The Greeks have made their choice. Faced with two painful alternatives, they chose to stand with their elected leaders and to reject overwhelmingly the harsh, unending austerity that their creditors demanded. Now Europe’s leaders must make their choice. Will they come to their senses and open new negotiations with the Syriza government? Or will they remain unbending, force Greece into official bankruptcy and inexorably out of the euro?
Too much of what has been reported in the U.S. media in these last, fraught weeks has echoed fulminations of the creditors that distort reality. Syriza has been painted as a party of the extreme left, with Prime Minister Alexis Tsipras’s government depicted as irresponsible and irreverent. This scorn comes from troika functionaries committed to enforcing utterly ruinous policies and whose behavior towards a democratically elected government has been insulting in the extreme.
Contrary to reports, the Syriza government has always been pro-Europe, and committed to staying in the euro. Following the troika’s policies, the Greeks have suffered a brutal depression, with worse unemployment than the United States in the Great Depression, and the obliteration of one-fourth of the country’s gross domestic product. And that depression has left Greece with a greater debt burden than it carried before the calamity. Worse, as part of the euro zone, Greece has not been able to depreciate its currency to make its exports or tourist industry more competitive. It can only repay its debts by savage cuts in spending that have crippled its economy.
Syriza was elected with a mandate to negotiate a new deal that would give Greece some hope of a way out. Syriza sought both an easing of austerity and a change in its terms. The troika’s negotiators demanded not only that austerity would continue for years on end, but also that they would dictate its terms. Syriza made concession after concession — disappointing or even outraging many of its own supporters — but held to its core values. It would accept austerity, but raise taxes on the rich rather than cut the pensions of the poorest retirees. It would not trample labor rights nor continue a fire sale of privatizations.
The Greeks citizens have given Europe another chance by overwhelmingly voting “no” on the ruinous conditions their government refused to accept. Now, Europe would do well to have some adult leadership. The European Central Bank (ECB) should resume the lending needed to reopen the Greek banks. The European community should resume negotiations, offering Greece a course that holds some hope for a way out — at the very least a less harsh austerity and a greater flexibility as to how the budget balance or surplus is achieved. If the democratically elected government of Greece chooses to crack down on the country’s wealthy tax dodgers rather than cut the pensions of the poorest retirees, its creditors should not stand in the way. And longer term, although this is surely too much to hope, Germany and France should lead the launch of a new European wide program of public investment, giving the indebted countries a chance to repay their debts and rebalance their economies in the context of growth, not stagnation or worse.
This is also time for President Obama to speak publicly about the importance of Greek democracy and the importance of the U.S. alliance with Greece. He should embrace the choice of the Greek people, making it clear that forcing the country into unending depression is not a sensible course. He should urge France and Germany to show flexibility in policy and not just in posturing. And the Treasury Department should exercise its influence on the International Monetary Fund, urging managing director Christine Lagarde to stop insisting on harsh conditions that even the IMF has acknowledged have already been proven a failure.
Neo-conservatives like Robert Kaplan are issuing alarms about NATO’s southeastern flank in Cold War terms. But this isn’t a question of a renewed Cold War; it is a question of a continued class war. At issue isn’t some armchair strategist’s nostalgia for Cold War maneuvers, but whether Europe’s creditors and market fundamentalists will use the crisis to further erode the social contract across the European Union or whether a pro-European left can revive Europe’s original vision of peace and widely shared prosperity. If Syriza fails, the likely result is not a leftist government embracing the Russians, but a neo-Nazi party — like the Golden Dawn — peddling nationalism and hate.
Decisive action must occur in a matter of days, if not hours. The ECB will decide on Monday whether it will provide Greece’s banks with desperately needed liquidity. If the ECB refuses, Greek banks will be forced to issue some form of scrip or IOU to pay payrolls and pensions. That script will turn into an independent currency if no agreement can be reached. The Greeks will be forced from the euro in an inevitably chaotic exit. They will suffer an even worse depression, but gain their own currency and the possibility of a way out. The euro will be exposed as fragile, with weaker countries paying the price in higher interest rates and greater burdens. And the nationalist parties on the right will be strengthened across the European Union.
Syriza’s outgoing finance minister, Yanis Varoufakis, expressed the hope that the referendum would allow Europe to “begin to heal its wounds, our wounds” He presented his resignation after the referendum as a peace offering to European negotiators. And in contrast with the harsh statements by European functionaries, the French Finance Minister Michel Sapin offered a ray of light, suggesting that France could support further debt relief for Greece and that a Greek exit from the euro zone is “not desired by the French president.” Hopefully Europe’s leaders will understand that this is not about accounting, but the continent’s future.