“Greek debt deal an EU bank bailout”

Posted by in Development, Economics, Politics

“Its ultimate rationale, dictated by political convenience, was to give Northern Europe a roundabout bank bailout.” This quote is from distinguished historian Adam Tooze in his review of “Adults s in the Room: My Battle with the European and American Deep Establishment” by Yanis Varoufakis.

But Tooze disputes Varousfakis’s conviction that these EU policies are either an illogical bureaucratic muddle or an inner-circle conspiracy: “In 2012, it took the combined weight of France, Italy, Spain, the European Central Bank, the European Commission, and the Obama administration to convince Germany to accept the ECB’s commitment to do “whatever it takes” to save the eurozone. In the aftermath of that crisis, Europe’s political economy came to be dominated by the “reform” project first launched by Germany’s main political parties in the early 2000s, which centered on labor market liberalization and fiscal consolidation.

This project was motivated by the lessons from the aftermath of communism and the perceived pressures of globalization. In 2015 no one in the Eurogroup wanted to revisit the mess of 2010–2012, certainly not at the behest of a Greek government that rejected the entire premise on which the eurozone had finally been stabilized. If Greece was still struggling, what it needed was not radical experimentation, but more reform. Syriza would have to be ground down.”

Tooze again, on the ECB’s quantitative easing: “In a coincidence that would prove fateful, three days before Syriza was elected in January 2015, the ECB’s president, Mario Draghi, announced a new policy of quantitative easing for the eurozone (purchasing bonds in order to reduce interest rates). By buying sovereign and private bonds, the ECB propped up their prices, pushed interest rates down, and flushed hundreds of billions in euro liquidity into the financial system. The primary aim was to stimulate the eurozone economy, but quantitative easing also had political ramifications. As long as the ECB kept buying their bonds, Spain, Italy, and Portugal were immune to contagion from the uncertainty surrounding Greece. They could force Greece to the brink of a disorderly Grexit without fear of destabilizing the rest of the eurozone and fight Greece’s political contagion without having to worry about the financial kind.”

On the EU: “The EU today is no longer the “good Europe” of a decade ago. But neither is it the technocratic and neoliberal machine that it is variously caricatured to be. It has become an arena for a political clash between contending visions of socioeconomic change. As is commonly observed, the EU does not have a democratic constitution. Like any large, complex polity, it is made up of multiple constituencies governed by different and conflicting logics. National politics today, whether in Greece, Germany, France, or the Czech Republic, take place within a European force field. Within that force field, Syriza’s challenge mattered. It still does, as does the lower-key progressive project in Portugal. But both of these challenges are small, weak, and opposed by powerful enemies.”

Read the full review here: www.nybooks.com