Germany Wants to Bail Out Its Austerity Measures – Not Greece

by Peter Bloom, The Conversation

After several months of tense and often antagonistic negotiations, Greece and its creditors appear to be at a stalemate. In order to receive a further bail-out funds, the Syriza government has proposed a set of reforms that in the view of Germany, the ECB and the IMF “don’t make the grade”.

To many, any compromise by Syriza represents a tragic surrender of its principles and a blow to the emerging anti-austerity sentiment rising across Europe. As one Athenian commentator observed:

They were voted in to say no. No to the same old, same old. Because the people have been desperate, they have felt humiliated and impoverished.

For others, Syriza must accept a “course correction” and embrace “responsible” economics required for ensuring the country’s present and future financial solvency. In this view:

“Greece’s fate lies in Athen’s hands, not Berlin’s”.

Indeed this stand-off seems to have reinvigorated the defenders of austerity. A recent Wall Street Journal article openly rebuked Syriza’s struggle, declaring:

there’s a growing sense that the best purpose Greece could now serve is as a demonstration of the dangers of failing to make other economies competitive. You can never save someone from himself, but you can try to learn from a bad example.

Regardless of the outcome, the rhetoric surrounding these negotiations reveals a troubling public campaign to politically strengthen these conservative economic measures, whether or not they are actually economically effective. This raises renewed questions of whether these negotiations are meant to “bail out” Greece – or the very idea of austerity.

Reaching an Agreement

On Friday, Syriza proposed to its creditors a set of reforms which aimed to avoid defaulting on their loans and the “bad scenario” of leaving the eurozone altogether. The troika of creditors, however, has demanded further austerity measures which include cutting government subsidies to the pension system, privatising state assets and weakening collective bargaining.

This would be a compromise for a government that rode to victory in no small part based on its vocal and vehement rejection of austerity. This is hardly surprising in light of austerity policies leading to unemployment rates of 28% nationally, without reducing the debt or providing the economic growth it promised.

But, despite maintaining that they would compromise so long as they stuck to the overarching commitment to stop the damage done by austerity, the Greek government has been forced to bow to what they have termed the “blackmail” of the pro-austerity lobby. As the Greek president Alexis Tsipras has described:

on the side of the troika, what we saw was something like blackmail. ‘If you don’t cut pensions, if you don’t fire people, we will not give you this bit of funding.’

Germany has been accused, in this respect, of “destroying the Greek economy in order to save it”. In the end, Syriza is being given a potentially unwinnable political ultimatim: either die quickly from lack of capital or slowly by more austerity.

A matter of irresponsibility?

It is telling how Germany has responded to the Greek situation. While much of Europe and the world have rallied round the economically beleaguered nation, the German government has gone on the attack in order to defend austerity.

They have shifted the blame for the failures of these policies to Greece and, by proxy, all other countries who have suffered disproportionately from austerity. Germany’s finance minister, Wolfgang Schäuble, stated during negotiations:

The new Greek government has totally destroyed the trust of its European partners … this is a serious setback. Until November, Athens was on a road that could have led it to exit the crisis. This has gone.

Not seeing eye to eye: Germany and Greece’s finance ministers. EPA/Michael Kappeler

More recently, this rhetoric has taken an even more severe turn. Greece lodged an official complaint with the German foreign ministry for the condescending tone Schäuble took with the Greek finance minister Yanis Varoufakis. He supposedly referred to Varoufakis as “foolishly naïve”, a statement he later blamed on a mistranslation.

This echoes a months-long campaign by German leaders to paint not just Syriza but the entire Greek economic and political system as “irresponsible”.

Blaming the victim

These declarations continue a dangerous and false narrative painting austerity as responsible and evidence-based against opponents who are portrayed as radical and delusional. However, this popular discourse is extremely, and intentionally, misleading. As the Nobel Prize-winning economist Paul Krugman has said, the demand that Greece accept austerity was based on growth and unemployment assumptions, which were downright fanciful:

The troika (the IMF, European Central Bank and European Commission) while pretending to be hardheaded and realistic, was peddling an economic fantasy. And the Greek people have been paying the price for those elite delusions.

Rescuing austerity not Greece

Of course Germany has much to gain from blaming Greece. Significantly, a number of northern European countries – Germany prominent among them – have substantially profited from these policies. The euro crisis created conditions that have benefited the German economy. It enjoyed the windfall of negative interest rates on bonds, unemployment is down and exports are booming.

And yet it is easy to peddle the myth that the real drug is social welfare and public investment for which the rest of society must pay. The eurozone’s wealthier citizens say they should not have to waste their tax dollars on profligate “lazy” foreigners who refuse to be economically sensible. They insist that these countries deserve all the suffering they experience because it is their fault for being irresponsible.

This rhetoric of austerity and fiscal responsibility shifts criticism away from a conservative financially driven ideology of Europe’s elites onto its most affected victims. Never mind that thus far the loans to southern Europe have actually saved richer countries including Germany money. Or that the real drain on our treasury is the tax avoidance of the very financial elites who now join in the chorus for fiscal accountability.

The latest agreement between Greece and its creditors appears to be more about rescuing austerity than saving Greece. With Germany demanding that Greece’s reform plan “must add up”, before releasing the funds the crisis-hit country needs to operate, Europe is clearly at a crossroads. Will it keep bailing out austerity and its elite supporters by blaming its most affected victims?

This article was originally published on The Conversation. Read the original article.