The Greek Financial Coup d’Etat

A Greek Farce, Then Gloom

By IVAN KRASTEVJULY 16, 2015

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NYTIMES

Alexis Tsipras and his government colleagues in Athens are self-proclaimed Marxists, but they have forgotten the warning that great world-historic facts and personages appear, so to speak, twice: the first time as tragedy; the second time as farce. And now it is difficult for them to argue that they weren’t the ones who staged the farce.

On Oct. 31, 2011, the Greek prime minister, George Papandreou, announced plans for a referendum on a bailout plan proposed by the European Union, the European Central Bank and the International Monetary Fund. He asked Greeks to support the reform measures demanded by the creditors as the price of staying in the eurozone.

The second appearance of the referendum idea came on the initiative of Mr. Tsipras and his Syriza party: This time, call it democracy castrated. The Greeks actually held the vote on July 5 — the vast majority rejecting the terms for a new, third bailout by the so-called troika as the government wanted — but their heroic resistance to the creditors lasted a whole seven days. By Monday, Mr. Tsipras had accepted a much harsher version of the bailout and agreed to implement policies that he had only recently deemed “criminal.”

The temporary resolution of the Greek crisis shows that, in order for the common European currency to survive, the voters of the debtor nations will have to be deprived of their right to change economic policy, even as they keep their right to change governments. Given what has occurred, it is clear that what Mr. Tsipras and Yanis Varoufakis, his finance minister until July 6, were fighting was not so much the policies proposed by the creditors but being held responsible for accepting them.

In dealing with Athens’s rebellion European leaders faced a tough choice: They could either allow Greece to default, thus putting the common currency at risk, destroying the Greek economy, and sending the message that in a political union of creditors and debtors there is no place for solidarity; or they could save Greece on Mr. Tsipras’s terms, thus signaling that political blackmail works and inspiring populist parties all over the Continent.

Faced with this dilemma, European leaders found a third option: to save Greece on such drastic terms that no other populist government would even be tempted to follow its example. Now Mr. Tsipras has become living proof that “there is no alternative” to the current economic policies of the European Union.

The immediate impact of the Greek agreement is calmer markets, defeated Greeks and skeptical Germans. So should Europe celebrate? Do European leaders expect Greece to be transformed by the accord as Central Europe was transformed in the 1990s? Is it possible that the whole referendum episode — a resounding public “no” followed by Mr. Tsipras’s climb-down with the creditors — could serve not to humiliate Greek voters but instead to re-educate them?

While many in Brussels are hoping that the Greeks have learned, it is more than likely that the new reform package agreed to on Monday will result in further radicalization of certain segments of the European left and the spread of apathy in Greece.

Mr. Tsipras’s leftist populism failed to win Greece a better deal. Instead, the real political winner is most likely to be not the moderate center but the anti-European right. And while European leaders can congratulate themselves on keeping the Union going, the price that Europe will pay for saving Greece economically and losing it politically is the transformation of the Union from a project sustained by hopes and aspirations into one surviving on shared fears and confusion.

Chancellor Angela Merkel’s hope that Greece could be transformed on the model of Central Europe rings false — at least at the moment. Berlin’s policies after the financial crisis of 2009 were heavily influenced by its experience in helping post-Communist Central and Eastern Europe undergo major economic and political changes, but Greece’s situation today is not like that of Poland or Bulgaria in the 1990s. It is true that the recession at that time in most of Central and Eastern Europe is comparable to what Greece has endured over the last five years and that many of the reforms demanded by the Greeks were successfully implemented by East Europeans. But if there is one factor that sharply distinguishes Europe’s post-Communist nations in the 1990s from Greece today, it is the nature of public expectations about the future.

Although the economies of Central and Eastern Europe were in a shambles, the citizens of these nations were generally optimistic: People tended to view reforms as a painful but relatively short stage on the way to a brighter future. In Greece, the public mood is one of total mistrust and pessimism: Reforms are seen as tantamount to no future. In fact, opinion polls indicate that most Greeks expect their children’s lives to be worse than their own.

These sharply different expectations best explain why in post-Communist Europe reforms were strongly supported by the young, while in Greece 85 percent of those between the ages of 18 and 24, and 72 percent of people from 25 to 34, rejected the creditors’ reform package. In the East, politicians blamed the economic catastrophe largely on the old Communist regime; in the case of Greece, the old regime is the European Union. In Central Europe, Brussels was viewed as a friend and ally; in Greece it is viewed as a creditor and hostile power.

In short, reforms that worked in times of public optimism collapse in times of pessimism.

Ivan Krastev is a political scientist, the chairman of the Center for Liberal Strategies in Sofia and a permanent fellow at the Institute for Human Sciences in Vienna.