The Political Economy of Public Debt and Austerity in the Eu
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THE POLITICAL ECONOMY OF PUBLIC DEBT AND AUSTERITY IN THE EU Edited by Elena Papadopoulou and Gabriel Sakellaridis The Political Economy of Public Debt and Austerity in the EU Edited by Elena Papadopoulou and Gabriel Sakellaridis Copy-editing: Eric Canepa ÷ 2012 by transform! european network for alternative thinking and political dialogue 11 Rue Michel-Ange, 1000 Brussels, Belgium Tel.: 0049 30 29784533, Fax: 0049 30 29784536 e-mail: [email protected] Nissos Publications 14, Sarri str., 10553 Athens Tel./Fax: 0030 210 3250058 e-mail: [email protected] Cover design: Panos Vovos Permission to reproduce material from this volume is granted on condition that the source is acknolwledged. ISBN: 978-960-9535-46-5 ATHENS 2012 SECTION 4 LIST OF CONTENTS THE PIGS AS (SCAPE)GOATS Javier Navascue´s Foreword 9 Spain 145 Elena Papadopoulou, Gabriel Sakellaridis Mariana Morta´gua Introduction 11 Portugal 159 Daniel Finn SECTION 1 Ireland 181 UNDERSTANDING THE EUROPEAN DEBT CRISIS IN A GLOBAL PERSPECTIVE E´ric Toussaint George Stathakis Greece 191 The World Public Debt Crisis 33 Tama´s Morva Brigitte Unger Hungary 203 Causes of the Debt Crisis ü Greek Problem or Systemic Problem? 41 Euclid Tsakalotos SECTION 5 Crisis, Inequality and Capitalist Legitimacy 57 OVERCOMING THE CRISIS: THE IMPERATIVE FOR ALTERNATIVE PROPOSALS Dimitris P. Sotiropoulos Yiannis Dragasakis Thoughts on the Ongoing European Debt Crisis: A New Theoretical and Political Perspective 65 A Radical Solution Only Through a Common Left European Strategy 217 Kunibert Raffer Insolvency Protection and Fairness for Greece: Implementing the Raffer Proposal 225 SECTION 2 Pedro Pa´ez Pe´rez THE MANAGEMENT OF THE DEBT CRISIS BY THE EU AND THE EUROPEAN ELITES A Latin-American Perspective on Austerity Policies, Debt and the New Financial Architecture 239 Marica Frangakis Nicos Chountis From Banking Crisis to Austerity in the EU- The Need for Solidarity 77 The Debt Crisis and the Alternative Strategies of the Left 253 Jan Toporowski Yanis Varoufakis Government Bonds and European Debt Markets 91 A Modest Proposal for Overcoming the Euro Crisis 259 Riccardo Bellofiore The Postman Always Rings Twice: The Euro Crisis Inside the Global Crisis. 99 SECTION 6 THE CRUCIAL ROLE OF THE EUROPEAN LEFT - POLITICAL INTERVENTIONS SECTION 3 Pierre Laurent People Should Not Pay for the Crisis of Capitalism 273 FACETS OF THE SOCIAL AND POLITICAL CONSEQUENCES OF THE CRISIS IN EUROPE Maria Karamessini Alexis Tsipras Global Economic Crisis and the European Union- Implications, Policies and Challenges 111 A European Solution for a European Problem: The Debt Crisis as a Social Crisis 279 Giovanna Vertova Women on the Verge of a Nervous Breakdown: The Gender Impact of the Crisis 123 LIST OF CONTRIBUTORS 287 Elisabeth Gauthier The Rule of the Markets: Democracy in Shambles 135 sacrificing entire national economies and states on the altar of the financial markets. It leads to deprivation and suffering of the populations, without providing a way out of the crisis, while at the same time it threatens to devour democracy and destroy European integration. The second road (and logic) requires, among others, a cancellation of a large part of national debts, the socialisation of the banking and financial sector, the redistribution of income, the fight against corruption and a reconstruction of Europe’s real economies according to ecological standards. Europe has to reject austerity, which will certainly deepen recession and undermine growth which could increase employment. It requires a breach with the dictatorship of the financial markets and the replacement of the current power elites in the European Foreword states and in the EU as a whole. A realistic and radical interpretation of the crisis is one of the most important intellectual challenges with which the radical Left has to cope. Analysis, exchange of spectre is haunting Europe. It is the spectre of political change starting from a experiences and an effort to provide national and European alternatives is a Asmall country of its southern periphery. And again, all the powers of old Europe prerequisite for a change in politics on a European scale. In 2008, the network of have joined forces for a holy alliance against this spectre: The governments of transform! europe üwhich is also the political foundation of the Party of the European Germany and until recently of France, the European Commission, the International Leftü launched an on-going programme dealing with the political, economic and Monetary Fund, the European Central Bank, the Round Table of the Industrialists, social aspects of the crisis in Europe. This programme includes confererences, the financial markets and the rating agencies, the mainstream-media. seminars, workshops and the publication of numerous articles in the transform! The message they send to Greece and to the other peoples of Europe is magazine, as well as in our website (www.transform-network.net). A prominent straightforward: Either you accept the austerity programs, the reduction of your activity in this programme was a big Conference on the Debt Crisis in Europe, living standard, the carving up of the labour and social laws, the destruction of the organized in Athens on the 10-12th of March 2011, by transform! europe, the Party of public health and education systems, that is, the further deepening of social inequality the European Left, Nicos Poulantzas Institute and Synaspismos. Following this or we will exclude you from the eurozone and the EU. Submission or expulsion. That Conference, the Board of transform! decided to publish a book based on a selection of is what their democracy looks like. papers presented there and assigned the task of its editing to Elena Papadopoulou and However, the June 2012 elections in Greece, with the radical Left of SYRIZA Gabriel Sakellaridis. coming close to winning the government and increasing its percentage to the We hope that the book ««The Political Economy of Public Debt and Austerity in spectacular 27% (from the modest 4,6% in the 2009 elections), is a clear mark for the EU ¥,¥ published right after the big victory of SYRIZA in Greece, will contribute to political change in our continent. To this one can add the very good results of the the understanding of the crisis in Europe and to the struggle for a democratic and French Front de Gauche in the French Presidential elections, where Jean-Luc social exit from it. Me´ lenchon gained 11.11% of the vote, as well as the expected march of the Socialist Party in the Netherlands. If one takes into account the big strikes taking place in On behalf of the Management Board of transfom! europe, Spain and Italy, but also the re-awakening of the German trade-unions, it is obvious that the peoples of Europe overwhelmingly reject austerity and search for alternative Walter Baier (coordinator of transform!, Austria), Elisabeth Gauthier (Espaces Marx, political solutions. France), Haris Golemis (Nicos Poulantzas Institute, Greece), Ruurik Holm (Left Following these developments, the EU is presently on a crossroads, with each road Forum, Finland) having its own logic and consequences. The first aims to restore financial stability by 12 ELENA PAPADOPOULOU, GABRIEL SAKELLARIDIS The capitalist crisis, which started in 2007 from the United States as a financial crisis, has amplified the pressures for a wholesale retrenchment of the welfare state along with the privatization of public sector enterprises, labor market flexibility, anti- inflationary policy and financial liberalization. In this introduction we attempt a preliminary and tentative analysis on the three following general questions which, to a certain extent, permeate a large part of the contributions collected in this book: 1. What is the character of the debt crisis in Europe? Our main argument is that the latter cannot be separated from the global financial crisis, as it constitutes its expression at the European level. We trace the origins of the debt crisis in the Introduction neoliberal structure of the national political economies as well as the architecture of the Eurozone. 2. How is the crisis managed by the European political and economic elites? The point made here is that the reluctance for radical political decisions and the attachment to harsh austerity policies intensify the crisis, deepen recession, increase unemployment, deteriorate public finances and deconstruct European societies. 3. Finally, we touch upon the question of the ««democratic deficit ¥,¥ an important lmost three years after its eruption, the debt crisis in Europe remains unresolved, political issue accentuated in the era of the crisis. Awhile the economies of the European South are forced to contain their public deficits and service their debt obligations through the imposition of harsh austerity. FROM THE WORLD FINANCIAL CRISIS TO THE DEBT CRISIS IN THE EUROZONE: On the political level, the recent elections mainly in Greece but also in France, as well DISMANTLING NEOLIBERAL MYTHS as the fall of the government in the Netherlands, point to a growing rejection of austerity policies. On the economic level, the recent rescue of the Spanish banking The financial debacle, which started from the US subprime loans market in 2007 and system, the unviability of the Greek debt üonly a few months after its restructuringü, shook the foundations of the global economy after the collapse of Lehman Brothers the official request on the part of Cyprus to enter the bailout mechanism, as well as in September 2008, signaled the crisis of neoliberalism. Finance, either in the form of the serious problems faced by the Italian and other European economies point to a public or that of private borrowing, was the very essence of the new organization of new impasse, thus making the question of the survival of the euro and the Eurozone capitalist reproduction. Therefore a financial breakdown of this magnitude does not more and more pressuring. simply reflect a superficial crisis in financial markets but translates into a deep Given the fact that the European and Monetary Union (EMU) and the adoption structural capitalist crisis (Dume´ nil and Le´ vy, 2011).