In November 2011, Angela Merkel, the German chancellor, and Nicolas Sarkozy, France’s then-president, bullied Prime Minister George Papandreou out of an attempt to establish Greek ownership of the second rescue loan (and the attached conditions) through a referendum. While the eurozone failed to scare Syriza off from holding a ballot this June, it was not for the lack of trying. Why this astonishingly prickly attitude to letting people make a choice? The answer is as obvious as it is worrying: Europe’s leaders fear that the people will make the wrong choice.
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It is the expression of this particular preference — keep the euro, but with different policies — that the eurozone political elite has done everything it can to prevent. Is this justified? There are three interpretations: one disingenuous; one charitable; and one cynical. All are deeply troubling for any democrat.
The disingenuous account is that the Greek population voted to get more of other people’s money for free. That is not something democracy gives anyone a legitimate option to choose. But Greece’s government has made ends meet since 2013; and even before that only one-tenth of the loans went to covering primary spending. At most “in the euro with alternative policies” means a default within the eurozone.
The charitable interpretation is that eurozone leaders believe there is no alternative — beyond the euro’s complete unravelling — to the policies they have rallied behind, which buy financial support from Germany and other creditor countries in return for tight fiscal and monetary policy and structural reforms imposed from the centre.
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The uncharitable interpretation is that having tied their credibility to policies that can fairly be blamed for holding back Europe’s economic growth, the established elites cannot afford to admit that they were wrong. The claim that there is no alternative cannot survive the demonstration of an alternative that works. So the political imperative is to insist that the euro requires the cash-for-control consensus to be respected — and that challenging it is tantamount to abandoning the euro.
But it is not true. Early sovereign and bank debt restructurings in Greece would have removed the need for massive official rescue loans. The shift to austerity and monetary tightening in 2010-11 was a policy choice; different ones could have been made. And the reform agenda that now forms Europe’s hegemonic ideology may or may not be good for long-term growth — the International Monetary Fund’s research gives a mixed verdict — but is hardly a sine qua non for the euro’s survival. If one country chooses less growth-friendly policies than others, it must simply accept being a laggard. This is as it should be in a union of democracies.
Yet untold numbers of independent observers have uncritically bought into the “no alternative” rhetoric, without realising that if true, it is a terrible indictment of monetary union. The euro’s goal was to smooth cross-border trade and investment and reinforce the political bonds that prevent a return to past enmities. It was not to remove any choice over the economic models under which different nations wish to live.
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