The Blog

The Greek Deal Is Not a Coup, It Is a Logical Consequence of Intergovernmentalism

Already before Eurozone leaders reached a final agreement on the third bailout package for Greece, the hashtag #ThisIsACoup had started to make its rounds on social media. Few hours after the Eurogroup's draconian list of demands was published, Economics Nobel Prize winner Paul Krugman endorsed the hashtag in his New York Times blog, arguing that the deal amounts to a "complete destruction of national sovereignty".

As with past agreements, the new deal has once again prevented a Greek default and is likely to once again prevent the country's recovery. With previous measures having at best allowed and at worst caused the Hellenic economy's collapse, it seems unlikely that an even higher dose of the same medicine will turn it around. There is no alternative to less and better-targeted austerity and even the IMF advocates a haircut now. Particularly leaders and voters in Germany, itself a major beneficiary of debt relief and economic assistance, should acknowledge this sooner rather than later.

However, while the Greek deal is politically, economically and ethically questionable, those who used the hashtag #ThisIsACoup got it wrong. They should have a look at Egypt, where the military ousted an elected president in 2013 and has killed and jailed many of those opposing the new regime too loudly. This is not what happened in Greece.

Yes, the Greek population clearly rejected the austerity measures twice, once when putting Alexis Tsipras and Syriza in power and then again in the referendum. Yes, the Greek government has been pressured into accepting a deal that looks pretty much the same as the one refused by popular vote. Yes, this might lead to the fall of the Greek government. And yes, fellow Eurozone governments would not particularly mind if it did.

However, rather than being a coup, the Eurozone's leaders unwillingness to acknowledge the result of the Greek referendum and to compromise with the Syriza government is a logical consequence of the intergovernmental system through which large parts of EU affairs are governed.

If all those Eurozone states whose tax-payers' money was and is used for loans or guarantees to bailout Greece had asked their citizens, there probably would not have been any bailout at all. In that case, Greece might have defaulted as early as 2010, potentially triggering a financial crisis far worse than the one caused by the 2008 collapse of Lehman Brothers.

Germany faces a major backlash over the Greek deal now, including another hashtag calling for a boycott of its economy. However, actually some other Eurozone members are much harsher on Greece. "The feast time at the expense of others is over for Greece" Lithuanian prime minister Dalia Grybauskaite said in early July. "Eurozone countries are really not going to pay for the irresponsible behaviour of the new Greek government" she added.

In the Baltics, many of those who experienced enormous hardships during the post-1989 transition of their economies have little sympathy for Greece. Particularly since they are asked to provide financial support for a country whose wages, pensions and unemployment benefits are significantly higher than their own.

Ignoring Northern and Eastern European opposition to debt relief would not be less undemocratic than it has been to ignore the outcome of the Greek referendum. Those who single out the recent developments indirectly maintain that the popular will of Greek voters is worth more than the will of voters in other EU states.

In much the same way as many other undemocratic and ineffective deals that EU leaders have made, the Greek deal is a logical consequence of intergovernmentalism. What is essentially a domestic European issue has largely been handled through classic international diplomacy. And in this line of business, voters do not matter all that much. And voters in small countries hardly matter at all.

There is no such thing as democratic intergovernmentalism. If decisions are reached through international negotiations, you cannot take election results or referenda in all participating states into account. With 28 member states in the EU and 19 in the Eurozone, almost every decision would be blocked somewhere.

The problem is that there are no European legislative and governmental structures to deal with European domestic issues. This is what caused the Eurozone sovereign debt crisis in the first place: Comprehensive economic integration was not followed up with comprehensive political integration. It is also the reason for the disastrous crisis management over the past five years, as measures were usually lowest common denominator compromises of member states' governments stubbornly pursing their egoistic short-term interests.

According to the Italian finance minister Pier Carlo Padoan, only Italy, Cyprus and France supported a compromise with Greece. This is hardly surprising. Northern and Eastern European governments were facing massive domestic pressure not to be too lenient. And after having prescribed austerity measures on their own citizens and being haunted by left-wing opposition, the conservative governments of Spain and Portugal had no interest in enabling Syriza to get its compromise either.

In Greece, austerity will not bring the desired results and there is no alternative to restructuring the country's debt. But this problem will either be left for future governments or it will be acknowledged step by step using the same salami tactics Angela Merkel employed to move from her categorical refusal to support Greece in 2010 all the way to agreeing on a third bailout package in 2015.

Intergovernmentalism has proven to be an inadequate system of governance to manage the European economy in general and the Eurozone's sovereign debt crisis in particular. The failure is systemic, rather than just political. It is thus not only the current Eurozone leaders who are to blame for screwing up Greece. It is also all those who have been jealously guarding national governments' and parliaments' powers and opposed the transfer of competences on economic and fiscal policy to the European Commission and the European Parliament.

And in Germany's defence it should be acknowledged that it has traditionally been among the member states most supportive of such political integration.

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