The crushing of Syriza: an Aesopian fable

Illustration for Aesop's fable of The Lion's Share: for the 1501 edition of Steinhowel. Wikicommons. Some rights reserved.According to a well established narrative in
2010 and 2011 Greece was ‘saved’ by a multi-billion euro ‘bail-out’ provided by
a ‘troika’ of institutions, the EC, ECB and the IMF. As a condition for the
‘bail-out’, Greece had to implement an ‘economic adjustment programme’ designed
by the ‘troika’ which had come to be known as the ‘austerity’ strategy.

It had three components: fiscal consolidation,
internal devaluation and structural reforms. All three elements were expected
to promote growth and ultimately reduction in indebtedness. Fiscal
consolidation by restoring sound public finances can improve confidence and stimulate
business investment and growth. This is known as the theory of ‘expansionary
fiscal contraction’. Internal devaluation can also promote growth by improving
competitiveness and therefore resulting in an increase in exports, which could
potentially offset the deflationary impact of the internal devaluation.
Finally, ‘structural reforms’ by modernizing the economy and creating a
business-friendly environment can create the conditions necessary for a private
sector-led growth.

The austerity strategy, however, is not without
its critics. There are many powerful and cogent theoretical and empirical
arguments against it. Indeed a credible and persuasive case can be made that it
has failed in achieving its objectives, the principal one being the reduction
in indebtedness that caused the crisis in the first place. After five years of
austerity a majority of Greek people, especially those who were at the
receiving end of a savage 1930s style economic depression, have come to believe
that the strategy was counter-productive, self-defeating and had failed to
deliver what it promised. In January 2015, Greece elected a government with a
mandate to try to win hearts and minds in Europe not only about ending
austerity in Greece but also about the need to reform a malfunctioning and
dysfunctional monetary union. 

In early February 2015 a charismatic young
Greek Prime Minister and a brilliantly eloquent but ‘unconventional’ Greek
Finance Minister arrived in Brussels ready to present to their colleague in the
Euro-group the ‘counter-narrative’ of the eurozone crisis which had four major
elements: beginning with the premise that indebtedness in Greece and in other
eurozone peripheral countries had similar underlying causes: a malfunctioning
monetary union. Secondly, that the ‘rescue’ of Greece in 2010 resulted in the
rescue of European banks and prevented ‘contagion’ in the eurozone. Thirdly, it
was the implementation of savage austerity rather than the non-implementation
of the ‘troika’ adjustment programme that produced the collapse of the Greek
economy. Lastly, that the Greek debt was unsustainable in 2010 and 2012 and that
it is even more unsustainable in 2015.

The euro-group meetings were not, of course,
academic seminars in which the relative merits of alternative ‘narratives’ of
the crisis in the eurozone could be debated. Greece was told in no uncertain
terms that in the eurozone compliance with the rules and commitment to the
undertakings of previous governments has precedence over recent electoral
mandates. The German finance minister reportedly stated: “We cannot change the
rules every time there is an election in the eurozone”. The only concession
that could be afforded to the new government was a five month period during
which an alternative means of achieving the targets agreed by the previous
government were to be worked out and presented. There would be no ‘debt
forgiveness’ and no reversal of austerity.

Constructive ambiguity

Thereafter, eurozone policymaking was
transformed and entered the strange world of ‘constructive ambiguity’ and game
theory. The games of ‘chicken’ and ‘high-stakes poker’ and scenes from
Hollywood movies from Dirty Harry to Rebel Without a Cause were the most
popular journalistic references for what was going on between Greece and its
partners in the eurozone negotiations after January 25, 2015.  Eventually Syriza did blink first; it went
‘all-in’ with a rubbish hand; its car fell off the cliff and as far as Clint
Eastwood was concerned, they did ‘make his day’.

Following the humiliating crushing of Syriza on
July 12, 2015, the pertinence of an Aesopian fable may not have been lost on Tsipras
and Varoufakis, both well versed in Greek mythology, and called, The Lion’s Share.

A Lion, a Donkey and a Fox agreed to go hunting
together. At the end of the day the lion asks the donkey to divide the spoils.
Meticulously and fairly the donkey divides the spoils in three equal parts. So
enraged and offended is the lion that he kills and devours the donkey. He then
asks the fox to divide the spoils. The fox creates a huge pile in front of the
lion, leaving a tiny piece for herself. The lion is very impressed and asks the
fox how she learned to divide so fairly and properly? The fox replied: the
donkey’s predicament.

Greece’s ‘predicament’ will reverberate around
Europe and no doubt will become a salutary and painful lesson for millions of
citizens in the eurozone: they must not vote for parties that promise to end
austerity and hope to remain in the eurozone. 
It is better to act like the fox than the unfortunate donkey in the
Aesopian fable.

What stands out as a central message of the
story is not the savagery and
brutality of the lion but the idiotic miscalculation of the donkey in assuming
equality of status with the lion. Similarly with regard to the negotiations
between Greece and the Euro-group the bulk of the criticism is of Tsipras and
Varoufakis for their serious miscalculation of power relations in the eurozone while
not so much criticism is directed at the brutality in the use of power in the Eurozone,
which is not too dissimilar to the one prevailing in the jungle.

It is the same old story and same old message
since the eurozone crisis erupted in 2010. All indebted economies must accept
austerity or ‘end up like Greece’. Except that in 2010 the image of ‘ending up
like Greece’ was that of a Dickensian debtors’ prison. In 2015 it is that of
hell. The agreement is vindictive and has been compared to the Versailles
Treaty of 1919. Ambrose Evans-Pritchard uses
much stronger language. He argues that comparing the terms of the
euro-group agreement to the Versailles treaty does not quite capture the
‘depravity’ of these terms. He writes: “What Greece is being asked to do is
scientifically impossible. Almost everybody involved in the talks knows this. Yet
the lie goes on because the dysfunctional nature of EMU politics and governance
makes it impossible to come clean. The country is dishonestly kept in a
permanent state of crisis”

Muddling through?

The euro-group led by Germany was not in the
least interested in the Varoufakis ‘counter-narrative’ any more than the lion
was interested in the donkey’s notions of fairness and justice. What mattered
above all was that Syriza and other political parties that have similar
aspirations must be crushed. Following the Syriza capitulation and humiliation
of July 12, no one is interested in the ‘counter-narrative’ any more. On the
contrary the dominant narrative and its central message are now propagated and
re-iterated not only by the ‘usual suspects’ of Merkel, Schaeuble and
Dijsselbloem but also by new political players from Finland and the Baltic
states.

Greece having broken the rules of the eurozone
and lied about it was shown leniency and solidarity through a generous ‘rescue’
package and a ‘reform’ program that could have lifted the country out of the
crisis. Greece not only failed to implement the agreed strategy but also
elected a government of inexperienced amateurs who believed they could change
hearts and minds in Europe and start the long overdue process of completing the
European project. If Greece wants to stay in the eurozone it must be prepared
to abide by its rules. The Greek people were given a final chance on July 12, 2015
to decide what they really wanted.
They must fully implement the new agreement, regain their lost credibility and
come to terms with the ‘reality’ of eurozone membership: it is ‘austerity or
bust’. Moreover the ‘amputation’ option is still available.   

There is a glimmer of hope among those who
continue to believe in the ideal of a united Europe that the
‘counter-narrative’ of the eurozone crisis so brutally dismissed and ridiculed
by the policymaking elite of the euro-group is beginning to find resonance
among many anti-austerity citizens of the eurozone.

Whether the humiliating crushing of Syriza in
Greece for daring to challenge the dominant narrative of the crisis would help
or hinder the emergence of a movement for the long-awaited political reform of
Europe remains to be seen. The only ‘contradiction’ that remains in the
eurozone is the utopian expectation that a monetary union will work under
German hegemony without political union. The centrifugal forces unleashed by
the eurozone crisis are unlikely to be halted by this sorry episode. Germany’
insistence of holding on to the ‘Lion’s share’ of decision-making power in the
eurozone is not only regrettable but dangerous. With ‘Grexit’ still on the
table what next, ‘Brexit’? ‘Muddling-through’ like the Euro-group
‘a-Greek-ment’ of July 12 is no substitute for rational policymaking in the
eurozone, the second largest economy in the world. 

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