By Andreas Bieler and Jamie Jordan.
Concerns over Greece’s ability to pay back its debt continue unabated, with one crisis meeting taking place in Brussels after another. While the media focuses on Greece’s ability to meet the conditions by the European Union, in this post we will have another look at some of the key underlying dynamics of the crisis.
It is often argued in the media that citizens of richer countries would now have to pay for the ‘profligacy’ of citizens from indebted countries. Cultural arguments of apparently ‘lazy Greek’ workers as the cause of the crisis are put forward despite the fact that Greek workers are amongst those who work the most hours in Europe (McDonald 2012). Rather than the result of Greeks living above their means, however, the crisis is a reflection of the highly uneven European political economy. While Germany and other countries of the European core have pursued a growth strategy based on exports, countries in the European periphery including Greece followed a strategy of demand-led growth often financed with loans from abroad. Nevertheless, it would be wrong simply to blame the Greeks for this situation. The super profits resulting from German export success needed new points of investment to generate more profits and state bonds of peripheral countries seemed to be the ideal investment opportunity with guaranteed profits, backed by sovereign states. In a way, Germany has recycled its profits in the form of lending to peripheral countries. In turn, these credits to the periphery were used to purchase more goods in the core ensuring a continuation of the German export success. Hence, the recurrent distinction between credit- and export-led economies is misleading. Firms in core countries would not have been able to pursue export-led growth strategies, if global aggregate demand had not been supported by the real estate and stock market bubbles that occurred in the periphery as a result of lending. German export success, in other words, depended on Greece’s increasing indebtedness.
Unsurprisingly, it is not the Greek, Portuguese, Irish or Cypriot citizens and their health and education systems that are being rescued. It is the banks, who had organised the lending of super profits to peripheral countries, which had been exposed to private and national debt in these countries. Especially German and French banks were heavily exposed to Greek debt (Rogers 2011), with much of this exposure having now been socialised through bond purchases by the European Central Bank (ECB). The bailout packages for Greece came at a high price, making support dependent on austerity policies including: (1) cuts in funding of essential public services; (2) cuts in public sector employment; (3) push towards privatisation of state assets; and (4) undermining of industrial relations and trade union rights through enforced cuts in minimum wages and a further liberalisation of labour markets. The implications for Greece have been disastrous. Unemployment is currently at 25 per cent, with youth unemployment almost 50 per cent. Since the onset of the Eurozone crisis and the imposed austerity the economy has shrunk by 25 per cent (BBC 12 May, 2012).
It would be wrong, however, to regard the conflict over the way out of the crisis as a conflict between different countries, between Germany and Greece. In contrast to general assumptions, German workers have not benefitted from the export success. In fact, German productivity increases have to a significant extent resulted from drastic downward pressure on wages and working related conditions. German employers have relentlessly squeezed their workers and export success has been built on increasing inequality within German society. ‘The euro is a “beggar-thy-neighbour” policy for Germany, on condition that it beggars its own workers first’ (Lapavitsas 2012: 30). Hence, the real conflict here is between workers and big business, which takes place across the EU, as employers have abused the crisis to cut back workers’ post-war gains in the periphery as in the core, in Greece as in Germany. The crisis provides capital with the rationale to justify cuts, they would otherwise have been unable to implement.
Despite the draconian imposition of cuts, Greek workers have not only been victims of the crisis. For several years now, they have successfully established neighbourhood support groups and so-called social clinics, which provide health care for those pushed out of the official system by austerity. It is these movements of resistance on the ground, which provided the foundation for Syriza’s electoral success back in January. These local self-help groups were not all organised by Syriza itself, but party activists have been actively involved in these groups. While many political parties elsewhere have transformed themselves into purely electoral machines, Syriza is tightly integrated into its social basis of activists and voters. It is for this reason, why Syriza cannot and will not accept to abandon its anti-austerity election pledges in exchange for a new agreement with the Eurogroup. It is for this reason, why the party may decide to hold a referendum on any deal struck in Brussels (BBC, 12 May 2015).
Importantly, it is not only Greece, which is under pressure as a result of the current stand-off. The European finance ministers too have to think twice, before they let Greece go bankrupt, because if Greece was able to demonstrate that there is an alternative to austerity outside the Euro, the citizens of other countries under pressure may follow this example. Eventually, the whole project around austerity and restructuring may fall apart. Unsurprisingly, Syriza and Greece represent hope for an alternative future for many on the left across Europe.
Andreas Bieler is Professor of Political Economy and Fellow of the Centre for the Study of Social and Global Justice. Jamie Jordan is a PhD candidate International focusing particularly on the regional political economy of Europe.
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