When the "adults in the room" are destructive

"Keep in mind that the ruling class can be self-destructively mad; not just pretending!" (Daniel Ellsberg to Yanis Varoufakis, 2015)

Economist and one-time Greek Finance Minister Yanis Varoufakis has written an account of his experience in 2015 trying desperately but ultimately unsuccessfully to get a debt deal for Greece that wouldn't condemn the country to indefinite economic depression, Adults in the Room: My Battle with the European and American Deep Establishment. It was published in the US Tuesday.

The Ellsberg quote comes in Varoufakis' description of the later stages of negotiations with the EU leaders, of whom Germany's Angela Merkel was easily the most significant.

[Prime Minister] Alexis [Tsipras] looked at me serenely and asked, 'What are the chances that they [the EU institutions and the IMF] will come back to us with something decent, Yani?'

At that critical juncture in our country's history I was obliged to answer with the greatest possible precision. I told him that the probability they would do so was mo per cent if they acted rationally. But, I warned, as Dan Ellsberg, the great American economist and Pentagon strategist turned pacifist whistle-blower, had emailed me a few weeks before, 'Keep in mind that the ruling class can be self-destructively mad; not just pretending!'

'Powerful European leaders have a track record of being bad at serving their interests, of falling prey to irrational urges,' I said. And given that irrationality breeds unpredictability, I estimated that a more sensible probability - that Chancellor Merkel would opt for the mutually assured damage of Grexit rather than a mutually advantageous deal - was around fifty-fifty.' [my emphasis in bold]

Adults in the Room is not only a good read, giving a chronological account of his short but highly eventful tenure as Greek Finance Minister under the Syriza government elected in 2015. Their mandate was to get Greece out from under the ruinous austerity program imposed on them by the "troika" of the IMF, the ECB and the European Commission. In the end, they failed, with Alexis Tsipras' government eventually backing down from risking leaving the euro currency.

Greece is still struggling with the same problems 2 1/2 years later, the austerity program keeping the country in what is in effect a permanent depression. The human cost has been staggering. The pro-EU, anti-austerity group of which Varoufakis is now a part, DiEM25, has recently proposed a New Deal for Greece, which advocates the kind of solutions that he wanted to put into place in 2015. It's opening sentences (bolding in original):

The seven-year economic crisis has kept Greece locked in a state of quadruple insolvency: with a bankrupt state, bankrupt banks, bankrupt businesses, and bankrupt households. Everyone owes to everyone and no one can pay.

Under these circumstances, there can be only one overarching goal: to restructure all public and private debt; a move which requires the restoration of democratic sovereignty.

Those themes run throughout Adults in the Room. Varoufakis does a great job of explaining the interactions between economic policy and the power dynamics within the EU. He cautions against shoeboxing the power rivalries within the EU in opposition between nations. He prefers to see the central conflict in basic left-populist terms as between the oligarchies of the EU nations and the people of the whole EU. At the same time, his account leaves little doubt that the chief enforcer for those EU elites is named Angela Merkel.

Greece did wind up with too much public debt to service, which became a legitimate debt crisis after the 2008 Great Recession began. A major portion of those bonds were held by French and German banks, already hit hard in other ways by the financial crisis, so German officials were particularly opposed to having the debt written down, which would be the normal procedure in such a case. Because the German government would then be faced with recapitalizing the banks, and Merkel didn't want to be seen doing that. The "solution" was a remarkable approach to excessive debt. The troika arranged additional loans to Greece so that they could service the old debt and avoid any French or German bank insolvencies. And forcing Greece to accept radical austerity measures as part of the deal.

Economists and financial journalists - among them Paul Krugman, Joe Stiglitz, Barry Eichengreen, Wolfgang Münchau, Martin Wolf, Varoufakis himself and his successor as Finance Minister Euclid Tsakalotos - predicted in real time that this was a disastrous program that would not solve the debt problem and would hammer the already distressed Greek economy. And events validated their predictions in a gruesomely spectacular way. As the austerity measures made the Greek GDP shrink, the expanded debt forced on them by the troika made the debt a bigger and bigger ratio to the GDP, which meant their debt position deteriorated further, requiring more "bailouts."

I put bailout in quotation marks, because the additional loans forced on Greece were not bailouts. They were additional debt. But politically, Merkel and her Grand Coalition government (CDU/CSU and SPD) decided to present the program as a generous bailout by Germany to Greece. And encouraged nationalist resentment against it. So it became distressingly common for Germans and Austrians to gripe about "lazy" and "corrupt" and "irresponsible" Greeks. This nationalist attitude toward Greece soared during the 2015 negotiations over yet another debt solution that had become urgent.

Varoufakis calls Merkel's strategy "extend-and-pretend," his version of the American "kicking the can down the road." One of the most notable aspects of Varoufakis' account is that the conservative German Finance Minister Wolfgang Schäuble repeatedly admitted to his Greek counterpart that he knew the program on which the EU was insisting would not actually solve the problem it claimed to be solving.

And this is where the Ellsberg quote comes in. Varoufakis also specializes in game theory. And his understanding of the basic negotiating options for Greece meant that if the EU had offered debt relief and a decent recovery program for Greece, then Syriza could accept it and the deal would be done. But if Germany and their allies in the EU insisted on continuing the unrealistic extend-and-pretend austerity program - which is what actually happened - then Greece would have to be prepared to be pushed out of the eurozone in order to be able to force Germany to agree to a solution that kept them within the eurozone without ruinous austerity.

This remains the basic dilemma for the EU and the eurozone. The German political scientist Claus Offe describes it in Europe Entrapped (2016) in terms that are broadly consistent with Varoufakis' description and which obviously draws heavily on the lessons of Greece's doomed 2015 attempt to break out of the debt-and-austerity trap. The German version is titled Europa in der Falle, which the English title also renders well. For the eurozone, no one knows exactly the consequence of a member nation leaving. But it would be a big risk. Because of the very likely possibilities is that the currency zone would quickly disintegrate with one nation after another leaving. The currency breakups after the fall of the Soviet Union and of Yugoslavia don't give anyone looking at this problem warm and fuzzy feelings.

Leaving the eurozone is also presumed to mean that the leaving nation would also have to leave the EU itself, which would create further economic problems. Brexit is providing a real world test of that process, but without the even more consequential implications of having to leave the euro currency zone, since Britain was never a member of it.

Varoufakis and Tsipras assumed on taking office that Germany was likely to insist on their hard line until the very end, which is what occurred. If Greece refused to agree to an unfavorable deal, Germany would then be forced to push Greece out of the eurozone. Schäuble, on Varoufakis' evidence, wanted that to be the outcome. He was willing to take the risk. That's the context in which the Ellsberg quote comes into play. The Greek negotiating strategy was predicated on the idea that Merkel's government would only agree to a realistic program that provided debt restructuring if they thought that Greece was serious about leaving the eurozone rather than accept a continuing of the troika program.

In the end, it was Tsipras who backed down from the risk of Greece leaving the euro. And in a humiliating way. Greece got a terrible deal and the same dilemma persists, unsolved, with 2 1/2 more years of serious economoic damage to the country. And it gives us a good idea of what to look for in future such confrontations. And in the ongoing Brexit negotiations.

One key point that Varoufakis stressed during the process was that Merkel's determination to coerce Greece into capitulation was primarily aimed at deterring other EU countries from going the same route, France in particular. She seems to seriously believe in her austerity policies, because she is especially determined to force them on the eurozone countries.

And Adults in the Room gives a vivid picture of what the much-discussed "democratic deficit" in the EU and especially the eurozone looks like. It's not a pretty picture. In an article (Why we must save the EU Guardian 04/05/2016), Varoufakis relates an emblematic moment in the "democratic deficit":

After I had recited our government’s plea for a substantial renegotiation of the so-called “Greek economic programme”, which had the troika’s fingerprints all over it, Dr Schäuble astounded me with a reply that should send shivers up the spine of every democrat: “Elections cannot be allowed to change an economic programme of a member state!” he said categorically.

During a break from that 10-hour Eurogroup meeting, in which I had struggled to reclaim some economic sovereignty on behalf of my battered parliament and our suffering people, another finance minister attempted to soothe me by saying: “Yanis, you must understand that no country can be sovereign today. Especially not a small and bankrupt one like yours.”

This line of argument is probably the most pernicious fallacy to have afflicted public debate in our modern liberal democracies. Indeed, I would go as far as to suggest that it may be the greatest threat to liberal democracy itself. Its true meaning is that sovereignty is passé unless you are the United States, China or, maybe, Putin’s Russia. In which case you might as well append your country to a transnational alliance of states where your parliament is reduced to a rubber stamp, and all authority is vested in the larger states. [my emphasis]

European Trumpism on immigration and refugees

The Hungarian government of Prime Minister Viktor Orbán "will introduce measures within weeks to hold immigrants in detention “shelters” indefinitely in order to stop them traveling freely within Europe, his spokesman said on Monday," reports Politico EU (Tom McTague, Hungary hardens immigration line 02/07/2017).

Orbán's approach to government is often called "illiberal democracy." His politics fit broadly into the Trumputist umbrella. And according to McTague's report, Trump is providing validation and encouragement for Orbán's approach, at least by example:

Under Orbán’s proposal, those entering Hungary illegally — even if they are fleeing war-torn countries in the Middle East and Africa — will be kept in government camps, banned from moving freely within Hungary, until their status has been resolved, which could take “months.” ...

Budapest has clashed with Brussels before on the issue, most notably last year when it rejected an EU refugee resettlement plan and in 2015 when Hungarian police fired tear gas and water cannons against migrants on its border. But Orbán’s government has been emboldened by the election of U.S. President Donald Trump. In a speech last month, Orbán welcomed Trump’s election, saying it heralds a new age where countries are free to put their interests first. “The era of multilateralism is at an end, and the era of bilateral relations is upon us,” he said. ...

The election of Trump has also given Hungary’s government fresh confidence to pursue its agenda. “The change in the perception of the United States has helped,” [Orbán spokesman Zoltan] Kovacs said.

With Trump expressing hostility toward the EU as such, the refugee crisis becomes even more of a problem for the EU and its main leader, Angela Merkel.

And this again brings into sharp relief the deficiency of Merkel's extend-and-pretend method of addressing EU problems. I'm including here again a documentary video that I recently posted, the second part of the Aljazeera Big Picture documentary called, The Making And Breaking Of Europe 02/03/2017, which is particularly good in discussing how the nationalist sentiment against Greece over their debt crisis, actively encouraged by Merkel and her party and her coalition partners the Social Democrats, and supported by the other EU countries under pressure from Germany, fed into the narrow nationalist response by so many EU countries over the refugee crisis.

Merkel's policy in Greece was extend-and-pretend on a grand scale, avoiding a full-blown default but imposing draconian austerity measures that not only a healthy economic recovery impossible, but also extends the debt crisis itself indefinitely.

She also applied that approach to the refugee crisis, which has been at the crisis stage since at least 2011. That's six years ago now. Because of the geography, Turkey and EU member Greece landed with heavy responsibility for it from the start. (See Greece completes anti-migrant fence at Turkish border Ekathimerini 17.12.2012)

The Libya intervention gave a significant boost to the refugee flow. EU members France and Britain took the lead in that intervention, with of course support from the US under President Obama and Secretary of State Hillary Clinton. Libya previously absorbed a lot of refugees from Northern Africa, like those from Eritrea. (Migrant crisis: EU leaders agree plan to stop Libya influx BBC News 02/03/2017)

But this BBC News report from 2015 shows the countries of origin of most of the refugees in the year that Merkel was forced to recognize the crisis in a newly dramatic way and failed to push most other EU countries into compliance with her desire to resettle them across the EU: Migrant crisis: Migration to Europe explained in seven charts 03/04/2016.

The leading countries of origin reported by the BBC at that time were, largest to smallest numbers, were Syria, Afghanistan, Iraq, Kosovo, Albania, Pakistan, Eritrea, Nigeria, Iran and Ukraine.

Wars generate refugees. Wars in the Middle East generate refugees into Europe.

Now there are new strains on Greece's capacity to house the refugees. (Commission awards €3.9 million in emergency funding to Greece to help improve reception conditions on the Greek islands European Commission 02/06/2017)

Rescue.org as of this writing has a featured Greece crisis briefing which apparently dates from around September 2016.

And, oh yeah, the Greek debt crisis continues, of course: Investors in Greece fear ‘accident’ as debt payment time nears Ekathimerini 02/07/2017; Helena Smith, Grexit? Greece again on the brink as debt crisis threatens break with EU Guardian 02/03/2017.

Zeitgeist summary, featuring Greece, Italy and the US Democratic Party

I don't really think there is such a things as a Zeitgeist. A Weltgeist, maybe.

But if there were a Zeitgeist, Duncan "Atrios" Black sums up the American version of it remarkably succinctly here: "We're sort of reaching the breaking point of the decades long battle between the party that promises to kick those other people, and the party that promises not to kick them quite so hard." Nice Things Eschaton 12/23/2016

He elaborates:

ACA, for all its benefits, just couldn't be implemented without making it fucking hard for people. That the subsidies aren't generous enough makes it too expensive for people, and that's a problem, but it's one thing to be forced to buy a car you can't really afford, another to buy a car that you can't afford that you have to take in for repairs every other week. The government can't just provide the nice things it once provided because reasons. Hell, once upon a time they built community pools and golf courses. Now your HOA might have a pool.

We're the richest damn country in the history of the world (close enough, anyway). Life shouldn't be so hard. Not against The Data, but the data doesn't really capture what's going on for "the middle class." It isn't that wages are stagnant or shrinking - though that's an issue too! - It's that doing the right thing and having a tiny bit of luck is no longer enough to achieve economic security anymore. Life's a crap shoot from 18-67 (soon to be longer, if Republicans get their way). We're all one medium sized economic hit (including medical) away from the downward spiral. And thanks to that glorious bankruptcy bill, once you get into a hole you're probably trapped there. Bipartisany goodness to make David Broder swoon. 74-25 in the Senate, 302-126 in the House. But the Dems are the good guys! Yah, well, not enough of them and not consistently enough. Vote for Dems and the share of them voting for horrible things will shrink slightly!

He also makes a pitch for recognizing the dominance of the current neoliberal economic ideology in Europe and the US.

That dominance has been characterized more severely in Europe than even in the US by the capitulation of the center-left parties to Herbert Hooover/Heinrich Brüning policies.

The result in Europe is chronic crisis in the eurozone, now flaring up again in more urgent fashion in Italy (Philippe Legrain, Italy on the Brink Project Syndicate 12/08/2016) and Greece (Frances Coppola, Greece: The Game Is On Again Forbes 12/28/2016). But note that Legrain takes the neoliberal posture, lamenting that outgoing Italian Prime Minister Matteo Renzi "was the pro-EU establishment’s best – and perhaps last – hope for delivering the growth-enhancing reforms needed to secure Italy’s long-term future in the eurozone." Growth-enhancing reforms in the neoliberal vocabulary means deregulation, reduction of the public sector, weakening of labor unions and labor law, reduction of income for the majority.

I would read the failure of the Greek negotiating strategy against Angela Merkel in 2015 differently that Coppola does. But she's clear-headed about the stakes involved:

Now it is the IMF’s turn to misread the psychological framing. This is not a four-handed poker game, it is a duel to the death. And it is not really about Greece. The surface conflict is between Greece and its creditors, but the underlying power struggle is between the German-led creditor bloc and the European Commission. The eventual outcome will determine the shape of the Eurozone, and indeed the whole EU, in the future.

Neither the Greek government nor the European Commission want the IMF involved. The only reason the IMF is still involved is that the creditors want it to be. And the reason the creditors want the IMF involved is that they do not trust the Commission to deliver the harsh penance they have prescribed for Greece. The IMF has been cast in the role of creditors’ second.

Unfortunately, this is not how the IMF sees itself. It is still trying to act as a neutral broker, crafting a deal acceptable to both sides. It has repeatedly called for substantial debt relief, but has also demanded deep reforms to the Greek economy. But because it is no longer perceived as neutral, its call for debt relief is ignored while its reform initiative is inevitably seen as a disguised demand for more austerity.

And despite noises recently from the IMF that it may realize the disastrous effects of austerity policies, Coppola recounts how the European Commission (aka, Merkel) is actually defending a marginal departure from extreme austerity by the Greek government against the criticism of the IMF.

What.A.Mess

Jamie Galbraith on the left and center-left in Europe

Jamie Galbraith has been writing about the state of politics in Europe, The Future of the Left in Europe The American Prospect 08/17/2016 and From the destruction of Greece to democracy in Europe Boston Globe 08/22/2016.

In his Prospect piece, he notes that there are varying patterns in whether voters that have been heavily disadvantaged by neoliberal economic and social policies tend to left parties or rightwing ones:

Stymied for now, the radical left faces a strategic choice. One option is to break up the European Union, hoping that the voters in the newly exited states will move to the Left, once the heavy thumb of austerity imposed from Brussels and Frankfurt comes off. This strategy is known as Lexit. Its advantage lies in the disillusion of many working-class voters with the European institutions, a fact clearly seen in the turn of traditional Labour Party districts across England and Wales to the Leave column in the referendum.

But Lexit faces the difficulty that the dominant anti-European forces are not left-wing at all. They are the extreme parties of the radical Right—from the frankly Nazi Golden Dawn in Greece to UKIP and France's National Front. Lexit forces are therefore allied, distastefully, with nativists, xenophobes, and neo-fascists. Once out of Europe, there is reason to fear that the far Right would come to power first, and would undermine the democratic guarantees, which flow partly from European law, that preserve the possibility of progressive victories later on. This process is already advanced, even within Europe, in Poland and Hungary; it is a potential threat to democratic stability even in France.

And he describes how drastically the situation of the center-left parties has been changing:

The rise of radical-left parties just a quarter-century after “the end of history” has put the mainstream into a spiritual crisis. Several decades back, leaders like Tony Blair, Gerhard Schroeder, and (more recently) George Papandreou could plausibly claim to be the modern generation. There were framed and forged by the economic and ideological transformations of the Thatcher-Reagan era and by Western triumph in the Cold War. They rejected old-style socialism and trimmed the welfare state. They advanced the European project, accepted the leadership of the United States, and deferred to the free market. In parallel, they also advanced a broad liberalization of social life, including reproductive choice, gay rights, racial and ethnic and religious diversity, and freedom of movement. These were what (largely) defined the mainstream as progressive: They imparted a veneer of social equalization over rapidly rising economic inequality. [my emphasis]

In the Globe column, he gives this picture of the current political moment:

Greece was given collective punishment as a lesson [for its attempt in 2015 to stop radical austerity policies]. It was done to show that “there is no alternative.” It was done to stop any other attempt to develop, articulate, and defend a more rational policy. It was done to protect the power of the European Central Bank, the German government in Europe, and the policy-making authority, in face of a long record of failure, of the IMF.

Greece is now a colony — the polite say “protectorate.” Elsewhere in Europe the left — Podemos in Spain, the Left Bloc in Portugal, Die Linke in Germany — has stalled out, for now. In France the Socialists are destroying themselves. Italy alone is interesting: It is in the midst of a banking crisis whose only solution is stronger growth; this requires the government to defy Eurozone doctrine or it may lose power to the radical Five Star movement soon. But, apart from that one case, progressive Europe is blocked.

Next up will be the far right, especially the National Front in France, which if it came to power would blow the European Union apart. Similar pressures are building in Poland and Hungary, which have governments already outside of European democratic norms. In Britain, right-wing Tories and the UK Independence Party have combined to vote the UK out of the European Union — although with surprisingly moderate political results so far.

George Soros on the state of the EU

George Soros has some warnings about the current state of the European Union in ‘The EU Is on the Verge of Collapse’—An Interview, George Soros and Gregor Peter Schmitz New York Review of Books 02/11/2016 issue; accessed 01/21/2016.

... the EU is on the verge of collapse. The Greek crisis taught the European authorities the art of muddling through one crisis after another. This practice is popularly known as kicking the can down the road, although it would be more accurate to describe it as kicking a ball uphill so that it keeps rolling back down. The EU now is confronted with not one but five or six crises at the same time.

He has an informed account of Angela Merkel's political survival skills and the limitations her survival strategy has imposed on her ability to manage the crises in the EU and the eurozone.

I'm not thrilled about Soros' hawkish position on Ukraine. But it's consistent with his long-held foreign policy positions.

He is very good on the failure of Merkel's policy toward Greece:

I have no reason to change my critical views on her leadership in the euro crisis. Europe could have used the kind of leadership she is showing now much earlier. It is unfortunate that when Lehman Brothers went bankrupt in 2008, she was not willing to allow the rescue of the European banking system to be guaranteed on a Europe-wide basis because she felt that the prevailing German public opinion would be opposed to it. If she had tried to change public opinion instead of following it, the tragedy of the European Union could have been avoided. ...

The European Union was meant to be a voluntary association of equals but the euro crisis turned it into a relationship between debtors and creditors where the debtors have difficulties in meeting their obligations and the creditors set the conditions that the debtors have to meet. That relationship is neither voluntary nor equal. The migration crisis introduced other fissures. Therefore, the very survival of the EU is at risk.

... Greece was mishandled from the beginning. When the Greek crisis originally surfaced toward the end of 2009, the EU, led by Germany, came to the rescue, but it charged punitive interest rates for the loans it offered. That is what made the Greek national debt unsustainable. And it repeated the same mistake in the recent negotiations. The EU wanted to punish Prime Minister Alexis Tsipras and especially his former finance minister Yanis Varoufakis at the same time as it had no choice but to avoid a Greek default. Consequently, the EU imposed conditions that will push Greece into deeper depression.

Schmitz: Is Greece an interesting country for private investors?

Soros: Not as long as it is part of the eurozone. With the euro, the country is unlikely ever to flourish because the exchange rate is too high for it to be competitive. [my emphasis in bold]

Long-festering problems in the EU

The unsolved major problems of the EU and the eurozone continue to snowball in a way that makes the survival of the former and even more so of the latter more problematic all the time. Cooperation within the EU has broken down over the refugee problem and the influx of refugees is providing a newly growing target for far-right parties. Germany has joined its very junior EU/eurozone partner France in participating directly in the Syrian civil war, the prolongation of which will worsen the refugee problem. France may use its war costs to demand loosening of its requirements under the stone-conservative Fiscal (Suicide) Pact of 2012, which could lead to further conflict with Merkel and the stone-conservative Herbert Hoover/Heinrich Brüning economic policies to which she is committed. Not to mention the incredibly complex and risky politics of the Syrian civil war itself.

The devastating extent of the post-2008 depression in the eurozone "peripheral" countries like Greece, Ireland, Italy, Portugal and Spain is largely due to the effects of the Hoover/Brüning policies Merkel imposed on them. Especially Greece. Merkel's insistence on the Hoover/Brüning policies led to various "regime change" operations in pursuit of them, including actual regime changes in Greece in 2011, Italy in 2011, even in Greece of 2015. The Merkel-bot President of Portugal in 2015 tried to block a majority left coalition from taking power after they won a majority in the elections. We'll see what happens in Spain as the new left majority there seeks to form an anti-austerity government. Such high-handed efforts to dominate and impose on other "partners" a highly destructive and massively discredited economic policy has naturally given reason for them to suspect the value of German domination of the EU and the eurozone.

Now Merkel needs other countries in the EU to support her refugee policy, which is a genuinely European problem. In particular, the Germans want Greece to do a better job in retaining refugees from outside the Schengen Area there so they won't come to Germany. But they are getting the best cooperation from their partners! Who could have foreseen such a thing?

All these problems are the culmination so far of Merkel's nationalist approach to EU affairs, by which she insisted on retaining maximum influence and advantage for Germany at the expense of the "partners." And which led to her characteristic approach to EU and eurozone problems, "extend and pretend." Postpone reaching a substantive and permanent solution to the problem, whether it is bank regulation, refugees or the unending euro crisis. Just to mention a few.

The euro crisis is still likely to be the one that provokes formal splits. Wolfgang Münchau continues in his weekly columns to point out the various reasons for his. (Daran wird der Euro zerbrechen Spiegel Online 25.12.2015

But it can't be seen in isolation to the other problems. The crass xenophobia against Greece and other "periphery" countries encouraged and in a real way propagated by the German government, including Merkel's junior coalition partner the SPD, was picked up not just by the Stammtisch (good ole boy opinion) but by both the boulevard and the "quality" press. The Austrian government was as extreme in promoting nationalist hostility as Merkel's has been. But a very similar process took place in Austria.

That nationalist sentiment carried over to the refugee crisis, which in turn reinforced it. It has led to new border controls, which partially removes one of the most concrete benefits most people have seen from the EU. Münchau puts it even more strongly: "The influx of refugees into Germany and the terrorist attacks in France have put a de facto end to Schengen. National border controls have been reinstated in many places." (Fighting Brexit with fear will backfire Financial Times 12/20/2015) Even new walls along national borders, like in the good old days of the Berlin Wall, though so far with less lethal enforcement. And the increased nationalism presents a problem for security cooperation among EU members against terrorism, while terrorist attacks increase xenophobia against immigrants, which in turn strengthen nationalism and xenophobic fear.

You're doing a heckuva job as EU leader, Angie, a heckuva job!!

Jürgen Habermas has been a sympathetic critic of the EU for a long time. In the conventional political vocabulary, "Eurocritic" has referred to supporters of the Union who argued for urgent reforms to integrate the members countries more; "Euroskeptic" has referred to usually nationalist/rightwing opponents of EU membership. After Germany's handling of the Greek negotiations in 2015, it is clear that as long as Merkel remains in powers and/or her austerity doctrine in force, any country seeking to put an end to austerity for themselves will need to be prepared to leave the eurozone if they don't get agreement. Because without a thoroughly credible threat to exit, they have to expect to be crushed like Greece was.

A 2006 article by Habermas, "Die Bewährung Europas" Blätter für deutsche und internationale Politik 12/2006, serves to illustrate the long-standing and chronic nature of the EU's current problems. The euro crisis hadn't yet broken out, and it is not on Habermas' 2006 list. A number of economists had warned that the construction of the eurozone was flawed from the start in a way that made it particularly unsuited to deal with a depression crisis like the one that struck in 2008. But Habermas pointed to real problems that today are intertwining with the euro crisis. In a perceptive observation, he described there nine years ago how neoliberal economic assumptions were already promoting a nationalism among EU nations that has now become toxic to the point of threatening the entire "European project," as it is called:

Die Rückwendung zum Nationalstaat hat in vielen Ländern eine introvertierte Stimmung gefördert: Das Europa-Thema ist entwertet, man beschäftigt sich lieber mit der nationalen Agenda. Bei uns umarmen sich in den Talkshows Großväter und Enkel in der Rührung über den neuen Wohlfühlpatriotismus. Die Gewissheit heiler nationaler Wurzeln soll eine wohlfahrtsstaatlich verweichlichte Bevölkerung für den globalen Wettkampf „zukunftsfähig“ machen. Diese Rhetorik passt zum gegenwärtigen Zustand einer sozialdarwinistisch enthemmten Weltpolitik.

[The return to the national state has promoted an introverted mood in many countries: The theme of Europe is devalued. One prefers to concerns themselves with the national agenda. With us [Germans], grandfathers and grandsons hug each other with emotion over the new feel-good patriotism. The certainly of healthy {heiler} national roots is expected to make an welfare-state-produced effeminate population "ready for the future" of the global competition. This rhetoric belongs to the present situation of an unleashed Social Darwinist world politics.]

Habermas nine years ago pointed to the following visible, major problems in the construction of the European Union:

1. The "democratic deficit," the phrase Habermas uses here. More and more decisions were being take at the EU level that were obligatory on the members without the same kind of meaningful electoral input the citizens have at the national level being in effect at the EU level.
2. The failure to achieve a cohesive foreign policy. Only a united Europe could successfully lead the pressure on the United States for "die Fortentwicklung des klassischen Völkerrechts zu einer politisch verfassten Weltgesellschaft" ("further development of the classical international law to a politically secured world community.")
3. The ongoing "Unterminierung menschenwürdiger sozialer Standards" ("undermining of humane social standards.")
4. The culturally fundamentalist divisions within Europe and within EU members states. This is a reminder that integration of national, ethnic and religious minorities as well as the handling of new immigrants certainly didn't first become evident in 2015: "Es geht darum, die Angehörigen fremder Kulturen und fremder Religionsgemeinschaften gleichzeitig in ihrem Anderssein zu respektieren und in die staatsbürgerliche Solidarität einzubeziehen." ("It has to do with respecting the members of unfamiliar cultures and unfamiliar religious communities in their difference and bring them into the solidarity of citizens.") And he makes the important point that the success of social integration of minorities within member countries also contributes to the success of international integration within the EU.
5. Habermas doesn't make the following a separate point, though in my mind it needs to rank with the others as (5): "Wir sollten George W. Bush nicht auch noch in der Militarisierung des westlichen Geistes folgen." ("We [Europeans] should also not follow George W. Bush in the militarizing of the Western spirit.")

Habermas' comment on the intersection of the second and third problems is revealing:

"Erst eine Europäische Union, die außenpolitisch handlungsfähig würde, könnte auf den Kurs der Weltwirtschaftspolitik Einfluss nehmen. Sie könnte die globale Umweltpolitik vorantreiben und erste Schritte auf dem Wege zu einer Weltinnenpolitik machen. Damit könnte sie anderen Kontinenten für den Zusammenschluss von Nationalstaaten zu supranationalen Mächten ein Beispiel geben. Denn ohne Global Players dieser neuen Art kann ein Gleichgewicht zwischen Subjekten eines gerechteren Weltwirtschaftsregimes nicht entstehen."

Here the failure of the one-time center left parties, the Social Democrats, is a central component of this interweaving of problems. With reference to Germany, Albert Scharenberg wrote in 2007 ("Dem Morgenrot entgegen?" Blätter 5/2007):

Die regierende Sozialdemokratie brachte durch ihre den Sozialstaat deformierenden „Reformen“, insbesondere durch Hartz IV, ihre ureigenste Klientel gegen sich auf – Gewerkschafter und Arbeitslose.

[The ruling Social Democracy through their "reforms" that deformed the welfare state, especially with Hartz IV {that allowed for lower-paid and less secure jobs than before in Germany}, turned their most basic supporters against them - unions and the unemployed.]

This is not just true of the German SPD, but also of the social democrats in France and other countries, including Spain. The latter party, the PSOE, has the chance to form a government in Spain after this month's elections. But their ability to do so and their ability to successful press an anti-austerity program in office has been significantly compromised by their previous embrace of Merkelnomics. (Antoio Avendaño, Un muerto viviente llamado Pedro Sánchez Andaluces.es 27.12.2015)

Euro crisis and its twin, the refugee crisis

Wolfgang Münchau is writing aboput Gemeinsame Währung: Die wahre Krise (Common Currency: The True Crisis) Spiegel Online 13.11.2015. His column is an early postmortum on the euro:

Die Flüchtlingskrise ist politisch wichtig, aber nicht wirklich ökonomisch. Sie wirkt kurzfristig wie ein leichtes Konjunkturprogramm und wird langfristig die deutsche Demographie etwas verbessern. Ich halte den Effekt für positiv, aber viel mehr ist dazu nicht zu sagen.

Die Eurokrise hingegen ist weder ausgestanden noch bewältigt. Sie wirkt weiter, jeden Tag. Sie wirkt ökonomisch auf Europa wie die Flüchtlingskrise politisch. Jeden Tag wird es schlimmer, weil man nicht das Problem löst, sondern weil man damit beschäftigt ist, irgendwelche Feuer zu löschen, die man durch die eigene Inkompetenz entfacht hat.

[The refugee crisis is politically important but not really economically. It has the short-term effect of a mild stimulus program and in the long run with improve German demography a bit. I see the effect as positive, but there's not a lot more to say about it.

The euro crisis, on the other hand, has been neither survived nor overcome. It's still going on, every day. It acts economically on Europe like the refugee crisis politically. Every day it gets worse, because the problem has not been solved, but we are rather busy putting out some fire or other that our own incompetence started.]

He actually uses the indeterminate "one (man)" where I translate "we." But I'm pretty sure the main "one" he means is Angela Merkel.

He also sees the growing German trade surplus as a problem in itself.

In a separate column, Münchau warns that Italy could soon find itself in the position where it finds the political and/or economic advantages of leaving the euro immediately compelling. (Italy’s economic recovery is not what it seems Financial Times 11/15/2015) He praises social-democratic Prime Minister Matteo Renzi for his important though relatively modest departures from Angela Merkel's austerity regime. "But," he writes, "what worries me is that the Italian government is not ready for when the impact of the slowdown in China and emerging markets hits Europe." And he observes, "Friday’s preliminary figures for eurozone gross domestic product show that the slowdown has started."

Andreas Schnauder calls attention to the connections between the euro crisis and the refugee crisis in Zwei Krisen, ein Versagen Der Standard 12.11.2015:

In Griechenland wird wieder großflächig gestreikt. Dadurch werden Erinnerungen wach, dass das Land vor nur vier Monaten noch am Abgrund stand und mehr als nur Spekulationen über einen Austritt aus der Eurozone die Runde machten. Inzwischen hat sich die Lage dank umfassender Hilfszusagen wieder beruhigt, doch gelöst wurden die Probleme nicht. Vielmehr hat sich die europäische Aufmerksamkeit zum Thema Flüchtlinge verlagert. Beide Krisen haben eines gemein: Sie waren lange vorhersehbar, ohne dass die EU rechtzeitig und richtig reagiert hätte.

[In Greece, there are again widespread strikes. Thereby memories are kept alive, the the country just four months ago stood on the abyss and not merely speculation was making the rounds about an exit from the eurozone. Since then things have calmed down, thanks to comprehensive promises of assistance, but the problems are certainly not solved. The attention of Europe has fastened much more on the refugee theme. Both crises have something in common: they were foreseeable long ago, with the EU reacting in a timely and correct way.]

Deutsche Welle English reports, Paris attacks stoke fears amongst refugees 11/17/2015:

Lisa Caspari in Der Anfang vom Ende Die Zeit 11.11.2015 takes note of how Merkel's attempt to create a short-term fix for this year's acute phase of the refugee problem is already looking like a failure.

Caspari takes the dissent withing the CDU/CSU against Merkel's refugee policies more seriously than I would. They look to me like the kind of political Kabuki on xenophobia that the CDU/CSU has used in the past, trying to have it both ways by having the leaders argue to respect law and human rights while dissenters argue for anti-immigrant, xenophobic position to protect their right flank politically. An ENSA poll commissioned by the sensationalist tabloid Bild-Zeitung is showing the far-right Alternative für Deutschland (AfD) as the third most popular party in Germany, after Merkel's coalition parties, the CDU/CSU and the SPD. But (CDU/CSU stoppen Umfrage-Absturz Bild-Zeitung 17.11.2015)

Yiannis Baboulias also describes the political tensions within the EU, even before last Friday's terrorist killings (The refugee crisis is tearing Europe apart Aljazeera America 11/05/2015. He also points to the cheap nationalist spirit Merkel and her CDU/CSU/SPD government promoted over the euro crisis:

The political divisions between the EU’s richer and poorer members are also growing. Treaties are being thrown out the window, as country after country is building walls and reinstating passport controls even for EU citizens. Activists took to the streets last weekend near Greece’s land border with Turkey, demanding to open the fence that was built there three years ago. They were met with riot police and tear gas. Opening the border is not a decision the Greek government can make alone; if they do so unilaterally, it’s almost certain every border north of Greece will be sealed. Greece would become a purgatory for hundreds of thousands of people who don’t want to be there. There is virtually zero chance European leaders will ever allow for this safe pathway to open.

As with the battle over austerity, the refugee crisis has turned into a class issue and a cultural divide. In northern Europe, the scorn facing “refugees” and “economic migrants” mirrors that facing “lazy, profligate southerners” in countries such as Greece and Spain. [my emphasis]

EU refugee crisis, 2015 acute phase

Srecko Horvat has been writing for years about the European refugee crisis. In The roots of this refugee crisis go back even further than the Arab spring Guardian 09/24/2015, he writes:

This will be remembered as the year when Europe experienced the biggest displacement of people since the second world war. As the latest report (published last Friday) by the International Organisation for Migration shows, a record 473,887 refugees have crossed the Mediterranean to Europe so far in 2015, including at least 182,000 Syrians – almost 40% of the total.

He makes the point that is critical to understanding why the refugee crisis is a sign of such massive failure within the EU and why it is intertwined with the euro crisis:

It began years ago. What countries such as Croatia, Serbia, Slovenia or Hungary are experiencing now is something that has been present for years in Greece, Macedonia and Italy, especially Lampedusa. The only reason the refugee crisis is now in the spotlight lies in a banal but brutal fact: it has penetrated from the periphery of Europe to the heart of the European Union.

Furthermore, the real causes go back much earlier than the war in Syria. Although it is being presented as a “natural disaster”, this is a result of very concrete politics that can be traced back to the invasions of Afghanistan and Iraq.

(A significant number of refugees into Europe also come from Africa.

This crisis displays the same attitude of dominance by the "core" countries over the "periphery" that we see in the euro crisis. It is the same extend-and-pretend approach of creating short-term mitigation solutions that actually deepen the underlying crisis and make it more intractable. It's the same attitude of nationalist particularism that we see in the euro crisis exercised by the "core" countries against the "periphery."

The Merkel-friendly German President (head of state), Joachim Gauck, made a public intervention to criticize the language used by some of Merkel's CDU officials, notably Finance Minister Wolfgang Schäuble. Gauck warned against using "horror scenarios" and inflammatory anti-immigrant rhetoric. Schäuble, pandering to xenophobic sentiment, recently compared the inflkux of refugees to an avalanche into a valley. (Florian Gathmann und Philipp Wittrock, Schäubles Lawinen-Vergleich: Der Polarisierer Spiegel Online 12.11.2015)

After getting favorable and gullible press coverage for her announcement in September that refugees were welcome in German and playing the "compassionate pastor's daughter" (mitfühlende Pastorentochter), Merkel's government has now agreed to attempt to go back to the "Dublin III" approach, in which refugees would be contained in the EU countries in which they first arrived. Germany could then play the high-minded, compassionate power while the refugees were stuffed into inadequate processing centers which the receiving countries like Greece don't have the resources to manage properly. (Jürgen Klöckner, Warum die Regierung den heimlichen Kurswechsel in der Flüchtlingskrise kleinredet Huffington Post Deutschland 11/11/2015)

The SPD leadership is perfectly happy with this arrangement and are faithfully supporting the mitfühlende Pastorentochter as she panders to xenophobes with that policy. Meanwhile, her own party (CDU/CSU) gets to demand harsher measures against the refugees. Klöckner writes, "In diesen Tagen scheint es, als habe die Kanzlerin mehr Unterstützer in der SPD als in den eigenen Reihen." ("These days, it seems as though the Chancellor [Merkel] has more supporters in the SPD than in her own ranks.") Can the SPD get any more pitiful? Sadly, they probably can.

Martin Scultz is a German Social Democrat who is currently the President of the European Parliament. He is also a shameless Angie-bot. He echoes Merkel's demand for other countries to take on more refugees, a reasonable demand in itself: "Das größte Problem, das wir zur Zeit haben, ist, dass viel versprochen und wenig eingehalten wird", he says. ("The biggest problem we have right now is that a lot is promised but little carried out.") (EU-Parlamentspräsident zur Flüchtlingskrise: "Viel versprochen und wenig eingehalten" Spiegel Online 11.11.2015)

It's worth repeating that Merkel's September announcement was a typical Merkel extend-and-pretend move. It made her look like a generous and responsible leader to people who weren't paying close attention to the years-long refugee crisis. But it wasn't well thought out. And it was a substitute for the failure of the EU leadership, especially the EU's dominant power Germany, to address the problem in a sufficient way. And now her government is already trying to go back to the previous failed system of control.

The idea of confining them to refugee camps for extended periods isn't a good one. The camps now are often overcrowded and dangerous. (Peter Maxwill, Geschlecht und Asyl: Frauen und Kinder zuletzt Spiegel Online 09.09.2015)

Spiegel Online has a page listing key factual points out the refugee crisis, Asyl und Einwanderung: Fakten zur Flüchtlingskrise - endlich verständlich Spiegel Online; accessed 11/12/2015.

BBC News has some general information and graphics on the crisis: Migrant crisis: Migration to Europe explained in graphics 11/09/2015

EU refugee crisis

The most important common thread connecting the eurozone crisis to the refugee crisis is the prominent role of nationalist appeals and actions by Germany under the leadership of Chancellor Angela Merkel.

The ruinous austerity policies imposed on "periphery" countries like Greece, Ireland, Italy, Portugal and Spain have been justified by rhetoric from Merkel, her CDU/CSU party and her coalition partner party the SPD, that emphasized that those countries were under the tutelage of Germany. The fact that "periphery" became a common way to describe the less powerful economies of the eurozone, all of which are developed countries, is telling. That term was previously used to refer to the colonial situation with the colonizing powers called the "metropoles" and the colonized countries the "periphery." (Greece is well on the way to slipping out of the developed category if the austerity continues.) The contempt for their eurozone partners promoted by the two biggest political parties and fueled by bad press coverage (not just from the tabloids either!) made it far more difficult to negotiate half-reasonable economic policies in the Greek crisis earlier this year. And the fear and hostility generated by Merkel's handling of the euro crisis is a major barrier to further integration in the EU or to the kind of policies that would allow the fatally flawed euro to serve long-term.

Regugees from Syria now arriving in Europe have been met with met in Austria and Germany with crass xenophobia from a significant portion of the population. And that hostility has been amplified by "mainstream" politicians seeking to further exploit nationalist fear and hatred. Like the euro crisis, the refugee crisis is discussed as being a problem for the further existence of the EU. With Britain threatening an exit from the EU unless the EU is weakened rather than strengthen, the possible disintegration of the EU is a real near-term possibility. (Nicholas Watt, Cameron vows to 'throw himself headlong' into keeping Britain in a reformed EU Guardian 11/09/2015; Flüchtlingskrise: Luxemburgs Außenminister warnt vor Zerfall der EU Spiegel Online 09.11.2015)

German Interior Minister Thomas de Maizière suggested publicly that Syrian refugees should be given restricted asylum rights, less than those currently afforded: a more restricted asylum time limit, refusal of family reunification rights now protected. This has caused grumbling and grumping within Merkel's coalition. Some observers interpret the flap as a looming government crisis, i.e., one that would bring down Merkel's coalition and force new elections. For example: Björn Hengst et al, Merkel in der Flüchtlingskrise: Die Vertrauensfrage Spiegel Online 09.11.2015, who points to dissent from Merkel's official position and coalition policy from prominent officials in the CDU and CSU. Including Finance Minister and Scourge of Greece, Wolfgang Schäuble (CDU), and Bavarian Finance Minister Markus Söder (CSU). He doesn't specifically mention the far more prominent dissent of CSU head Horst Seehofer. (Stefan Braun und Christoph Hickmann, Seehofer befeuert neuen Asyl-Streit Süddeutsche Zeitung 08.11.2015; Braun und Hickman, CDU-Spitze zwingt Merkel zur Kurskorrektur Süddeutsche Zeitung 09.11.2015)

Left-leaning Jakob Augstein is also on board with the idea of a governmental crisis being in progress: Minister gegen Merkel: Der Putsch Spiegel Online 09.11.2015:

Kontrollverlust. So lautet der Vorwurf, der Angela Merkel in der Flüchtlingskrise gemacht wird. Zu Recht. Eine Kanzlerin ohne Kontrolle ist eine Kanzlerin in der Krise. Aber Merkels Problem sind nicht die Fremden. Sondern ihre Freunde. Niemand sollte von Merkel erwarten, die Flüchtlingsströme im Griff zu haben. Aber man muss von ihr erwarten, dass sie ihre Regierung im Griff hat. Kontrolle über die Flüchtlingsströme ist eine Illusion. Kontrolle über die eigenen Minister eine Notwendigkeit. Wir erleben die Entmachtung einer Kanzlerin. Ist es für ein Machtwort schon zu spät?

[Loss of control. That is the accusation that is being made against Angela Merkel in the refugee crisis. Rightly so. A Chancellor without control is a Chancellor in crisis. But the foreigners are not Merkel's problem. But rather her friends. No one should expect that Merkel will get a handle on the refugee influx. But one would expect from her that she would get a handle on her own government. Control over the stream of refugees is an illusion. Control over her own Ministers a necessity. We are experiencing the disempowerment of a Chancellor. Is it already too late for a definitive solution (Machtwort)?]

The lesson he takes from this situation is, "Die Flüchtlingskrise ist zur Regierungskrise geworden." ("The refugee crisis has become a governmental crisis.")


Jens Berger suspects that what we're seeing instead is some cynical political Kabuki, in which the coalition's agreed policy will continue in force while the CDU/CSU demagogue the issue to pull in some xenophobic votes. (Subsidiärer Theaterdonner – wie die CDU am rechten Rand fischt Nachdenkseiten 09.11.2015

Berger argues that De Maizière as Interior Minister (roughly equivalent to Attorney General in the US) does not have the power to implement the changes in asylum policy that he suggests. It is largely regulated by the 1951 Geneva Refugees Convention, of which Germany is a signatory. An English webpage on the Convention is available on the site of the UN Refugee Commission, UNHCR.

Berger thinks the German politicians like Seehofer and De Maizière are trying to give the public an idea that a change in legal handling would stem the current influx of refugees, though it won't. One change that could be made would be to change the current decision that puts all Syrian refugees on a fast track for asylum to one that treats them all as potential candidates for asylum. But Berger argues that the only thing that would accomplish is to further overburden the asylum courts, which are already overwhelmed. They would have to argue their case for asylum through a longer court process. It won't stop the refugees from coming.

He concludes:

Der Theaterdonner von Thomas de Maizière erfüllt dennoch seinen Zweck. Zwischen den Zeilen liest sich sein unausgegorener Vorstoß nämlich folgendermaßen: Abschieben, kein Nachzug, harte Hand, weniger Flüchtlinge. Das kommt beim rechten Flügel unserer Gesellschaft natürlich gut an. Die Union hat es in den letzten Monaten ohnehin geschafft, beinahe den gesamten gesellschaftlichen Diskurs zum Thema innerhalb ihrer eigenen Reihen aufzunehmen. Für „Helldeutschland“ gibt es Angela Merkel und Peter Altmaier, die an die humanitäre Seite appellieren und aus der Not eine Tugend machen, indem sie sich öffentlich dafür rühmen, dass sie die gegebenen Gesetze befolgen. Und auf der anderen Seite gibt es die Seehofers und de Maizières, die für „Dunkeldeutschland“ eine harte Kante vorspielen und zumindest verbal munter im braunen Sumpf fischen. Außen vor steht die SPD, die sich das Schauspiel anschaut, als sei sie das Kaninchen vor der Schlange. Die Medien sind derweil außer sich vor Freude, dass ihnen ein derartiges Schauspiel geboten wird. Als Teile der CDU 2002 bei der Debatte des Zuwanderungsgesetzes ähnlichen Theaterdonner veranstaltet haben, ließ der damalige saarländische Ministerpräsident Peter Müller das Publikum Monate später wissen. „Die Empörung hatten wir verabredet. Das war Theater, aber legitimes Theater“. Gut möglich, dass sich Thomas de Maizière oder Peter Altmaier in einigen Monaten genau so äußern.

[The theatrical thunder of Thomas de Maizière nevertheless fulfills its goal. Between the lines, one can read his half-baked thrust: deportation, no return, hard line, fewer refugees. Of course, that sounds good to the rightwing of our society. The Union {CDU/CSU} in recent months has managed to take nearly all of the social discourse to become themes within their own ranks. For "Light Germany" {„Helldeutschland“} there are Angela Merkel and Peter Altmeier {her refugee coordinator}, who appeal to the humanitarian side and make a virtue out of the emergency, in which they publicly take responsibility that they follow the given laws. And on the other side, there are the Seehofers and De Maizières, who feign a hard edge for the "Dark Germany" and at least verbally fish jauntily in the brown {neo-Nazi} swamp. The SPDm who is just watching the show, stands ignored, like the rabbit before the snake. When parts of the CDU in 2002 staged similar theatrical thunder in the debate on the immigration debate, the then Governor of Saarland Peter Müller let the public know months later, "We colluded on the outrage. It was theater, but legitimate theater." It's quite possible that Thomas de Maizière or Peter Altmaier will be speaking the same way in a few months.]

But the disagreements among the EU states about taking on refugees, and the wall-building craze that is catching on represent a real failure of the EU to put together a coordinated response to a real crisis. And the resulting nationalist agitation in various countries further complicates the EU process to improve its institutions going forward.

This crisis is not new, it's been going on for years. And, like with the euro crisis, Merkel has been relying on extend-and-pretend stopgap solutions. The fallout from that style has been not only problems going unsolved, but mutual distrust among EU nations that make real problems even harder to solve.

Luxembourg's Foreign Minister Jean Asselborn goes even further. Speaking of the refugee crisis and the failure to date to achieve the necessary cooperation among EU nations, he says, "Der Kitt, der uns zusammenhält, ist noch immer die Kultur der humanen Werte. Und dieser falsche Nationalismus kann zu einem richtigen Krieg führen." ("The cement that holds us together is always the culture of humane values. And this false nationalism can lead to a real war.") Asselborn warnt vor Zerfall der EU Die Zeit 09.11.2015.

This Spanish-language video from TV Pública argentina gives an overview of the current stage of the refugee crisis V7inter - Crisis migratoria en Europa 11/07/2015:

Wolfgang Münchau has been a persistent critic of Merkel's disastrous handling of the euro crisis. And he's also unimpressed with her stopgap approach on the refugee crisis either, as he explains in Merkels unmoralische Flüchtlingspolitik Spiegel Online 30.10.2015.

In der praktischen Politik hingegen versteckte und versteckt sie sich aber in beiden Fällen hinter nationalen deutschen Interessen und unternimmt nur das mindeste, um eine Eskalation der Krise zu verhindern. Das hehre Prinzip überlebt - aber nur kosmetisch. Den Euro gibt es natürlich noch, und es wird ihn auch weiterhin geben. Aber ökonomisch ist das Experiment einer europäischen Währungsunion gescheitert. Die Skeptiker unter den Ökonomen hatten recht. Die Politik laviert zwischen einer Scheinwelt, in der wir alle gerettet sind, und einer Realität, in der es allen schlechter geht als zuvor.

Ich stimme somit überhaupt nicht mit dem Konsens über Merkels historische Leistung überein: Euro-Krise schlecht. Flüchtlingskrise gut. Ich sehe stattdessen die Gemeinsamkeiten eines politischen Managements, das kein Problem löst und alles nur vor sich herschiebt.

[In practical policy, however {in contrast to Merkel's good PR internationally on the refugee crisis}, she has hidden herself and is hiding herself behind German national interests and undertakes on the minimum {needed} to prevent an escalation of the crisis. The sublime principle survives - but only cosmetically. The euro, of course, still exists, and will continue to exist. But economically the experiment of a European currency union has failed. The skeptics among the economists were right. Policy maneuvers between a world of appearances in which everyone is saved, and the reality in which things are going worse for everyone than before.

I absolutely disagree with the consensus on Merkel's historic service {which says}: euro crisis bad, refugee crisis good. Instead, I see the commonalities of a political management that solves no problem and only shuffles around everything before it.]

In the crisis, Münchau sees Merkel relying on measures that have to be centrally managed to be effective, but have to be coordinated in a decentralized manner. Berlin can't just order other countries to take a quota of refugees designated by Angie.

He describes her current official approach this way:

Denken Sie jetzt mal die Merkelsche Flüchtlingspolitik bis zu ihrem bitteren Ende. Es werden mehr Flüchtlinge kommen. Und Merkel wird natürlich nicht die Grenze zu machen. Sie wird stattdessen mit den Türken verhandeln. Mit den Griechen. Und mit den Kroaten. Sie wird enorme Summen lockermachen, um dafür zu sorgen, dass die Flüchtlinge nicht weiter in den Westen kommen. So wie die griechische Wirtschaft in einer permanenten Rezession verharrt, so werden die Flüchtlinge in permanenten Aufnahmelagern verharren.

[Now think through the Merkelian refugee policy to its bitter end. More refugees will come. And Merkel will of course not close the border. Instead, she will negotiate with Turkey. With the Greeks. And with the Croats. She will make enormous sums available in order to insure that the refugees don't come farther to the west {i.e., to Germany}. Just as the Greek economy is stuck in a permanent recession, so the refugees will be stuck in permanent receiving centers.]

Heck of a job, Angie, heck of a job! Maybe she could hire Shrub Bush's FEMA director Michael "Brownie" Brown as an adviser on refugee policy. Shoot, may she already has!

This BBC News piece by Mark Mardell also notices the high-risk nature of Merkel's current policies, Migrant crisis will decide Merkel's future 05.11.2015:

Mutti has applied balm to the wound, and covered it with a sticking plaster. It is what mothers do.

Angela Merkel's nickname {Mutti} captures the sense of a leader of homely, sensible authority and comforting common sense.

The verb "to Merkel" - prevaricate - could soon have a whole new meaning: she who dares, wins. Perhaps.

The sticking plaster could soon peel off, leaving the wound merely less politically visible, although still publicly festering.

She has risked her reputation on a gamble that at first sight seems totally out of character - "reckless" is not a word you would normally apply to her 10 years in power.

One usually loyal German politician told me her decision to open Germany's borders to all refugees from Sudan and Syria was "madness". [my emphasis]

But I would say that Angie's risking "her reputation on a gamble" would seem "totally out of character" only to those who have followed her decision-making approach on the euro crisis. A defining feature of Merkel's political style is to maintain a public image of benevolence and responsibility while actually running a highwire act.

Polish elections and German hegemony

The large rightwing party in Poland with a distinctly nationalist edge, the Law and Justice (PiS), won last Sunday's (Oct 25) election with enough seats to give them a majority in Parliament without coalition partners (A conservative enigma 10/31/2015):

Jaroslaw Kaczynski, the veteran leader of Poland’s right-wing Law and Justice party (PiS), is the architect of that success. His party came first with 37.6% of the vote, giving it 235 out of 460 seats in the lower chamber of parliament (the Sejm) and the first independent majority in post-communist Poland. The centrist Civic Platform (PO) party, in power since 2007, finished with 24.1% of the vote. As PiS savours its victory, people at home and abroad are wondering where its ideological heart lies.

There is a lot of imaginative falderol written about "populism of the left and right," particularly in ill-informed American press articles about European politics.

But Alex Duval Smith describes the PiS' economic policies this way (Polish election: Law and Justice wins over third of vote in first results The Guardian 10/27/2015):

The party favours a sharp rise in public spending and a larger state role in the economy. It also wants the central bank to launch a cheap lending programme worth 350bn złoty (£59bn) over six years to support growth – an idea that some see as undermining the bank’s independence.

Kaczyński’s party revealed plans to reap new revenues from next year with a tax on banks’ assets, and there were also signs it was confident of sufficient informal support in parliament from other parties to make changes to Poland’s constitution.

“Many party leaders have talked of wanting deeper change in Poland, so, if we want to deliver that, changes to the constitution are vital,” the party’s spokesman on economic affairs, Zbigniew Kuźmiuk, said on Monday.

That in itself sounds like a sensible kind of policy difference from neoliberal dogma, whatever their other policy positions.

Marcin Goettig and Agnieszka Barteczko report for Reuters on the PiS policies (Poland's Eurosceptics win outright majority in parliament 10/27/2015):

The socially conservative PiS has promised to increase state control over Poland's $535 billion economy, the biggest in central and eastern Europe, and to tax banks and stop privatization.

Its opposition to accepting migrants fleeing war in the Middle East and Africa is likely to set it on a collision course with its key European Union allies.

The incumbent centrist Civic Platform won 138 seats, while the anti-establishment Kukiz'15 party secured 42 seats, the pro-market liberal Nowoczesna 28, and the agrarian PSL 16.

Two leftist parties failed to pass the election threshold, meaning leftists will have no representation in the legislature for the first time since 1989.

Law and Justice also wants to lower the retirement age and boost economic growth to 5 percent through fiscal and monetary stimulus. It rejects adoption of the euro single currency any time soon.

PiS's pledges also include raising public spending by over 2 percent of GDP and at the same time keeping the fiscal deficit below the 3 percent EU ceiling.

"Law and Justice faces a huge responsibility," said Andrzej Rychard, sociologist at the Polish Academy of Sciences. "Some of these promises may prove difficult to keep." [my emphasis]

Given the nightmare trap the euro has become for countries like Greece, Ireland, Italy, Portugal and Greece, staying out of the eurozone is a smart move.

They also note, "The president, Andrzej Duda, was also elected in May on a PiS ticket, giving the PiS a clean sweep of the main elected offices." PiS also has a majority in the upper house.

From at least a superficial view, the PiS does seem to be operating with some mix of left/Keynesian and rightwing, xenophobic policies. If the center-left social-democratic parties can't make their way back to Keynesian, pro-labor platforms and campaigns, the xenophobic right in other countries could benefit from advocating a combination of policies like those of the PiS.

Reuters describes the PiS as a "Euroskeptic" party. Before this year, "Euroskeptic" tended to be used to describe nationalist critics who wanted to weaken or abolish the EU, while left critics looking for democratic reforms and stimulus policies within the EU were called "Eurocritical."

But after Germany's humiliation of Greece in 2015, those distinctions are blurring. Merkel's eurozone policies are untenable. And the Greek negotiations this year showed that unless a country is willing to risk leaving the eurozone, fundamental departures from Merkel's austerity policies and the restrictive treaties that embody them will remain a dim prospect.

Timothy Garton Ash also notes this combination in Poland has survived worse than this shift to conservatism. Don’t despair The Guardian 10/26/2015):

PiS represents a large part of Polish society: patriotic, Catholic, conservative inhabitants of small towns and villages, especially in the poorer east and south-east of the country; people who don’t feel they have benefited from the transition to market democracy. It promises a strong state to protect them from the cold winds of economic and social liberalism. It is rightwing in culture, religion, sexual morality (no abortion or in vitro fertilisation), xenophobia (no Muslim refugees please, we’re Polish) and nationalism, but almost leftwing in its economic and social promises to the poor and left-behind. (Orbán conjures something of the same mixture in Hungary.) Simplifying greatly, there are two Polands, and this time this one won. [my emphpasis]

But grim news for Germany's hegemonic position in the EU and especially the eurozone may be good news for eurozone citizens currently suffering the German-imposed austerity policies. Daniel Gros in this Center for European Policy Studies commentary, The End of German Hegemony 10/16/2015, offers this perspective:

[F]rom a soft-power perspective, the mere fact that people believe Germany is strong bolsters the country’s status and strategic position. But it will not be long before people begin to notice that the main driver of that perception – that Germany’s economy continued to grow, while most other eurozone economies experienced a prolonged recession – represents an exceptional circumstance, one that will soon disappear.

In 12 of the last 20 years, Germany’s growth rate been lower than the average of the other three large eurozone countries (France, Italy, and Spain). Although German growth surged ahead during the post-crisis period, as the graph shows, the International Monetary Fund predicts that it will fall back below that three-country average – and far below the eurozone average, which includes the smaller high-growth countries of Central and Eastern Europe – within five years.

(The article notes that an "earlier version" of this piece appeared as The End of German Hegemony Project Syndicate 10/15/2015.)

Gros lists the aging population as one of Germany's long-term problems. But I've learned to be wary of this claim. Stated in isolation, it functions as an ideological justification for neoliberal austerity policies like cutting pensions and raising the retirement age.

And Gros is basically expressing support for the foolish chronic-austerity policies advocated by Merkel's government. Germany's current growth issues could be effectively addressed, and much of the immediate problems of the eurozone ameliorated (but not solved), by Germany pursuing a sensible stimulus policies and higher wages at home. German wage growth has lagged seriously behind productivity growth for years now, which is why the complaints of German "wage dumping" are justified. It's part of the way Merkel's government - and the red/green coalition that preceded Merkel - have been squeezing advantages out of the eurozone at the cost of doing serious damage to their supposed eurozone "partners."

Sad state of the EU

Wolfgang Münchau warns, "The eurozone is once again in a position where economic recovery is weakening before it really started, where the global risks are rising, and where inflation remains way off target." (Draghi must be more unconventional Financial Times 10/25/2015)

Yanis Varoufakis says, "Europe’s crisis is poised to enter its most dangerous phase." (Schäuble’s Gathering Storm Project Syndicate 10/23/2015)

Münchau there is writing more narrowly about the course of the eurozone economy. But Varoufakis is writing about that, too, as well as the political dimensions of the crisis. But in his FT piece, he notes of the Italian situation, "Matteo Renzi, the Italian prime minister, is currently using every trick in the book to circumvent European budget rules. His previously planned spending cuts are lower; the tax cuts are bigger — and of the wrong kind; and against the advice of the European Commission, he is now cutting unpopular property tariffs instead of labour taxes."

Varoufakis also discusses Italy's bucking of Germany's domination of the eurozone economy:

Renzi has come close to demolishing, at least rhetorically, the fiscal rules that Germany has defended for so long. In a remarkable act of defiance, he threatened that if the European Commission rejected Italy’s national budget, he would re-submit it without change.

This was not the first time Renzi had alienated Germany’s leaders. And it was no accident that his statement followed a months-long effort by his own finance minister, Pier Carlo Padoan, to demonstrate Italy’s commitment to the eurozone’s German-backed “rules.” Renzi understands that adherence to German-inspired parsimony is leading Italy’s economy and public finances into deeper stagnation, accompanied by further deterioration of the debt-to-GDP ratio. A consummate politician, Renzi knows that this is a short path to electoral disaster.

He also discusses the increasingly public dissent by the Socialist government of France to German misrule in the eurozone.

Ambrose Evans-Pritchard reports France signals EU treaty change to avert Brexit, warns on euro survival Telegraph 09/24/2015:

Mr Macron had even tougher words for Germany, warning that the eurozone will disintegrate in a storm of populist revolt unless Berlin drops its vehement opposition to fiscal union and large transfers to the poorer regions.

The former Rothschild banker said the currency bloc is fundamentally unworkable without a joint budget to back it up and will leave debt-stricken countries on the periphery in permanent trouble.

“If we don’t move forward, we are deciding the dismantling of the eurozone. We have to choose: is it a fixed exchange system or a monetary union?” he said.

He called the struggle over the euro a new Thirty Years war in Europe between Calvinists and Catholics. "The Calvinists want to make others pay until the end of their life. They want reforms or no contributions toward any solidarity. On the other side are the Catholics, largely on the periphery,” he said.

"At every eurozone summit, at every Eurogroup, we have this same dilemma between member states. We have to exit this religious war," he said. [my emphasis]

Varoufakis seems to approve Macron's use of "Calvinists" to describe the supporters of Angela Merkel's ruinous austerity economics.

Neither France nor Italy is mounting the kind of challenge that Greece did earlier this year. But their situations are also not nearly as desperate as Greece's is. But Münchau in Spiegel Online recommends Renzi's example along with that of the Canadian Liberal Party's leader Justin Trudeau as potential models for the German Social Democratic Party (SPD) as to how they might revive their steadily declining political prospects: by offering meaningful alternatives to austerity policies. (So könnte die SPD zum Erfolg zurückkehren 23.10.2015)

Michael Krätke writes (Das Problem ist Deutschland Der Freitag 14.12.014), "Die Euro-Krise signalisiert seit mehr als fünf Jahren, dass die Währungsunion umgebaut werden muss, um zu überleben." ("The euro crisis signaled more than five years ago that the currency union had to be reconstructed to survive.")

He's right. But Angela Merkel continues to milk the eurozone arrangements for the narrow benefit they can provide for Germany. And the walls between EU members continue to go up.

Meanwhile, a majority left bloc in the Portuguese Parliament is now confronting President Aníbal Cavaco Silva over his attempt to keep a pro-austerity government in power after the recent elections there. When it comes to enforcing austerity, Merkel and her allies aren't terribly scrupulous about this whole democracy business.

Trials and tribulations of the EU

Here's a couple of articles offering rather gloomy outlooks for the EU at the moment. One is from Wolfgang Münchau in the Financial Times, Five concurrent crises push Europe into the realm of chaos 09/27/2015:

Europe is juggling five simultaneous crises, all unforeseen shocks in different stages of development: refugees from Syria, eurozone periphery debt, a global economic downturn, Russia’s annexation of Crimea and its aftermath, and Volkswagen’s crimes and misdemeanours. ...

An innocuous crisis trigger in Europe has been Angela Merkel’s principled decision to open up Germany to refugees from Syria. Most Germans greeted her decision with exuberance, but she did not prepare her country, and the rest of Europe, politically and logistically for what was to come. In Berlin and Hamburg the housing situation is so desperate that the authorities are preparing legislation to confiscate empty privately owned apartments and, in Hamburg, commercial properties too. There have been cases where local governments terminated rental contracts of tenants in social housing to give shelter to refugees. When the public sector behaves this way, xenophobia is only nanoseconds away. ...

The combination of an economic slowdown and the refugee crisis will transform the German fiscal surplus into a small deficit, which would be fine under normal circumstances. Germany should be running a modest deficit to support the eurozone economy. But Germany imposed on itself a constitutional law that enforces budgetary balance over the economic cycle. Once the surpluses are gone, the political and legal room for discretionary policy ac­tion will have disappeared. To put it more crudely: the Germans have decided to spend the surplus on the refugees, not on Greece.

Heckuva job, Angie, heckuva job!

And Bob Kuttner weighs in with The European Prospect The American Prospect 09/28/2015:

After the euro became Europe’s common currency in 2002, leadership of the project passed to German conservatives. Their goal, above all, was fiscal balance. Helmut Kohl, chancellor at the time of German reunification, and before the launch of the euro, conditioned Germany’s willingness to give up the deutsche mark on extremely conservative fiscal and monetary rules. Germany is obsessed with price stability because of its experiences with hyper-inflation both in the Weimar period and in the chaos after World War II. More recently, the costs of absorbing the former communist DDR pushed Germany well beyond the fiscal norms that Kohl had imposed on the rest of Europe. All of these provisions, hidden in plain view in the Maastricht Treaty, were mere nuisances until the financial crisis of 2008 hit. The Maastricht rules then gave German Chancellor Angela Merkel and the banks a hammer with which to destroy the sovereignty and social solidarity of lesser nations.

Austerity not only served as perverse macroeconomic policy, but the plans imposed on the debtor states of Greece, Spain, Portugal, and Ireland included neoliberal policies that went far beyond mere budget balance, reminiscent of the IMF in its worst period. According to their EU masters, these countries needed to restore growth to reassure their creditors. How to accomplish that trick at a time of fiscal belt-tightening? Cut wages, undermine collective-bargaining rights, intensify privatizations, reduce taxes on business, and eviscerate social outlays. Basically, the crisis gave a huge political opening for neoliberal policies that are not even effective economics. The resulting stagnation undermines voter confidence in both the nation-state and in the European Union. The European Central Bank, with far less general authority than the U.S. Federal Reserve, serves mainly as the agent of banks. Thus did a project promoted by social democrats in the 1980s and 1990s become an instrument of deep conservatism.

And he notes how the refugee crisis not only reflects the EU's chronic weaknesses and exacerbates them:

If Europe needed one more assault to further undermine the model, it came via the refugee crisis. The crisis laid bare two awful fragilities. The first is the dysfunction of the EU as a confederation with multiple veto points and little capacity for leadership in a crisis. As Henry Kissinger reportedly said, expressing his skepticism about the EU as a diplomatic player, “Who do I call?”

The second frailty is that, despite all of the efforts of Brussels to forge a common identity, the continent is still, in the famous formulation of General de Gaulle, one of the original Euro-skeptics, a Europe “des patries”—a Europe of nations. When a crunch comes, most citizens are French or Danish first, European second. And most social contracts are still forged—or not—at the level of the polity. The EU is woefully incomplete as a polity, much less a democracy. All over Europe, the EU is increasingly a project of elites, losing the trust of citizens. [my emphasis]

And here's a useful illustration from a German Green Member of the European Parliament, Ska Keller, on How Europe is "Helping" 4 Million Syrian Refugees 21.09.2015.

The real existing EU: Germany and Greece under the Compassionate Pastor's Daughter

The fight of Alexis Tsipras' government earlier this year against the harsh austerity measures imposed by the German government of the Mitfühlende Pastorentochter Angela Merkel via the Troika of the EU, the ECB and the IMF has highlighted for the world Greece's need for debt structuring.

So it's not at all surprising to see that need articulated by Richard Portes, who "argues that Greece is fundamentally insolvent and that the EU and its attendant institutions should recognize that fact and work immediately toward some form of sovereign debt restructuring." (Fiscal Austerity & Greece New Economic Thinking 09/26/2015)

He has the following to say about those famous "structural reforms" we hear so much about from the advocates of neoliberalism:

Portes also suggests that Greece is a special case, a country that does not lend itself readily to easy reform. There is an ongoing banking crisis, unsustainable debt levels ..., and institutions by and large remain malfunctioning. So whilst Portes agrees with much of the prevailing sentiment that further fiscal austerity will be counterproductive, he also argues that Greece must relent as well: it must signal its commitment to deep structural reform, particularly in regard to the endemic corruption in public administration, tax evasion, and the complex oligarchic system that links political parties to the media and administration. For Portes, no further fiscal austerity makes sense, but he suggests that Greece could aid its cause by reforming product markets and services that are still oligopolistic, with numerous barriers to entry and, hence competition. A second priority is to modernize the legal framework of property rights, investor protection and corporate governance, as well as a massive reorganization and restructuring of the public administration. These, rather than further wage cuts, are the only way to raise the competitiveness of the Greek economy. [my emphasis]

This is one way that the Greek fight this year has helped turn neoliberal rhetoric against itself.

The standard neoliberal recipe for "structural reforms" includes those obvious-sounding elements he mentions: fight corruption, crack down on tax evasion, even reduce the power of "oligarchy." Oligarchy in the neoliberal vocabulary refers to the capitalist class in countries considered in disfavor by whoever is using the term. In favored countries, they are economic elites ("job creators" for US Republicans) who are eager to show their public spirit by engaging in business-government cooperation and public-private partnerships, aka, PPP for the Kool Kids. In disfavored countries, they are oligarchs practicing crony capitalism.

In the Europe of the Mitfühlende Pastorentochter, Greece is the model of a corrupt, oligarchical, inefficient southern European country full of lazy and irresponsible people, needing the tutelage of a superior country with honest business practices and a good work ethic, i.e., Germany.

The dishonest and lawless practices of a great German company like Volkswagen are certainly no sign of deficiency in the superior economic and moral standards of Germany and the EU operating under the direction of the Mitfühlende Pastorentochter! Oh, no, that was just a couple of bad apples, or something. Why, it would be frivolous to even suggest that this was a symptom of a corrupt, oligarchical political system practicing crony capitalism. (Timeline: Is Volkswagen’s ‘Bug’ an EU Feature? Emptywheel 09/25/2015)

Brendan Greeley writing for the well-known radical-left Bloomberg Businessweek (note for Republicans: that's supposed to be obvious irony) asks, Did Privilege Enable Volkswagen’s Diesel Deception? 09/24/2015:

In Italy, the privilege is called potere speciale; in France, action spécifique; in the U.K., it’s a “golden share.” Those are all different names for an ownership stake that gives a government — be it national or local — special powers above any other shareholder. That makes a crucial difference in running a business. Governments, for example, have good reason to prevent jobs from moving to more competitive labor markets. A golden share can help with that.

But for countries practicing the neoliberal dogma in ways other than the ones discussed here so far, this is not crony capitalism or corruption, you see. Not at all. It's responsible gubment support for the Job Creators through public-private partnership. Or something.

In Europe, most golden shares are held in utilities and telecoms, companies that were state monopolies before being privatized. For more than a decade, the European Union, as it expanded and liberalized its common open market, has been trying to undo the persistence of state control. But there is one golden share that has endured, a German law so breathtakingly exceptional it can only be called what it is in fact called—“das VW-Gesetz,” the Volkswagen Law. It is explicitly designed for a single company. Germany has managed to defend its golden share against the EU because VW had built a reputation as a force for good: responsible corporate citizen, pioneer in environmental progess [sic]. [my emphasis]

Fortunately for the EU, Germany staunchly defends the rules for everybody. Well, with the occasional exception:

[Germany's "Volkswagen Law"] eventually brought Germany into conflict with the EU. In 2000 the European Commission — the EU’s executive body—began enforcement actions against the golden shares that remained in the newly privatized utilities in several countries. It acted against Italy for its shares in Eni, the former state oil company; against France, for its holdings in Elf Aquitaine, another oil company; and against the U.K. and its British Airports Authority. Several countries responded by defining their golden shares more narrowly, exercised only to defend a compelling national interest.

“The case of Volkswagen is peculiar because we are not dealing with public services,” says Daniele Gallo of Luiss Guido Carli University in Rome. “We are dealing with a company that sells cars.” In 2007 the commission won a judgment in the European Court of Justice against the Volkswagen Law. Germany, which usually follows the court’s judgments, responded instead with improvisation and duct tape: It struck some of the law’s provisions, which Volkswagen immediately added to its own bylaws. Lower Saxony retained its de facto veto over major decisions. The EC challenged, but the Court of Justice upheld the rejiggered law in 2013.

But this is consistent with the actual priorities of the neoliberal agenda and the actual application of it under the leadership of the Mitfühlende Pastorentochter. Germany gets to angle narrow nationalistic advantages out the EU and especially eurozone structures and processes. And those reforms emphasized by Portes - enforcing tax laws, reducing corruption, limiting the power of the oligarchy - are not the highest priorities.

Portes also notes "that the German government in particular (which consistently insists on 'following the rules') has been a serial violator of the Stability and Growth Pact, and conveniently forgets its own history when it comes to issues of debt forgiveness." The hardline "ordoliberalism" to which the Mitfühlende Pastorentochter adheres does seems to take deficits seriously, though exceptions can be made for the convenience of model country Germany, of course.

The "structural reforms" on which the Troika under the direction of the Mitfühlende Pastorentochter has been very intent on enforcing, most cruelly in Greece's case, are those calling for privatization of public property, deregulation of private business, elimination of capital controls, weakening of labor unions, reductions of wages and salaries and protective legislation for workers (aka, "liberalization of labor markets"), reductions of social services, raising the retirement age and reducing old-age pensions.

Alexis Tsipras' government shows every sign of being serious about improving tax collection and fighting corruption. His former Finance Minister Yanis Varoufakis expects that in his new government, Tsipras is "going to make a big deal out of how uniquely positioned he is to take on the oligarchy and tax evaders because Syriza has no strings attached." (Quoted in David Patrikarakos, Varoufakis told you so Politico EU 09/23/15)

But the Troika has actually impeded them in those efforts in various ways. As Varoufakis puts it, the Troika "is in cahoots with the oligarchs. Since 2010 the oligarchs have been the greatest supporters of the Troika and the Troika has been sheltering them." And presumably will continue to do so. As long as the Mitfühlende Pastorentochter has her way. As Varoufakis says, the July MOU the Troika imposed on Greece has deprived the country of "all the instruments the state has to fight a war against them."

Varoufakis refers to some of the ways in which the Troika, in cooperation with the Greek oligarchy, is impeding one of the very reforms, combating tax evasion, that Portes considers most urgent and emphasizing others (The lenders are the real winners in Greece – Alexis Tsipras has been set up to fail The Guardian 09/21/2015):

Tsipras must now implement a fiscal consolidation and reform programme that was designed to fail. Illiquid small businesses, with no access to capital markets, have to now pre-pay next year’s tax on their projected 2016 profits. Households will need to fork out outrageous property taxes on non-performing apartments and shops, which they can’t even sell. VAT [value-added taxes] rate hikes will boost VAT evasion. Week in week out, the troika will be demanding more recessionary, antisocial policies: pension cuts, lower child benefits, more foreclosures. [my emphasis]

And it's always important to remember the cost to Europe's fundamental democratic system from the midconduct of the Troika and the Mitfühlende Pastorentochter. Varoufakis in The Guardian: "Of course, to get to this point Greek democracy has had to be deeply wounded (1.6 million Greeks who voted in the July referendum did not bother to turn up at the polling stations on Sunday) – no great loss to bureaucrats in Brussels, Frankfurt and Washington DC for whom democracy appears, in any case, to be a nuisance."

The is the real existing EU, currently under management of the Mitfühlende Pastorentochter.