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See John Agnew's most recent Society & Space contributions: Foolish Leader or Failing Hegemony? The Insight and Confusion of Fahrenheit 9/11 and The US Trade and Budget Deficits in Global Perspective: An Essay in Geopolitical-Economy
Opinion polls suggest that the anti-austerity political party Syriza will receive the largest number of votes in the forthcoming Greek parliamentary election. This is not a surprise. Much of the Greek public is tired of the policies of fiscal retrenchment and debt obsession that have dominated the country since the onset of the Eurozone crisis in 2009. Much of the astounding public debt that the Greek government has acquired since the onset of the crisis is not owed to private investors but to the European Union, the International Monetary Fund and the European Financial Stability Facility. Around three quarters of Greek debt or 270bn Euros out of 317bn Euros owed is held by the official sector. The total debt mountain is equivalent to 177 per cent of Greece’s Gross Domestic Product. Most of this is held outside the country, so foreigners must be impressed at efforts to reduce it in order to keep financing it. Down the road whatever economic growth there is will taken up with meeting debt service obligations rather than with raising domestic incomes.
The genesis of this crisis is subject to some dispute. Among other factors, it is clear that serious levels of tax evasion and patronage politics indigenous to Greece did play some role. At the very least, they made it difficult for the Greek government to mobilize fiscal resources once there was a run on Greek sovereign bonds and they made stories of Greek profligacy and self-deception all too plausible as the complete explanation for what had gone wrong. As the crisis developed a broader context began to seep into scholarly and some media accounts. This was that the history of the crisis and its perpetuation could only be understood if a central role is given to the German government. Rather than Greece’s savior, a view remarkably popular among some Germans, the German government is in fact the main author of the crisis and, more particularly, why it has remained unresolved. I want to briefly describe the three main arguments that underpin the German specter as it hovers over the Greek election and that are undoubtedly inspiring some of the discussions surrounding it.
The first one is the morality tale popular in Germany that the crisis and its aftermath are entirely the fruits of Greek indolence and corruption. In this account, the German and Greek economies are viewed as totally separate “storage bins” akin to the silo-like territorial logic of household economies: one well managed and frugal, the other mismanaged and profligate. Yet, as is well known to macroeconomists, Germany has long run a positive balance of payments with countries such as Greece (including a number of the other impacted peripheral Eurozone countries). German economic growth has thus relied to a certain extent on Greeks (and others) buying German products and services. Germany is not an isolated state. Indeed, the German government long mediated large purchases of military goods (naval ships in particular) between German builders and the Greek government. Only a Volk-focused myopia could not see this connection. Renewed economic growth in Greece would be good for Germans as well as Greeks. Unfortunately, austerity is not and never has been conducive to economic growth.
Second, and touching on why some Germans might see themselves as saviors but that in reality suggests more by way of hypocrisy, the German “bailout” of Greece (through Germany’s overwhelming influence in the EU and the European Central bank) has been posed, for example by the German economist Hans-Werner Sinn, as making the US Marshall Plan assistance to West Germany after the Second World War seem like a pittance. Sinn calculates that US aid to West Germany in 1950 was cumulatively about 2 per cent of GDP, whereas German aid to Greece as of 2012 was over 60 per cent of Greek GDP. What is completely missing from the comparison and makes it utterly self-serving on the part of Sinn is that the Marshall Plan was never just about aid and future debt guarantees. At its center was a massive sovereign debt relief program that allowed West Germany by the mid-1950s to have a state debt/GDP ratio of less than 20% when countries such as the UK that received no such largesse from the US struggled with debt/GDP ratios of around 200%. Neither Greece nor any other Eurozone member struggling with a serious bond crisis has received this sort of assistance. The German government has been behaving much more in line with the infamous Dawes and Young Plans in the 1920s, respectively, in pushing first for massive borrowing and then deep austerity programs rather than with the debt forgiveness that came to Germany with the Marshall Plan. Of course, the historical context is very different. Nevertheless, if the analogy is to be used, it should be to put the German government in a particularly poor light: as a niggardly imposer of austerity rather than a liberator from the burden of debt.
Finally, and perhaps most importantly, German politicians and economists have consistently fixated on the dangers of a massive monetary inflation in the face of debt forgiveness and the stimulus spending that might well have primed the pump of economic growth in debt-encumbered Greece. This betrays both a popular folkloric obsession in Germany with inflation that may go back to the damaging monetary inflation of the 1920s but also to the ideas of the so-called ordo-liberals who dominate academic and government economics in Germany. Sinn, mentioned previously, is one of their leading exponents in the English-speaking world. It is a territorialized neo-liberalism in which the state is supposed to provide a stable legal environment and enforce competition law against oligopolists but refrain from endorsing the sort of stimulative measures associated with Keynesian economics. In monetary policy ordo-liberals favor independent central banks (but not, apparently, a very independent European one) and the primacy of price stability. Founded as a school of economic thought in the 1930s, it was an intellectual response to both the failure of laissez faire economics and a practical reaction to the 1920s monetary inflation. As such it underpinned the economic logic of post-second World War Germany’s social market economy. Clearly, the whole approach rests on assumptions that do not fit very well either the workings of the Eurozone or those of an increasingly globalized world. As if anyone sentient needed reminding, deflation looms ahead as the main monetary enemy across the world economy, not inflation.
It is then to the German connection that we should turn to understand what may happen in the Greek election. Syriza will appeal to those Greeks who accept part or whole of the story I have told (and those seriously fed up with austerity who need no such rationale!) Those Greeks who think the debt crisis is entirely or mainly of their own making will probably support the status quo. Those who blame immigrants for reminding them that Greeks are not really special will support the Nazi right.