Stop squeezing Syriza. We can’t afford another wrong turn in Europe

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‘While Greece’s failures are widely recognised, including by Syriza itself, it is time to concede that the eurozone has also failed Greece and its citizens.’ Photograph: Michael Debets/Pacific Press/Barcroft India

by Sony Kapoor at The Guardian
Friday 6 February 2015 18.25
With Syriza having won Greece’s election on a platform to reject the Troika-imposed bailout, the eurozone has reached yet another fork in the road. Let us hope it does not take the wrong turn, again.

Squeezing Syriza and humiliating Greece further, as appears to be the strategy in Germany and other powers in the EU, could be the straw that breaks the eurozone’s back. Cutting Greece any slack is opposed by a majority of Germans, even while support for Alexis Tsipras in Greece soared after his election as he fought for concessions on debt. Political space in the eurozone has shrunk to a point where it may no longer be possible to implement sensible economic policy. Which wrong turns did we take? How can we choose wisely this time?

At the outbreak of the crisis, EU leaders insisted on national solutions to what was essentially a European problem: the fragility of large often pan-European banks. This increased the final bill, as countries refused to bite the bullet and delayed recognising that their banks were bust.

Even as leaders came under domestic fire for rescuing banks with taxpayer money, Greece’s fiscal problems provided a godsend distraction. Many northern Europeans promoted a narrative of “lazy Greeks” who had been “fiscally profligate”.

While the unsustainability of Greek debt was recognised by many, intensive lobbying by German and French banks which owned large amounts of Greek bonds meant that the much-needed restructuring of this debt was vetoed. An ill-designed programme was imposed as condition of financial aid to Greece. This was essentially a bailout of European banks at the expense of Greek citizens and European taxpayers.

Even worse, the narrative of “lazy southerners” and a “fiscal crisis” promoted by Germany and EU institutions crowded out the reality of an untreated banking crisis.

Ireland, having foolishly guaranteed its insolvent banks, was then forbidden from imposing losses on bank bondholders by the ECB. Private debt became public and the banking crisis became a fiscal one. Even though the failure to repair and restructure banks was the biggest problem in countries such as Spain, many were treated as though they had been fiscally irresponsible and prescribed austerity.

As bank uncertainty and fiscal cuts were biting and driving the eurozone into a deep recession, the narrative of a “fiscal crisis” became self-fulfilling as debt-to-GDP ratios climbed because of both bank rescues and collapsing GDPs. The problem was compounded by Angela Merkel and Nicolas Sarkozy threatening to push Greece out of the eurozone, which in turn made markets question the viability of the single currency and fuelled panic, driving Spanish and Italian spreads up to record levels.

Thus the downward spiral of a badly misdiagnosed and deliberately miscommunicated problem, and a tragically ill-conceived treatment began. Bailing out the supposedly lazy southerners has stoked anti-EU sentiment in creditor economies like Germany, who want to see more, not less austerity in debtor economies. Suffering under Troika-imposed excessive austerity has fuelled the rise of anti-austerity parties such as Syriza and Podémos.

While Greece’s failures are widely recognised, including by Syriza itself, it is time to concede that the eurozone has also failed Greece and its citizens. Without a mea culpa acknowledging that Greece’s rescue was actually a rescue of European banks and the programme poorly designed, German and Greek citizens would never see eye-to-eye. They deserve to be told the truth.

Syriza, more than anyone else, is being honest about what went wrong. Choking them would only catalyse anti-European sentiment and would be the last, potentially fatal, wrong turn for the eurozone. Choosing wisely means a compromise, no matter what the short-term political cost.

One response to “Stop squeezing Syriza. We can’t afford another wrong turn in Europe

  1. It was the EU who rose retirement ages and then took pension funds to pay off debt that was not the fault of the poor.

    There was no need to raise the retirement age in the UK as we are not an ageing society, after over half a century of mass immigration of the young, who have larger families and half of births in the UK are now to foreign mothers. These migrants are not benefit burdens, but successfull business people generating jobs and have been for some time.

    There is a right turn that is morally just.

    Greece is not the sole nation deep in debt to the EU government. Most of Europe has. The people suffering are exactly the same people as did the German started two world wars in Europe. We fought against being ruled by the Germans, it appears, for good reason.

    There is a solution.

    For the banks holding the debts of most of Europe to do a fire sale of the assets, both salaries and buildings and land, owned by the EU government, to pay off like 10 cents of the dollar type thing.

    Each nation would then be debt free to an EU government that no longer is a heavy burden of taxation on all of Europe.

    With no contribution to an unnecessary layer of politicians and government and no salaries and expenses to MEPs, all that money would end all pretense that austerity can solve a recession.

    Europe is killing is population with its present set up. That German politicians exact such life threatening austerity on others (yet there are foodbanks in Germany as well), means the
    anti-European feeling is not about nationhood, but about individual survival of all ages.

    Even the USA talk against austerity and for investment.

    Because the EU is faced with a Europe wide default of debt at this rate.

    So the EU’s existence threatens the world economy.

    Are we going to end up like Venezuela with queues for food and medicine, in shops with empty shelves?

    Why does not the financial world demand all the assets of the EU government befare we hit something worse than the 1929 crash by all of Europe defaulting all at once?

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