by Euclid Tsakalotos*
Greece is facing in early May perhaps its most critical election ever. The results could have a very significant impact not only for Greece but for the whole of the eurozone. At the moment the two main parties of the centre-left and centre-right are polling at well below 40%, in a country where in most previous elections they have achieved, on average, around 80%. Thus Greece could be the first country to reject the policies of austerity, associated with the Merkozy axis, since the outbreak of the eurozone crisis. For the two major parties that have supported these policies, the Greek electorate faces a stark choice: a continuation of austerity or declaring default and thereby ending Greece’s participation in the eurozone, with all the cost that that this entails. One section of the Left, in essence, accepts the terms of this choice. It has been well represented in the British press, with economists, such as Costas Lapavitsas, arguing that only a withdrawal from the eurozone can set up the framework for a different economic approach based on nationalizing the banks, introducing capital controls, promoting an industrial policy and redistributing income and wealth. It cannot be said that it is a strategy that is firmly based on a detailed reading of historical precedents.
In the 1970s and 1980s we had a number of experiments with a very similar approach to leftist economic strategies: the Alternative Economic Strategy in Britain, the Common Programme of the Left in France, and the Greek socialist party’s (PASOK) approach in the early eighties. All three relied on the type of economic policies and institutions now being proposed by one section of the Left in Greece. All three were essentially national strategies with little consideration for either international constraints or the type of international alliances necessary to overcome them. And all three collapsed in international financial crises, in 1976, 1983, and 1985 respectively, that signaled a change in direction in favour of much more orthodox economic policies. And the consequences of those failures are still with us today. Firstly, the perceived failure of a more leftist approach underpinned the hegemony of neo-liberalism and the widespread feeling that there was no alternative. One aspect of this hegemony was the convergence on matters of economics of the parties of the centre-left and the centre-right. Secondly, with the Left in retreat, the process of European integration was promoted with little input from the Left. Delors’ support for a more “social Europe” came to nothing as the Maastricht Treaty swept all before it, becoming the cornerstone for the implementation of the whole panoply of neo-liberal economic policies.
So as a minimum the Left needs to think very carefully as to how it can avoid the type of financial crises that have played such havoc with its approach in the past. Capital controls, which were available to all three experiments mentioned above, by themselves can only do so much. What is needed to take on capital markets is a supra-national strategy for a supra-national problem – one economy cannot take on the financial markets, or multinational corporations for that matter, on its own. Protection from financial markets is the only way to begin to redress the “hollowing out” of democracy that has been such a feature in the process of European integration. But the eurozone debt problem is also one with a very strong international element. The establishment of a eurobond, a large eurozone budget to provide stabilization and redistribution protection for the weaker economies, and a coordinated fiscal expansion would all contribute to the mitigation of the debt problem of the PI(I)Gs. Finally, to address the social problem of the eurozone, to begin a process of income redistribution, and to implement different taxation policies with different winners and losers, there needs to be a strong element of coordination between member states.
It is in this context that another section of the Greek Left, has refused to accept the stark choice that the ruling orthodoxy is presenting to the Greek electorate. This Left understands that a Greek exit from the eurozone would lead to as many problems for the eurozone as it would for Greece. By turning a monetary union into the equivalent of a much more unstable fixed exchange rate system, as was the case with the ERM in the late 1980s, the pressures on the next economy to leave would be irrepressible. It is this that gives any alternative government the power to negotiate. A government of the Left would set out different economic and social priorities, with creditors being well down the list, at least for the initial period. It could demand a union wide response to the eurozone debt problem that included both a reduction in the overall level and repayment in proportion to the recovery of economic conditions.
Moreover such a strategy would be consciously pitched to appeal to the forces of labour in other austerity-stricken member states. It would argue that a different path is not just good for Greece but for a change in direction for the whole eurozone, removing the vicious circle of austerity-recession-more austerity measures. It would begin to reconnect to the idea of Europe as a democratic space that would encourage income redistribution, a decommodification of social services and experimenting with different consumption and production prototypes. That would see unions, social movements, and collective action of all sorts as part of the answer and not the problem.
It is quite possible, that ruling groups within the eurozone would have the power to reject such a shift. It would clearly depend on the level of support and solidarity generated by a government challenging established priorities and configurations of power. But a government seeking the good of its own people, and those elsewhere suffering from unemployment, falling wages and reduced social benefits would have one major advantage. It would not be seen to pursuing the national interest, through a competitive devaluation, but a strategy for the benefit of popular forces throughout the union.
And even if Greece was forced out, the extent of the solidarity created and the havoc generated to the eurozone, would still give an alternative government considerable leverage with respect to the terms of any disengagement. The exit strategy should be a last step for the Greek Left, not the beginning.
*Euclid Tsakalotos is a professor of economics at the University of Athens. He is a member of the central committee of Synaspismos and the Coalition of the Radical Left (SYRIZA).