What happened there must be top of the list of reasons why progressives would want to pull out of the EU. Reading the sequence of events from the point of view of the Finance Minister who lived through them is a pretty damning indictment.
My own version of what happened runs like this:
- Greece was admitted to the Euro for reasons of vanity and wishful thinking. You can’t have a monetary union between parts of the world that don’t share significant economic characteristics. Greece and Germany didn’t.
- The Greek state and Greek individuals were able to borrow large amounts of Euros at cheap rates once they were inside the EU and the country experienced a huge growth spurt that enabled that borrowing bubble to be just about sustained. Until the 2007-8 financial crash.
- As soon as the world economy slowed up Greece’s problems of an unsustainable boom fuelled by excessive borrowing became horribly exposed. As did the level of tax dodging from the wealthy.
- Greek debts quickly became impossible to service. If they pulled out of the Euro they would still have to pay all those debts in Euros whilst earning low value Drachma. They were therefore trying desperately to stay in but every saving to pay creditors simply slowed the economy more and made it harder.
- The EU tried to tackle the problem by hoping it would go away, making new and bigger loans to pay old ones and telling a sovereign government what cuts it had to make.
- Austerity caused even further economic slowdowns which made the state’s finances even worse. The EU then demanded even sharper austerity.
- When the experience of all this austerity led to the election of a “far left” Greek government it honestly told the creditors it could never pay all the debts. It offered instead to achieve a small budget surplus and pay amounts that were achievable.
- Every single EU key decision member knew their proposals were realistic and that sooner or later a lot of debt was going to have to be quietly cancelled by “rescheduling”
- The EU decided instead that it was important to be seen to be punishing Greece in order to encourage other nations inside the Euro to also accept Angela Merkyl’s blind faith that you can get out of a horrible recession by cutting back on spending
- The cut backs across Europe slowed up growth across the continent and produced unemployment levels that were over 25% in Spain and Portugal and caused immense pain in France and Italy.
- In the UK and the US austerity for the people was accompanied by profligacy for the financial sector which had created the boom and bust in the first place. Quantitative Easing meant that the US electronically printed $4,500 billion of easy money and the UK £425 billion. As a result both those economies kept on growing despite cutbacks for ordinary people.
- The sight of horrible unemployment, slow growth and bullying behaviour towards sovereign nations in the Eurozone accompanied by high employment levels in the UK was used to argue that the UK didn’t need the EU and our sovereignty was at risk if we remained inside.
Unfortunately there are massive problems with this theory. We live in a global economy so it is impossible to build socialism in one country. It is only possible to apply higher standards if you protect yourself against unfair competition from those who apply lower standards. That is what the EU allows us to do. Leaving the EU free trade zone means we need new trade deals. That means giving up our sovereignty to people like US corporate lawyers who will sit on unelected bodies policing any new deals. Staying in the EU free trade zone whilst not being a member simply means obeying all the rules without shaping them.
This is why despite all his horrible experiences at the hands of the EU Yanis Varoufakis comes to a conclusion that might surprise many people. He is convinced that it is important to stay inside the EU and reform it. He says with complete conviction that “the task we face cannot be achieved by solitary nations” and asks the glaring obvious question: “Would the weak in Britain suffer less after Brexit?”
That is pretty much identical to the line the Green Party has taken throughout the Brexit debate. We don’t want the same old inadequately democratic EU run by a technocratic elite. We want to establish another kind of EU – one that is run by its people not the other way around.
It isn’t easy creating effective democratic control over international institutions. It isn’t easy making those institutions step back and let national and local governments control as much as possible. Nor is it easy to change the mindset and the ideology of governments across an entire continent. But the task is necessary and unavoidable. You cannot live in a global economy without global management. If we can’t even manage to create effective and humane EU institutions then what hope is there of doing so across an entire planet? And that is what is necessary to tackle the environmental and economic challenges we face.