Presenting his new governments’ plans before the Greek parliament last Sunday (8/2/2015), the newly elected Prime Minister Alexis Tsipras appeared defiant. Greece will not seek an extension of the current bailout program, he said. The bailout, agreed between the ‘Troika’ (EU, ECB and IMF) and Greece, has been a “toxic mistake” and its consequences for Greek society disastrous.
This is a high risk strategy, which, for the time being, has set Greece apart from its partners. The 172 billion Euros bailout program expires on 28/2/2015. Unless it is extended, the last (still unfinished) review of the bailout cannot be concluded and, therefore, Greece will not receive the last tranche of 7.2 billion euros owed by the troika. This is money Greece badly needs. Without it, it will be unable to finance itself.
The looming collision between Greece and the Eurozone is forcing both sides to face their moment of truth. On the one hand, the consequences of austerity have been devastating for Greece. No society can live for long with 26% unemployment (50% youth unemployment), 25% contraction of the economy, 40% decrease of spending power, radical cuts in pensions and lots of new taxes that have brought ordinary families to their knees.
Mr. Tsipras was elected, as he said in parliament, with “a strong and clear mandate to immediately end austerity and change policies”. For this to happen, the entire bailout agreement needs to be revised. What a better signal to creditors that this is what he intends than rejecting their last aid tranche? It is a bold act of defiance. Mr. Tsipras knows that his main negotiating card is a possible Grexit and the huge problems this is likely going to cause to the Eurozone. The dynamics of a default will be unpredictable.
On the other hand, at the other end of the table sits Germany. Greece must keep up its commitments and stick to the bailout agreed, the stern-looking Finance minister of Germany, Wolfgang Schäuble, keeps saying. He knows that Greece urgently needs financing and cannot afford the stand-off too long. A country that is, in effect, bankrupt is weak; its creditors have the upper hand. Playing hardball sounds a good strategy for Germany and its allies.
However, the outcome of the recent Greek elections cannot be plausibly ignored. The devastating consequences of austerity need to be acknowledged. Greek society is collapsing, political extremism is rising. Would it not be more reasonable for reality to be acknowledged rather than for ‘the rules’ to be blindly followed? How often did governments get it wrong by sticking to decisions that turned out to be dysfunctional? What more evidence did the late US Secretary of Defense Robert McNamara need to see before he could change his mind about the Vietnam War? True leaders need to see the big picture and to look far ahead. I doubt this is happening right now in Europe.
Germany blames Greece (“the causes of the problem are to be found in Greece” said Mr. Schäuble recently in Berlin), while Greece blames Germany for imposing harsh austerity. No party can bring itself to see the whole picture: the Eurozone is a badly designed edifice and Greece has a lot to blame itself for its predicament (a corrupt political system, extensive tax evasion, and rampant clientelism). The root cause of the crisis in the Eurozone is the debilitating asymmetry between economics and politics: the euro is not supported by a political community that is willing to share risks. This asymmetry creates a collective action problem: ‘you go first and I will follow’. You first relax austerity and I will then reform, say the Greeks; you first undertake reform and I will then think about debt relief, say the Germans. The Greek crisis is forcing the Eurozone to wake up to its real problems. Will it?
I am skeptical, but not hopeless. Positions harden on both sides. What is worrying is self-righteous dogmatism. The Greek crisis is a Eurozone crisis. The institutions supporting the Euro need mending. A political community needs to gradually emerge. Also, countries like Greece that deviate from the European institutional norms need to engage seriously in reform. The superior aim of community-building involves intelligent adjustment on both sides. A compromise is needed. It is not right against wrong, but two rights clashing. The right to stick to rules agreed versus the right of a society to live decently. The art of politics is, partly, the art of crafting principled compromises between conflicting rights.
The classical Greeks were aware of the devastating consequences of self-righteous stubbornness. Sophocles’ Antigone is about the tragedy that is caused when the clash between right and right is mishandled. On the one hand there is the right of Creon, the King of Thebes, to formally enforce the law. On the other hand there is the unwritten right of Antigone to bury her dead brother, even if he was a traitor to his city and, according to law, should remain unburried. By each one stubbornly sticking to his or her right, Creon and Antigone bring about tragedy to Thebes. The Messenger in the play notes that Creon’s mishandling “shows the world that of all the ills afflicting men, the worst is lack of judgment”. At the end of the play, having lost his son and his wife, Creon realizes his poor judgment. Tragedy taught him wisdom, but, alas, it is too late! The play ends with the Chorus noting that “the mighty words of the proud are paid in full with mighty blows of fate. And at long last, those blows will teach us wisdom”.
Here is the Sophoclean challenge for our politicians: true statesmanship is finding the courage and having the intelligence to be wise without experiencing tragedy - to see the big picture, to revise one’s thinking, to think ahead, and to create space for compromise. Can Eurozone decision makers live up to that challenge?
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Hi Hari,
Thanks for the insightful analysis. You put it rightly that Europe faces a fundamental collective action problem. At the same time, it is interesting (even from a research point of view) to unpack HOW the prevailing norm and assumptions in the Eurozone – austerity first, commitment to strict rules, acceptance that the most powerful actor determines such rules, etc. – for “solving” the collective action problem have emerged. It seems to me that such norms and assumptions are raised on moral grounds. The moral grounds, which are embraced, have a Lutheran origin (see an exceptionally interesting article about that, here: http://www.nytimes.com/2012/08/12/opinion/sunday/in-euro-crisis-germany-looks-to-martin-luther.html?_r=0).
First, according to Lutheran dogma, the strong should give as little help as possible to the needy, not because the latter are undeserving, but because the latter would otherwise not be helped to actually take responsibility for their own houses. So the first high moral ground is that: “insisting on austerity is actually solidarity shown to Greek society, which can learn the rules of keeping its own house in order”. If Greeks were given too much help, they would not actually be helped.
A second moral ground also has its roots in Lutheranism. Using the words of Harvard Professor of History, Ozment, (see earlier article), the moral ground goes like that: “human life cannot thrive in deadbeat towns and profligate lands… money is a scarce commodity that has to be systematically processed, recorded and safeguarded before being put out to new borrowers and petitioners”. Greeks have clearly been disrespectful of this rule. Hence, Greece and any other country, which faces a debt crisis, the argument goes, are actually sinners; the moral responsibility of the powerful to help the sinner is bounded (although it still exists). Even worse, if the sinner does not even acknowledge his/her sins, then the moral responsibility of the good citizen to help the sinner is eliminated. The grand narrative, upon which the rules of collective action in the Eurozone are erected, presents Greeks as the biggest sinners, who have violated the second moral ground and have not even repented of their wrongdoings.
In times of economic crisis, the German government has mobilized such powerful moral reasoning to defend its stance. I think the majority of German citizens support their government on this as they think of the collective action problem through these two high moral grounds and thus cannot comprehend the Greek definition of solidarity. It may be that the moral reasoning is a façade. Yet, it is not just a façade, as it’s deeply rooted in German society’s cultural norms and moral upbringing. The interesting thing is that no other moral ground could make its way in the EU discourse on the debt crisis. Why is that? Since the European debt crisis has entangled moral rules and economic “facts”, could Greece defend its position on the basis of different moral grounds? Or, could Greece make its case by mobilizing these dominant moral grounds?
Manos
Fascinating points Manos, very well put. It gives me food for thought. I do not have an answer to your questions straight away. Your points help us see why Tsipras may not be getting the ear of northern European societies: in him they do not see someone repenting for past national sins but one blaming the 'good Samaritans' who came to Greek rescue! The Greek narrative would be more effective if an acknowledgement of Greek mistakes was made, along with an effort to sincerely address past wrongdoings. It seems to me that it would be more effective to use the dominant Lutheran morality to argue the Greek case than resort to an altogether different moral system. Martin Wolf put it nicely in the FT: the moral responsibility is not borne only by the imprudent borrower but also by the careless lender too. At any rate, you touched on a really big and fascinating issue - many thanks for that
Thanks Hari! You are spot on. Our argument that austerity is wrong does not completely work for European “ears” (esp. German), because austerity seems right in a moral sense. Yes, it’s painful, but in the end Greece will be emancipated and learn to live righteously (i.e. not wasting money, not borrowing, being productive in some sense etc.)… That’s the Merkel argument using Portugal and Ireland as examples. I think the Tsipras’ argument that Merkel herself is doing something wrong (her insistence on austerity) is never going to work, and, it’s not unimaginable that it may even trigger revolt within German (e.g. people protesting against saving Greece). Our government should have been smarter to frame our argument as mainly our (i.e. ex governments' ) fault and the programme design… not Germany’s insistence on austerity and rules. But then, we also have our own moral principles, which we hold dear. Yes, we have been wrong, but we cannot be “dictated” the right thing to do, esp. by Germany who has a very sinful past… It may be possible that, if at the end of this crisis Greece manages to get some concessions (austerity relief), we may be witnessing the de-moralisation of the debt crisis, or its re-moralisation… we’ll see.
PS. Potami leader’s speech yesterday was really good… but one thing was wrong in my opinion. He mistakenly, I think, suggested that Greeece needs to just sign the deal that the previous government had made with the troika. My objection is that he shouldn’t have said it publicly.
κ.Γκερεδάκη,
με την έμμεση παραδοχή σας ότι οι Έλληνες σε κάποιο βαθμό είναι οι sinners σε μια διεθνοποιημένη οικονομία όπου πολλές αποφάσεις λαμβάνονται στο εξωτερικό, μήπως υποβαθμίζετε την άρνηση του risk sharing εκ μέρους της EU, που τόσο εύστοχα έθεσε ο κ. Τσούκας;
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