Clash with Syriza: what does reform really mean? Part 2

Employment & Income26 Mar 2015Frans Bieckmann

In my previous blog post, I wrote about the apparent consensus in Europe on the ‘structural reforms’ that Greece and the Southern European countries should introduce. In the debate, we need to be much more explicit about what reforms we are talking about. An even more important question is whether the reforms would genuinely help to achieve a stronger and especially more inclusive economy in these countries. And are there no alternatives? These questions are discussed in this interesting debate on the Social Europe website. In the debate, American economist James Galbraith (co-author with Yanis Varoufakis and Stuart Holland of A modest proposal for resolving the Eurozone crisis) says ‘The Greek people elected a government that was prepared to take a reality-based view of the economic situation in Greece and of the catastrophic failures of the previous regimes, of six years of policies driven by austerity, debt peonage and a rhetoric of reform that was leading in many ways to the dissolution of Greek society … and by doing so created a difference of view with the irreality that dominates the standpoint of the centre of Europe, in particular of Brussels, Berlin and Frankfurt, and to a certain degree Paris.’ [02:01 to 03:06]

Before briefly analyzing the policy failures in Greece in the past six years, Galbraith says ‘The Greek situation is the opening wedge of a movement for change in Europe’ [05:00 to 06:45]. According to Maria Joao Rodrigues, vice-president of the Socialists & Democrats (S&D) Group in the European Parliament, the solution should not be about ‘cutting wages, or cutting pensions or cutting access to the welfare system,’ but achieving an effective public administration able to collect taxes on a fair basis for the state to be able to operate and invest. ‘So we need to change completely the priorities of the reform agenda’, says Rodrigues, shifting the focus to the tax system, a welfare system with universal coverage, and investing in SMEs to start them growing again and create jobs. With investment almost non-existent in Greece, Rodrigues emphasizes the importance of involving Greece fully in the European investment plan recently launched by president of the European Commission Jean-Claude Juncker [09:04 to 10:32].

The third participant in the Social Europe debate is Spanish economist David Lizoain, who recently wrote a column with the revealing title Which side are you on, Jeroen Dijsselbloem?. Lizoain compares the Greek situation with that of Spain and Portugal. He can see many similarities: societies under stress, enormously high youth unemployment, and all subject to European constraints. ‘The resistance against those rules that has begun in Greece is a ray of optimism,’ Lizoain says, ‘because it could mark a turning point in how the European institutions are structured.’[13:50 to 14:03]

Leading the debate Editor-in-Chief of Social Europe Henning Meyer asks the question that also interests me: why is the analysis of what is happening in Southern Europe (and therefore the rest of Europe) made in this debate not universally accepted? And why are the policy alternatives, which are not especially radical, so vehemently rejected by European orthodoxy? Even worse, at least in the Netherlands, these alternatives are hardly even put forward, not by political parties – even those on the left – and not in the social discussion. Are we too ensconced in our own national cocoon, do we lack the necessary knowledge, or do the political, ideological and bureaucratic dynamics prevent us from transcending our own borders?

Lizoain’s comments come close to answering these questions. He points out that the austerity regime has produced not only losers but also winners, implying that it is the winners who are resisting an alternative solution to the crisis. ‘For example’, he says, ‘it is not exactly the Greek state that is bailed out (by the billions being provided to Greece; FB), it is German and French banks that no longer have any exposure. They are the winners’. [22.00 to 22.19] And it is their governments, the most powerful in Europe, that back those banks.

I find myself becoming increasingly curious about the alternative reform programme that the Syriza government would like to pursue. We don’t know the details yet (at least, I haven’t been able to find them), but we should be able to derive something from Galbraith’s short explanation of the ‘modest proposal’ he wrote together with, among others, the most important negotiator on the Greek side, economics professor and now Greek Minister of Finance Yanis Varoufakis. ‘In our modest proposal,’ Galbraith says, ‘we proposed an investment programme, utilizing the European Investment Bank and the European Investment Fund, (…) a case by case resolution of insolvent banks by a competent European authority, (…) a way of lifting the burden of national debts, not just for Greece’ and a European humanitarian programme ‘to protect the most vulnerable of the European population’[34:30 to 35:45]. Galbraith explains that solutions like this are perfectly possible within existing European treaties, including the Maastricht Treaty, which in his view (and here he quotes Italian prime minister Matteo Renzi) is interpreted far too narrowly in Brussels, Berlin and Frankfurt, for example on the point of the 3% criterion for budget deficits.

If the Greek government is going to launch proposals like these against the troika of European Commission, ECB and IMF and Jeroen Dijsselbloem’s Eurogroup, it deserves at least a serious political and social discussion.