer that was less punitive than the deal its leaders have accepted this week. Why should it be relevant to Greece’s European creditors who are stressing on austerity, that 26 per cent of Greece is unemployed, youth unemployment is at 50 per cent, the country’s tourism industry is suffering, and its banks as well as stock market have been closed for three weeksIJ
Greece is not a rogue country. It is a beautiful land with hardworking people. And yet the deal that Greek leaders and their creditors in Europe reached this week will deepen political and economic strains in a country already in depression. The deal keeps Greece in the Euro zone at least a while longer, at great cost, and with little certainty about the future of Greece or of Europe. Because of bad macro-economic policy, Greece has agreed to accept a cash lifeline in exchange of higher taxes, cuts to Government pensions and a sell-off of about 50 billion Euros worth of its state assets.
The Greek people, let us say unlike the French, believe that more is achieved in Parliament than on the streets. They have an obsessional respect for parliamentary democracy. This is why the referendum on Sunday, July 5, 2015, that asked them to vote for or against the bailout plan offered by their country’s European creditors, was important for the people. A lot of Greek people did not mean to reject the bailout when they voted in majority to reject the bailout. They wanted the bailout, but they also wanted to reject it first, as a sort of prideful gesture, so that they might then accept it later with greater dignity. This is as absurd as some of our own emotional reactions to issues of high personal importance.
My point here is that the Greek voted less with rationality and rather with abundant emotions. Gut feeling and passionate reasoning, of course, go hand in hand during the course of any voting process. Elections or plebiscites, no matter how well organised in attempt, have been inseparable from emotions, and their final outcome is unpredictable because those abstractions are precisely the things which we are taught all our lives to least talk about.
But the vote of the people notwithstanding, the bailout offer to Greece was made by its European creditors, and Greece’s Prime Minister went ahead and accepted it. The only area where the creditors agreed to retreat in the conditions imposed in the bailout offer was in modifying a proposal that Greece be forced to transfer 50 billion Euros worth of national assets to a new privatisation fund located outside Greece and administered by foreigners. It was instead decided that the fund will be based in Athens and managed by the Greek authorities under the supervision of the relevant European institutions. This was based on the realisation that locating the privatisation fund outside Greece would be one humiliation too much for the pride of the Greek people.
Democracy anywhere is always inherently messy. This is probably because its success relies on feelings, intuitions, biases, hopes, predispositions, societal traits and bonding to political ideologies. However, if democracy cannot express these emotions, it dies. By countermanding first the victory of an elected Government and then a 61 per cent majority vote in the Referendum, Europe has vetoed and belittled the outcomes of Greek democracy. Will the democratic spirit survive in Greece after thisIJ
Also globalisation has brought about emergent styles of mobilisation amongst people, money, and ideas that have greater freedom to flow across the borders of countries. In the 1970s, scholars such as RO Keohane and JS Nye wrote a great deal on the growth of multinational companies. later, especially in the 1990s, the impact of migrant flows on inter-state relations was much scrutinised upon by academics.
More recently and until some years ago, economists further debated if the increasingly enormous flow of people, money, and ideas would in any way lead to the decline of the power of the state in international relations. They questioned if a state-centric system would hitherto co-exist with a decentralised system of new non-state transnational actors that would then together define how countries behaved with each other.
The global financial crisis that started in 2006 blew away any such theories. Governments overruled the actions of powerful private financial institutions at that time, re-establishing firmly the might of the state. The decline of the power of the state in international relations, it was almost unanimously agreed, was a myth.
In Europe, despite the Schengen Agreement allowing for free movement of people and the Euro allowing for a common currency, the state is taking the lead. Even the pride-driven vote by the Greek people in the referendum was only so that the Greek Prime Minister could say ‘no’ to Wolfgang Schäuble, the German Finance Minister, and to Jean-Claude Juncker, the President of the European Commission, when they really wanted the Greek people to vote ‘yes’.
But the fact is that the people of Greece are anyway cornered, the banks are closed. The Government has put limits to cash withdrawals to 60 Euros per day, and blocked most international transactions that would allow money to flow out of the country, including Internet commerce.
Further if Prime Minister Alexis Tsipras would have acted in accordance with the people’s vote in the referendum, the European Central Bank would have turned off every lifeline to Greece this week.
And so the only ones celebrating in Europe this week are the French. Alongside the Bastille Day celebration of France’s glorious history this week on July 14, there was a sense of pride that the night before the French President had secured a Greek deal with its Eurozone creditors. President François Hollande probably would not have been able to remember the last time he was called a revolutionary. After living through the worst opinion poll ratings of any modern French leader, he is now being credited as single-handedly keeping Greece in the Eurozone. It was finally a display of France’s power in Europe. In Greece, France had won.
German economic and political power in Europe is well-established. This is not the case for France in general. Further the German leadership’s views within the European Union are frequently different to that of the French. Keeping the balance at the core of the European Union has never been easy for any French President.
This week France ‘won’ in the sense that the unravelling of the Eurozone did not happen on July 13, 2015. But it came at the cost of policies that make it less likely that will be the case a year from now.
On the other hand, the conditions Germany won to put in place in the bailout offer seem so severe that it could easily topple the fragile coalition Government in Greece.
Most recently, the IMF — which is another of Greece’s creditor — has urged Europe to give substantial debt relief. The United States has been a weak yet right voice in the events related to the Greek economy, by at times telling Greece’s European creditors the strategic importance of giving more money to help Greece. Now the US-influenced IMF, which has so far lent Greece at least $23.6 billion, suggests that it might not lend Greece any more money if Germany and other European lenders do not forgive some of the Greek debt or at least stretch out the repayments. This issue could well be the next immediate sticking point for the Greek economy.
So the deal among Europe’s political leaders deciding the future of Greece is of course far
from done.
If Prime Minister Tsipras had more seriously developed a detailed plan for the option of an exit from the Euro system, the situation would have been much different. It could have been an opportunity for his socialist Government to get out and organise a society for the people rather than for Europe’s political leaders.
In the meantime, the reaction of the Greek people to the capital controls imposed on them is becoming as harrowing and absurd as was their reasoning for their referendum vote. Instead of clinging to their money in their savings accounts, many Greeks are now spending erratically. Greeks are not sure whether the banks will ever reopen. They are not sure whether they will ever again have free access to the Euros in their bank accounts. Since cash withdrawals are now restricted, the Greeks are spending more than ever before by either using their debit cards or via bank transfers inside Greece. They are also hurriedly paying off all their taxes in order to settle their debts before things get worse.
The writer is Chief Sustainability Officer for the group of companies Jindal Steel and Power ltd, and a Global leadership Fellow alumnus of the World Economic Forum