Why Angela Merkel Is Wrong On Greece

by Jürgen Habermas on 25 June 2015 originally published at http://www.socialeurope.eu

The latest judgment of the European Court of Justice (ECJ) casts a harsh light on the flawed construction of a currency union without a political union. In the summer of 2012 all citizens owed Mario Draghi a debt of gratitude for uttering a single sentence that saved them from the disastrous consequences of the threat of an immediate collapse of their currency.

By announcing the purchase if need be of unlimited amounts of government bonds, he pulled the chestnuts out of the fire for the Eurogroup. He had to press ahead alone because the heads of government were incapable of acting in the common European interest; they remained locked into their respective national interests and frozen in a state of shock. Financial markets reacted then with relief over a single sentence with which the head of the European Central Bank simulated a fiscal sovereignty he did not possess. It is still the central banks of the member states, as before, which act as the lender of last resort.

The ECJ has not ruled out this competence as contrary to the letter of the European Treaties; but as a consequence of its judgment the ECB can in fact, subject to a few restrictions, occupy the room for manoeuvre of just such a lender of last resort. The court signed off on a rescue action that was not entirely constitutional and the German federal constitutional court will probably follow that judgment with some additional precisions. One is tempted to say that the law of the European Treaties must not be directly bent by its protectors but it can be tweaked even so in order to iron out, on a case by case basis, the unfortunate consequences of that flawed construction of the European Monetary Union (EMU). That flaw – as lawyers, political scientists and economists have proven again and again over the years – can only be rectified by a reform of the institutions.

The case that is passed to and from between Karlsruhe and Luxembourg shines a light on a gap in the construction of the currency union which the ECB has filled by means of emergency relief. But the lack of fiscal sovereignty is just one of the many weak spots. This currency union will remain unstable as long as it is not enhanced by a banking, fiscal and economic union. But that means expanding the EMU into a Political Union if we want to avoid even strengthening the present technocratic character of the EU and overtly writing off democracy as merely decorative.

Those dramatic events of 2012 explain why Mario Draghi is swimming against the sluggish tide of a short-sighted, nay panic-stricken policy mix. With the change of government in Greece he immediately piped up: “We need a quantum leap in institutional convergence…. We must put to one side a rules-based system for national economic policy and instead hand over more sovereignty to common institutions.” Even if it’s not what one expects a former Goldman Sachs banker to say, he even wanted to couple these overdue reforms with “more democratic accountability” (Süddeutsche Zeitung, March 17, 2015).

These were the words of someone who had learned that the wrangling behind closed doors among heads of government only thinking of their national voter base is simply not good enough if one wants to achieve the necessary fiscal, economic and social policy decisions. Today, three months later, the ECB is yet again at work buying time for incapable governments with emergency lending.

The Greek election result is a vote against humiliating misery

Because the federal German Chancellor opted as early as May 2010 to treat investor interests as more important than a haircut in restoring the Greek economy to health, we’re stuck in a crisis once more. This time it’s the hole left by another institutional deficit that emerges.

The Greek election result is the vote of a nation that, with a significant majority, is standing up against the humiliating as well as oppressive misery of an austerity policy imposed upon their country. There can be no argument about the vote itself: The population rejects the continuation of a policy whose drastic failure is something they have experienced at first hand. Equipped with this democratic legitimacy, the Greek government is trying to bring about a change of policy in the Eurozone.

This brings them in Brussels right up against the representatives of 18 other governments which justify their rejection by coolly pointing to their own democratic mandate. You’ll recall those first meetings when the arrogantly swaggering novices basking in the upbeat mood of their triumph joined in grotesque battle with the incumbent rulers acting partly like paternalistic uncles and partly like sneering old hands: Both sides insisted parrot-like that they enjoyed the authority given by their respective “people.”

The unintentionally comic nature of their uniformly nation-state way of thinking brought what is lacking unmistakably to the attention of European public opinion: a focus for a common decision-making process among citizens across national borders about weighty courses of political action in the core of Europe.

But the veil cast over this institutional deficit of an empowered European Parliament based on a European-wide system of political parties has not yet been really shredded. The Greek election has thrown a spanner in the works of Brussels because here the citizens have themselves chosen a European political alternative for which they are geared up. Elsewhere, government representatives make such decisions as technocrats among themselves and spare public opinion in their countries from upsetting issues. The compromise negotiations in Brussels really get bogged down because both sides don’t ascribe blame for the barren nature of their discussions on the flawed construction of the proceedings and institutions of the EMU but on the bad behaviour of their partner.

It’s certainly the case that we’re dealing here with the stubborn sticking to a policy of an austerity programme that not only runs into overwhelming criticism from international experts but has caused barbaric costs in Greece and has demonstrably failed here. But, in the basic conflict opposing one side looking for a change of policy to the other obstinately refusing to engage at all in political negotiations, a deeper asymmetry is exposed.

Let’s be quite clear about the disgusting, nay scandalous aspect of this rejection: A compromise collapses not because of a few billion here or there, not even because of this or that condition, but solely because of the Greek demand to allow a new start for the economy and a population exploited by a corrupt elite by agreeing debt forgiveness – or an equivalent regulation, e.g. a debt moratorium tied to growth.

Instead, the creditors insist upon the acknowledgment of a debt mountain that the Greek economy will never be able to overcome. Mind you, it goes without saying that a haircut is unavoidable sooner or later. So the creditors insist with bad faith on the formal recognition of a debt burden they know is intolerable. Until recently, they even persisted with the literally fantastic demand for a primary surplus of more than 4%. This has been cut to a still unrealistic demand for 1%; but, so far, an agreement upon which the fate of the European Union depends has failed because of the demand from the creditors to stick to a fiction.

The weak performance of the Greek government

Of course, the ‘donor countries’ can see political reasons for holding onto this fiction which allow an unpleasant decision to be put off in the short term. They fear, for instance, a domino effect in other ‘recipient countries’; and Angela Merkel cannot be sure of her own majority in the Bundestag. But any wrong policy must one way or the other be revised in the light of its counterproductive consequences. On the other hand, you can’t pin the blame for the impasse on just one side.

I cannot judge if there’s a well-thought-out strategy behind the tactical steps taken by the Greek government and what is down to political necessities, to inexperience or the incompetence of the main players. I don’t have enough knowledge about the widespread practices and societal structures standing in the way of potential reforms either. But it’s obvious that the House of Wittelsbach has failed to construct a functioning state.

However that may be, such difficult circumstances don’t explain why the Greek government itself is making it hard for its supporters to make out any consistent line behind its erratic behaviour. There’s no sensible effort evident for building coalitions; one doesn’t know whether the leftist nationalists are not clinging to a somewhat ethno-centric sense of solidarity and are only pursuing continued membership of the Eurozone for narrow prudential reasons – or if their views do go beyond the nation state.

The demand for a haircut as the basso continuo of their negotiations is, either way, insufficient to arouse confidence on the opposite side that the new government is different – that it will act more energetically and responsibly than the clientilist governments that it replaced. Tsipras and Syriza might have drawn up the reform programme of a left-wing government and thus ‘showcase’ it to their negotiating partners in Brussels and Berlin. Amartya Sen last month in Firle, East Sussex, compared the austerity policy pushed through by the federal German government with a medicine that contains a toxic mixture of antibiotics and rat poison.

In complete accordance with the Nobel Prize-winner for economics, the left-wing government might have taken on a Keynesian segregation of the Merkel medicine and consequentially thrown out all neoliberal impositions; but, at the same time, they would have had to give credibility to their intentions of carrying through the overdue modernisation of state and economy, execute a fairer form of cross subsidies, combat corruption and tax evasion etc. Instead, it resorted to moralising – to a blame game that worked to the advantage of the German government in the given circumstances, enabling it to dismiss with neo-German robustness the wholly justified complaint of Greece about the clever way a line was drawn (under debts) in the two-plus-four negotiations (of 1990 over German unification).

The weak performance of the Greek government doesn’t alter the fact of a scandal that consists in politicians in Brussels and Berlin refusing to meet their colleagues from Athens as politicians. They indeed do look like politicians but (until last Monday) only spoke in their economic role as creditors. This transformation into zombies is intended to give the protracted insolvency of a state the appearance of a non-political, civil court proceeding.

That makes it all the easier to deny any political co-responsibility. Our press is making fun about the act of renaming the Troika; it is indeed like a magic trick. But, with it, there comes the legitimate wish to see emerge the true face of the politician behind the mask of the creditor. For only as politicians can these people be held responsible for a fiasco that has played out in massively ruined life-chances, in joblessness, sickness, social misery and hopelessness.

The scandal within the scandal is constipation

Angela Merkel brought in the IMF from the outset for her dubious rescue moves. This body is responsible for dysfunctions in the international financial system; as therapist it takes care of its stability and thus acts in the common interest of investors, especially of institutional investors. As Troika members, European institutions also coalesce with this player so that politicians, in so far as acting in this function, can retreat into the role of untouchable agents acting strictly according to the rules of the IMF. This dissipation of politics into market conformity helps to explain the chutzpah with which representatives of the federal German government, all of them highly moral people, can deny their political co-responsibility for the disastrous social consequences that they nevertheless took on board as opinion leaders of the European Council through the implementation of the neoliberal austerity programmes.

The scandal within the scandal is the constipated manner in which the German government perceives its leadership role. Germany is indebted for the stimulus behind the economic recovery from which it still benefits today to the wisdom of the creditor nations which, in the London Agreement of 1953, wrote off around half of its debts.

But this is not about moral embarrassment but about the political core of the matter: The political elites in Europe should no longer hide from their voters and themselves dodge the alternatives posed to us by an politically incomplete currency union. It’s the citizens, not the banks, which must retain the final say in existential questions for Europe.

As regards the post-democratic lulling to sleep of public opinion, the switching of the press into a therapeutic type of journalism is a contributory factor – as it marches arm in arm with the political class in caring for the wellbeing of customers, not citizens.

The German original of this article appeared in Süddeutsche Zeitung

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