Europe and the Spectre of Democracy – interviewed by Michel Feher (Part 1)

08/03/2016 by

In early January 2016, Michel Feher interviewed me in Paris in advance of our announcement of DiEM25.

Click  here for Part 1 or here for the Zone Books – Near Futures website, to watch the complete video and/or read the transcript. 

MF: I’d like to start with a couple of questions about Greece and the relationship between Greece and its creditors under Syriza II – Alexis Tsipras’ second government. The first question regards the relation between Syriza II and the IMF. In the wake of what could be called the surrender of the Greek government, and in spite of the July 5th referendum, the IMF seemed to soften its position in certain respects. Now that Greece had surrendered to the terms of the “Memorandum,” the representatives of the Washington-based institution conceded, “we have to admit that the Greek debt is in fact unsustainable,” which implies that some measure of relief is necessary. The German Finance Minister Wolfgang Schäuble, as well as the chairman of the German Central Bank and other hard-line members of the creditors’ club immediately balked at the idea of a “haircut,” however modest. While the rift between the ostensibly more forgiving approach of the IMF and the intransigent stance epitomized by Schäuble has not subsided in the ensuing months, Alexis Tsipras has been trying, so far unsuccessfully, to exclude the IMF from the group of institutions involved in the implementation of the third “Memorandum of Understanding.” How do you explain the attempt by the Greek Prime Minister to get rid of the institutional actor that seems the most willing to reckon with the fact that Greece’s debt needs to be partly written off?

YV: Firstly, let’s begin by stating the fact, the historical fact, that there is no new development here. The IMF has been repeating, quite correctly, that the debt is unsustainable since 2011, 2012. There was even a time, when Christine Lagarde in 2012, 2013, proposed to the Greek government of the time, the right-wing/PASOK government, to forge an alliance between Athens and Washington DC, the IMF, in the Eurogroup, in order to bring about debt relief. Then, the Greek government rejected that, choosing instead to remain loyal to Berlin. So what you just described is a repetition and continuation of this pattern. The explanation for this by Alexis Tsipras, the Greek Prime Minster, if you were to put this question to him, would be that the IMF keeps making these noises about the importance of debt relief but only refers to the part of the debt owed to the Europeans. He would tell you that the IMF would never consider debt relief for the part of the debt that is owed to the IMF. So it only puts forward the suggestion of a haircut to other people’s money, and not its own loans to Greece.

In addition, and far more importantly, the IMF, he would say, sets ruthless and rather horrific conditions in the realm of labor relations and pension cuts. Alexis Tsipras has always held this view, even when I was in the cabinet. This was not my view, it was his, and I was ambivalent about whether we are better off getting rid of the IMF because the IMF’s noises regarding debt relief are insubstantial and hypocritical, and they don’t help much anyway. He believed that in order to achieve a better balance between social policies regarding labor markets, pensions, and debt relief, it was best to try to deal with European officials directly. I am of the view that this is a mistake because having the support of the IMF is instrumental to the federal government in Berlin. This seeming contest between Washington DC, Frankfurt, Brussels, and Berlin is a game that Athens shouldn’t be playing. The IMF will stay in the program, possibly without lending more money, because it is absolutely essential for Angela Merkel to be seen in the eyes of the federal government as having the IMF on her side.

The surrender, as you put it, was devastating for one reason: we, the Greek government, did not use the IMF’s internal divisions in order to extract from the Troika an agreement where debt relief and debt restrictions would come first and before anything else. Once that surrender was effected, I think all this gaming, regarding whether the IMF should be part of the program or not, is neither here nor there. It is beside the point, the pot has been lost.

MF: My second question relates to the nexus formed by the consequences of the third memorandum imposed on Greece and the evolution of European immigration policies. Starting on August 30th 2015, there has been this remarkable shift in the German government’s official policy with regard to refugees – especially from Syria. You wrote about it yourself, emphasizing the contrast between the principled nature of the German Chancellor’s stance in the context of the inflow of asylum seekers and her attitude toward Greece a few months earlier.1 Though Germany had de facto already been more welcoming than its European partners (with the exception of Sweden), what was remarkable in Angela Merkel’s speech on August 30th was that she said, first, that welcoming refugees was a moral duty and, second, that Germany and Europe as a whole could afford it. This was maybe the most remarkable part of her statement, since, until then, European governments had always justified their policy of inhospitality by claiming that they just could not afford to let everyone in. Now, after the initial shock produced by Angela Merkel’s sudden turn-about, the French and British governments as well as the representatives of European institutions – and prominent members of the Chancellor’s own party and government – were quick to counter the call for a Wilkommenskultur: though careful to keep their distance from the openly xenophobic position of Central and Eastern European leaders, they managed to impose a “middle ground” whereby the EU would be more welcoming toward certified refugees but, at the same time, show even more toughness than before with economic migrants. In order to sort between “good” and “bad” foreigners, EU officials decided to introduce so-called “hot spots” along the borders of Europe where the selection process would occur. Under the guidance of the German government, they also sought to sign new agreements with “transit” countries – Turkey in particular – whose governments would receive ample European funding to prevent asylum seekers from entering EU territory.

So this is where Greece, all of a sudden, becomes an important player: as the main entry point for refugees, it is granted the status of an internal transit country. In other words, European authorities, and the German government in particular, want their Greek counterpart to keep migrants from pursuing their journey to the north of Europe. Hence, in October and November, there were rumors in the German press that Angela Merkel was about to soften her position with regard to the Greek debt crisis if, in return, Alexis Tsipras’ government agreed both to retain refugees in Greece and to step up the control of its country’s borders. However, what we have heard in the last few months amounts to a shift from carrot to stick, meaning that the European Commission, backed by the governments of several member-states, is now threatening Greece with a new kind of “Grexit” – an exit from the Schengen Area where, in principle, internal European border control has been abolished – if its government does not make greater efforts to protect the rest of the Union from refugees. What do you make of this new development?

YV: If you take the three words “European,” “refugee,” and “policy,” and put them together, you end up with a joke. There is no such thing as a “European refugee policy.” In the same way that you would end up with a magnificent anecdote if you put “European,” “foreign,” and “policy” together. What you described is proof of this fact. There is no such thing as a European refugee policy. The policy, on the one hand, and the instrument implementing it, on the other, which is a body that is supposedly overseeing the protection of the common EU borders – both of these are in a shambles.

The arrival of so many refugees – independently of the Greek negotiations regarding the Memorandum of Understanding – coincided with the defeat of our government, and the humiliation of the Greek prime minster, and all of my comrades who accepted the surrender and stayed in the government. At the time, I said that the surrender was a defeat for Athens’ government and a major injury to the spirit of Europe. The notion that you can drag a country through the mud, and humiliate it by forcing upon its bankrupt government a program that everyone knows is inhuman, as well as another loan with conditions that are absolutely impossible to fathom – all of this expresses a shattered European spirit. Let me give you a simple example. The idea that every single Greek company (whether they are a single person company, a conglomerate or a corporation) has to prepay the whole of their 2016 corporate tax in the last two months of 2015 is a notion that only needs to be directly stated so that you can recognize that this is done to a country specifically in order to crush and humiliate its government. The moment some entity like the Troika imposes such a humiliating treaty on one state in order to bring about an electoral outcome that they prefer – whether you are in Spain, in Portugal, in Ireland – causes you to realize that the very spirit of the European Union has been crushed, broken, shattered. Once the spirit of the EU has been shattered, how do you expect a common, humane, rational, and enlightened approach to the problem of refugees? Once the spirit of the Union has been dealt such a heavy blow, then everyone thinks about their strategy in terms of avoiding their contribution to a common cause, and everybody adopts an envious attitude, a “not in my backyard” kind of attitude. Everybody tries to shed their responsibility regarding refugees, regarding any common burden-sharing.

Angela Merkel at that point responded magnificently. I don’t know why, and I don’t really care. I wouldn’t be surprised if the terrible effect on Germany’s image of how her government had death with ours had something to do with it. Angela Merkel can be accused of many things, but she can’t be accused of not being an astute politician who understands the effect various developments have on Germany’s image and on her own image as the Chancellor of Germany. But again, I am pleased that she made this magnificent decision, whatever the underlying purpose and rationale was.

Of course, once the Greek government was humiliated and the spirit of the Union was crushed, that magnificent decision was not supported by a fragmented European Union. So she found herself in the eye of the storm. She found herself receiving the slings and the arrows of a lot of ultra-nationalist, anti-refugee, blatantly racist, or sometimes quasi- and hidden-racist narratives against her and her decision to open the borders to the Syrian refugees. As a result, she then had to backtrack and create a fudge, a typical European Union fudge. Part of that fudge is what you described: thinking in terms of borders and “buffer zones”; the idea of reconstituting borders within Europe, which was aided by the terrible events in Paris; the idea of creating a wall between the European Union and Turkey, with a buffer zone on the other side of the wall, which could be purchased from President Erdoğan of Turkey for 2–2.5 billion euros; and the idea of having another buffer zone on the other side in Greece, with Frontex or some iteration of Frontex playing the role of border control, which would effectively take over control of Greece’s border with Turkey from Greek authorities. When the Greek authorities resisted this plan based on the fact that we don’t really have a federation, and that we don’t have a federal border patrol like the US does, then suddenly the Greek government was treated with threats just as they were treated a few months before in relation to debt reform. Just as we were threatened with Grexit earlier, the Tsipras government was threatened with the exit from Schengen.

This is what happens when an economic crisis, which was inevitable and created by the bad design of the common currency area, spills over into a crisis of politics, of culture, of legitimacy, of the very constitution of Europe itself – in the final analysis, it spills over into the crisis of European democracy.

MF: Practically, however, don’t you think that, as the pressure Angela Merkel is already under continues to mount, the Greek government could acquire more leverage? To put it cynically, if the Chancellor eventually yields to the demands coming from her majority and adopts a tougher line, at least with respect to the control of Europe’s external borders – which seems to be the trend, especially since the Cologne events on New Year’s Eve – won’t she need to help Greece play its part as a “buffer zone” at the edge of Europe?

YV: I don’t believe that the bargaining power of the Greek government has been increased by these developments. This is because you can only increase something if it is non-zero. If it is zero, and you multiply it by any factor you want, it will still be zero. Greek bargaining power is now zero. And it is zero because of the surrender to the Memorandum of Understanding that I refused to sign and vote for in August. On the first page of this document there is one sentence, “the killer sentence,” as I call it. It states, I think verbatim, that the Greek authorities commit to agreeing with the institutions. Full stop! The implication is that, even if they don’t agree, they commit to the institutions. Any treaty between me and you, where I commit to agree with you, whereas you don’t commit to agree with me, is effectively a surrender of my inalienable rights. It is the transformation of my person into your slave. Once you have done that you don’t have any bargaining power at all.

Greece has always been important. It was important before July and August. If you take one quick look at the map of Europe – Russia, Ukraine, Turkey, but also in relation to North Africa, Libya and so on – you realize what the Americans always understood since the time when they intervened in the Greek Civil War in 1946. The geographical position of Greece renders the place a strategic key point. This has always been the case. Last year when I was a minster, it was clear that the United States, Berlin, and Brussels considered us crucial in the geopolitical developments vis-à-vis Russia, Ukraine, ISIS, Libya, Egypt, and the Palestinian issue. They only put the squeeze on us, with the closure of banks and the threat of the Grexit, when they knew our side was about to capitulate. Once they know you will capitulate, it doesn’t really matter how important you are to them because they know they have you. Therefore I don’t believe that the added bargaining power caused by the refugee issue is going to make any difference since they take it for granted that they effectively rule the roost in Greece.

MF: Let’s move on to some speculation about the conditions under which the critical state in which the European Union finds itself could evolve. We will get to the chances of a democratic awakening a little later but, first, I would like to get your views on a possible external disruption, namely, the considerable downturn of the Chinese economy and its potential ripple effects. It is true that, with the possible exception of Germany, European economies are not decisively dependent on their commercial relations with China, at least at this point in time. However, the indirect effects of a persistently sluggish growth rate in China may be consequential for Europe: the Chinese authorities may react to the downturn of their economy by boosting their export industry, rather than focusing on their domestic market, thereby reducing imports from developed countries in general – Europe and Germany in particular. 

Now, we must remember that what enabled the “surplus” countries of northern Europe to impose perennial austerity programs on their deficit-ridden partners in the south was the fact that the northern export industries were primarily geared toward non-European markets – such as the United States but also China and the other emerging economies – which meant that they no longer needed to keep the southern European populations as solvent consumers. So, the question is whether losing China, and maybe other emerging economies, as a safe outlet for their export industry could suggest to the German authorities and their pro-austerity partners in the Eurozone that the time has come to give back the Greek, Spanish, Italian, and Portuguese people the means to buy German goods . . .?

YV: I wonder! In 2013 I was re-writing and editing a book that I scripted in 2011 called The Global Minotaur, which was my theory of the global crisis of 2008 and 2009. I wrote exactly this story that you just put to me in the book’s last chapter. What I had effectively said in the original draft in 2011 was that – in the immediate aftermath of the great financial sector implosion, which began with Bear Stearns, Northern Rock, and Lehman Brothers in 2007 and 2008 – the Chinese authorities, very astutely, understood what was going on. In a state of panic they decided it was imperative for them to maintain their domestic growth rates at a level that would keep the social economy stable and that would maintain the migration waves within China from the hinterlands to the coastal areas. By doing so, they hoped that – on the basis of building bubbles through real-estate operations that would be financed through asset price inflation – this would provide credit to the economy and then become a kind of investment-spurt that would make up for decreasing export revenues. By doing this, they thought that they would be buying time. They knew they had about 5 or 6 years within which to do this, and they were hoping that within these 5 or 6 years, America and Europe would get their act together and push up the level of aggregate demand globally so as to prevent the bubbles in China from bursting. Neither America nor Europe came to the party, and the Chinese bubble started to deflate. The Chinese authorities have been very skilled at preventing deflation from becoming a complete blowup, but they cannot stop it: they are not even trying to order the tide to return.

While I was finishing that book in 2013, I posed this very question, which you just put to me. It’s a great question. Germany redirected its net exports from the periphery of Europe to China – not to other emerging economies, but to China as well as the economies that are kept afloat by China. I wrote that this was not going to last because the Chinese bubble, which was an intentional bubble, couldn’t be anything else and so it was going to deflate. Slow, fast, or medium-fast: it was going to happen. And now it has happened. Additionally, you have the rest of the emerging economies and China together, which today are characterized by a level of private sector indebtedness that is higher than that of America and Europe prior to the 2008 collapse. That speaks volumes toward what is coming. Even if you don’t have Lehman Brothers-like catastrophes in China, this level of private sector debt is such that it leads to a simple conclusion: we are not going to have investment that grows anymore, not in the emerging market, and certainly not in Europe or the United States. We are simply not going to be able to envisage a situation in which Germany can continue along the lines of beggar-thy-neighbor to maintain its net export growth and to ignore the rest of the Eurozone.

Does this mean some sense is going to be knocked into the heads of the people in the German Ministry of Finance? Or does it mean that denial is going to be maintained through greater authoritarianism in the European Union? It could be either. In the former case, if some sense pervades, there would thus be greater openness to the idea of creating the circumstances of a “New Deal” for Europe by means of, for instance, energizing the European Investment Bank to create an investment that lets growth expand. Then there would be hope. But I very much fear that denial is the order of the day, as it has been in the last 5, 6 years. In this scenario, Germany would become more deflationary and the rest of Europe would descend into an even deeper depression.

If you take into consideration everything we discussed before – about refugees, about foreign policy, about the geopolitical issues confronting us – and you add to the mix the developments of deflation and depression, aided by what is happening in China, then you end up with a picture that becomes bleaker and bleaker.

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