Greece deal threatens to destroy EU

July 17, 2015

Europe, as we know it, may well be over.

The promise of a peaceful integration of equals with a capitalist framework lies tattered on the floor of a negotiation room in Brussels. There, the SYRIZA-led Greek government finally succumbed to the blackmail, economic carpet-bombing and “mental water-boarding” of the European powers.

For many, the brutal humiliation of the Greek government and people heralds the end of the dream that the EU could be softly nudged towards a benevolent economic and political union.

German philosopher Juergen Habermas, an intellectual figurehead of the project of European integration, told The Guardian on July 17 that the outcome of negotiations means the “European Council is effectively declaring itself politically bankrupt”.
Nobel Prize-winning economist Paul Krugman described the terms of the deal as “madness”. He said: “What we’ve learned these past couple of weeks is that being a member of the Eurozone means that the creditors can destroy your economy if you step out of line.

“This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief … it’s a grotesque betrayal of everything the European project was supposed to stand for.”

Revelations from former Greek finance minister Yanis Varoufakis about the bullying and contemptuous nature of the “bargaining” process between Greece and its creditors over the past five months have served to underline the crisis in the existing European project.

Disunity and distrust

The EU has always been a project for capitalist stability and power. It was born – via the European Economic Community – out of the post-war need to establish capitalist stability in Europe.

The process was fostered by a desire to prevent French and German competition from leading to another damaging and costly war. The United States also wanted a united Western Europe to act as a bulwark against the Soviet bloc.

Fintan O’Toole wrote in the July 14 Irish Times:“[The] EU project was all about the gradual convergence of equal nations into an 'ever closer union'. That’s finished now.

“The whole notion was underpinned by three conditions. One was that the process of European integration was consensual … The second was that these incremental steps were … 'irreversible' and 'irrevocable'.

“The third,” O'Toole said, “unspoken but completely understood, was that Germany would restrain itself. Each of these fundamental conditions was torched over the weekend.”

For O’Toole, the European Central Bank (ECB) actions in trying to suffocate Greek banks and force its government to implement capital controls - so as to bring the elected SYRIZA government to heel – has ripped asunder any pretence of consent.

The demand that €50 billion of Greek public assets be placed in a fund in Luxembourg, run by a bank controlled by the German government and finance minister, as insurance against future debt defaults, was a clear statement – not just to Greece, but to other member states – that the EU is a coercive, disciplinarian institution.

The second condition – that integration was irreversible – was demolished by the push by German finance minister Wolfgang Schäuble for a temporary Greek exit from the euro (a “Grexit”).

Finally, the role of Germany in effectively reducing Greece to a protectorate of the EU has – for some – answered the decades-old question: “a German Europe or a European Germany”?

The eurozone and EU have long been dominated by Germany, whose economy is the strongest in Europe. But the humiliation of Greece has created the perception within the EU of a German play for power that calls into question the democratic credentials of the EU.

Not democratic

It would be a mistake to single out Germany, however. While the EU has taken long strides towards becoming an economic union, it has baulked time and again at political integration. As a result, there has been a growing democratic deficit.

The European Parliament itself has little influence. Real power is wielded by the “eurocrats” of the various institutions. The unelected European Commission and European Council hold executive power, while the ECB controls and defines fiscal policy.

Even where elected politicians wield some power, such as in the Eurogroup, openness and democracy are the first victims. In a July 13 interview with The New Statesman, Varoufakis recounts his attempt to challenge the legality of a communique issued without Greek consent at the time of the referendum.

“After a handful of calls, a lawyer turned … and said, 'Well, the Eurogroup does not exist in law, there is no treaty which has convened this group'.”

“So,” Varoufakis said, “What we have is a non-existent group that has the greatest power to determine the lives of Europeans. It’s not answerable to anyone, given it doesn’t exist in law; no minutes are kept; and it’s confidential.

“No citizen ever knows what is said within ... These are decisions of almost life and death, and no member has to answer to anybody.”


This lack of democracy in the European institutions is now combined with a strict adherence to the economics of austerity.

The financial and economic architecture of the eurozone has become a mechanism for driving down wages and weakening labour rights, a process that began well before the financial crisis erupted.

Since the introduction of the euro in 2001, German workers have had their wages increasingly squeezed, contributing to the surge in profitability for German industry. While the economic boom lasted, cheap credit flowed across the eurozone. This allowed investment and raising wages and standards of living for millions across the continent.

However, the crisis of profitability brought on by the Global Financial Crisis presented a chance for the spread of austerity measures across the eurozone. This led to cutting wages and social spending, winding back collective bargaining rights, and pushing privatisation.

Greece is one of the biggest victims of this new project of further dismantling the social gains of the post-war period. Greece’s debt – built up on cheap credit during the boom – was owed to banks ultimately based in France and Germany.

Rather than allowing the write-down of Greece’s debts, or even directly bailing out the French and German banks most heavily exposed to Greek debt the Troika of the Eurogroup, the ECB and International Monetary Fund (IMF) forced Greece to take on huge new debts. This was combined with imposing strict austerity policies and unmanageable interest and repayment schedules.

The main beneficiary of this approach has not been the Greek people. A Jubilee Debt Campaign (JDC) study in January found that more than 90% of the bail-out funds went directly to paying off Greece's creditors.

According to figures released by JDC on July 10, the Eurosystem banks (the ECB and national central banks) made a collective €6 billion profit out of Greek debt in 2013 alone.

JDC economist Tim Jones accused the ECB of acting “exactly like a vulture fund, buying up debts cheaply during the crisis, refusing to take part in a necessary restructuring of the debt, and demanding to be repaid at a large profit”.

The biggest reason for Greece’s ongoing economic depression is the austerity measures enforced by the Troika that have led to a catastrophic collapse in spending since 2008.

The consequence of these harsh recessionary policies has been a humanitarian crisis – the Greek economy has contracted by over 25%, pensions have nearly halved, youth unemployment has topped 60% and suicides have increased by more than 35%.

In his New Statesman interview, Varoufakis lamented the fact his eurozone colleagues showed no interest in discussing economics. Instead, the entire process was political.

It was designed to freeze SYRIZA out. It aimed to send a message to those tempted to support other anti-austerity parties - such as Podemos in Spain or Sinn Fein in Ireland - that “there is no alternative.”

The ascendancy of politics over economics is further underlined by the situation in the Ukraine, which has received more than €36.1 billion in assistance from the IMF. It recently had previous loans worth between €13.5 billion and €18 billion written off.

For the powers that run Europe, there are clear political reasons for propping up Ukraine against Russia.

A new Versailles?

As finance minister, Varoufakis went to Brussels with a set of moderate, rational demands for alleviating pressure on the Greek economy and people. He presented proposals that could restore growth and prosperity in the eurozone.

In his own words, he sought to “save capitalism from itself”. The apparent response from the guardians of European capitalism is that it does not want to be saved.

Varoufakis compared the agreement forced on Greece to the Treaty of Versailles – the humiliating economic and political terms forced onto Germany after World War I. The treatment the treaty meted out created deep resentment in Germany that contributed to the rise of Nazism.

Like Versaille, the Greek deal is extremely harsh - and likely to be dangerously counter-productive. By further crippling the Greek economy and impoverishing the working class, it gives succour to the far right – in Greece and further abroad in Europe.

However, Gabi Zimmer, president of the European United Left/Nordic Green Left group in the European Parliament, said a “Grexit” would “also strengthen the right-wing extremists who exploit euro-scepticism for their nationalistic and backward ideology”.

“This model is an EU for banks and big corporations … We want another Europe, we want a social Europe, but we want a united Europe where we fight for our ideas.”

A strong left response to austerity is critical. Bernd Riexinger, national co-leader of left-wing German party Die Linke, tweeted after the deal was struck a call for “a rebellion of Europeans” to “refound the EU”.

Similarly, Marina Prentoulis, a SYRIZA spokesperson in Britain, told TeleSUR on July 16 that a “pan-European movement” was needed to confront the power of European capital and the neoliberal agenda of European leaders.

[A longer version can be read at Links — International Journal of Socialist Renewal.]

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