Tsipras, a Political Master

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Europe and the world should be taking a moment and reflect on the political mastery of Alexis Tsipras of Greece. In less than a year, Mr. Tsipras won two general elections, won a referendum and implemented contradictory policies, all this by changing his political standing and under terrible domestic and economic conditions. Aside from political ideology, Alexis Tsipras is undeniably one of the most talented European politicians. However has his mastery of politics translated into sound governing skills?

Early 2015, most Europeans, including a some Greek citizens, had never heard of Alexis Tsipras. The 41 year old tieless politician finds his political ideology in extreme left affiliated at first to the Communist Party. His political house is centered in the extreme left side of the political spectrum. After years of internal evolution in the Greek lefts, he then became the leader of the exteme-left wing party, Syriza (which means Coalition of the Radical Left) and was elected at the helm of Greece in February 2015. This was the beginning of his true political exposition.

Chapter 1: His election in February 2015 marked the end of the decade long transfer of power between the two leading parties. Tsipras was elected based on a program of anti-austerity policies, fight for Greek interests before the Troika (ECB, IMF, and Commission), increase of minimum wages, restauration of state employees and increase of pensions. If European media were deeply skeptical about his rise and thought that he would not last a year, they have appeared to be wrong. Ensuing his election, Tspiras disappeared from European minds until the looming of the deadlines for debt repayments of the IMF and ECB.

Chapter 2: The second chapter of his reign started several weeks prior the eventual default 478861728of Greece for the repayment of a  €1.5 billion to the IMF on June 30th, and a second one to the ECB mid-2015. These negotiations at EU finance ministers level and EU leaders level were extremely tense as neither Tsipras nor his finance minister, Yanis Varoufakis, wanted to accept the deal put on the table by the Troika and Germany. At the last minute, PM Tsipras called for a referendum on July 5th asking Greeks to decide on their fate: voting yes to the deal implied more austerity measures; a no vote was a rejection of the deal and could lead to a Greek default and leaving the Eurozone, known as a Grexit. Not only did Tsipras organized the referendum without noticing his European partners, but he campaigned for the no vote.

Chapter 3: The no camp, or Oxi, won the referendum with 61.3% and Europe was expecting a progressive departure of Greece from the Eurozone. Even President Juncker of the European Commission asked for a report on how to accompany Greece outside the Euro area. Instead of using his domestic mandate, Tsipras fired his finance minister (officially he resigned desipte winning) and went back to the negotiation table

ATHENS, GREECE - 2015/06/29: The word 'OXI' (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a 'NO' vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE – 2015/06/29: The word ‘OXI’ (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a ‘NO’ vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)

requesting the initial deal. Germany refused and France played an important role of holding together the parties and the negotiations alive. Ultimately, Greece agreed on a worst deal than previously offered and Tsipras implemented additional austerity measures and required reforms. The deal entailed the following aspects: raising the age for retirement; a VAT hike at 23% across sectors; privatization of key sectors of Greek economy; and removal of tax breaks for some Greek islands. These reforms would permit to unlock a third loan package of €86 billion until 2018.

Chapter 4: Tsipras agreed on the second deal, agreed at EU level on July 13th, which was worst than the initial offer, and brought it back home for a vote. The Greek Parliament voted and agreed on July 15th, on the bailout deal, which was approved with a 229-64 majority. However, Tsipras’ party, Syriza, seems to have lost some unity with 32 Syriza MPs defying their leader’s pleas and rejected the deal. Throughout July and August, Tsipras was facing serious political criticism and opposition by the members of his own party. Syriza was divided between a radical branch, led by Mr. Lafazanis, and a more centrist one counting Tsipras. The radical branch of Syriza had not accepted the political move by Tsipras to go against the popular vote of the referendum. “Mr Lafazanis’s supporters speak of an ‘ideological betrayal’ and ‘treachery’ by Mr Tsipras’s faction.”

Chapter 5: On August 20th, PM Tsipras announced his resignation and his candidacy for the next general election that would take place mid-September. His rationale was to get reelected without the radical branch of Syriza. His political gamble worked as he was reelected with 35.5% of the vote and was able to drop the hard-liners from his party. Syriza won 145 seats out of the 300 seats of the parliament, only four fewer than after the January elections. In order to assure a majority, Tsipras agreed on a coalition with right-wing party Independent Greeks (ANEL) with its leader Panos Kammenos. ANEL is an ultra-nationalist anti-immigrant party, often compared to UKIP in the United Kingdom. With this alliance, the Syriza-ANEL coalition offer the majority with 155 seats in the Parliament to Tsipras. Even President of the European Parliament, Martin Schulz, expressed his concerns directly to PM Tsipras about this political alliance.

Political Talent over Governing Skills?

In less than a year, PM Tsipras has demonstrated his political talent in remaining alive and electable despite party, domestic and European pressures all this under dire economic conditions and an unemployment level around 25%. If Tsipras proved to the world that he cannot lose an election, he needs to now tackle the true problems of Greece: crony capitalism, clientelism, systemic corruption, and implementing structural reforms of the economy and state. The country has been on life line for over 5 years, its intellectuals are fleeing away, higher education is barely financed and Greece cannot even protect its borders. Winning elections is one thing, implementing reforms and governing are another.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).
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Once upon a time, the EU was a Nobel Peace Prize Laureate

 

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Three years ago I wrote a piece beginning by: “It all started in the aftermath of World War II and in the emotional and material rumbles of Europe. The visionary great men of Europe — Jean Monnet, Robert Schuman and Konrad Adenauer —understood that peace in Europe would only be possible through deep economic integration, strengthening an irreversible degree of cooperation between Western European powers.” This was in mid-October of 2012, when the Norwegian Nobel Committee gave the Nobel Peace Prize to the European Union (EU). The rationale behind the prize was that the EU was a process permitting to make war unthinkable and allow for economic growth. This was a proud moment for Europeans, even though most of them did not pay much attention, and for Europeanists.

Radicalization of Domestic Politics

Today it is with real sadness to realize that in less than three years the survival of the EU appears in direct jeopardy and on the brink of implosion. Domestically, nationalism is ramping through either the rise of extreme-right wing parties, like the Front National in France, UKIP in Britain, Golden Dawn in Greece, or more recently through the

Image: AFP/Getty Image
Image: AFP/Getty Image

reemergence of extreme leftist parties like Podemos in Spain, Syriza in Greece, and the newly elected Jeremy Corbyn in Britain. In addition, the narratives and actions demonstrated by the Obrán government in Hungary talking of a Christian Europe is affecting the overall normative message of EU (read a previous analysis here). These movements demonstrate a radicalization of the political debate directly informed by a highly emotional and confused electorate witnessing a continuous and unstoppable decline of their socio-economic condition.

Directly related to the rise of European nationalism is the financial crisis, which has spilled over to the Eurozone. The euro crisis has left the 17 Eurozone economies, at the exception of Germany, into a state of economic lethargy. In the case of Greece, the country has been on the brink of default for years and its future does not look promising based on the reports produced by the International Monetary Fund, a member of the Troika. In the case of France, still an economic pillar of the Eurozone, the succession from right to left has demonstrated the inabilities of traditional political parties to build confidence, implement meaningful structural reform, and lower inequalities. Part of the problem is the divide between a common currency and national fiscal policies.

Regional Inefficiencies

Regionally, the lingering war in Ukraine is a direct illustration that war on the European continent continues to live on. A last minute cancelation by Ukrainian President Viktor Yanukovych of a bilateral agreement between Ukraine and the EU in November 2013 sent off Ukraine into one of its darkest periods. Two years later, Ukraine lost a piece of its territory, Crimea, which was annexed by Russia in spring 2014 after a quickly organized referendum (read here an analysis on Russian influence over Europe). Since the annexation of Crimea, not only as Ukraine lost the peninsula, which is never mentioned by

Photo: Kremlin.ru [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons
Photo: Kremlin.ru [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)%5D, via Wikimedia Commons

the 28 EU Member States, but the war in the Eastern border of Ukraine has severely affected the political, economic and stability of Ukraine. The only instrument implemented by the EU, which has been very successful, is a series of sanctions against Russia. But unity among the 28 on keeping and deepening the sanctions is slowly disappearing in favor of national gains.

The second serious regional crisis is the current migration crisis. After the 2007 Arab Spring, many in the West and the Middle East and North Africa (MENA) were hopeful for a democratic transition of many countries under long-term dictatorships like in Egypt, Syria, Tunisia and Libya. The time of euphoria quickly turned sour for Arabs and Westerners, witnessing either the reemergence of authoritarian regimes (Egypt), their survival (Syria) or simply collapse of the state (Libya). Since then, the EU, which has not done enough with its American counterparts in assisting in the transition of these states, is seeing an unprecedented number of refugees fleeing their homes, which have become war zones like in Syria, Afghanistan, Eritrea, Somalia and so forth. The mass of refugees seeking for asylum in the richest EU countries is not new, but the current mass of refugees is unprecedented and is underlining the weaknesses of the EU (institutional) and dismantling European solidarity.

A Crisis for Ages – The Migration Nightmare

If the Eurozone crisis, or at least a Greek default, were framed as the event that could kill the Euro and ultimately the Union as whole, these were the good old days. The migration crisis is directly threatening the future of the Union. If Germany and Sweden have been the good Samaritans in welcoming refugees (in 2015, it is estimated that Germany could welcome between 800,000 and 1,000,000 asylum seekers), Chancellor Merkel with her Minister of Interior, Thomas de Maizière, have reinstalled border control at the frontier with Austria. This move by Germany has started a snowball effects with other EU Member States implementing similar measures. The closing of borders to control the movement of people is a direct violation of the Treaties. The border-free Schengen agreement is one of the most successful and visible symbols of the European Union. It is too some extent a sacrosanct dimension of the EU.

European Integration in Danger?

The European integration process is a complex story of crises and adequate responses through policy changes and bargaining power. The period of the empty chair, the end of european_crisisthe Cold War and the reunification of Germany, the war in Kosovo, the divide between old and new Europe around the Iraq crisis, the no to the 2007 Constitutional Treaty and the Eurozone crisis have all been serious crises, but yet manageable for the European leaders. It appeared that European actors understood the need to solidify the Union and put aside differences in order to solve a crisis. The migration crisis is showing the worst of Europeans and their leaders, and European solidarity remains to be seen. Jean-Claude Juncker, President of the Commission, called for courage in remaining altogether and implementing meaningful measures like quotas. With a weakening Euro, as the Eurozone crisis has yet to be solved, the Schengen agreement under attack, a possible Brexit in 2016/17, the EU appears to move towards an ‘ever-lesser Europe.’ Yes, once upon a time, the EU was a Nobel Peace Prize laureate.

(Copyright 2014 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

 

Politipond’s Quiz – Summer 2015

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Fall is on the corner, and it is time to see how well you have been following the different issues taking place over the summer in the transatlantic arena. Take a short quiz and see if you passed.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Greece – Failure of Leadership with Global Consequences

Photo: EPA
Photo: EPA

“Le drame grec n’est pas et ne sera pas seulement national : il a et il aura des effets sur l’ensemble de l’Europe, dont la Grèce fait partie intégrante par son histoire et sa géographie” – Jacques Delors, Pascal Lamy et Antonio Vitorino in Le Monde of July 4th.

Greece and the European Union have their backs against the wall. Greece faces two deadlines, June 30th repayment of €1.6bn to the International Monetary Fund (which remains unpaid until the results of the referendum), and the July 20th of €3.5bn to the European Central Bank (ECB). Even if Greece were to repay the first bill, it would be unable to do so on July 20th.

So far, Greek Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, feel that the terms of the new bailouts are too destructive and would require more cuts on Greek social programs that they have asked Greek citizens to vote on their futures (the referendum is currently taking place in Greece). Without an extension of his first debt, Greece has no chance of receiving the remaining of the credit of €7.2 billion and would ultimately default. So, how has a crisis starting in October 2009 been so poorly managed and is putting at risk the stability of Europe and global markets?

A Call for Democracy?

On the night of Saturday  27th, Prime Minister Tsipras announced on television, at the great surprise of his European counterparts, that he would be holding a referendum on July 5th asking the Greek citizens to decide on the future of Greece, either by accepting the deal and the ensuing austerity measures, or by rejecting the deal and ultimately having to default. In order to hold the referendum, Tsipras asked his creditors to postpone the June 30th deadline by five days, which has been rejected. For instance, the leader of the Eurogroup of Eurozone finance ministers, Jeroen Dijsselbloem, said at a news conference that “The Greek government has broken off the process. However regrettable, the program will expire on Tuesday night.”

International public opinions have been deeply divided when reflecting on Tsipras’ call. On the one hand, some have argued that Tsipras is gambling with the future of Greece and ultimately the Eurozone and the stability of global market. While others have talked of a smart political move by Tsipras. On the question of the referendum, Prime Minister Tsipras has already expressed that he will be campaigning for a ‘no’ vote (read here Varoufakis’ recommendation for a no vote). Two of the top American economists, Joseph Stiglitz and Paul Krugman, announced in separate editorials that they would vote ‘No’ at the referendum. Joseph Stiglitz said clearly in his op-ed that the tension between Greece and its creditors (troika) is about power and democracy rather than economics. Yet, many media outlets have been very critical towards Tsipras as one can see the recent cartoon published by the Economist:

The Economist - July 4th
The Economist – July 4th

Merkel & Hollande, European Leaders? Think again…

The current crisis is more of a political failure than an economic/monetary one. It is the failure of Chancellor Angela Merkel of Germany and François Hollande of France to recognize that saving Greece is more important than letting a Eurozone member

Photo: EPA/WOLFGANG KUMM
Photo: EPA/WOLFGANG KUMM

defaulting on its payments and obligations. Chancellor Merkel has been portrayed as the leader of Europe, which seems to be a wrong assessment in retrospective. A leader is not an individual working on protecting solely the interest of his/her country, but in the interest of the system as whole. In addition, one needs to recognize that Merkel rejected a last minute call by Tsipras to redefine the terms of the agreement. She reiterated that there was no point in holding talks with Greece before the July 5th referendum. Her finance minister, Wolfgang Schäuble, was more critical, saying, “Greece is in a difficult situation, but purely because of the behaviour of the Greek government … Seeking the blame outside Greece might be helpful in Greece, but it has nothing to do with reality.” As hard it may be to justify another rescue of Greece to her electorate, Angela Merkel needs to recognize that a Greek default would endanger Germany, the Eurozone, the EU and global financial markets as a whole.

In the case of François Hollande, he has been too quiet and distant on the question of the Greek default. François Hollande, a socialist by political affiliation, missed a strategic moment in establishing himself as the axiom between the members of the South with the ones of the North. François Hollande’s gamble has been to bandwagon with Germany rather than positioning himself with a clear strategy and eventually offering alternative options in favor of Southern members. Hollande’s gamble is not only failing, but he has become irrelevant on the Greek dossier (not what French finance minister, Michel Sapin, would claim). Such strategic absence by France is regrettable, as the country economic base is so fragile that a Greek default would certainly put a halt to the more than timid recovery if one considers the degree of involvement of French banks in the Greek economy. It is difficult to imagine France striving through another Eurozone crisis with GDP growth rate of 0.6% and an unemployment level at 10.5%.

Global Earthquake, and American Powerlessness

A Greek default would have serious global consequences causing contagion throughout the world. Since Monday morning, global stock markets have been declining and are waiting on the eventual repercussions of a Greek default as many unpredictable consequences could occur considering the complex interconnection of world financial system.

The United States has been following the European drama very closely and powerlessly from the other side of the pond. Even though the US economy is slowly picking up, it has remained very timid with strong quarters and weaker ones. President Obama has been in directly contact (and through his Jack Lew, his Secretary of Treasury) with his European counterparts, Ms. Merkel and M. Hollande, expressing his concerns about the eventual consequences on the global finance and calling for a resolution. Speaking at a news conference, the Chairman of the Federal Reserve, Janet Yellen, said that “To the extent that there are impacts on the euro-area economy or on global financial markets, there would undoubtedly be spillovers to the United States that would affect our outlook as well.” The US have been very worried about the course of actions taken by the Europeans and has urged Greece and the Europeans to reach a deal in order to avoid a default.

A second reality, beside economics, is pure geopolitics and security. With a Greek default, the country would become unable to secure its borders, a real problem with the current migration crisis in the Mediterranean – wherein the EU and its Member States are failing to address – (read previous analyses here and here). Even if most of the coverage has focused on Italy, Greece is the second entry point to Europe by the sea and land. The second geopolitical reality is the rapprochement of Athens with Moscow. This rapprochement is taking place at a time

Reuters
Reuters

wherein the EU is extending its economic sanctions against Russia (so much for European unity vis-à-vis Russia). Greece and Russia are working on an deepening energy and agricultural ties. “Russia wants to build a pipeline through the Balkans, and Greece wants it, too” said Dimitris Vitsas, a ruling leftist Syriza party lawmaker, “We can develop a common enterprise not only in this, but for agricultural products and so on.” From Moscow’ standpoint, the gas deal with Athens is an important entrypoint into European politics. Moscow has been financing European radical parties and worked on transforming its image from within (read here a previous analysis on Russia in Europe).

Geopolitics highly matter in the Greek dossier and seem to have been sidelined for obvious economical and financial realities. With or without a Greek collapse, geopolitics will remain and affect the stability of Europe.

A New Meaning of Europe?

The European project is based on core principles, norms and values: solidarity, peace, democracy and respect. At several occasions, German Chancellor Angela Merkel used the phrase, “If the euro fails, Europe fails,” in order to talk about the need to save Greece. With the Greek fiasco, it seems that each normative dimension has been violated by all European parties. The concept of European solidarity is not embedded in punishing but assistance.

Greece is so indebted with a debt representing 183.2% of the GDP with an unemployment rate above 25% that its future can only be with a serious assistance by its European counterparts. Even if Greek debt is abysmal, Greece’s economy only represents 2% of the eurozone. In order to make Greece stable and functional, it will need to go through serious structural reforms and clean up the high level of corruption. Certainly some Eastern, Central and Baltic Member States, like Lithuania and Bulgaria, feel that Greece should implement the necessary reforms as the quality of life in Greece, especially the level of pensions in Greece, are much higher than in poorer EU Member States. But this could be adjusted once Greece is under European protection. Can these take place under additional austerity measures?

Last but not least, the European political narratives have evolved these last five years. Back in 2009, the concept of Grexit was not an option, just a concept describing an unthinkable future (read an interview on the topic here). Today, a Grexit appears as an option and eventually a reality. On the verge of a default, it seems that the EU project may be endangered because of lack of flexibility and lack of understanding of its heritage. Letting Greece default would be a failure of leadership and failure of strategic thinking.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

 

Grexit, Zombies and Back to the Future

grexit

With the looming Greek deadline, it is interesting to revisit an interview conduced back in 2011 about the future of Greece as a member of the Eurozone. Not surprisingly, not much as changed since then aside from the perpetual rotation of Prime Ministers unable to balance the debt, european and international pressures, and domestic forces.

In almost five years, the EU, the Eurozone and Greece are in the same situation that they initially were. Today Greece is on the verge of defaulting on its debt of €1.5 billion to the IMF on June 30th. Since the election of Prime Minister Alexis Tsipras, the fight between Greece and the Troika+Germany has been tense with no real solution (read a previous analysis on Syriza here). The bargaining process has brought the EU and Greece in front of a wall. The only difference between 2011 and 2015 is the acceptance of the concept of Grexit. In 2011, Grexit was only a word to express the unthinkable. In 2015, Grexit is an option.

Here is the interview of Dr. Lorca-Susino taken place in Miami in 2011:

“What makes a currency unique? The symbols, monuments, leaders figuring on the paper money, are exemplifications of the collective identity and shared culture. In the case of the Euro, as underlined by Gideon Rachman, the symbols on Euro’s coins and bills are fictitious.

Last week [September 15th, 2011], I ask one of my close friends, Dr. Maria Lorca-Susino, and also co-worker at the EU Center of Excellence at the University of Miami to grant me a little of her time for an interview on the future of the Euro and its impacts on the EU as whole. The fraternity among Europeans living abroad is such that she could not refuse. Dr. Lorca-Susino has emerged as one of the top thinkers on the Euro and recently published an outstanding book, The Euro in the 21st century, from the ashes of her dissertation. I had in mind to do the interview à la Financial Times, unfortunately neither lunch nor coffee were part of it.

Zombies have become a very trendy concept to use in International Relations and mass culture [it was the case in 2011 with all the movies, tv-shows and Drezner’s book Theories of International Politics and Zombies], and I could not resist on using it for this piece. Is Greece a zombie? Can a bite from Greece lead to contagion to the other members of the Eurozone? and ultimately to the European Union as a whole? Could it lead to the comeback of national currencies? Would a default of Greece be like a heat shot to a zombie? These were my general questions throughout our discussion.

I started straight with a large, contentious and complex question, “How do you see the future of the Euro?” As a true academic, she replied by “it depends,” and then claimed that it will be “without Greece.” Greece has been at the heart of a massive political storm in Europe for several reasons: first, Greece is seen by the Troika – EU, IMF, ECB – as not doing enough; second, Greece could be considered as a failed-state. The problem with Greece is that the Greek government is unable to raise money [this changed in 2014 in Greece], as opposed to be unwilling to. Furthermore, from an economic standpoint, the case of Greece is a problem of solvency – no more assets – as opposed to have a problem of liquidity, which is the case of the Italy.

Dr. Lorca-Susino underlined that the Eurozone without Greece is not a “big problem” as the Treaties have been already breached many times. The no bailout rule has been breached, so why would it be a problem to remove Greece for the Eurozone? At that time, I should have raised the fact that one of the problems is perhaps not political, but instead unethical. But even the notion of ethics on the Greek fiasco lost its value a long time ago, when the Greek government cooked the books. The fact is that Greece lied and did not report the “real” data concerning its deficit and debt. The expulsion of Greece from the Eurozone is not a question of economic weakness, as argued by Dr. Lorca-Susino, but instead a consequence of its dishonesty to the other Member States. The cover-up by the Greek government did put the entire system in jeopardy, as she recalled, but also limited the time for action or reaction of the other Member States in dealing with such crisis.

I, then, wondered about the need to restructure, redesign the architecture of the Eurozone. She replied very simply that, “the Eurozone has all the requirements. But the only problem is that they have not been respected.” Originally and “in good faith” – as underlined several times throughout our discussion – Member States were allowed to maintain their fiscal autonomy. She went on and argued that the “unwritten rule for this fiscal independence” was because of a shared belief that Member States were part of a so-called “gentlemen club.” In other words, Member States’ words were the only guarantee needed for a stable and safe economic climax within the Eurozone. Short-term breaching was permitted, as it was the case with France and Germany, as long as Member States readjusted their deficits.

What about a common EU fiscal system? “Fiscal unity is complicated,” argued Dr. Lorca-Susino, “because it would send the entire European political class to unemployment.” Her vision of the role of politicians is reduced to their abilities to make the budget in accordance with the country’s needs. Fiscal unity is not a fiscal question, but instead a political one. However, another problem would be to design a common European taxation system with all its complexity around the question of redistribution in accordance with national taxation and European needs. Fiscal unity would ultimately lead toward a federal state along the lines of the United States.

But, what is the role of the European public in all that? Have European citizens been removed from the equation? Since the beginning of the crisis in 2008, the European public, all across the Union, has been extremely critical and vocal of all the austerity measures undertaken, especially the ones implemented in Greece, Spain, Italy, Britain, and to some extent France. A large segment of Europeans see the European Union as the supra-entity forcing national governments to cut their budgets and ultimately weakening the power of the welfare state. Her answer, once more, was sharp and clear, “the Euro is like Bush! Everybody blames it!” Her argument is that European citizens truly believe that life post-Euro was better. To some extent, the economic rationale is valid, monetary autonomy. Furthermore, national governments have used the Euro as a shield in order to push unpopular national economic policies without affecting the electability of its political class.

On the international stage, the Euro has been used as an instrument from diversion especially in the US. On the money market, the Euro is not seen anymore as a strong, stable currency leading investors in buying massive amount of Swiss Franc with all the consequences it entails for the Swiss authorities.

To conclude this piece, I would emphasize two points: first, the Euro is far from being perfect, however, it has become an European scapegoat. At least, Member States can agree on something; second, as argued by Dr. Lorca-Susino, “Greece is not buyable as a country, as an economy.” Greece looks like a zombie. One of the problems with zombies is the difficulty to find a vaccine. “

0,,18530052_303,00Putting this interview in perspective and as a concluding remark, one should mention the call by Prime Minister Tsipras to put the decision in the hands of the Greeks by holding a referendum on July 5th. This fascinating political move by Tsipras put the Greeks in the driver seat. Tsipras and his finance minister, Yanis Varoufakis, are opposed to the terms of the new bailout. For instance, in his public address on June 26th, PM Tsipras said “After five months of tough negotiations, our partners ended up with a proposal in the form of an ultimatum,” with “new, unbearable measures,” which would force for additional cuts to pensions, salaries and tax increases. He added that “the goal of some of Greece’s partners is the humiliation of an entire nation.” It is the first time since the beginning of the eurozone crisis that a government is asking directly its citizenry to make a choice on their future.

In order to do so Tsipras had asked to his creditors and the Eurogroup to give a 5 days extension. The next day, June 27th, the finance ministers of the Eurogroup rejected Tsipras’ demand. Jeroen Dijsselbloem, the leader of the Eurogroup of eurozone finance ministers, told a news conference that “The Greek government has broken off the process. However regrettable, the program will expire on Tuesday night.” Ultimately, Greece seems on the verge to leave the Euro. A Grexit is now a reality.

This piece was initially published on Foreign Policy Association’s Blog on September 23rd, 2011 under the title of “Euro, Zombies, and Greece: A Discussion with Dr. Lorca-Susino”
(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Euro-tic – The European Nightmare?

trash

The EU is stuck for one reason or two, its euro-tic dilemma. The EU is stuck between 1+28 chairs: the European chair (European level) and the National chairs (Domestic forces). The challenges facing the EU can be solved through two types of policies: either through more integrated policies, or through individual/national policies. However, the current status-quo centered around this Euro-ticism is unsustainable in the short-, mid-, and long-term.

Today two pressing issues are facing the EU with serious consequences if left unresolved, the migrant crisis in the Mediterranean Sea and the Greek debt crisis. Both crises are challenging and complex in their root causes, in the policy design to solve them, in the policy implementation, and on top of it the outcomes – positive or negative – will only be visible in the mid- and long-term. Considering the current negotiations process at the EU level due to the institutional design of the EU and the domestic pressures no viable and sustainable long-term solutions can neither be designed nor adopted.

Fortress Europe

In the case of the migration crisis in the Mediterranean sea, the EU and its 28 Member States are failing in trying to solve the crisis. So far the only solution has been to increase the funding of the EU agency, FRONTEX, by providing more money and capabilities to EUNAVFOR Med. Nevertheless, the CSDP operation does not have a search and rescue mission, only a border management mandate (refer to chart here). So the EU will be patrolling around Italy and Greece in order to assist the member states in the protection of Europe.

_82453476_migrant_routes_624_14_15_v3

The solution seems quite simple, an orchestrated distribution plan between the 28 Member States to accept a number of refugees over a 10 year period by offering them a blue-card (similar to the American green-card) allowing them to integrate and find a job in Europe. Such policy is sustainable and acceptable based on European values and norms. Additionally, it would work as most of the migrants trying to reach Europe are principally composed of members of the middle-class in their home countries destroyed by war, terrorism and

Source: The Economist
Source: The Economist

other sorts of crisis.

It is difficult to imagine that neither France nor Germany cannot assimilate 1000 refugees on year basis. Even if this policy could work on the long-term, it would be political suicidal for Chancellor Merkel and President Hollande to come home with such plan. The domestic radical forces (right and left) would build such a front against the leadership that their political parties would not survive another elections.

Grexit or Nothing?

In the case of the Greek debt crisis, the Euro-tic dilemma is once again ever more present. For over five years, the Greek hot potato has been switching hands in Europe. The present crisis, between Prime Minister Tsipras and the Troika (Commission, ECB, and IMF)+Germany, illustrates the euro-tic tension facing the EU and its Member States. Greece is on the verge of defaulting on its debt of €1.5 billion to the IMF on June 30th (some news in the media claim that an agreement will be reached). The

Photo: AP
Photo: AP

country is dealing with a debt of €130 billion representing 180% of its GDP.

Like the migration crisis, the solution would consist in deepening the integration process of the Eurozone. The Eurozone cannot have several gears with on the one hand the ECB in charge of monetary policy and on the other 19 individual fiscal policies.

In the case of Greece, one solution could be to pool the debts of all Eurozone members, naturally keeping track of the percentage of each national debt. One common debt would allow better interest rates and strengthen the Eurozone. Naturally, most European citizens would feel cheated if their elected officials came back home after agreeing on such policy. The domestic price for such policy choice would be serious for national leaderships.

Photo: AFP
Photo: AFP

The solution for Greece is only long-term at the EU and national level. For the EU, the Member States may have to revisit the treaties and address the weaknesses once and for all. This will not happen as most EU leaders are reticent to touch at the treaties – the last one, Treaty of Lisbon, was a continuity of the failed Constitutional Treaty of 2004 -. Several EU Member State’s constitutions require a referendum in order to validate a Treaty. That would probably not pass the domestic vote.

Greece, one of the weakest Eurozone members, is seeking for a ‘silver bullet’ at home. The Grexit seems a possibility – as opposed to five years ago -. Tsipras is now talking with Russia and signed an energy deal with the country, which is under European sanctions. Moscow and Athens deny talks of an eventual financial assistance. Such move by Athens is quite an aberration considering the current sanctions implemented by the EU against Russia for its annexation of Crimea and continuous involvement in the war in Ukraine.

If Greece is in such precarious situation it is because of its recurrent and embedded problem of corruption and mismanagement of money. In order to really make Greece a sustainable EU and Eurozone member, Greece will need to do some serious structural reform and get once and for all ride of corruption. These will take at least a generation.

Euro-tic nightmare, or the end of solidarity

The tension between European and domestic levels has always been present throughout the European construction. So far, it was manageable because of lesser number of Member States, ‘better’ national leadership, and most importantly a continuous economic growth. The 2007 financial crisis changed everything. Solidarity is much easier in time of growth than hardship. Today, domestic public opinions, throughout the Union, feel more comfortable with extreme political parties – see the latest results of elections in Poland and Denmark – calling for a return to inward looking and revisionist policies than with more center political parties unable to govern. Big Member States, like France, are flirting with extreme right and Britain is getting ready for an eventual secession from the Union.

Ultimately, the Union and its national governments are unmanageable. In this period of socio-politico-economico troubles surrounded by serious geopolitical crises and shifts, the European dream of an ‘ever closer union’ seems on the brink of collapse. EU leaders ought to bring more EU into their domestic policies and narratives, and the EU needs to build new bridges towards domestic electorates. Europe is entering a real period of darkness.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Syriza – The Greek Silver Bullet?

Photographer: Yorgos Karahalis /Bloomberg
Photographer: Yorgos Karahalis /Bloomberg

Syriza won the 2015 Greek elections with over 12.5 percentage points on New Democracy. Syriza elections at the head of the Greek government should not be seen as a surprise. It was in fact a continuity of its rise. For instance, in May 2014, the party had already won the majority in Greece, with 26.6%, for the European elections. Ensuing the results, Syriza did not have enough votes in order to fully control the new Greek government. The question was answered when Panos Kammenos, the leader of the coalition partner, Independent Greeks, a right-wing party, decided to join forces with Alexis Tsipras. The Independent Greeks, whom received 13 seats at the Parliament, formed a coalition with Syriza, holding 149 seats (two shy of the majority). Independent Greeks and Syriza share one element in common: desire to renegotiate the terms of the bailouts and ending the austerity measures (See below the distribution of power inside the new Greek Parliament).

Source: BBC News
Source: BBC News

In any case, Alexis Tsipras, will become the next greek prime minister. His mandate is based on ending the austerity measures, while maintaining the flow of European assistance to Greece. M. Tsipras, as Chancellor Merkel, President Hollande, know very well that a Grexit – exit of the Greece from the Eurozone – would be a terrible moment for the Euro and the EU. But one of the core questions is: how much are European partners – Germany, France and the European and international institutions – prepared to compromise with him?

Seeking for Dignity and Political Sovereignty

The current legislative elections in Greece have become more than just an election. By bringing Syriza to power Greek citizens want to change the political direction of their country. For now six years, the greek economy is in recession and the succeeding governments – socialists and conservatives – have all continued the same policy based on austerity measures in order to clean-up Greek finances. However, these measures, attached to the succeeding bailouts, have had terrible consequences on the quality of life in Greece.

For the first time in recent years in Europe, it is not a extreme-right wing party threatening to overtake power, but an extreme-left. These elections raise important question: the future of Greece in the Eurozone; the future of austerity measures implemented by the Troika (Commission, European Central Bank, and International Monetary Fund); and the return of democracy in Greece. After voting, Alexis Tsipras made two pledges: first, “Democracy will return to Greece.” Second, “the choice is clearer than ever. Either the troika comes back and continues its work and its catastrophic politic of austerity, or we are moving towards a difficult and tense renegotiations with our partners in order to re-conquer our dignity.” Tsipras was able to base its campaign on the themes of dignity and national sovereignty. In a report on France Inter, a French journalist was describing the emotions of Greek citizens as they feel proud of having reconquered their political sovereignty, which is not anymore under the helm of the Troika -at least for now-.

However, Wolfango Piccoli, managing director at Teneo Intelligence in London, told Bloomberg Businessweek that “Tsipras will be the celebrated winner, but delivering on voters’ larger-than-life expectations has not become easier after the landslide victory.” The next day will be tough for Greeks and Tsipras. Many questions are now being asked in Greece: who will compose the new government? how will Tsipras be able to renegotiate the terms of the bailout? how will Syriza be able to govern?

The Real Impacts of the Austerity Measures

The case of Greece within the Eurozone diverge from other Eurozone members like Italy, Spain, Portugal or even Ireland. When Greece was on the verge of defaulting in 2008, the main reason was that the political class had cooked the numbers for quite some time. Greece had been for decades under a corrupted political class. Syriza rise to power put an end to the perpetual control of Greek politics by either the Papandreou or the Karamanlis family and their connection to powerful oligarchs. If one recall, it took a long time for the other Eurozone members to decide on saving Greece and then how to implement a plan in order to save Greece and keep it inside the Eurozone. In some way, the members wanted to give a lesson to Greece. It has been now more than five years since the first bailout package was delivered to Greece. The first package included “€110 billion ($150 billion) and was first agreed upon by the euro-zone member states and the IMF in 2010.”

In counterpart to receiving bailout money from the Troika, Greece has had to implement serious structural reform in order to reform the labor market and in liberalizing areas of the product markets. Aside from the reforms, the Greek government had to cut pensions, lay out large amount of public servants, and so forth. Certainly Greece lied and did not follow the guidelines established in the Eurozone once it adopted the Euro in 2001. But the costs of the austerity measures on Greece and the greek society have been terrible. How do the austerity measures translate into daily life? For most of Western citizens, these are two words reflecting government spending cuts in most social policies. Well, for Greece and Greek citizens, austerity measures look like this:

  • on public health
    • left over a million without healthcare (for a country counting 11 million citizens, so 1/10);
    • country’s health budget was slashed by almost 40%;
    • rising infant mortality rates by 43% from 2008 to 2010;
    • soaring levels of HIV infection among drug users;
    • the return of malaria;
    • and a spike in the suicide count;
    • decline of birth rate by 15% (a drop from 118,302 in 2008 to 100,980 in 2012);
  • on the economic life
    • decline of GDP per capita from roughly $30,000 in 2008 to $21,000 in 2014;
    • 1/5 of the country lives under poverty lines;
    • rising unemployment levels at 25.8% in Greece compared to 23.7% in Spain, 13.4% in Italy, 13.1% in Portugal and 10.4% in France;
    • highest youth unemployment rate in Europe with 61.5% in 2013 (see chart below);

chartoftheday_1524_Youth_Unemployment_Still_Unrelenting_in_Europe_b

  • on social life
    • cuts on public education and especially higher education;
    • over 200,000 Greek citizens have left the country since 2009, and a majority of them are going to either Germany or the United Kingdom;
    • a ‘brain drain’ is occurring, which will affect the transition of the country in the decades to come.

In some part of the country, Médecins du monde, an international non-governmental organization, is now providing healthcare. On its website Médecins du monde writes that “the measures destined to save the financial system do not take into consideration the human consequences.” In some ways, considering the numbers above, it is not difficult to understand why Greek citizens picked the Syriza route over the traditional center right/left.

Syriza: A European Experiment?

Will the elections of a radical left party save Greece? Not really. Syriza is far from being a silver bullet. However, it could offer some serious leverage in order to loosen the weight of the austerity measures, re-negotiate the terms of the bailout, and find a long-term plan for Greece. Additionally, Syriza has become for many a political experiment in a Europe in search of a new political and economic life. Syriza does not appear to be a red revolution, but rather a road for more human transition.

Dying in Greece because of poverty is a reality, and is unacceptable on one of the richest continents. Greece is a core EU Member State, it is a Member of the Eurozone. The European Union is a political and social endeavor between a group of states committed to such goal. The force of the austerity measures and the requirements on Greece in order to save the Union back in 2008 may have been a necessity at first considering the degree of interconnection between all world banks. However, the continuity of their effects on Greece should have long been renegotiated. The EU has become a multi-speed Union, composed of a Northern Group and Southern Group (rich and poor) on many important issues: in defense with the CSDP; in democratic and judiciary terms – see at Romania, Bulgaria and Czech Republic -; in economic policies – look at Greece, Portugal, Spain and Italy -.

The ECB announced last week the beginning of a massive Quantitative Easing (QE), a program open-ended by nature – at least until the inflation rate of 2% is attained – of a value of €60 billion a month. However, the European QE won’t be enough until the European economic engines are not reformed and become more competitive. In parallel, the European Commission has announced the launch in 2015 of its Juncker Plan, a €315bn investment fund program intended to kick-start the European economy/ies. Both plans, QE and the Juncker Plan, will be necessary, but Member States ought to address their economic, industrial and financial models at home and harmonize them with European regulations and commitments that they agreed to.

Syriza won’t solve Greece’s problems, but it will once and for all bring important issues on the European table. The 2008 financial crisis has had devastating effects on most European citizens. The European welfare states are under-attack; unemployment levels among European youth is too high for any viable future of the EU-28 and the Union; and the rise of political extremes – right and left – endangered democratic foundations. Syriza’s message embodies all these elements. Money won’t solve it all, but politics will. As underscored by Christian Odendahl and Simon Tilford of the Center for European Reform, the three areas of negotiations will be required in Greece: debt relief, austerity, and structural reform. Both side, Greece, and the international institutions and EU Member States, will be bargaining for their side during tense period of negotiations. Both have some nuclear options, as highlighted by Odendahl and Tilford, “the withdrawal of liquidity for Greek banks, which the ECB has said it is considering; and the unilateral default on official loans by Greece.” The bottom is line is keeping Greece in, while loosening government maneuvers.

These elections are for the first time since the 2008 financial crisis illustrating a real popular call for ending austerity measures through neo-keynesian policies (read here a good analysis on the issue), and not anti-globalization and mercantilist policies advocated by extreme-right parties. As Tsipras told Greek citizens a week ago, “Our victory is also a victory of all the people of Europe struggling against austerity, which is destroying our common European future.” Europe will be watching carefully the way Tsipras implements its reforms, while keeping Greece in the Eurozone, keeping the flow of foreign aids, getting private investments, and rebuilding the public sectors to acceptable standards. “Populist parties across Europe” writes Judy Dempsey “are cock-a-hoop over Tsipras’s victory, seeing it as an inspiration for their own political ambitions.” But a failure by Tsipras will be the nail in the coffin for radical lefts and socialist parties around Europe; while a mild- or full- success could change the economic, social, fiscal and monetary debates in the decades to come. Greece is hoping; Europe is monitoring; the World is watching.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).