Economics and politics - comment and analysis
3. July 2015 I Heiner Flassbeck I Economic Policy, Europe

The Sleepwalkers

On the 25th of January 2015, a little more than five months ago, the Greek electorate used its right in a free election to make a choice about the destiny of their country. The result of the election conveyed that a majority of the Greeks voted against austerity and SYRIZA came to power. Since that day, many European governments, led by Germany, have outdone themselves in stubbornly refusing to reach an honest and honourable compromise with the new Greek government. But now, it seems to be pretty much over. It appears that, as of today, the last act of this European tragedy is to be performed.

Two and a half years ago, I had the opportunity to talk at length with Alexis Tsipras about the possibilities of a new left-wing government in Greece. I predicted the future course of events. Tsipras did not believe me. He refused to believe that a democratic Europe would prevent a democratically elected government from acting upon the will of the people. In one way, this naivety speaks for Alexis Tsipras. Perhaps he never completely understood the stubbornness of the people he is up against. Still, this is what happened: the EU institutions did not care about free elections and democratic results. This was to be expected and it is nothing out of the ordinary. I know, from experience in dealing with many developing countries, that democracy does not count whenever a government has to negotiate terms with its creditors (in casu the International Monetary Fund). This happened in Asia, in Africa and in Latin America and it is not different for Greece.

No one cares that, in such proceedings and negotiations, the faith that people of debtor countries place in democracy is severely shaken or even completely destroyed. No one cares if, as has happened in many cases before, that the relationships between countries are damaged for many years to come. The creditor countries dictate what has to be done and that is it. No one cares that it destroys the possibility of fair and mutually beneficial economic cooperation for the future. None of this is an issue for the missionaries of economic ”reforms.” The very last thing that they will ever contemplate is to adjust the economic policies of creditor countries. These people have much more formidable causes to serve than a bit of democracy in a few small countries here and there. Where do the leftists of SYRIZA get the idea from that the Greek government can decide upon Greek pensions, Greek social welfare, Greek wages? This is what Alexis Tsipras failed to fully understand. As things stand at the moment in Europe, the concept of ‘sovereignty’ is a doubtful proposition.

It is precisely in this spirit that the German Chancellor pronounced a remarkable sentence in the German Bundestag last Friday. Merkel said that “Since the beginning of the European debt crisis, Germany is pursuing a clear goal: Europe has to emerge stronger from the crisis, stronger than when it entered into it. In this way, we have come a long way.”

Did Europe come a long way? Europe is almost in its seventh year of recession and stagnation. It lost hundreds of billions of potential prosperity simply because European politicians are unable to solve the crisis. After six years of economic turmoil, levels of unemployment are soaring in several member states. In some countries – Greece, Portugal, Spain, Italy and even France – unemployment is unimaginably high. It is unacceptable, especially in view of what could have been accomplished with good policies. The human cost is unacceptable. We have deflation in Europe. The European Central Bank (ECB) despairingly tests the last available measures in order to bring back some stability and minimise further losses. The situation has become so bad that, as things stand, Europe has to hope that devaluations of its currency will impact its economy positively. All of this is bad enough. European policy-makers have failed to properly analyse the causes of all this misery, let alone propose solutions that would be in the common interest of the Union. It brought Europe closer to political disintegration. Citizens of many countries – including those in Greece and in the United Kingdom – are asking themselves: What is Europe doing for them? What it is good for? Why should they support a politically divided and economically limping superstructure that seemingly lacks a vision of its own and has followed Germany down the road of lower wages and increasing trade imbalances? The German recipe has created unemployment and growing inequality everywhere and made it impossible for the Union to function properly. The European politicians have failed miserably. One very sad consequence is that everywhere nationalist movements are gaining support.

If this is the Europe that, in the eyes of the German Chancellor, is stronger than before the crisis then one can only conclude that the Chancellor is sleepwalking and that she is effectively leading Europe towards disaster. It is, as we know, not the first time that politicians are sleepwalking into disaster. In his book on the causes of the First World War, Christopher Clark described the outstanding characteristics of the era preceding the outbreak of this first European cataclysm: the inability of politicians to analyse what is effectively going on (blinded as they were by their own ideologies and fossilised world views) and their inability to understand the position of the other party in a rational way. Ultimately, the First World broke out, although no one was really pushing for war, because the mad process proved unstoppable.

The German Chancellor’s view of the world is as narrow and wrong as only a mercantilist view can be. Adam Smith and David Ricardo, some 200 years ago, understood that the underlying doctrine of mercantilism is fundamentally wrong. Are we totally unable to learn? By forcing her world views upon the whole of Europe, Merkel and other conservative politicians have managed to create a structure that is completely indigestible to the rest of the world and that creates nothing but dysfunction. Most of our partner countries are deeply reluctant to go down the mercantilist path that the ”leading nation” prescribes as the proper medicine for the economic illnesses we suffer from. I am afraid that one of our readers, who pointed this out (thank you!) is absolutely right: Merkel, and other naive spirits within the vicinity of the Chancellor, believe in a mirage of a ‘strong Europe in a German sense.’ The latter imposes a Europe without any debts, a Europe where all countries show current account surpluses and a Europe that is ready to tighten the belt even more, so that it can meet the challenges of the new emerging powers. This makes, of course, no logical sense whatsoever, but, unfortunately and masochistically, this is the road that Europe is taking.

No one opposes this sort of thinking more than SYRIZA and that is the reason why “SYRIZA must be defeated.” No compromise will be made with the Greek leftists. They need to disappear. But do not get this wrong! After SYRIZA, there is Podemos or another group or party that will realise that this carnage cannot go on any longer and that has the capacity to connect and appeal to the electorate. Furthermore, even if the right would succeed in silencing the left for once and for all, the game would not be won for the right. The extreme right is gaining votes every time an election is organised in Europe. It will be difficult, if not close to impossible, to silence the extreme right because they, unlike SYRIZA which is pro-European, are directly questioning the whole edifice of Europe and will not go into any negotiations on the matter.

The ‘stronger Europe’ on the basis of the German model that Merkel talks about is nothing but a pipe dream. Many intelligent people know this, but few in Germany are willing to openly act against it. Many Germans remain silent, not because they agree with Merkel, but because of their loyalty to the country. One should not openly criticise her or his own country, especially not when it is already being severely criticised by many others abroad. The media suffer from the same misunderstanding and defend the indefensible. Politicians of all parties bow when you expect them to walk upright (with the remarkable exception of the left). The problem is that such an attitude is nothing but mere form of misunderstood patriotism. As such, it is also sleepwalking. We can stop telling the truth as we honestly see it and we can stop analysing when it leads to results that we do not really like, but such self-censorship is destructive. It is our responsibility to be critical of our own country because that is the best that we can do for it – and for the world.

Later generations will wonder why so few were willing to honestly analyse what happened in Europe during these fateful years. They will ask themselves how it was possible that so few had the courage to speak truth to power. It is easy to close our eyes to the responsibility of the powerful and to the carnage that they created. Everyone should ask himself or herself what their children are going to tell their children when they ask about the era when short-sighted politicians destroyed our hopes for a better life.

Published in German June 22

Translation: W. Denayer