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Sovereign or Orphan: Europa and Zeus

In an old Greek myth, Europa is a Phoenician women, who while gathering flowers with her attendants, sees Zeus the great god, who has taken the form of a white bull. She caresses his flanks, and gets on his back, and then bull rides off with her across the sea to the island of Create, and as they used to say in the old days, ‘seduces’ her.

Roles which seem to be reversed in the present day, Greece it seems has come under the will of a new Europe, than is really run by finance capital. At first pass, the matter seems to one of unpayable and mounting debt: Greek debt is more than 150% of its GDP. Pay cuts for civil servants, tax increases and the like do not seem to be able to get the state to breakeven point, debts keep mounting, even as protests against the already server austerities have rocked the streets of that country.
While debt in many European countries, Spain, Italy, Ireland and Portugal among them is massive, as is debt in the United States (nearly 100% of GDP) and deserves a separate discussion, debt alone is not the reason for what seems to be an intractable crisis. Rather, it is the question of sovereignty.

To understand this, we need to understand the policy issues at stake here. Most sovereign states have two policy strands in their economic management, monetary policy and fiscal policy. Monetary policy, in short has to do with the issuing of money, that is to say currency, and is usually handled by a ‘central bank.’ This is supposed to be an institution quite independent of government and politics, yet part of a sovereign state apparatus. Fiscal policy, on the other hand, is made by a government through its ministry of finance or treasury, and it has to do with how it collects money and spends it. Now, as I said, these are two different functions, and should be independent of each other, but usually this mutual independence is over shadowed by the over arching sovereignty of the state.

Argentina, nearly a decade ago in December 2001 faced a debt crisis like Greece. They did not have the revenue to pay their loans. Yet, they were able to default; stop interest payments on their international bonds and devalue their currency, and while there have been some hard times since, there have been positive results also. Paul Krugman, a noted and Nobel prize winning economist says in his blog: “Argentina suffered terribly from 1998 through 2001, as it tried to be orthodox and do the right thing. After it defaulted at the end of 2001, it went through a brief severe downturn, but soon began a rapid recovery that continued for a long time.”

Euro zone
Greece can’t simply do this, because it doesn’t control its monetary policy. Europe does. And it isn’t Europa anymore, and Zeus seems to be dead. To be more precise and serious, euro zone monetary policy is governed by a European Central bank, since Greece, unlike Britain, Denmark and Sweden, has joined both the super-state European union, and the euro zone. It can’t devalue its currency, because it doesn’t control it. If it could, it might have been able to try the Argentinean route. So what can it do, since the prescription of austerity is not solving the problem?

Indeed, it can attempt to leave the Euro Zone, and this was the question to be asked at the referendum proposed by the Greek Prime Minister. First it seemed the question was going to turn on the acceptance of the austerity package, which 60% of Greeks naturally oppose because it would mean huge reductions in their incomes. Financial markets swooned, and emergency aid was cut off by the EU. Then it turned out that was not to be the question, but rather, as one high powered financial news service, Bloomberg, put it, the question was to be, do you wish to, “stay with the euro, or return to the drachma as an orphan state”? According a prior poll cited by editors at Bloomberg, 70% of Greeks don’t want to leave the Euro zone, so the question, put this way, would preserve the monetary union.

Yet it is by no means clear that George Papandreou, whose father and grandfather were also prime ministers, would have equated sovereignty to orphan-hood. Indeed, even though he has now, under pressure from his own finance minister backed away from the whole idea of any referendum at all, it must surely have been this equation that crossed his mind, and must cross the mind of his fellow citizens. What is the worth of ceding ones sovereignty for the sake of domineering parents?
Or perhaps roles have been reversed fully; and it is Europa who now pulls Zeus on to her back, and carries him off to Brussels?

(Published in print and on the web, in the Nation on Sunday, on 6th Nov., 2011)

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