Europe’s Attack on Greek Democracy
By Joseph E. Stiglitz
June 29, 2015 "Information
- NEW YORK – The rising crescendo of bickering and acrimony
within Europe might seem to outsiders to be the inevitable result of the
bitter endgame playing out between Greece and its creditors. In fact,
European leaders are finally beginning to reveal the true nature of the
ongoing debt dispute, and the answer is not pleasant: it is about power and
democracy much more than money and economics.
the economics behind the program that the “troika” (the European Commission,
the European Central Bank, and the International Monetary Fund) foisted on
Greece five years ago has been abysmal, resulting in a 25% decline in the
country’s GDP. I can think of no depression, ever, that has been so
deliberate and had such catastrophic consequences: Greece’s rate of youth
unemployment, for example, now exceeds 60%.
startling that the troika has refused to accept responsibility for any of
this or admit how bad its forecasts and models have been. But what is even
more surprising is that Europe’s leaders have not even learned. The
troika is still demanding that Greece achieve a primary budget
surplus (excluding interest payments) of 3.5% of GDP by 2018.
around the world have condemned that target as punitive, because aiming for
it will inevitably result in a deeper downturn. Indeed, even if Greece’s
debt is restructured beyond anything imaginable, the country will remain in
depression if voters there commit to the troika’s target in the snap
referendum to be held this weekend.
of transforming a large primary deficit into a surplus, few countries have
accomplished anything like what the Greeks have achieved in the last five
years. And, though the cost in terms of human suffering has been extremely
high, the Greek government’s recent proposals went a long way toward meeting
its creditors’ demands.
be clear: almost none of the huge amount of money loaned to Greece has
actually gone there. It has gone to pay out private-sector creditors –
including German and French banks. Greece has gotten but a pittance, but it
has paid a high price to preserve these countries’ banking systems. The IMF
and the other “official” creditors do not need the money that is being
demanded. Under a business-as-usual scenario, the money received would most
likely just be lent out again to Greece.
again, it’s not about the money. It’s about using “deadlines” to force
Greece to knuckle under, and to accept the unacceptable – not only austerity
measures, but other regressive and punitive policies.
would Europe do this? Why are European Union leaders resisting the
referendum and refusing even to extend by a few days the June 30 deadline
for Greece’s next payment to the IMF? Isn’t Europe all about democracy?
January, Greece’s citizens voted for a government committed to
ending austerity. If the government were simply fulfilling its campaign
promises, it would already have rejected the proposal. But it wanted to give
Greeks a chance to weigh in on this issue, so critical for their country’s
That concern for popular legitimacy is incompatible with
the politics of the eurozone, which was never a very democratic project.
Most of its members’ governments did not seek their people’s approval to
turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes
said no. They understood that unemployment would rise if the country’s
monetary policy were set by a central bank that focused single-mindedly on
inflation (and also that there would be insufficient attention to financial
stability). The economy would suffer, because the economic model underlying
the eurozone was predicated on power relationships that disadvantaged
And, sure enough, what we are seeing now, 16 years after
the eurozone institutionalized those relationships, is the antithesis of
democracy: Many European leaders want to see the end of Prime Minister
Alexis Tsipras’s leftist government. After all, it is extremely inconvenient
to have in Greece a government that is so opposed to the types of policies
that have done so much to increase inequality in so many advanced countries,
and that is so committed to curbing the unbridled power of wealth. They seem
to believe that they can eventually bring down the Greek government by
bullying it into accepting an agreement that contravenes its mandate.
It is hard to advise Greeks how to vote on July 5.
Neither alternative – approval or rejection of the troika’s terms – will be
easy, and both carry huge risks. A yes vote would mean depression almost
without end. Perhaps a depleted country – one that has sold off all of its
assets, and whose bright young people have emigrated – might finally
get debt forgiveness; perhaps, having shriveled into a middle-income
economy, Greece might finally be able to get assistance from the
World Bank. All of this might happen in the next decade, or perhaps in the
decade after that.
contrast, a no vote would at least open the possibility that Greece, with
its strong democratic tradition, might grasp its destiny in its own hands.
Greeks might gain the opportunity to
shape a future that, though perhaps not as prosperous as the past, is
far more hopeful than the unconscionable torture of the present.
I know how
I would vote.