Monday, 13 July 2015

New Order

The party of order has won. A split in Syriza is now likely and a new Greek government of national unity the most probable outcome. I suspect Tsipras will remain at the helm, partly because the eurogroup want to tie him to a personal guarantee of implementation, and partly because the leaders of the mainstream Greek parties lack credibility and don't want to accept a poisoned chalice. The specificity of the terms of the agreement, and the insistence on reimposed inspection and homework-marking, are humiliating for the Greeks. If this isn't quite a Carthaginian Peace, it certainly echoes the punitive and counter-productive attitude of Versailles in 1919. It is even faintly redolent of the arrogance of the Allied takeover of Iraq in 2003, with its talk of "de-politicising" the Civil Service. What is perhaps most disturbing is the evidence that the eurogroup were never sincere during the negotiations, and that all key decisions were dictated by Germany.

However, it is misleading to call this as a "coup", as power has not be seized. The power was already in the hands of the Troika and had been since 2009. Syriza have always had a poor hand, but they thought (not unreasonably) that the rest of the eurozone would reckon an easing of austerity to be a fair price for a genuinely reformist government. In the event, Syriza's "impudence" has only produced a more vindictive imposition, both to preserve the fiction of beneficial austerity and isolate any political initiative outside the orthodoxy. That orthodoxy is now as much ordoliberal (the adherence to established rules) as neoliberal (deregulation, marketisation etc). As a consequence, talk of a fissure in Europe has shifted from German-Greek relations to German-French relations, though the evidence from Varoufakis (who is, admittedly, not a disinterested observer) is that the French failed to stand up to the Germans when it mattered.

This is hardly surprising. The French crisis of confidence over recent decades has a number of causes, from stylised declinisme (equal parts nostalgia for De Gaulle and the soixante-huitards), through anxieties about modernity (the role of women, laicité, Islam and the rise of the FN), through fears of creeping Americanisation and cultural homogenisation (notably the advance of English). But at root, there lies a fear that in a German-dominated EU France will be marginalised, with its natural supporters (Italy, Spain, Portugal and Greece) exiled to the periphery and Germany buttressed by a hardcore (Kerneuropa) of Austria, The Netherlands, Finland and the Baltic states. This begins to stir uncomfortable memories of both the foreign policy failures of the later years of the Third Republic and the pathological denial of Vichy: a failure in its historic objective of constraining Germany followed by an abject humiliation.

There is a suspicion that the relentless face-punching of the Greeks is meant to be an exemplary lesson for the French. If the attitude of France in the aftermath of 1989 was essentially one of skittish worry - that Germany would be distracted by reunification and so neglect the joint project of the EU - the attitude now is one of sphincter-squeaking anxiety at Germany's evident willingness to lead. The claim last week that Angela Merkel was in a cleft stick - terrified of being the leader who oversaw the first substantive reverse for Europe, in the form of a Grexit, while simultaneously terrified of alienating popular opinion at home - looks absurd in retrospect. She was always going to get a deal, and always on whatever terms Germany chose. The pro-Greek rhetoric from Hollande and Renzi on Sunday, like the subsequent claim that France was the active midwife of the agreement, was just face-saving.

Three years ago, Perry Anderson put the emerging German role into historic perspective: "To work, the Union requires the state that is a different order of magnitude in population and wealth to give it coherence and direction. Europe needs the hegemony of Germany, and Germans must cease to be shy in exercising it. France, its nuclear arsenal and seat in the Security Council now of little relevance, must adjust its pretensions accordingly. Germany should handle France as Bismarck dealt with Bavaria in that other federal system, the Kaiserreich, soothing the lesser member with symbolic awards and bureaucratic balances under Prussian primacy". This view is coloured by Anderson's increasingly unsympathetic view of the French, but he is also aware of the inherent weakness of Germany and how its obduracy reflects immobility: "The new hegemon may be flexing its muscles. But it remains a lame one, unable either to dismantle the monetary union generating disorder, or to move beyond it towards a political union in which it would have to accept fiscal transfers its electors refuse".

Absent any vision for the EU beyond the preservation of order and a respect for rules, the Germanification of Europe proceeds incrementally: a slow march through the institutions. As Eric Bonse puts it, "The old complaint of a 'pro-French bias' in Brussels has fallen by the wayside; German personnel policy has won the day. Almost all the strategically important positions are now held by Germans, and understandably this is not received with universal enthusiasm. ...  A special characteristic of this casting is that some lead roles are reserved not for Germans but for politicians like Tusk or Juncker, who have close ties to the German government. ... all EU actors – and not just the Germans – are integrated into a regulatory framework that turns them into German Europe's pawns." Historically, France and Britain were the leading providers of the senior civil servants of the EU Commission, which reflected the larger governmental expertise of those two states in the second half of the twentieth century. No more.

Though Germany had long enjoyed indirect influence via the Bundesbank, the launch of the euro and the establishment of the Frankfurt-based ECB brought more of the German style of administration into the workings of the EU. In particular it shifted the normative framework away from the counter-cyclical policies of Keynsianism, while placing a greater emphasis on regulating monopolies and cartels (e.g. its attitude towards US tech companies). That combination of belt-tightening and market intervention is central to the Greek agreement. As Bonse notes, "German Europe is not chiefly held together by individuals, but by rules – just as the 'ordoliberal' school of thought demands. Yet these rules have brought Europe neither growth nor stability. They are fragile, in need of enhancement or even failing. They are also no longer recognized by all EU countries – in fact, quite the opposite: Greece, alongside the UK and Hungary, is more or less openly laying down a challenge to the rules. In short: German Europe is stronger, but at the same time more vulnerable, than ever before".

While some have opportunistically tried to corral Greece with the UK as a dispute over sovereignty and subsidiarity, the Procrustean fate of the country is actually symptomatic of Germany's failure in its leadership role, not a difference of views over "ever closer union". The corrosion of democracy does not arise solely from the flaws of the euro itself, but from the limiting beliefs of Ordoliberalism. Europe is moving from the republic of ideas, which was founded in Paris in 1789, to a republic of rules, which was constituted in Frankfurt in 1998. The French feel powerless to resist this, while the British are concerned solely with self-interested exemptions. Everybody else is making their peace with the new German order; some more messily and painfully than others.


  1. I think the most amazing thing is just how quickly even the ideological pretence of democracy has been jettisoned. In many ways it resembles a reversion to the era before the First World War, but minus the militarism. Then again, great powers do not need massive armed forces when they can expect supposedly radical movements to rule on their behalf.

    1. Some have referred to this a "gun boat diplomacy", which echoes your observation, however we need to ask: where is the dreadnought? The dispiriting fact is that enforcement has been achieved via the banking sector, proving once more that the response to 2008 was to preserve the political power of finance at the cost of sacrificing the economy.

  2. If we now have an EU recast as a republic of rules - where does that leave Cameron's renegotiation?

    1. The vibe so far is that Germany is open to negotiation, but not to the flouting of rules. Much of their anger with Greece is based on a perception of "bad faith" and reneging on prior agreements (tarring Syriza with this brush was unfair but politically hard to resist).

      The free movement of people is sacrosanct, because this is a rule that everyone explicitly signed up for when they joined the EU, hence Cameron's focus on restricting benefits rather than immigration. I suspect he'll get enough on out-of-work benefits to satisfy the Daily Mail, but will have to cede on in-work benefits as they are seen as removing friction from labour mobility.

      There's probably scope for change in the area of subsidiarity, as this fits with the current multi-speed strategy (Schauble's attempt to "bench" Greece for 5 years is consistent with this), including an exemption from the "ever closer union" language (most of the EU is baffled why this is an issue for the UK, as it is aspirational waffle that refers to "peoples" not states).

      The two big issues are protecting the privileges of the City, and ensuring that single market measures are not unilaterally taken by the eurozone. There's obviously scope for a quid pro quo here.

    2. Herbie Destroys the Environment14 July 2015 at 17:09

      "The vibe so far is that Germany is open to negotiation, but not to the flouting of rules. Much of their anger with Greece is based on a perception of "bad faith" and reneging on prior agreements (tarring Syriza with this brush was unfair but politically hard to resist). "

      I have heard this argument but I honestly don't buy it. I think this is political and any reference to we are just playing by the rules is simply capitalizing on a national stereotype. They always rewrite the rules when it suits.

    3. I agree that the Germans (like anyone else) are perfectly capable of rewriting the rules when it suits them - something David Cameron is obviously banking on - but I think they are genuinely miffed when others break the rules without permission.

      It would be sterotypical to imagine that "Verboten!" is the first word on their lips, but I think you aren't allowing for the normative weight of Ordoliberalism in German political practice. NB: This is not some continuation of Prussian officiouness, let alone the "only following orders" excuse of the Nazi period, but a conscious (and very bourgeois) reaction against totalitarianism after WW2.

      Ordoliberalism seeks to maintain a "safe space" for politics, so it cannot be exploited by "extremists" of either right or left, and sees the Basic Law (the German constitution) as the means to achieve it. It is notable that despite their deification of the law, Germans aren't disputatious. They have fewer lawyers per capita than the UK and half the number found in Greece, where disputes over property are common.

    4. Herbie Destroys the Environment14 July 2015 at 18:42

      "Ordoliberalism seeks to maintain a "safe space" for politics, so it cannot be exploited by "extremists""

      I guess this is a case of those who right the rules get to decide what is and isn't extremist and define it loosely to fit its needs.

      There is no Ordoliberalism going on here, just national interest and national politics. Between you and me I don't really see any material difference between 'Ordoliberalism' and, well, normal capitalism!

    5. Ideologies don't appear out of thin air, and 'ordoliberalism', despite the fact that it is not a new idea, is perfect for the present conditions of European capitalism. By insisting on playing by 'the rules' you can effectively enshrine a system of 'conservative liberalism' and create a cordon sanitaire from which it is protected from political action.

      This state of affairs is not limited to Germany, and insulating yourself from popular pressure is the aspiration of almost every government within the EU. The problem for some national elites is that 'the rules' as they are currently constituted within the EU and the Eurozone do favour the interests of capitalists and politicians in Germany. This isn't just due to German economic power or national cultural stereotypes, but with countries like Britain is a result of some very poor diplomacy in the last 30 years.

    6. Herbie Destroys the Environment15 July 2015 at 17:46

      I want to point out that I do know that write is not spelled right!

  3. To irritate me even further, the point of view was expressed this morning on BBC Breakfast News that the deal would enable Greece to achieve lasting reform and a normal economy. Aside from the fact that I've no idea what a 'normal economy' is, surely they're entirely missing the point if they think that it is acceptable to dictate such terms to a nation-state and act in loco-parentis for a 'irresponsible' Greek political, social and economic polity?

    If only the Soviet Union had found a way to enforce a 'normal' progression towards communism on Hungary and Czechoslovakia without sending in the tanks.....

    1. Greece can't achieve a "normal" economy relative to the rest of the EU because of its geography, its dependence on tourism and shipping, and its high level of self-employment.

      While most of the Mediterranean countries have some structural weaknesses (relative to the countries of the North European Plain), none are as bad as Greece. For example, Southern Italy is pretty much on a par with Greece, but the North has rich agricultural plains, developed industries, and a good position for trade with the rest of Euope.

      In a currency union, Greece can only improve competitiveness by raising productivity (cutting wages alone is counter-productive). This is difficult in tourism, an industry based on seasonal labour and human interaction. Shipping is already highly productive, but largely because it employs foreign crews and most shipbuilding has long moved to Asia. It helps the balance of payments, but it isn't an engine for the economy.

      The biggest hope for Greece is that the liberalisation demanded by the Troika will result in foreign firms buying into and consolidating the service sector. This would boost productivity and also increase tax revenues (through PAYE rising as self-employment falls), but the dependence on tourism will remain a weakness. Athens could become a service centre for the Balkans and Near East, however it faces strong competition, not least from Istanbul.

      The Troika's programme would probably work well in The Netherlands, but it is unlikely to turn round the Greek economy any time soon.