The EU’s response to the Greek debt crisis will set the bloc’s political direction for years to come. If we continue to choke the debtor, we risk drowning all of Europe, argue Ernest Maragall and Jordi Angusto.
Ernest Maragall is a Catalan member of the European Parliament in the Group of the Greens/European Free Alliance. Jordi Angusto is his policy advisor.
There is a false narrative being perpetuated about the Greek bailout and its possible modification and extension, as if it’s a matter affecting Greece alone.
This is in no way true; the current negotiations between the Greek government and the Eurogroup are setting the political course for the kind of Europe we’ll have in the near future. Are we going to stick with this hellish cycle of credit and debt, which has been so unfair and ineffective, or has Europe learned its lesson?
What should be the next steps for Europe?
Firstly, there must be a recognition that the austerity imposed on countries that have been ‘bailed out’ – whether completely or partially, as in the case of Spain – has been unfair and ineffective. In fact, the current expansive monetary policy and the Juncker investment plan are by themselves an admission that the Merkel discipline has led to a dead end. Deflation, unemployment and colossal poverty, extreme inequality, Euroscepticism, lack of social cohesion – need we say more?
Have you ever wondered why the US has long since exited the crisis and now has less than half the unemployment that it did? The answer lies in a series of measures taken with the logic of the debtor, in the case of the US, whilst Europe has favoured the creditor approach, as is the case with Germany. As Keynes explained nearly a century ago, if the debtor drowns, then the creditor too goes under. If the debtor lifts his head, the creditor will also benefit.
This is the dilemma of the European debate today about Greece. Continue choking the debtor, who’s supposedly at fault for their predicament, and risk drowning all of Europe, or find a solution that’s good for Greece and good for all of Europe. That’s exactly the kind of solution put forward by Yanis Varoufakis, who was, after all, a celebrated economist long before he became Greek finance minister. As he has said, let’s look at a renegotiation of debt and interest payments tied to economic growth, among other criteria.
Nor should we forget that Spain survives economically today thanks to an expansive monetary policy justified to avoid deflation, which increases its colossal debt but at the same time allows a low debt burden. But if interest rates return to more normal levels, how will Spain cope with its debt repayment?
Spain’s position on Greece continues to be hugely myopic. Spain demands the return of the money lent to Greece at interest rates well above those paid when making huge profits, all the while refusing to negotiate about its own debt. A debt that would never have evolved were it not for the euro and which should not be exacerbated by austerity policies.
In the European Parliament, the Greens/EFA group and left-wing parties have advocated a global conference on peripheral debt and a “New Deal”. Yet the Council and the Eurogroup still defend Merkel’s discipline and promote an investment plan that is actually a step forward in the overall process of privatisation. The disparity is absolute, and what’s even more astounding is that social democrats are giving their full support to this neo-liberal approach.
Greece has a long way to go to get its economy back on track. It cannot reverse European policies by itself, while pursuing an increase in public spending that can’t be afforded. Europe will not put up the cash, and its own cash supplies are flowing away daily. Individual solutions to these matters are simply not feasible within a collective such as the European Union. Neither Hollande nor Renzi could apply their own solutions, despite their countries’ respective sizes.
Should Greece exit the euro, as suggested by some German think-tanks? Who knows? Perhaps it would be less painful for Greece to leave than to remain; but surely it would be a huge failure for Europe? And if the bottom of the class is expelled, then who will be next?
Unless the European Union can learn to manage and reduce regional disparities, it will not be worthy of the name. Moreover, these disparities can only be managed effectively if Europe genuinely exists in political terms; this must mean an end to counting the unemployed Greeks and/or Spaniards, and a start to counting the unemployed Europeans.
The negotiations between Greece and Europe now taking place will set the political course for the European Union for years to come. Put simply, if we choose to humiliate the debtor, then the European project is dead.