Break up or make up? Dealing with European trust issues

Pragmatism is dead. The Greek crisis has turned into a bashing of policies and vanities, which has a poisonous effect on the country and the entire European Union. While slowly a leftist economic opposition to the neoliberal austerity policies emerged, deep cuts in the most important value of the EU have been made – trust. They derive from actual economic failure on several levels and aggressive populist rhetoric. However, underlying misconceptions about economics and solidarity create a heavy burden regarding the solution of the European fiscal crisis.

Economic theories are theories – not the Holy Grail!

In the past decades, economists enjoyed a high reputation and tricked people by creating the image of their field as an area, which is solely based on evidence and facts. The public has forgotten that the same top economists who failed to predict the burst of the US real estate bubble in 2008 and the European crisis are the ones who still shape the debate. However, just the way people have different opinions and preferences on cars, food or vacation, economist have different perspective on the solution of economic crises. Both left-wing and right-wing approaches have logic theoretic concepts and actually make sense. Admittedly, modern economics is based on experience and data, but this does not exclude failure and flaws along the process of finding solutions.

However, the previous years have shown that the economic debate is led in a moral and highly biased way: leftist accuse neoliberals of designing a poisonous cocktail, which increases poverty and only targets the support of companies and the finance sector, while neoliberals criticise leftist for weak fiscal policies and the prolonging of the crisis. Soon, the ethic dimension was predominant – instead of asking what economically would be most effective for the majority of the stake holders, emotional discussions about guilt, right or wrong and good or bad were influencing the decision makers.

It seems that it is hard to accept that the truth lies between both approaches – yes, the IMF has admitted that the implemented policies of the last years have been partially inappropriate for the Greek case, but it is true as well that Greeks still have to work on their structures. Hence, the trust in economists is eroding, because both the neoliberals and the leftist are right and wrong at the same time, but each pretend that only one strict path is correct – their own. The lacking economic pragmatism deepens the divide between the parties, which support investment-driven policies and the ones which seek to implement strict austerity measures. The Euro-Group, the Troika and the Greek government are jeopardizing the future of the European Union, since political vanities have become more important than the correction of prior mistakes and the search for new possibilities to solve the crisis.

A Union without solidarity is doomed to fail!

Trust in economic solutions is important, but the core of the European Union and its growth has been solidarity and trust in the equality of other peoples. The reconciliation of World War II has been embedded in the European Union – Germans diplomatically succeeded to strengthen ties with French and Poles, their debts have been cut, an aspect which currently seems to be forgotten. The current lack of solidarity is rooted in populism, media and the history of the European countries. Western media enjoyed to portray the southern members of the Union as lazy and corrupt. While there has been a core of truth in these claims, the current Greek government reinforces the negative image by acting inappropriately.

Building a national identity on the historic fact that Greece has been the “cradle of democracy”, is a nice thing, accusing other politicians of terrorism (Varoufakis, 03.07.15), isn’t. Additionally, Syriza governor Rena Dourou explained in an interview with the German newspaper Der Spiegel that it was contradictory to maintain Bulgaria, Romania and Croatia in the European Union, but to „attempt to push Greece away“ or to try to decrease the levels of salaries and pensions to the levels of the other Balkan countries. Such statements are not only logically flawed, but dangerous, since shooting against other members of the Union triggers anger instead of the necessary understanding. First of all, Bulgaria, Romania and Croatia are not members of the Euro-Zone, their public debt in relation to the GDP is much lower (28%, 37% and 85% respectively, compared to 177% in Greece), the comparison is therefore out of context. Second – and this is what is triggering the current opposition of countries like Latvia, Lithuania and Slovakia – other countries have gone through severe budget cuts in order to fulfil the criteria to enter the European Union or to fight the crisis and have endured it relatively silently.

In Lithuania and Latvia, GDP has been growing in spite of the crisis, but the average pensions remain at low levels around 240-300€ monthly although life costs increase. Greek pensioners receive on average 833€. Additionally, Latvia and Hungary have similar poverty rates and Portugal is going through a comparable austerity programme as planned for Greece. However, nobody cared about these countries in the past, therefore they expect Greeks to accept these measures as they have in the past. Since the country is the only one of the crisis economies, which seems to be in an economic free fall, a bail out might be the only solution out of the misery. Hence, if Greek decision makers want to convince the Euro-Group to take mild decisions in favour of the maintenance of their life standard, it will be crucial to remind its members of the value of solidarity instead of triggering the opposite.

Photo: Thijs ter Haar; Creative Commons.

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