Greferendum: The Last Battle of Economic Ideas in Europe

Regan_Aidan HD

The Greek people have sent a resounding message to European institutions that they have had enough of their one-sided failed policy of austerity. The very fact that so many Eurocrats, policymakers, politicians and academics across the European continent, lambasted Alexis Tspiras and the Syriza leadership for daring to consult Greek citizens on whether or not they should accept the Troika bailout program, speaks volumes about just how out of touch they are with the impulses of democratic politics. In this commentary, Dr. Aidan Regan argues that the “Greferendum” can be considered the last battle of economic ideas in Europe and a direct challenge to the irresponsible economics underpinning the European policy response to the crisis.

Rather than turn the debate into a question on whether Greece is “in or out” of the Euro area, Syriza cleverly turned the debate into a question on the democratic values and economic idea of “Social Europe”. This basically meant that Greek citizens could walk into the ballot box and vote “OXI” to the “neoliberal policy package of adjustment” whilst continuing to support an implicit Yes to a “new and different vision” of European integration, based around the values of democracy.

There is now an almost near consensus among the academic community that the adjustment in Greece has failed, and there is no shortage of commentary on why this is the case. Greece is a small closed consumption oriented economy, whereas the entire European adjustment is premised on the assumption that Greece is a small open export oriented economy (such as Ireland). In a context of collapsed demand, and no institutional capacity for export growth, this implies that the Greek debt-GDP ratio can only be reduced through some form of debt forgiveness. Even the IMF publicly accept this (alongside the entire European political economy scholarly community).

However, despite all the technical macro economic arguments, highlighting the problems of the Greek situation, and why the adjustment can’t work, there has been no clear set of economic ideas around which an alternative policy or narrative could crystallise. The Germans, in particular, took grave offence to being lectured on macro economics, whilst the values of “Social Europe” sounds slightly daft in a context where so many social democratic parties are the ones implementing the policies of austerity. This contradiction was captured perfectly by the ill-judged intervention of the President of the European parliament, Martin Schulz, into the Greek referendum. Syriza have simply been bold enough to act on the representative values and economic ideas of social democracy, by refusing to accept that austerity is “the only game in town”.

It is this refusal to accept the austerity narrative that has infuriated so many European politicians, given that they have risked their entire career by politely lining up behind the German consensus.

One does not have to like Syriza to acknowledge that they are radical social democrats, who have defied the trajectory of politics across Europe. It is often forgotten that Syriza, a diffuse coalition across the spectrum of the left, have their historical roots in those social movements who wanted a clear break from the failed Communist parties associated with Moscow. The strategy has always been to embrace Western Europe, and to combine radical civil social movements with a mass electoral party. The fact that they have held together, since being elected into government, has surprised many, as it was assumed that the more radical left elements of the coalition would eventually pull out of government. This is precisely what the European institutions hoped for during the past six months of supposed negotiations.

Syriza are defying the predictions of the late, and brilliant, political scientist, Peter Mair. In his book “Ruling the Void, the Hollowing out of Western Democracy“, Mair argued that European politics has evolved into a professional practice, with elites withdrawing from the values of representation, to focus on solving problems to what are perceived as technical problems. The EU is the “technocratic” form of government exemplified. Politicians, the argument goes, should act as “responsible” problem solvers and not “representatives” of democratic constituencies. In European policy discourse, and within contemporary political science, the very idea of democratic representation is often dismissed as “populism”.

Democratically elected governments, of course, must act responsibly, particularly when they share a currency union with 18 other countries. Acting responsibly means not taking decisions that have negative indirect consequences for other member-states and their citizens. The entire European political elite considered Tspira’s sudden announcement of a referendum on the “bailout” as populist and irresponsible politics. But arguably it was the responsible thing to do as what he was being asked to implement can only be described as irresponsible economics, which would have continued the downward trajectory of growth and incomes in an already depressed economy.

It is not responsible politics to implement failed economic policy.

The very fact that Syriza chose to give priority to the democratic politics of representation over the supposed technocratic politics of responsibility, has meant that macro economic policies in Europe have been re-politicised. Whilst we still do not know the full outcome of the OXI vote (the ECB, under direction from the Euro group, might still decide to cut off ELA funding to Greek banks, and thereby force a Grexit), what we do know is that the referendum has exposed a tension in competing visions of European integration. No government since the crisis erupted in the single currency has dared challenge the Euro-German consensus, and therefore there has not been any real battle over economic ideas.

In this regard, Syriza have done all European democrats a favour, by forcing a re-politicisation of economic policy. Furthermore, it was not the instincts of “responsible governments” but “representative government” that led to a democratic rejection of irresponsible economics. If the Euro group fail to acknowledge this, and refuse to accept that an alternative adjustment path must be negotiated for Greece, then they are bordering a form of contemporary authoritarianism.


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