http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11742624/EMU-brutality-in-Greece-has-destroyed-the-trust-of-Europes-Left.htmlEMU brutality in Greece has destroyed the trust of Europe's Left
'The Left let itself become the enforcer of reactionary policies and mass unemployment because of the euro.' Greece has broken the spell
The EU establishment henceforth faces what it has always feared: a political war on two fronts at once.
It is long been fighting an expanding coaltion of free marketeers, parliamentary "souverainistes", anti-immigrant populists on the Right.
Its has now lost its remaining emotional hold on the Left after the scorched-earth treatment of Greece over the past five months - culminating in the vindictive decision to impose yet harsher terms on this crushed nation just days after its cri de coeur in a landslide referendum.
This has been coming for a long time. We Conservatives have watched in disbelief as one Socialist party after another immolates itself on the altar of monetary union, defending a project that favours the elites - a "bankers' ramp", as the old Left used to call it.
We have watched our friends on the Left apologise for 1930s policies. We have seen them defend a regime of pro-cyclical fiscal cuts imposed on the whole eurozone by a handful of "Ordoliberal" reactionaries in the German finance ministry.
To the extent that these gentlemen know what they are doing - and most Nobel economists would dispute that - they have certainly not risen to the challenge of pan-EMU leadership. As ex-official Philippe Legrain writes in Foreign Policy, Germany is proving to be a "calamitous hegemon".
By a twist of fate, the Left has let itself become the enforcer of an economic structure that has led to levels of unemployment once unthinkable for a post-war social democratic government with its own currency and sovereign instruments. It has somehow found ways to justify a youth jobless rate still running at 42pc in Italy, 49pc in Spain and 50pc in Greece, despite mass emigration.
It has acquiesced in the Long Slump of the past six years, deeper in aggregate than the span from 1929 to 1935.
It meekly endorsed the EU Fiscal Compact, knowing that it imposes a legal requirement on eurozone states to slash their public debt by 1.5pc of GDP in France, 2pc in Spain and 3.5pc in Italy and Portugal, every year for the next two decades - a formula for near permanent depression. It outlaws Keynesian economics, and indeed classical economics. It is a doomsday construct.
This is what they agreed to, and what they have reluctantly defended, because until now they dared not question the sanctity of EMU. And so the once mighty Dutch Labour Party has been reduced to a pitiful relic. Pasok has been obliterated in Greece.
The Spanish Socialist Workers' Party has lost its left-wing to the rebel Podemos movement, freshly victorious in Barcelona. France's Socialist leader, Francois Hollande, has been languishing at 24pc in the polls as the French working class defects to the Front National.
Yet events in Greece have finally broken the spell. "Progressives should be appalled by European Union’s ruination of Greece. It’s time to reclaim the Eurosceptic cause," writes Owen Jones in a remarkable piece in The Guardian. The new term "Lexit" is gaining currency.
The voices of Left are uneasy. Their instincts are to oppose everything that UKIP stands for. "At first, only a few dipped their toes in the water; then others, hesitantly, followed their lead, all the time looking at each other for reassurance," Mr Jones writes.
Yet the cruelty on display in Brussels and Berlin has trumped all. Mr Jones runs through the names.
“Everything good about the EU is in retreat; everything bad is on the rampage,” says George Monbiot. “How can the left support what is being done?” asks Suzanne Moore. The EU is being portrayed “with some truth, as a cruel, fanatical and stupid institution”, says Nick Cohen.
Variants of this debate are stirring across Europe. Luigi Zingales, an adviser to Italy's premier Matteo Renzi, has become a flaming eurosceptic. "This European project is dead forever. If Europe is nothing but a bad version of the IMF, what is left of the European integration project?" he wrote as Greece capitulated.
Whether or not the EMU creditor powers intended to bring down an elected Greek government, and whether or not it was a "coup" as the Twitterati allege, there is no doubt that Syriza was compelled by financial coercion to abandon its election promises. It must even repeal all "fiscal" laws passed since January.
Without wishing to rehearse 15 years of Greek controversy - by now a familiar subject - let me just say that the country's crisis is a collective responsibility of the creditors, the EMU elites, the Greek oligarchy and, ultimately, of a jejeune Alexis Tsipras.
The Troika bail-out in 2010 was intended to save the euro and European banks at a time when there were no defences against contagion. Greece was not saved. It was sacrificed. The roots of the "Greek Spring" can be traced to this original sin, further fed by the Troika overkill that followed.
The EMU creditors never acknowledged their own guilt. They never made an honest attempt to negotiate with Syriza, even on matters of common ground. They essentially demanded that the austerity terms of the prior Memorandum be enforced to the letter - regardless of whether they made any economic sense - hiding behind Pharisaical talk of rules.
Yanis Varoufakis, the ex-finance minister, said all along that they wanted "ritual subjugation", and that is how it looks to great numbers of people across Europe.
They forced through the infamous deal in the early hours of Sunday night without offering any clear debt relief, even though they already knew that the IMF thinks Greece needs a 30-year moratorium on debt payments and probably outright fiscal subsidies. Nothing is resolved.
"Greece has paid a huge price for the mistakes of others, yet it is being treated incredibly harshly," said Simon Tilford, from the Centre for European Reform.
"What I find worrying is that so few political figures in Germany seem troubled by the spectacle of Greece being humiliated in this way. The Germans have developed a fantasy narrative of the crisis. They have somehow turned everything around and think that they are the victims," he said.
Mr Tilford said the Left in Italy, Spain and France have for years been clinging to the illusion that Germany would eventually agree to relax austerity and accept a different kind of EMU.
"This has been totally discredited by the events of last weekend. Everybody can see graphically and brutally where the limits lie. If you can't abide by euro rules, you will be quarantined and evicted," he said.
Let us not forget that the European Central Bank brought about the final collapse by freezing emergency liquidity to the Greek banks, forcing Syriza to shut the lenders' doors, impose capital controls and halt imports.
This violates the principle of the EU banking union, supposed to separate the fate of private banks from the travails of the sovereign state. It was a political decision - dressed up with technical flammery - and was arguably illegal. It is very hard to reconcile with the ECB's treaty duty to uphold financial stability.
We all know what the game was. Germany and its allies were determined to make an example of Syriza to discourage voters in any other country from daring to buck the system.
I doubt that this will work, even on its own narrow terms. Podemos remains defiant. It has accused the EU institutions and the Spanish government of committing an "act of terrorism" in violation of the Spanish Código Penal.
It is, in any case, a double-edged strategy. Costas Lapavitsas, a Syriza MP, said the salient message of the past five months is that no radical government can pursue sovereign policies as long as it is at the mercy of a central bank able to switch off liquidity at any time. "It is now perfectly clear that the only way out of this is to break free of monetary union,” he said.
All Souls economist Kevin O'Rourke says the next Left-wing party that rises to challenge the EMU will not be as "feckless" as Mr Tsipras, and will not bargain from a position of such abject weakness.
"The lesson that they will draw from this debacle is: negotiating with Germany is a waste of time; be willing to act unilaterally, be willing to default unilaterally, have a plan for achieving a primary surplus if you haven’t already achieved it, have a hard default and euro exit option in your back pocket, and be willing to use it at the first sign of hassle from the ECB," he said.
As for the conduct of Germany over the past week, what can one politely say? It is deemed poor taste to mention that the allied powers agreed to wipe out half of Germany's external liabilities at the London Debt Agreement in February 1953.
This act of statesmanship came less than eight years after the end of the Second World War, and the Nazi occupation of Greece, when the horrors were still fresh in everybody's mind. It is roughly equivalent to the lapse in time today since the Lehman crisis.
Debt relief came at some cost to Britain, the biggest pre-war creditor. It was agreed in the collective interest, on the basis of economic science, and deliberately framed as a "negotiation among equals" in order to clear away the fog of moral judgments. The result was the German Wirtschaftswunder and the glory years of post-War reconstruction.
Whatever you think of Greece's behaviour - and it hasn't hurt anybody - can we not at least have a miminum of common sense?
