The world-wide interest in the historic victory of the Greek anti-austerity left in the recent elections bears witness to the profound implications of this development for a European continent still mired in deep economic crisis.
A result of the failures (or successes, depending on one’s class standpoint) of the European response to the ongoing economic crisis, the victory of Syriza (an acronym which, in Greek, stands for ‘Coalition of the Radical left’) adds to the rifts that are developing within Europe while also prefiguring the future social and political struggles that will determine how the European crisis is resolved.
Let me take up these issues moving from the past to the future. The eurozone crisis that began about five years ago was one of the manifestations of the global economic crisis that had begun earlier with the burst of the real estate bubble in the US and the global financial crisis that ensued. Just as in the US, this crisis threatened the solvency of banks throughout Europe and the steps that European governments took to prevent a financial meltdown played an important role in the development and evolution of the eurozone crisis.
The link between the eurozone crisis and the bankruptcy of European banks took different forms. In Ireland the government found itself stuck with an astronomical debt when it took over the obligations of its bankrupt financial sector. Greece, by contrast, had accumulated a hefty public debt even before the onset of the crisis, as European banks and financial markets had supplied Greece with abundant cheap money. Charging interest rates that in the early 2000s treated Greece as a recipient almost as risk-free as Germany, European banks found themselves in a difficult position once it became clear that their assessments had been completely wrong.
If in 2010 Greece had defaulted on its debt, it would have probably brought down the European financial system and, with it, the global economy. In this respect, Greece’s 2010 bailout is better understood as a bailout for the European banks which, at that time, held most of Greece’s debt.
Needless to say, this was not how things were presented to the European public. Instead the dominant narrative focused on the supposed profligacy and laziness of Greeks, thus providing a justification for a brutal structural adjustment program that decimated public services, liquidated labor rights, drastically cut wages and pensions, while leading to a contraction of the Greek economy by 25% and a dramatic rise in unemployment.
The result has been a social catastrophe, with skyrocketing poverty, homelessness and suicide rates and a liquidation of the Greek middle class. While the austerity program imposed on Greece proved especially brutal, austerity has also had devastating economic and social effects in a number of other countries in the European periphery that found themselves with high public deficits and public debts as a result of the global crisis.
In essence, the austerity strategy attempts to resolve the crisis of neoliberal capitalism by entrenching the neoliberal model even further. This means that the European social model, with its reliance on a welfare state that distinguished it from the less humane Anglo-Saxon model of free market capitalism, is rapidly being eroded. And as this erosion proceeds apace the futility of the old social democratic claim that capitalism could be tamed becomes ever more apparent. In fact, when one surveys the political landscape in today’s Europe, one is struck by the fact that, in country after country, social democrats are more likely to support and implement austerity than to oppose and organize against it.
So, wherever it has been adopted, austerity has failed the majority of the population and benefited the tiny capitalist elites that no longer want to be bothered with pesky regulations and costly social protections.
And yet, even from a capitalist point of view, the austerity strategy has not been completely successful. In fact, Europe is currently faced with the prospect of deflation, or falling prices. While such a prospect may superficially seem beneficial for the average consumer, in reality it represents a serious economic threat as it can easily lead to a downward economic spiral.
Indeed, in an environment of falling prices, businesses are less likely to invest and consumers are more likely to postpone purchases. By depressing demand, therefore, deflation can prevent economic recovery and perpetuate high rates of unemployment.
Given all this, it is not surprising that serious rifts were developing within Europe (as well as between Europe and economic actors outside it) even before Syriza’s recent electoral victory. At the center of these rifts stand Germany and its chancellor Angela Merkel, Europe’s most powerful voice for austerity. While there are some rifts already developing within Merkel’s ruling coalition (which is made up of the chancellor’s Christian Democratic Party and the German Social Democrats), even more serious are the rifts between Germany and a number of other significant players in the eurozone crisis.
To begin with, Merkel’s support for austerity is so unwavering that it is eliciting resistance from even the European Central Bank, traditionally one of the European Union’s most conservative institutions. Recognizing the serious dangers of deflation that the austerity strategy is creating, the ECB is adopting a more expansionary monetary policy, while also becoming an advocate of a more expansionary fiscal policy, especially on the part of countries, such as Germany, that can afford it.
At least as important are the rifts developing between Germany, on the one hand, and Italy and France, on the other. While falling in line with the tendency of European social democrats to implement austerity, the Italian and French governments are starting to resist the rapid reduction of budget deficits required by the European rules. Already faced with economic stagnation, high levels of unemployment and growing popular discontent that has led to the rise of Marine Le Pen’s far right ‘National Front’ in France and Beppe Grillo’s ‘Five Star Movement’ in Italy, both French President Francois Hollande and Italian Prime Minister Matteo Renzi realize that prioritizing deficit reduction at all costs would be economically disastrous for their countries and political suicide for themselves.
In this respect, the French and Italian governments could be potential allies for Greece’s new Syriza government. There has in the past been a rift even between Germany and the International Monetary Fund with respect to the sustainability of the Greek debt. While the IMF has in the past argued that for the Greek debt to become sustainable part of it has to be written off, the German government resists this conclusion because it would stand to lose billions of euros and have to face the wrath of its citizens and taxpayers.
Finally, there is a rift between Germany and the U.S., since American government officials realize that the economic stagnation and deflation that austerity is creating in Europe are holding back the global economy.
And, last but not least, there is a growing rift, symbolized by the Syriza victory, between the political elites dispensing austerity and neoliberal ‘reforms’ and the majority of the population in the European periphery who see their living standards and social rights ruthlessly attacked.
It is in this context, therefore, that Syriza has taken power and is attempting to reverse austerity both in Greece and in Europe. As I write these lines in late January, it is clear that the new government’s first moves are designed not only to signal that it won’t back down on its pre-election promises to roll back austerity and renegotiate Greece’s debt but also to form alliances with other governments in the European periphery. Central to Syriza’s alliance strategy is the demand for a European conference to renegotiate not just Greece’s debt, which is only a small part of sovereign debt in Europe, but that of all the peripheral European economies held back by the need to prioritize debt repayment over the needs of their citizens.
It is too early to say whether Syriza will be successful in its bid to reverse the austerity tide within Europe. But its chances improve as parties of the anti-austerity left start to rise in other countries, such as Spain and Italy.
At the same time, the fact that the devastating effects of austerity are also leading to the rise of openly anti-European parties of the far right (for example, in France and the UK) is making it clear even to segments of Europe’s ruling circles that to salvage the European project constructively engaging, rather than ruthlessly opposing, Syriza may be a good idea.
On the other hand, there is also fear that any success by Syriza could lead to a political domino effect, as people in other countries of the European periphery are encouraged to flock into parties of the anti-neoliberal and anti-austerity left.
As has happened before during times of deep capitalist crisis, the eurozone crisis is creating rifts within the ruling class and thus an opening for a response to the crisis that is more progressive than the one adopted up to now.
It is up to the European left to take advantage of this opening. One thing is certain: interesting times lie ahead of us!