Why We Need Another European Council And Not a Greferendum

In the late 1950s, as the Cold War increasingly appeared likely to destroy the planet, the British philosopher Bertrand Russell wrote of the game of chicken being played by the superpowers:

As played by irresponsible boys, this game is considered decadent and immoral, though only the lives of the players are risked. But when the game is played by eminent statesmen, who risk not only their own lives but those of many hundreds of millions of human beings, it is thought on both sides that the statesmen on one side are displaying a high degree of wisdom and courage, and only the statesmen on the other side are reprehensible. This, of course, is absurd. Both are to blame for playing such an incredibly dangerous game.

A few days ago IMF head Lagarde complained acidly about a perceived lack of adults on the other, the Greek, side, of the seemingly interminable negotiations to end the crisis that has paralysed European policymaking. Tsipras has railed against European leaders, who in some cases have devoted their professional lives to the European cause, for wilfully betraying European values. In fact we have seen irresponsible boys (and a few girls) on both sides, each firmly convinced of being in the right and, consequently, that the other side is sure to chicken out. Meanwhile the cars speed toward each other. Russel’s diagnosis of the problem fits nicely. And the most likely – although still not inevitable – result at the time of writing appears to be a car crash, one that manages to be both a tragedy and a farce at the same time.

I don’t need to repeat the tragedy that is the collapse of the Greek economy and the social crisis there. Whatever the outcome of the referendum that has now been called for July 5^th it is hard to see this tragedy ending soon, and it is all too easy to see a further exacerbation.

One can understand why Tsipras felt compelled to call a referendum at such a juncture. There must have been serious doubts as to whether he could get what the institutions had slapped on the table through his parliament while at the same time carrying a majority of his own party with him. The latest covered-in-red-ink version of the proposals from the Greek side, sent back by Greece’s “partners” and plastered all over the European media, must have seemed like a calculated humiliation – and many believe that they were intended as such. The ultimatum certainly called into question the principle that, while overall fiscal targets were fixed, Greece had sovereignty regarding the means to achieve them.

If you ask a political leader to commit political suicide expect the unpredictable. Europe’s leaders and the IMF – whose internal coordination problems further complicated an already complex set-up – apparently thought Syriza would crumble under the pressure. They overreached. They have risked the livelihoods, if not the lives of hundreds of millions, having seemingly lost all sense of perspective. Not only have they been reluctant to accept the increasingly widely shared diagnosis among international macroeconomists, long familiar to Social Europe readers, that the so-called rescue packages have been fundamentally misguided. By obsessing over rates of VAT on various foodstuffs, while representing a €10 trillion against a €180 billion economy that has suffered unimaginable hardships, they have ceded the moral high ground.

Still, those simplistically celebrating the referendum as a triumph of democracy over an uncontrollable technocracy – how sick I am of hearing that Greece is the cradle of democracy, as if that had any relevance! – should pause. It is in many ways a farcical outcome and, worse, it is far from clear how it can contribute to a solution to the impasse. It would have been perfectly legitimate to announce in advance that any agreement reached with the institutions would need to be approved by the Greek people. But to play the R-card a few minutes before midnight, as technical teams wrangled over the fine-print and the gap between the two sides seemed bridgeable, and with yet another summit set for the following day: this shatters credibility. Those uncritically championing the Greek position must not forget that it is not only opposed by the “neoliberal Germans”; the Syriza-led government has managed to get every single finance minister in the Eurogroup against it. It has broken the first and most important role of EU politics: never ever be in a minority of one.

The farce deepens when it is realised that it is not even clear what the long-suffering Greek people will vote on. Different versions of the agreement to which voters are expected to say ‘yes’ or ‘no’ have now been distributed by both sides. They are in any case incomprehensible to anyone who has not been following the debate closely for months. The Commission is now claiming that a raft of more forward-looking proposals to boost investment and a vague outline for a longer-term plan were on the table. But are these to be considered part of the agreement to be voted on? More fundamentally, as the Eurogroup promptly withdrew their offer on learning of the referendum plan, formally there is no actual agreement to vote on at all!

And even if we turn a blind eye to all that, what will the referendum – assuming it is able to go ahead in a calm and efficient way, which is by no means clear – tell us that we do not already know? The Greeks want to remain in the euro – from which there is in any case no clear legal exit – but are not prepared to put up any longer with the conditions imposed by its creditors. Where there to be a 70+% no vote, the Greek government could come back and demand a better deal.

Even if complete domestic unanimity does not guarantee you get what you want in international negotiations, because the other side also has democratic legitimacy – I am perplexed and exasperated that after all this time some people just don’t seem to get this simple point – I think the chances would be better that Greece would then be given an improved deal. I don’t think this is likely, however. Already representatives of the institutions are portraying the referendum as an in-out vote on continued membership in the euro area. Formally this is nonsense, but it is certain to resonate with voters. The overwhelming majority of Greeks wants in, however angry they are – in my view very largely rightly – about what has been done to their country to achieve that end.

An overwhelming ‘yes’ vote would presumably mean the fall of the government – with an unclear perspective as to what follows. I think that outcome is unlikely unless a way is found to persuade the Syriza-led government to campaign for a yes. And that means a much better deal, of which unfortunately there is no sign at present.

Under current conditions I would be surprised if the referendum were to generate a large majority either way. But no result within a narrow range will shift the impasse, whichever side of the net the ball drops on. Varoufakis implied at the last Eurogroup that his government would respect a ‘yes’ vote and simply sign on the dotted line and move on. This seems unlikely however. Neither at national nor at European level will this be possible. At the very least a poltical realignment will be needed. In short, under present conditions, to the drum-beat of the predictable blame-game for the breakdown the referendum is not a way forward. What is then the way forward?

A cartoon is doing the rounds, in the Keep calm and… series. Designed in the EU’s blue and under the twelve stars it reads “Keep calm … and have another summit!”.

Yes, really. Another offer needs to be made to the Greek government and the Greek people by the European side, which is clearly in a vastly stronger position, and discussed at a meeting of the European Council (not the Eurogroup). It must do three main things. First, ease up on short-term austerity. It is madness and intransigence in equal measure to immediately seek to take out a combined 2% of GDP (through VAT and pension “reform”) of the Greek economy in its present state. Second, the principle that the Greek side should be able to implement equivalent mechanisms to reach a given goal should be respected not just in theory but also in practice. And third, the longer term perspective that Greece so urgently needs if investment and growth are to return and the banks are to be stabilised needs to be set out as concretely as possible, as soon as possible, with a clear commitment to a new programme.

Some proposals have been aired here: they need to be concretised and examined under the aspect “will they work” and not “who is seen as the victor”. The programme would need to be extended and some support for the Greek banks provided in the meantime. A genuine referendum could then be held fairly soon with a ‘yes’ recommendation from the government. And we could finally end this tragic farce and farcical tragedy.

If not, if European heads of government are not willing to see the risks they are taking, the cars will crash. And it will not be the irresponsible adolescent drivers who suffer. But ordinary working people and their families, in Greece but also throughout Europe.

Bertrand Russell is probably spinning in his grave.