The Corner

National Security & Defense

Greece: The Day After

As Greece prepares yet again to negotiate with the rest of the euro zone, it will do so without Yanis Varoufakis, Marxist, narcissist and clown and until earlier today the country’s finance minister. A rather less blameless Iphigenia, he’s been sacrificed to the gods of the euro zone, judged too contentious a figure to have any chance of cutting a deal.

His publisher saw the opportunity and ran with it, as the Wall Street Journal’s Matina Stevis reported:

Just three-and-a-half hours after controversial Greek finance minister Yanis Varoufakis resigned, his London-based book agents sent around a public-relations email offering excerpts from his updated book, the Global Minotaur, and other pieces of information.

The communications director at Zed Books, the publisher of Mr. Varoufakis’s book, sent your correspondent an email describing Mr. Varoufakis as the “possibly the coolest, charismatic and most intelligent Finance minister ever” and even suggested a hashtag: #MinisterofAwesome.

Writing for the Daily Telegraph, Ambrose Evans-Pritchard takes a look at his successor, Euclid (!) Tsakalotos:

He is comes from the radical Marxist wing of Syriza, and shares little of Mr Varoufakis’s European idealism…

For fans of Marxist prose in all its cultic opacity, here’s a link to a piece (Communist Dilemmas on the Greek Euro-Crisis: To Exit or Not to Exit?) Tsakalotos co-wrote with two others a while back.

An extract:

Such an approach displaces a major element of Marx’s problematic, namely class-struggle as the motive force of historical evolution, in favour of a bourgeois theoretical schema, according to which contradictions and exploitative relations between capitalist social formations move history. It has no conception of the state as the political condensation of class relations of domination, the factor that underwrites the cohesion of capitalist society.

Okey dokey.

Evans-Pritchard:

Scratch a little and you start to discover a eurosceptic who never wanted Greece to join the euro, indeed who already foresaw with remarkable prescience . . . in 1998 that EMU would not bring about the convergence of the core and peripheral countries. He was miles ahead of the amateurs religiously touting the benefits of EMU. For Mr Tsakalotos, EMU membership is a cost-benefit calculus. His own academic work has explored the issue of “first-mover advantage” after the rupture of currency pegs.

When we spoke at his office in the foreign ministry just before the referendum, he said that Grexit would be a very bad idea, but also gave me the strong impression that it is a matter of trade-offs. All depends on the exact terms that the eurozone is willing to offer his country, or whether it instead keeps Greece in a permanent “Nietzschean” cycle of control, as he puts it.

He also maintained the line – genuinely in my judgement – that Grexit would set off a political chain reaction and is therefore just as much a threat to the EMU Project as it is to Greece itself.

“I do believe if Greece was to leave, the eurozone would break up because it changes a monetary union into a hard-peg.”

The crucial point is that EMU is an “irrevocable promise” that no country will ever devalue again. Once that is breached, financial markets will not lightly believe in the pledge again.

There’s quite a bit to that. Maintaining a credible currency peg as, say, Denmark has done first with the Deutschmark and then the euro for decades has to have some degree of economic logic behind it (as Argentina’s peso/dollar peg eventually-and fatally-did not) together with a demonstrated willingness to defend it in tough times. If Greece were to leave the euro, there are plenty of other countries that would see their own attachment to the single currency again questioned (Uscitalia anyone?) and with that questioning a potentially very uncomfortable, and possibly dangerous, increase in borrowing costs.

Evans-Pritchard:

“People are wrong to say there’s not much contagion now but that’s not how it is going to work, maybe months later, in the following country in crisis. I fear that if it all breaks up we could then move to the kind of 1930s nationalist reactionary politics and the hegemony of the nasty Right,” [Tsakalotos] said.

The nasty Left, of course is just fine.

Writing for the Spectator, from a (non-nasty) left point of view, Nick Cohen takes a look at the political landscape the euro zone is creating (my emphasis added):

Europe brings peace. Is that so? It is becoming obvious that you cannot have the economics of the Great Depression without having the politics of the Great Depression. Tsipras’s Greek Marxists and Marine le Pen’s French ‘post-fascists’ may seem moderate when set against the men and women who will come after them if this crisis does not end. Far from quelling nationalism, meanwhile, the Euro has incited it. People who were rubbing along perfectly well in the early 1990s, now look on each other with an emotion close to hatred. Greeks, Italians and Spaniards wonder why Germans, Finns and the Dutch insist that they must suffer. The Germans, Finns and Dutch wonder why southern Europeans expect to live off their taxes.

And the eastern Europeans wonder that too. There’s been some surprise that the euro zone’s Eastern members are among those taking the hardest line on Greece. Writing for Bloomberg View, Leonid Bershidsky notes:

The easy way to explain that is jealousy: Greece has been getting aid to maintain a higher living standard than these countries have. To add insult to injury, their per capita exposure to Greece is higher, in comparison with their voters’ average incomes, than that of Germany and France.

That, however, is not the real reason. These countries have had to bend over backwards to satisfy the requirements of the monetary union, after already struggling to meet the EU’s increasingly exacting standards for membership just a few years ago. All Greece had to do to get into the euro was lie about its budget deficit. . . . 

And there’s also the precedent being set (it’s well worth reading the whole thing).

So what next?

I have very little doubt that “Brussels” wants to see Greece remain in the euro zone, partly for practical reasons (not least that “currency peg” argument), but also because it remains consumed by the idea that its ‘ever closer union’ is doomed unless it is perpetually moving forward. Whether it can persuade other euro zone countries to play along, however, is, after the last few days, considerably less clear.

For now, keep watching Greece’s still-shuttered banks. They survive courtesy of Emergency Liquidity Assistance approved by the European Central Bank, but if they turn out to require yet more of it, what will the “independent” ECB do?

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