justin_reynoldsJustin Reynolds of Edinburgh Central CLP argues that a Syriza victory in this month’s Greek general election could open the way for a reinvigorated social democratic Europe.

 

There has been much interest this week in the references to ‘Scotland’ and ‘patriotism’ in the new wording of Clause Four of Scottish Labour’s constitution.

But while pledging the party to ‘work for the patriotic interest of the people of Scotland’, the clause also reaffirms Scottish Labour’s historic internationalist perspective, committing it to work ‘With others, across the UK and internationally, to unlock the potential of all and to create a fairer society.’

That global outlook will be of particular importance over the next fortnight, with one of the most crucial European elections for some time taking place later this month. Remarkably the neo-Marxist Syriza party, a coalition of Euro-communists, ecologists and socialists, is favourite to win the Greek general election on 25 January, in the teeth of opposition from an anxious European political establishment. A Syriza victory could be of huge significance not just for Greece, but also for Europe, the UK and Scotland.

The ascent of this most unlikely of political forces, which has gone from polling no more than 5% just five years ago to the threshold of forming Greece’s next government, is only the most dramatic expression of an emerging movement within the European left that is challenging the EU’s reigning economic orthodoxies. Syriza is one of several new parties across the continent attempting nothing less than the reinvention of European social democracy. Its progress should be of the greatest interest to all of Europe’s established social democratic parties, including Scottish Labour.

Greece’s silent humanitarian crisis

The story of the impoverishment of Greece and the consequent rise of Syriza is, in condensed and particularly acute form, that of the Eurozone itself over the past few years.

Greece’s nightmare began when it became clear that the fallout from the 2008 financial crisis had left the country bankrupt, no longer able to service its debts. Fearing that Greece’s burden would force it out of the Eurozone, the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) – the so-called ‘troika’ – advanced the Greeks a €240bn emergency loan, conditional on the implementation of an unsparing restructuring agenda requiring draconian cuts in public spending, rapid labour market liberalisation, sharp tax increases, the paring back of the welfare state, and the effective removal of the minimum wage.

Now, five years on, having forced through the harshest of austerity programmes in the face of riots and the perennial threat of the loan’s withdrawal, Greece is running a modest budget surplus. But the human cost has been catastrophic.

Greek GDP has contracted by a quarter. One in four people are out of work, including 60% of young people aged between 18 and 24. Real wages have fallen by a third. The economy’s industrial base is now 35% smaller. Unaffordable rents have left hundreds of thousands homeless. Healthcare has been rationed. And the rate of infant mortality has risen by more than 40%.

Greece has been enduring a silent humanitarian crisis. Rather than attempting to comprehend those statistics one might simply view photographer Dimitris Michalakis stark collection of images, Four Years of Austerity in 40 Pictures. And when considering whether it has all been worthwhile it should be noted that Greece’s total outstanding debt is now 175%, as compared to 130% in 2009.

Enough is enough

Rather like the resolution of a medieval physician to redouble an application of leeches, the settled policy of Greece’s current government, following the troika, is to administer more of the same medicine. More cuts, more liberalisation, more restructuring in pursuit of continued budget surpluses.

Syriza is likely to form the next government because it is the only party to have said enough, and to have stated bluntly that it is a nonsense to pretend Greece will ever be in a position to pay off its debt. The cost is too high for a country already at breaking point, and would condemn the great majority of its population to austerity today, tomorrow, forever.

Syriza’s alternative programme has two essential elements:

  • First, a Syriza government would seek to renegotiate and write off more than 50% of the country’s debts, and commit Greece to securing balanced budgets rather than year-on-year surpluses. It would use its new-found fiscal flexibility for emergency poverty relief: to switch electricity supplies back on, to issue food stamps, to restore healthcare, to lower taxes, and to reset the minimum wage and pensions.
  • Second, Syriza wants to redirect Greek economic policy towards growth: to spark the Greece’s moribund economy back into life by giving the country a pay rise, investing in major job creation schemes, rebuilding the country’s disintegrating infrastructure, and a range of other expansionary measures.

But, crucially, Syriza’s objectives run deeper than Greek recovery alone. The party wants its pro-growth strategy to be the first shot in a battle to change the direction of economic policy across the Eurozone.

Greece is only the focal point of pain being experienced across the EU body politic. The Spanish, Italian and Irish economies are choked by debt, France is stuck in neutral gear, and even Germany, the Eurozone’s powerhouse, is stuttering on the edge of recession. Syriza’s programme has been worked out in consultation with other emerging parties of the European left, most notably Spain’s Podemos and Germany’s Die Linke, all of which believe that their own economies can only properly recover if the Eurozone undertakes concerted joint action to break free of the suffocating blanket of austerity.

And their argument has been gaining traction, with mainstream economists across Europe gradually accepting that the EU’s current economic strategy is simply not working, and has no prospect of doing so. Policies advocated by Syriza and Podemos are just some of the constituent elements of an emerging pan-European social democratic platform that includes the relaxation of restrictions on member states’ borrowing rights, the transition of the European Central Bank into a lender of last resort committed to full employment, the extension of youth job guarantee programmes to older workers, a European-wide minimum wage, the outlawing of zero-hours contracts, and a financial transactions tax.

It is perhaps not surprising that the agenda has the backing of well known centre-left economists such as Joseph Stiglitz and Thomas Piketty. More striking is the support it has gained in rather more conservative quarters. Wolfgang Münchau is one of several Financial Times commentators to argue that the radical left is right about Europe’s debt. Indeed Münchau goes further, arguing that if, as is expected, the EU introduces a form of quantitative easing, it would be more effective simply to hand money direct to European citizens – a ‘helicopter drop’ to use the technical term – than to transfer new money to banks in the hope that it will be passed on. As Münchau puts it:

“A payment of €10,000 per citizen would translate into €3tn, which would be of a size equivalent to the QE programme in Britain. A helicopter drop would work but sadly, I fear, it would be too unconventional for the continental European mind.”

A ‘wrong outcome’

It would indeed. The Greek election is being fought against a backdrop of EU establishment voices warning of the consequences of a Syriza victory. EU Commission head Jean-Claude Juncker, cautioning the Greek electorate against a ‘wrong outcome’ has said:

“I would like Greece to be ruled by people who have an eye and a heart for the many little people in Greece and who also understand the necessity of European processes … Each party who stands for election has to live up to these standards and I won’t comment on the chances of one or the other party, but I would prefer if known faces show up.”

It is little surprise that an inveterate EU insider such as Juncker might prefer the ‘little people’ to endorse the wisdom of the ‘known faces’. Rather more significant is the public opposition of Germany, the de facto architect of European economic policy, to any possibility of a change in course for the Eurozone. German Finance Minister Wolfgang Schäuble has said there is ‘no alternative’ to existing arrangements, and the word is that Angela Merkel is willing to call Syriza’s bluff and simply allow Greece to leave the Eurozone if debt negotiations fail, confident that the zone would be sufficiently robust to withstand the partial devaluation of the euro that would attend the loss of a member.

Germany’s fiscal rectitude is understandable for obvious historical reasons, but its stubborn rejection of any possibility of debt relief is – as Syriza has repeatedly noted – unfortunate given the galvanising effect the waiving of its own debt burden in the early 1950s had on the postwar German economic miracle.

It would, however, be wrong simply to blame Germany for the EU’s economic intransigence. As Will Hutton has argued forcefully it may well be that Germany, an essentially progressive nation that takes its responsibilities towards Europe seriously, will indeed be prepared to cut a deal with a Syriza government, discounting a significant proportion of Greek debt as an acceptable price for maintaining the Eurozone’s integrity.

At root the Eurozone’s problems are institutional: the EU’s economic architecture, as enshrined in agreements such as the Maastricht Treaty and the Stability and Growth Pact, places severe constraints on Europe’s capacity to pursue a progressive economic strategy. Those limitations were sharply illustrated recently when the Commission was widely ridiculed for trumpeting a €300bn investment plan that on closer inspection committed no more than €20bn of new seed-corn money: small beer indeed considering that the Eurozone is a €13tn economy. The hard truth is that the Commission simply doesn’t have the funds necessary to pursue a more ambitious strategy.

The UK and the Eurozone

Turning the EU oil tanker around will require enormous political effort. But the alternative is allowing it to drift through icy economic waters, chilling Europe’s collective prospects for recovery.

Certainly, a vibrant Eurozone is a necessary condition for sustaining the UK’s own nebulous economic upturn, which has thus far depended on the narrow, well trodden foundations of consumer debt and rising house prices. The economy’s structural fragilities remain: the deficit that should truly concentrate the the mind is the £100bn annual trade gap, a stark demonstration of Britain’s chronic weakness as a trading nation. Efforts to rebalance the economy towards exports – the stated aim of successive governments – are severely constrained by the Eurozone’s depression, the destination for more than 40% of British goods. The slowing down of the growth of alternative markets – in Brazil, Russia, India and China – makes European recovery more urgent still.

And so long as the Eurozone remains stagnant, of course, the issue of economic migration will rumble on: Polish, French, Italian and Spanish workers come to the UK in such numbers not for Britain’s meagre social security benefits, but because they cannot find decent job opportunities in their own countries.

Social democracy, old and new

Europe’s new left is beginning to take the place of established social democratic parties that seem resigned to managing the status quo.

Since the banking crisis, a first-order crisis of capitalism, parties of the right rather than the left have continued to set Europe’s economic direction, working relentlessly to convince electorates, with some success, that alternatives to austerity simply don’t exist. For sure, social democrats have won elections across Europe since 2008 – in France, in Spain and in Greece – but nothing much has changed: each new administration has broken early promises and fallen into line with ruling orthodoxies framed by Brussels, Frankfurt and Berlin. For many, Europe is much closer to a technocracy than a democracy, with parties of both left and right content to serve the same gruel.

New parties with greater resolve are moving into that vacant space. Here in Britain the Green Party, pledged to a expansionary ‘Green New Deal’, has grown significantly in recent years, as illustrated again this week by the controversy over its exclusion from the election leadership debates. And in Scotland the referendum debate saw the birth of several new anti-austerity initiatives such as the Common Weal and the Radical Independence Campaign, both of which have forged close links with Podemos and Syriza.

It is critical for Scottish Labour to understand and respect the appeal these new left movements hold for so many: in Scotland, the UK and across Europe. Quite simply, they give people hope. Hope that things can be different, that strong social democratic governments can act on behalf of the people against the depredations of unrestrained corporate and financial elites, and that there is an alternative to the interminable rhetoric of ‘balanced budgets’, ‘structural reforms’, ‘fiscal consolidation’ and ‘flexibility’: euphemisms for continued economic insecurity and deteriorating living standards. Indeed this new left isn’t really that ‘new’ at all, ultimately seeking to do no more – or less – than reinvigorate the abiding social democratic principle that the state can stand up to and manage capitalism for the common good.

The rise of the new left signals both danger and opportunity for established social democratic parties. Across Europe new parties are destabilising or replacing them outright. In Greece the venerable socialist party Pasok, which endorsed austerity when in office, has declined from 44% in 2009 to just over 3% today. Podemos is well ahead of PSOE, the long standing Spanish Socialist Workers Party. In Germany Die Linke is starting to make inroads into the support of the SPD, which is locked into coalition with Angela Merkel’s Christian Democrats.

But existing social democratic parties can respond appropriately, given the will. There are signs that some are getting the message. The French Socialist Party, for example, is dividing between President Hollande’s commitment to austerity, and a new grouping led by former economy minister Armand Montebourg lobbying for fiscal expansionism.

There are no easy answers to the question of how to pull Europe out from stagnant waters. But electorates across the continent, and here in Scotland, are restless, and want to believe things can change. This month’s Greek election may mark a turning point. Scottish Labour should be watching carefully. If Syriza can help break open the gates of austerity, and open up possibilities for a reinvigorated European social democracy, the way is clear for Labour and other established parties of the left to be bold. If that opportunity isn’t grasped, others will take it.