[D66] Greece is a sideshow. The eurozone has failed, and Germans are its victims too

[J.N.]

http://www.theguardian.com/commentisfree/2015/jun/22/greece-eurozone-germans-single-currency

Greece is a sideshow. The eurozone has failed, and Germans are its
victims too
Aditya Chakrabortty

Monday 22 June 2015 20.07 BST


Nearly every discussion of the Greek fiasco is based on a morality play.
Call it Naughty Greece versus Noble Europe. Those troublesome Greeks
never belonged in the euro, runs this story. Once inside, they got
themselves into a big fat mess – and now it’s up to Europe to sort it
all out.

Those are the basics all Wise Folk agree on. Then those on the right go
on to say feckless Greece must either accept Europe’s deal or get out of
the single currency. Or if more liberal, they hem and haw, cough and
splutter, before calling for Europe to show a little more charity to its
southern basketcase. Whatever their solution, the Wise Folk agree on the
problem: it’s not Brussels that’s at fault, it’s Athens. Oh, those
turbulent Greeks! That’s the attitude you smell when the IMF’s Christine
Lagarde decries the Syriza government for not being “adult” enough.
That’s what licenses the German press to portray Greece’s finance
minister, Yanis Varoufakis, as needing “psychiatric help”.

There’s just one problem with this story: like most morality tales, it
shatters upon contact with hard reality. Athens is merely the worst
outbreak of a much bigger disease within the euro project. Because the
single currency isn’t working for ordinary Europeans, from the Ruhr
valley to Rome.

On saying this, I don’t close my eyes to the endemic corruption and
tax-dodging in Greece (nor indeed, does the outsiders’ movement Syriza,
which came to power campaigning against just these vices). Nor am I
about to don Farage-ist chalkstripes. My charge is much simpler: the
euro project is not only failing to deliver on the promises of its
originators, it’s doing the exact opposite – by eroding the living
standards of ordinary Europeans. And as we’ll see, that’s true even for
those living in the continent’s number one economy, Germany.

First, let’s remind ourselves of the noble pledges made for the euro
project. Let’s play the grainy footage of Germany’s Helmut Schmidt and
France’s Giscard d’Estaing, as they lay the foundations for Europe’s
grand unifier. Most of all, let’s remind ourselves of what the true
believers felt. Take this from Oskar Lafontaine, Germany’s minister of
finance, on the very eve of the launch of the euro. He talked of “the
vision of a united Europe, to be reached through the gradual convergence
of living standards, the deepening of democracy, and the flowering of a
truly European culture”.

    This isn’t about creating a deeper democracy, but deeper markets –
and the two are increasingly incompatible

We could quote a thousand other such stanzas of euro-poetry, but that
single line from Lafontaine shows how far the single-currency project
has fallen. Instead of raising living standards across Europe, monetary
union is pushing them downwards. Rather than deepening democracy, it is
undermining it. As for “a truly European culture”, when German
journalists accuse Greek ministers of “psychosis”, that mythic agora of
nations is a long way off.

Of all these three charges, the first is most important – because it
explains how the entire union is being undermined. To see what’s
happened to the living standards of ordinary Europeans, turn to some
extraordinary research published this year by Heiner Flassbeck, former
chief economist at the United Nations Conference on Trade and
Development, and Costas Lapavitsas, an economics professor at Soas
University of London turned Syriza MP.

In Against the Troika, the German and the Greek publish one chart that
explodes the idea that the euro has raised living standards. What they
look at is unit labour costs – how much you need to pay staff to make
one unit of output: a widget, say, or a bit of software. And they map
labour costs across the eurozone from 1999 to 2013. What they find is
that German workers have barely seen wages rise for the 14-year stretch.
In the short life of the euro, working Germans have fared worse than the
French, Austrians, Italians and many across southern Europe.

Yes, we’re talking about the same Germany: the mightiest economy on the
continent, the one even David Cameron regards with envy. Yet the people
working there and making the country more prosperous have seen barely
any reward for their efforts. And this is the model for a continent.


Perhaps you have an image of Deutschland as being a nation of highly
skilled, highly rewarded workers in gleaming factories. That workforce
and its unions still exist – but it’s shrinking fast. What’s replacing
it, according to Germany’s leading expert on inequality, Gerhard Bosch,
are crap jobs. The low-wage workforce has shot up and is now almost at
US levels, he reckons.

Don’t blame this on the euro, but on the slow decline of German unions,
and the trend of business towards outsourcing to cheaper eastern Europe.
What the single currency has done is make Germany’s low-wage problems
the ruin of an entire continent.

Workers in France, Italy, Spain and the rest of the eurozone are now
being undercut by the epic wage freeze going on in the giant country in
the middle. Flassbeck and Lapavitsas describe this as Germany’s “beggar
thy neighbour” policy – “but only after beggaring its own people”.

In the last century, the other countries in the eurozone could have
become more competitive by devaluing their national currencies – just as
the UK has done since the banking meltdown. But now they’re all part of
the same club, the only post-crash solution has been to pay workers less.

That is expressly what the European commission, the European Central
Bank and the IMF are telling Greece: make workers redundant, pay those
still in a job much less, and slash pensions for the elderly. But it’s
not just in Greece. Nearly every meeting of the Wise Folk in Brussels
and Strasbourg comes up with the same communique for “reform” of the
labour market and social-security entitlements across the continent: a
not-so-coded call for attacking ordinary people’s living standards.

This is what the noble European project is turning into: a grim march to
the bottom. This isn’t about creating a deeper democracy, but deeper
markets – and the two are increasingly incompatible. Germany’s Angela
Merkel has shown no compunction about meddling in the democratic affairs
of other European countries – tacitly warning Greeks against voting for
Syriza for instance, or forcing the Spanish socialist prime minister,
José Luis Rodríguez Zapatero, to rip up the spending commitments that
had won him an election.

The diplomatic beatings administered to Syriza since it came to power
this year can only be seen as Europe trying to set an example to any
Spanish voters who might be tempted to support its sister movement
Podemos. Go too far left, runs the message, and you’ll get the same
treatment.

Whatever the founding ideals of the eurozone, they don’t match up to the
grim reality in 2015. This is Thatcher’s revolution, or Reagan’s – but
now on a continental scale. And as then, it is accompanied by the idea
that There Is No Alternative either to running an economy, or even to
which kind of government voters get to choose.

The fact that this entire show is being brought in by agreeable-looking
Wise Folk often claiming to be social democratic doesn’t render the
project any nicer or gentler. It just lends the entire thing a nasty
tang of hypocrisy.