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Austerity Has Been Discredited. So Why Won’t It Die?

Greece has been pushed to the brink not to help its economy, but to show who’s in charge.

Sarah Leonard

July 16, 2015

An anti-austerity protest takes place in front of Greece’s Parliament.(AP Photo/Yorgos Karahalis)

“All of the economic research that allegedly supported the austerity push has been discredited,” The New York Times‘s Paul Krugman wrote in April. Need evidence? Look at Greece, where EU-imposed austerity has sent the country’s GDP into a death spiral. As we go to press, the troika (the European Commission, the European Central Bank, and the International Monetary Fund) is asking Greece to vote on an emergency relief package packed with even more austerity demands, including harsh spending cuts. “The Greek government,” Thomas Piketty wrote at TheNation.com, “is being asked to put a gun to its head and pull the trigger.”

Why is a failed policy being pushed on Greece, and all of Southern Europe? A hint lies in the memoir by former US treasury secretary Timothy Geithner, in which he recalls a meeting with Wolfgang Schäuble, the German finance minister who now plays a dominant role in the eurozone. Schäuble advanced the argument that “letting Greece burn” would be “traumatic enough that it would help scare the rest of Europe into giving up more sovereignty to a stronger banking and fiscal union.” Greece has been pushed to the brink not to help its economy, but to show who’s in charge. Confirmation of the antidemocratic nature of the EU came from Yanis Varoufakis, who represented Greece as finance minister in its first round of negotiations with the troika. When he told Schäuble that Syriza had a mandate to renegotiate punitive concessions made by previous governments, Schäuble openly scoffed. “So at that point,” Varoufakis recounts, “I had to get up and say, ‘Well, perhaps we should simply not hold elections anymore for indebted countries,’ and there was no answer.”

As Greece confronts a new round of brutal austerity measures (the alternative is leaving the eurozone), the rest of Europe is watching. “When citizens repeatedly vote for a change of policy…but are told that these matters are determined elsewhere or that they have no choice, both democracy and faith in the European project suffer,” the economist Joseph Stiglitz wrote. With a Eurocrat elite in Brussels overruling the recent referendum and including in its proposals direct supervision of Greece’s economic policies, even voters in well-off countries have balked. The United Kingdom is due for a vote on continued 
EU membership, and Labour politician Andy Burnham has warned “that the EU is becoming associated with a right-of-centre economic orthodoxy that is being imposed on all parts of the EU.” Hundreds of thousands of people on Twitter stated their opinion on the troika more concisely: As the Greek negotiations reached their 16th hour in Brussels, #ThisIsACoup trended at No. 2 in the world, and No. 1 throughout much of the eurozone.

The liberal project of European integration is emerging as a coercive mechanism: one in which democracy, dignity, and sovereignty are ripped from economically weak countries for the benefit of the strong. The left should be doing some hard thinking about the eurozone and its role—if any—in a democratic Europe.

Editor’s note: An earlier version of this piece incorrectly stated that the United Kingdom is due for a vote on continued 
eurozone membership. The United Kingdom will be voting on continued membership in the European Union. The text has been updated to correct the error.

Sarah LeonardTwitterSarah Leonard is a contributing editor to The Nation and an editor-at-large at Dissent.


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