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Friday, 5 June 2015

Hardcore

I was initially optimistic about the outcome of the Greek debt crisis, reasoning that Syriza represented the best vehicle for genuine structural reform and therefore the completion of the country's long-delayed integration into the "Eurosystem", however I think I may have under-estimated the extent to which German conservatives have adopted a laager mentality since 2008, which has been evident in their increasingly vocal contempt for those, such as Syriza, whom they consider to be "impudent" in their criticism of the neoliberal/ordoliberal orthodoxy (a charge now being echoed by Greek conservatives). Oddly, this means the Germans are becoming more like the British in their attitude towards their fellow Europeans. Just as domestic eurosceptics assume that continentals don't fully understand such concepts as liberty, so the conservative core of the EU is now dismissive of the definitions of democracy and popular will current in the periphery.

Behind the caricatures and fantasy of the popular media, Britain's attitude to Europe has always been instrumental rather than idealistic, and seen as such by other European states. This gave us a reputation for being "high maintenance" long before Margaret Thatcher's handbag swung into action. It also led to a suspicion (at least on the part of the French) that La Perfide Albion, as a historic opponent of any form of continental union from the Holy Roman Empire onwards, would prefer Europe to remain weak and fractious, though after 1945 this was assumed to be driven more by the interests of US hegemony (sold domestically as "the special relationship") than the traditional balance of powers. That suspicion has largely evaporated as America has turned its focus towards Asia since the 90s and encouraged the EU to treat (and contain) Russia as a regional issue. A by-product of this has been the increasing marginalisation of the UK, both in Washington and "the chancelleries of Europe". The attitude of the French and Germans has evolved respectively from exasperation and indulgence to disinterest and polite boredom.

The decisive factor in the UK's attitude to Europe has always been the City of London. Big capital has been broadly pro, small capital broadly anti, leaving money capital the casting vote. The ideology of "global free trade" obscures the significance of the continent as the chief foreign market for London's financial services since the early 19th century. In the postwar era, with the sterling area entering its twilight, Europe was pretty much the only game in town. As the eurodollar markets developed in the 1960s, it became clear that closer political integration would be necessary to pre-empt the development of an "insider" competitor to London in any future union. The later growth of euroscepticism was fuelled in part by the City's embrace of globalisation once the US banks moved in after 1986 (Nigel Farage is a product of this era), however 2008 may have been the point at which the "buccaneering" conceit jumped the shark. It is now clear that the euro isn't going to be allowed to fail, and equally clear that banking union and future financial regulation will disadvantage any "outsider". This means that the City will probably plump for continued membership, with suitable "guarantees" over its operational independence.


Though it will be painful, a Grexit will be accommodated by the eurozone, and even a Brexit will be accommodated by the EU. Both have clearly been priced in, hence the willingness of the French and Germans to wind up Cameron by advocating moves towards a common EU Treasury while he is trying to "make nice". The caveat is that this indicates an acceptance that not all states will jump on the integration bus - i.e. a two-speed Europe is now official policy - with the eurozone "core" proceeding in lock-step and other EU states proceeding as they see fit. According to Angela Merkel: "we have always been able also to pursue a Europe at different speeds, to find opt-out solutions for example". This is pragmatic. Europe is neither an island nor as geographically and culturally consistent as North America. There are always going to be peripheral states that will require customised arrangements: Russia, Turkey, Switzerland, Norway etc. Extending this logic to states that are already members of the EU, but outside the eurozone, is no big deal, which is why a Brexit would not be as binary (and traumatic) as many think. But as Greece is finding, no such customisation will be tolerated within the eurozone.

However, Merkel's stance also glosses the actual history of the EU and in particular the tension, between a federalist vision of "ever closer union" and a sovereigntist one based on intergovernmentality and subsidiarity, that marked the decade up to Maastricht in 1991. The latter vision has become dominant, essentially because the fall of the Berlin Wall and the clamour for East European states to join the EU led to an acceptance that the greater economic variety required a "variable geometry" of integration (ironically, German reunification was much more idealistic than pragmatic). The pivotal moment was the paper, Reflections on Europe, produced by Karl Lamers and Wolfgang Sch√§uble in 1994. Though this continued to advance a federal vision, it was significant for proposing that EU integration should proceed with a "hard core" - essentially the traditional Franco-German axis and their closest allies - which acknowledged the impossibility of all Europe advancing as one for the foreseeable future. In other words: a looser arrangement for the EU as a whole, but more rapid integration for the core.


This hard core of the EU will inevitably be coterminus with the eurozone. Euro 2.0 will entail greater fiscal control by the EU to match monetary control, and the embedded ideology of that control will be neoliberal. The euro will be a means of disciplining nation states, as Greece is now finding. Another way of looking at this is that the hard core concept is a way of shoring-up the euro and making it resilient against future financial system shocks: fortress euro. That suggests a growing appetite to cut Greece loose as the "weakest link". The Greeks' miscalculation earlier this year was to assume that their eurozone peers would either acknowledge that their debts were unpayable and write them off (and encourage the IMF to do likewise), or extend-and-pretend in return for a sincere fiscal reform programme. Underlying this was the assumption that no one wanted Greece to leave the eurozone, either out of genuine pro-european solidarity or aversion to a setback for the common currency. That now looks like a misjudgement.

To write-off Greek debts would be to admit that Greece should never have been admitted to eurozone membership in the first place. This would stick in the craw of the other states that had to make sacrifices both in the lead up to the euro's launch and during the crisis of 2010-12. To push Greek repayments into the distant future would be to set a precedent for future fudges around fiscal responsibility, and would (at least in the mind of conservatives) raise the prospect of populist national governments "looting the EU treasury". This explains the salience of Greek pensions in popular mythology. In short, the EU core seems set on a policy of intolerance and obduracy until such time as the fiscal infrastructure of euro 2.0 is built and "good housekeeping" habits are internalised. The Greek miscalculation was encouraged by the reflationary noises made by Francois Hollande in France since 2012. In the event, he was unable to either significantly amend the fiscal pact or get agreement on a parallel growth pact. The German view simply steamrollered on. Both Hollande and Matteo Renzi of Italy continued to talk of "flexibility" up to late 2014, but both appear to have been called to order since then.

The history of the EU can be broken down into three, twenty-year periods: 1950 to 1970 focused on the free trade in goods - the original common market; 1970 to 1990 focused on the liberalisation of services, the harmonisation of goods and regional support; while the period between 1990 and 2010 shifted focus to accommodating growth eastwards. (As an aside, the commitment to the formation of the EU, including monetary union and social harmonisation, was made in 1972, ahead of the UK's 1975 referendum, so the claim that "we never voted for this" is specious). The Social Chapter of the 1991 Maastricht Treaty signalled the high-water-mark of "social Europe" and solidarity. Far from ushering in a mandatory regime of frogs' legs and siestas, this proved to be little more than the harmonisation of employment terms for big capital, hence the alacrity with which New Labour sidestepped John Major's opt-out and incorporated the provisions into statute in 1997.


The 1990-2010 period not only saw social policy gradually sidelined, it also saw the hegemony of neoliberalism, which moved the vocabulary of EU debate from cooperation to competition. This was reinforced by the particular circumstances of individual states as they responded to globalisation, such as the Harz reforms in Germany, which shifted the focus of economic development away from the liberalisation and infrastructure investment of the 1970-90 period towards labour market reform and wage repression. This turn inevitably undermined national welfare systems thereby eroding support for the nation state as the "container of social citizenship". As √Čtienne Balibar puts it, "In Europe today, therefore, the crisis of democratic legitimacy resides in the fact that national states have neither the means nor the will to defend or to renew the 'social contract', and the fact that the instances of the European Union are not predisposed to search for the forms and the contents of a social citizenship of a higher level".

Parallel to this, neoliberalism has also undermined the state through privatisation and marketisation, denigrating the public sector's motives and competence and calling into question the very idea of public service - i.e. that there might be a middle-ground between profit-seeking and charity. But this movement is not shrinking the state and marginalising it in our lives. Rather it is turning the state into the agent of privileged corporations that have growing control over us but who are increasingly beyond our control. The result is a collapse in loyalty to the state, which can be seen in the growing disillusion with the "political system", the compensatory affection for supra-state institutions - such as the NHS and the monarchy, the emergence of "national identities" that are anything but national (viz English vs British), and the increasing disregard for state integrity (the historic significance of May 2015 may be the death of conservative unionism and the consequent emergence of Scotophobia). This collapse in loyalty is both fed by and feeds the desire of the state to develop ever more thorough means of surveillance, which leads all too easily to the means of behavioural control and the direction of opinion.

Since 2010 we have obviously been in a new period of European history. Though it's early days, the outline is becoming clear: this will be the era in which EU policy is increasingly run in the interests of the core, with the periphery urged to adopt the "Berlin consensus" wholesale in the spirit of neoliberal competitiveness rather than any antiquated notion of international social solidarity. It looks like the Greek crisis will now be resolved in July. The delayed €1.6bn repayment to the IMF is not the problem. The real challenge is the €6.7bn of euros due to be repaid to the ECB in July and August, which just happens to be a little less than the €7.2bn being withheld by the Troika from the second bailout programme pending acceptable structural reforms. Shuffling the monies back and forth would open up negotiations for a third bailout, where the Greek government would focus on the necessity of write-offs as the quid pro quo for further reforms.


The question is whether Germany is holding out for better terms up-front, or whether it has no intention of agreeing to a write-off, come what may. I'm now in the latter, pessimistic camp. Either the Greek government will run up the white flag, leading to the split of Syriza and sending a clear message to other European states about the limits of democracy, or the Greeks will default. Alexis Tsipras's defiant speech to parliament today suggests that which way the Greek government jumps will now depend on popular reaction over the next few weeks: a call to democracy (which means people on the street as much as opinion polls) that must profoundly irritate the Troika. While the general assumption is that a default means Grexit, it could in fact result in neoliberal "special measures" whereby a Monti-like technocratic government takes over to impose EU-friendly reforms as the price of staying in the euro and guaranteeing small depositors. The risk for Syriza is that staying in the euro may trump all other considerations for enough Greeks to make this viable. In other words, the outcome is probably going to be the same whatever Alex Tsipras & co decide: the party of order wins.

11 comments:

  1. How likely is it thrat a failure of Syriza will lead to a desperate Greek people turning in desperation to Golden Dawn?

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    1. Unlikely. GD might get a boost in popularity, but their only hope of power would be a coalition with the conservatives, Nea Demokratia. This isn't going to happen, both because it would damage ND domestically and be objectionable to the European Commission. The more likely outcome is a "grand coalition" between ND, To Potami (the nearest thing to New Labour in Greek politics) and the remnants of PASOK, with a smear of "nonaligned" technocrats.

      To Potami are the great white hope of the Eurosystem establishment: europhile and neoliberal, and free of the historic corruption that taints ND and PASOK. If Syriza calls a snap election to back a position that countenances default (and thus possibly Grexit), then I suspect a large swath of the middle class will head to To Potami.

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  2. Europe really is a horrible issue for the left. Here in Britain we're faced with the prospect of a referendum choice between Cameron and Farage. More widely, the increasingly antisocial and undemocratic nature of the EU looks like it will only benefit the far right, as there is a very limited amount of effort from the left that concentrates on politicising cross-Europe issues.

    To Potami sound similar to the Spanish Ciudadanos, who have had a recent surge in popularity. Then again, populism worked for the Europhile neoliberal party in the UK for a while. In government it was a different story....

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    1. I think it generally surprises most Brits how high a reputation Blair still has among the European political class. People like Renzi and Valls are routinely characterised as the local franchisee, while To Potami and Ciudadanos are advocating a technocratic centrism straight from the New Labour playbook. This still looks attractive in states where more traditional SD parties have lost credibility.

      A Europe-wide cohort of neoliberal politicians was formed in the 1990s through Brussels internships, the Erasmus programme and other nepotistic leg-ups (consider Stephen Kinnock's recent "good egg" backing for Mary Creagh for the Labour leadership). Most of them still carry a torch for Blair. Ironically, it was an older cohort of Europhiles that first twigged Blair's dodginess - e.g. Roy Jenkins disillusion.

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    2. Actually, the particular 'Europhile neoliberals' I was thinking of were the Lib Dems! But it works just as well the way you've described it as well.

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  3. David
    How do you theorise the British left's pre new labour objections to the EU? Did old labour smell a neoliberal rat and if so what alternatives did they espouse. Is there any internationalist left position to be rescued from the current imbroglio?

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    1. Leaving aside the romantic fetishisation of parliamentary sovereignty by Foot & Benn, many on the left did smell a rat in the early 70s, but their concerns were focused on traditional targets such as multinationals (the worry being that they would shift production to the continent to access cheap labour) and landowners (the assumed beneficiaries of the Common Agricultural Policy).

      The primary objection to the EEC was the impact on food prices, based on the belief that we were being denied our traditional sources of cheap imports from the Commonwealth and a suspicion that VAT would be extended to foodstuffs. There was also a fear that the EEC might constrain the government's ability to intervene in industry and financial markets.

      With the benefit of hindsight, all of these concerns were misplaced. Globalisation steadily pushed down food prices; the decimation of industry and the deregulation of finance were all our own work, and proved that Europe was no constraint on government; and we saw a boost to foreign direct investment, though this in turn revealed the extent to which the UK has become a source of cheap labour.

      I think the left should take heart from the Greek crisis because it shows that a social movement - which is essentially what Syriza (like Podemos and to a certain extent the SNP) is - can be mobilised and that international solidarity (as opposed to crass nationalism) is popular. What the establishment most fears is an autonomous social movement that cannot be co-opted. It's easy to forget, but Solidarity in Poland initially scared the West as much as the Communist state.

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    2. I think the problem is going to be the whether disillusionment sets in if/when Syriza gets nowhere with the debt issue. It is good that these left-wing movements are relatively positive about working in the EU, but disappointing that this trend has bypassed Britain. By linking 'Europhilia' directly to what the UK and/or the labour movement gets from the EU itself, the centre-left has effectively disabled itself in situations like the present one where the EU is seen to be boosting 'unpopular' phenomena such as immigration, and where most of the EU's activity seems to be targetted towards safeguarding economic activity from political action. My view is that the UK left should have spent more time stressing the nature of the EU as a political space, where common aims can potentially be realised at an international level. The absence of this perspective has helped to create a situation whereby the right hold the key and it is treated as an option just to walk away from the EU if you don't like certain policies, without even asking whether this enables you to deal with any problems.
      From the left's point of view I think it would have been much better to counter criticism of the free movement of labour by suggesting restrictions on the free movement of capital, and by pointing out that the attitude of the Tories and UKIP towards immigration effectively would still involve cherrypicking cheaper skilled labour from abroad, while using sanctions and workfare to force the indigenous poor to do the 'dirty work' that unskilled immigrants currently perform. Like so many issues, immigration is another where the left is willing to tolerate the right setting the agenda.

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    3. I think you're right (if I'm interpreting you correctly) that the historic error of the last quarter of the 20th century was the failure of European labour movements to organise internationally and pursue "common aims" in the unified "political space" of the EU. They have been suckered into treating international agencies as disinterested brokers (the ideology that runs from the Red Cross via the UN to the EU), rather than sites of struggle.

      The German Ordoliberals played a long game here: co-determination, which europhiliac social democrats like Will Hutton are so enamoured of, make unions inward-looking while doing nothing to restrain the internationalism of capital. In the UK, the unions have been inhibited by the weight of their own history and their suspicion of syndicalism. France, Italy and Spain, where "one big union" has been a more significant strand in labour thought, have been unable to contend against this "Saxon" parochialism.

      Ironically, I suspect the prospects for the "union of unions" will improve soon, particularly within the eurozone. For example, the best way of solving Europe's "demographic challenge" (i.e. uniformly raising the retirement age) would be via a single, Europe-wide deal. Labour organisation is usually a delayed response - that's the nature of a "counter-movement" - so we should expect labour to internationalise in the wake of capital doing so.

      The solution to "the free movement of labour" is the equalisation of wages, which is already happening. Poland will get close enough to the UK (with wages moving up and down respectively) within the next 20 years to reduce movement to "acceptable" levels. The issue is moving to the periphery (i.e. sucking in young labour from non-EU states), as can be seen in the Med at the moment.

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    4. Yes, if you look at the British trade union movement, they were instrumental during the Delors presidency of the European Commission in creating a situation where the Labour Party was actively enthusiastic about the EU, rather than the hostility they had showed in the early 1980s or the toleration they demonstrated under New Labour (in spite of the greater keeness of the likes of Mandelson). This proved to be something of a false start, though, because the left saw the Delors-era EU as an institution from which it could gain and entrench social-democratic reforms that had been robbed by the Tories, rather than a polity within which it could join with like-minded forces in common struggle. As a result, once the Blair government had incorporated the Maastricht Social Chapter, and the EU became more neo-liberal in intent, the unions and the left seemed to lose interest.

      I think that what could be described as an 'instrumentalist' view of the EU as an institution is common in UK politics, but that it impacts more adversely on the left.

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  4. Thank you for this excellent answer. So in nuce, capital is international whilst labour is not, but might be expected to become more so in a kind of Polanyi double movement, at least in the EU?

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