Greece – Was it all for nothing?

Prime Minister Alexis Tsipras of Greece

Prime Minister Alexis Tsipras of Greece

In a recent column in London’s Guardian newspaper, Larry Elliott bemoaned that Greece’s five months of resistance to austerity were all for nothing, since the government of Alexis Tsipras caved in to European demands anyhow (Tsipras rattled his sabre until it was blunt – and for what?). I’m not so sure he’s right. I suspect the currents of this story may run deeper than what the headlines presently reveal.

Yours truly on Lefkada, in the Ionian islands, Greece, February 2015

Yours truly on Lefkada, in the Ionian islands, Greece, February 2015

Back in January, two days after the election that brought Syriza to power, I was received by Prokopis Pavlopoulos in his office around the corner from the Greek parliament building. He would shortly be named the new president of the republic. Despite being a conservative politician, he was known to be Alexis Tsipras’s choice for the post. In informed Athenian circles, word was circulating that he had been selected by Tsipras precisely to provide a bridge to the various groups the radical prime minister would be antagonising in the negotiations that would follow, both in Greece and without. In particular, given his long history as a minister of government, Mr. Pavlopoulos was said to have good relations with European leaders, and it was expected he would provide back-channel communications for Mr. Tsipras. In other words, he was to play good cop to Mr. Tsipras’s bully.

Greek President Prokopis Pavlopoulos in his law office, Athens

Greek President Prokopis Pavlopoulos in his law office, Athens

Since, as head of state, President Pavlopoulos is expected to stand somewhat above the fray, this is not the sort of role he could perform publicly, nor one about which he would speak openly. But it’s no secret he’s been involved in backroom discussions throughout this long process. It may well be that the President provided Mr. Tsipras with the cover he needed to open up some fault lines within Europe that helped the tipped the balance somewhat towards Syriza’s position. Officially, Europe presented a united from to Mr. Tsipras. But by the end of the summit this morning, there was no hiding the open disagreement between France and Germany on the issue of debt.

It wasn’t just Byron, you know. We outsiders have a history of looking to Greece with romantic eyes and projecting our own struggles onto its terrain. Many of us thus succumbed to the temptation of looking to Greece as once more a heroic if perhaps doomed resistor to oppression. We love Greek tragedy, don’t we: a poor, small, oppressed nation was standing up to the combined might of the European Union and neoliberal hegemony and crying stop. In this telling, those brave Greeks held out to the end as their economy fell down around them, and what did their leaders finally do? Agree to austerity no less bad than what they were implementing all along.

German finance minister Wolfgang Schauble

German finance minister Wolfgang Schauble

But who’s to say that the call for an end to austerity wasn’t, at least in part, a bargaining ploy, and that Tsipras saw this struggle as merely the first battle in a long war? Everyone in Greece wants austerity to end, but they disagree with some of the diagnoses both Europe and the IMF make of the Greek problem. As Mr. Pavolopoulos  himself told me when I met him in Athens, the Greek bureaucracy is calcified, politicised, and an obstacle to effective reform while the oligarchs, especially those who control the media, are too powerful, and their tentacles reach too deeply into the country’s political system. Few in Syriza would take issue with such declarations. Their disagreement is that they can’t reform the Greek state amid austerity, they can’t pay all the debts previous governments accumulated, and that in any event they shouldn’t be held responsible for the debts run up by previous governments that everyone agrees were both corrupt and inept. And on those points, Syriza has found sympathetic ears abroad: the Americans (you just have to read the title of a much-cited recent New York Times article, Germans Forget Postwar History Lesson on Debt Relief in Greek Crisis, to appreciate America’s lack of sympathy for the German position), some within the IMF, the French and Italian governments, and of course a broad swath of European civil society.

But not in Germany — and most decidedly not in that country’s powerful finance ministry and central bank. With France withdrawn into a period of introspection under a weak president, Germany, which also happens to be the largest creditor in Europe, took the lead. And under a conservative government with a strong commitment to fiscal prudence, there was no appetite for any leniency towards Greece. So what Tsipras needed to do was to raise the stakes of the game, standing up to the Germans and in the process provoking a sense of high anxiety both within Europe, and in global financial markets. The German government all but said ‘bring it on,’ but the French begged to differ. Not without cause: with its own problems of slowing growth and high debt, the French have every reason to feel more receptive to suggestions that some of the expense of past borrowing should be passed on to the shoulders of creditors.

Tsipras skilfully capitalised on Western hopes and fears, for example in the way he kept dropping heavy hints that if he was spurned by Europe, he could always turns to Russia. Anyone who knows anything about Greek history or Russian foreign policy knows there was never any real substance to that idea. In the famous ‘Percentages Agreement’ of 1944, Stalin claimed that Russia had a ten percent stake in Greece, and everything Russia has done since and throughout this particular crisis suggests that view continues to prevail in Moscow. One of my Athens informants told me of a conversation he had with somebody who handles the investments of Russian oligarchs, and who apparently conveyed to Tsipras that Russia wanted Greece to make peace with the EU.

Be that as it may, Tsipras won support for his all-important position that Greece could not be expected to reform itself and carry the full burden of its debt. He didn’t get the write-off he was looking for, but Angela Merkel allowed the issue to come on to the table in the form of a ‘re-profiling’ (for instance, lengthening the time needed to repay debt) As a matter of principle, that’s not so small. In the financial crises of recent years, governments have most often taken the full burden of bad bank loans and passed the cost onto citizens. Tsipras drew a line in the sand, and refused to cross it.

The Fourth Moscow Conference, 1944, where Churchill and Stalin discussed the 'percentages agreement'

The Fourth Moscow Conference, 1944, where Churchill and Stalin discussed the ‘percentages agreement’

Did it work? Here’s where Tsipras may have revealed himself to be a better strategist than tactician. Critics say he was needlessly confrontational, alienating even sympathetic governments. Domestically, he may have raised hopes greater than he could ever satisfy, and that he will now lose support on his left flank, possibly jeopardising his political future. So even if he did win a battle in a long war against neoliberalism that has only just begun — it wouldn’t be the first time a small Balkan country triggered a global conflict, would it? — he will in the process have sacrificed his own political life. But he, like his finance minister, who resigned after having professed to have achieved his goals, may be looking at a longer game than the election cycle.

The other thing worth noting is that the global prominence of the Greek government over the last six months provided heterodox economics with its first major platform since the 2008 financial crisis (I don’t count the sort of populism that passes for radical economics that we have seen in Venezuela as being something a serious economist should embrace). For those with an interest in the intellectual side of this fight, that may be significant. We’ve heard a lot about the crisis in economic theory since the 2008 Crisis, which shattered public confidence in economics. But you wouldn’t know it from walking into most any economics department, to speak nothing of finance ministries or central banks. Nowhere is the ‘there is no alternative’ mentality stronger than in the economics discipline. But the Greek government of the last six months showed that there are options. And to the extent neoliberalism will now be held to account for what happens in Greece, I think the Syrize episode may have yet prove to have been a turning point.

Back in January, I asked a colleague in Athens, Spyros Flogaitis, whether the election of Syriza was as revolutionary as some of us outside Greece wanted to imagine. Spyros, a friend from my Cambridge college (Wolfson)  is a former interior minister and one of the most astute commentators on Greek politics I know. He’s also a great wit, so he answered my question with an analogy. ‘If a Greek is on trial for murder, and his case is hopeless, and he will almost certainly be found guilty and spend life in prison, what kind of lawyer will he seek? One who will stand before the judge and insult him, then insult the prosecution, insult the police, insult everyone and do everything he can to humiliate them, before sitting down. Then he can go off to serve his life sentence satisfied that everyone else has been duly insulted.’ That, he said, is what the Greeks were looking for in Syriza.

So, the Greeks are submitting to the same sentence they had all along. But they went down fighting. Moreover, if in going down they took an old way of doing things, and made it possible for those who want to redraw Europe’s rules, it’s not clear to me that it was all for nothing.

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