Wednesday, July 15, 2015

Angela "Thucydides" Merkel vs the rational Greeks

Situations like Germany's brutal humbling of Greece and its Syriza government this week are where my sympathy for the "realist" foreign policy position starts to kick in, even though I always kind of hate myself for it.

The more flexible realists like Stephan Walt recognize that national leaders make choices and encourage them to make ones that are preferably rational and far-sighted. But the fact is that when a country has the ability to throw their weight around to their own short-term advantage like Germany does in the current eurozone, the temptation to do it is very big.

For all his hackery and petty-mindedness and corruption, Helmut Kohl actually understood that the conditions for the European Union to function well according to its original purpose included German leaders resisting the temptation to go all Bismarck on their partners. Merkel is more Thucydides-minded that “the strong do what they will, and the weak suffer what they must.”

Also, she really, really believes in her Herbert Hoover/Heinrich Brüning economics.

This article (Backlash brews in Germany over Berlin's role in Greece debt talks Al Jazeera/AFP 07/15/2015) by itself would leave a better impression of the major media outlets quoted than they deserve (Spiegel Online, Süddeutsche Zeitung, the FAZ/Frankfurter Allgemeine Zeitung). Most of the columns and news stories I've seen in all three pretty faithfully reflected Angie's preferred position. Spiegel Online had so many stories based on anonymous sources giving press-release-type quotes backing Angie's approach that I was beginning to wonder whether they were using Judith Miller as a ghost-writer.

The humiliation continued for Greece on Wednesday, as Alexis Tsipras and his government essentially self-immolated their own program on orders from Merkel and the Troika. Renee Maltezou and Angeliki Koutantou report in Greek parliament approves bailout measures as Syriza fragments Reuters 07/15/2015

The Greek parliament passed sweeping austerity measures demanded by lenders to open talks on a new multibillion-euro bailout package to keep Greece in the euro, but dozens of hardliners in the ruling Syriza party deserted Prime Minister Alexis Tsipras.

The package was approved with 229 votes in the 300-seat chamber. There were 64 votes against it and six abstentions. But Tsipras required the support of pro-European opposition parties to push the measure through, leaving a question over the future of his government.

Tsipras said there was no alternative to the package, which he acknowledged would cause hardship, but he stood by the decision. "I am the last person to shirk this responsibility," he told parliament.
Yanis Varoufakis voted against the surrender agreement:

The measures were branded "social genocide" by the firebrand speaker of parliament Zoe Constantopoulou and there were violent clashes between protestors and police outside parliament as the debate went on before the vote.

Among the 38 Syriza rebels was former Finance Minister Yanis Varoufakis, who was sacked by Tsipras last week and who denounced the bailout deal as "a new Versailles Treaty" - the agreement that demanded unaffordable reparations from Germany after its defeat in World War One.
I feel more sad than disappointed in Tsipras over this. Reuters quotes him saying, "I acknowledge the fiscal measures are harsh, that they won't benefit the Greek economy, but I'm forced to accept them." (my emphasis)

Merkel's government was harsh beyond any reasonable expectation. She could use some good "realist" advice on her foreign policy as it affects the eurozone. Because her dogmatic commitment to austericide measures for Greece and the rest of the eurozone periphery are far overriding even any selfish but sensible pragmatism.

As a postmortem on the negotiations, for a more successful possible outcome, Tsipras had to be prepared to call Merkel's bluff and proceed to set up a separate currency. He wasn't. He was convinced that "Grexit" would be worse than a continued depression.

The current Greek Finance Minister Euclid Tsakalotos in his 2013 book with Christos Laskos, Crucible of Resistance: Greece, the Eurozone and the World Economic Crisis, described the kind of political pressure Merkel and the Troika were putting on Syriza even three years ago when Syriza began surging in the election results:

The response from elites throughout the world, from Angela Merkel to Christine Lagarde of the IMF, was telling. A victory for SYRIZA would spell the end of Greece's participation in the euro, massive capital flight, bank runs, mass poverty and possibly the opening of the heavens and a deluge of frogs as well. Domestic elites were closely attuned to the same themes, and promoted a campaign of fear not seen since the [Greek] civil war [of 1946-1949].
Laskos and Tsakalotos there give an account of the debates within Syriza, which itself was an amalgamation of various left groupings, that shaped the party's strategic position on "Grexit":

One section of the Greek Left converged on a strategy of debt default and exiting the euro, together with restructuring the economy through devaluation, nationalization of the banks and the renationalization of public utilities, industrial policies, etc. ... The exit strategy has two main elements. The first relies on a desconstruction of the argument that the EU provides a privileged terrain for left-win strategies. The second relies on showing how debt default and euro exit provide the indispensable starting point for such strategies. The second relies on showing how debt default and euro exit provide the indispensable starting point for such strategies. It is the very cost of debt default, apparently, that will provide an inner dynamic, making (in quick succession) monetary policy independence, capital controls, nationalizations and industrial policies seem indispensable for national survival.
This was not the strategic approach on which Syriza settled. Instead they articulated a program of staying within the eurozone and politically compelling a solution within it.

The grounds for such a rejection [of the euro-exit strategy] were both tactical and strategic. Greece had every interest in internationalizing the problem of debt. The governments of austerity presented a simple dilemma to the Greek electorate: either accept the demands of our creditors (while hoping that negotiations can mitigate some of the worst 'excesses' of the adjustment programmes) and remain within the Eurozone, or face 'Grexit' and the extreme social costs that accompany any disorderly default. The euro exit strategy accepted the terms of this dilemma. The alternative was to challenge these terms: by pointing out that something far more systemic was at stake than a mere debt crisis; and that the debt aspects of the crisis constituted a Eurozone-wide problem best addressed at the supranational level. Such a response could appeal to the forces of labour in the South, in the first instance, but also to those in the North as well.
Those assumptions weren't wrong. Or, at least they were not unreasonable.

But the support that Greece got this year from progressive opposition groups in Europe and social-democratic governments in France and Italy were not enough to deter Germany from imposing its punitive program. And I'll believe the social-democratic governments that expressed mild sympathy for Greece's dilemma when they put up even an quarter of the resistance to Merkel's austerity policies that Tsipras and Varoufakis put up this year. Austria's Social Democratic Chancellor Werner Faymann criticized Merkel's handling of the negotiations that concluded in Greece's humiliating surrender on Monday. (Faymann: Deutsche Rolle in Griechenkrise war nicht positiv Standard 15.07.2015) But his government backed Merkel anyway.

But as Varoufakis has now told us and recent days' events have made painfully obvious, the German game seems to be to force Greece out of the euro, and do a lot of retaliatory damage to them in the process. This is a truly reckless and extreme course. But that certainly looks like the road Merkel and her Finance Minister Wolfgang Schäuble are on.

So even if Tsipras had been willing to call her bluff and prepare for an imminent Grexit, there's a good chance it wouldn't have worked. Merkel and Schäuble may well have been happy to push them out a bit faster. But for the Greek negotiating strategy to have had a chance of working under those conditions, they would have had to be prepared to proceed to a separate currency. And they weren't.

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