Don’t let the Greek fiasco weaken Labour’s commitment to Europe

The Greek settlement, or perhaps better the eurozone’s Diktat, is outrageous. It reflects such an intrusive, dictatorial, dirigiste, centralising mindset on the part of those in the control room of the EU (not just of the eurozone) that it will force many to revisit their enthusiasm for Britain’s EU membership. If Europe’s leaders show as much contempt for the residual independence and national sovereignty of the Union’s member states as the debt-collectors have shown for Greece, Cameron begins to look justified in seeking a UK opt-out from the “ever closer union” of European Holy Writ. UKIP is already crowing, and no wonder. Eurozone leaders’ treatment of Greece is a priceless gift to those campaigning for Brexit (UK exit from the EU) at Britain’s in/out referendum in or before 2017. It will be essential for Labour to stick to its guns on continued EU membership despite this set-back: the wider case for Britain in Europe is dented but by no means undermined.

The creditors’ conditions for a bail-out and debt re-structuring constitute a gross interference in “matters which are essentially within the domestic jurisdiction of any state”, contrary to Article 2(7) of the United Nations Charter. The monitoring and enforcement provisions are insulting, reducing Greece to little better than colonial status, and there’s no ethical, financial or political basis for the creditors’ careless assumption that repayment of debts (to themselves!) takes precedence over all considerations of humanity, the relief of human distress and deprivation, social and political cohesion, national pride, and respect for the clearly expressed wishes of the people of a democracy, not to mention the strong western strategic interest in maintaining Greece’s commitment and loyalty to Europe and the west.

In joining the EU or its predecessors, each member state voluntarily exchanged some elements of sovereignty for the benefits of collective action for the greater good. But few states would have joined if the advertised price in curtailment of political independence had been as high as that now forced on the Greeks. An ordinary borrower can choose between draconian terms offered by one lender and better terms from a different lender, or can ultimately decide to do without the loan. The Greeks have no such options. No one else will lend if the Troika won’t. The Greeks’ sole alternative to the Troika’s mindlessly harsh terms is penury and social collapse.

It’s true that the Greeks and their elected governments over the last several decades are largely responsible for their own calamitous situation (although not for the global financial crisis which has aggravated it), and that some (but not all) of the domestic ‘reforms’ imposed on them are necessary for economic recovery and thus in Greece’s interests. Moreover Greece might have secured marginally better terms from the creditors had it not been for the erratic, contradictory, antagonistic, amateurish and often insulting behaviour of the Syriza leadership in the negotiations, including the ill-conceived referendum rejecting a settlement that was anyway no longer on offer. But allowing the creditors’ understandable irritation over Tsipras’s behaviour to harden the terms of the eventual settlement is genuinely wicked: this is the perverse justice of the nursery.

Paradoxically, there’s a broad consensus among respected economists that the austerity régime being imposed on the Greeks against their will is likely to hinder and delay Greece’s eventual recovery and return to prosperity, not promote them. When lack of aggregate demand in the economy is a factor in the recession, making the Greeks increase VAT is crazy. An attack on widespread tax evasion is one thing: reducing the incomes of pensioners — among those with the highest marginal propensity to spend — is manifestly counter-productive. Even voodoo Osborneconomics hasn’t attempted that in Britain. Policies such as privatisation of national assets and progressive versus regressive tax regimes should be for Greeks and their governments to decide, not foreign financiers and politicians.

So this is a rotten deal. The sole reason for agreeing to it and seeking to conform to its terms is that the only available alternative would be even worse for Greece. A great injustice is being done; the great European idea is badly damaged. In exam question form:

“The single currency project was intrinsically flawed from the start. Its survival now will entail a degree of integration of economic, political and fiscal policies under central eurozone control and discipline, with implications for non-eurozone countries as well as for the rest, that many EU countries, including some eurozone members, will find it impossible to accept. Moreover, in the new two-speed Europe the discrepancy between the two speeds may prove too great to accommodate. Discuss.”

President Hollande almost alone comes out of this well. Although Cameron, heading a non-eurozone government, could never have played a central role, a more committed European could have discreetly supported French efforts to tone down Mrs Merkel’s and her domestic political supporters’ harsh, rigid and doctrinaire zeal. The partial discrediting of the European enterprise is a disaster for Britain, and a still greater one for eurozone members. But thanks to weak and clumsy Tory European diplomacy, Britain again stands helplessly on the sidelines, incapable of influencing events despite its own interests being indirectly involved. Our government’s sole concern is apparently to avoid any British contribution to the cost of the new Greek bail-out. How shaming is that?

Brian Barder is an author and a former diplomat