Three victories of Greece

Note translated by Evan Jones for Counterpunch

Whatever is the outcome of the Eurogroup’s meeting 22 June, it is from now on clear that the Greek Government has achieved a spectacular victory. The Government has been improperly labeled ‘a government of the radical left’ or ‘the Syriza government’, but in reality it is a coalition (and the fact that this union has been made with the ‘sovereignist’* party ANEL is significant).

This success concerns Greece, where the population has recovered its dignity, as well as the rest of Europe, where its example shows henceforth a path to follow.

But, more important, this government – in the ruthless struggle that it has led against the euphemistically labeled ‘institutions’, essentially the politico-economic apparatus of the EU, the Eurogroup [the finance Ministers], the European Commission and the European Central Bank – has demonstrated that the Emperor has no clothes.

That whole apparatus, complex and little transparent, has been challenged to respond to a political demand, and it has proved incapable of doing so. The image of the EU has been fundamentally altered.

Whatever happens on the 22nd – whether it ends on an acknowledgment of failure or by capitulation by Germany and of the partisans of austerity, or even, not impossible, by a defeat of the Greek government – the EU’s politico-economic apparatus will have demonstrated conclusively its toxicity, its incompetence and its rapacity. The European population will know from now on where to find their worst enemy.

  1. A European Union without direction

The Greek Government, in the course of negotiations which began in late January, has been confronted with a totally inflexible stance by the ‘institutions’. But this inflexibility has conveyed far more – a tragic lack of strategy and the pursuit of contradictory objectives rather than set objectives. One understands that, in effect, these institutions intend to cede not an inch on the principle of ‘Euro-austerity’, a politics of austerity on a European scale installed on the pretext of ‘saving the euro’.

It’s why they turned down flat the reasonable propositions of the Greek Government, as numerous economists have indicated.(1) The propositions asserted by these institutions have been described as the economic equivalent of the invasion of Iraq in 2003 by an editorialist who could in no way be classed on the left of the ideological spectrum.(2)

It is necessary to understand this as a significant admission of failure. A stance has been publically defended by the EU representatives, which was never founded in reality, and which has as its only justification the narrowest of ideology. These representatives have been incapable of adapting their stance and have tied themselves in knots with frequently deceitful arguments, as the US government did on the question of weapons of mass destruction attributed to Saddam Hussein.

At the same time, these institutions have always proclaimed their intent to keep Greece within the euro zone. It is necessary here to grasp the scale of the paradox: one claims one thing whereas one does everything to ensure a contrary outcome. If the Eurogroup countries genuinely wanted Greece to stay in the euro zone, they must recognize that the country required a commitment of investment over several years, and that it was necessary that the Eurogroup finance this investment.

Pursuing thus two contradictory objectives simultaneously, austerity and keeping Greece within the euro, it becomes probable that the institutions will end up losing both. Greece will exit the euro, and the politics of Euro-austerity will be compromised, with political consequences for Spain as well as Italy.

The Greek Government, in holding firm against the European institutions’ demands, has clearly exposed the inconsistency of the EU’s policies; the latter’s attitude has underlined their essential incoherence. But it also highlights something else: the congenital malformation of the euro zone.

  1. The euro, a stunted and dangerous monetary specimen

The question then arises as to how to understand why the institutions, at the heart of which are political personalities like Angela Merkel, Jean-Claude Juncker and François Hollande, have been incapable of seeing that, deprived of a large-scale investment plan that could allow the productive sector of the Greek system to recover the competitiveness it had before entering the euro, Greece would not prove capable of surviving within it.

The answer is quite straightforward: it is the intrinsic frailty of the euro combined with the commitment, politically as well as symbolically, that the Euro zone’s leaders have made in its creation.

The euro is presented as a ‘single currency’ for the countries that use it. That is reflected in the technical structure of the euro. The existence of the Target2 settlement system and the clearing between the euro ‘German’, ‘French’, ‘Italian’ or ‘Greek’ shows that we are not in the presence of a real single currency but rather of a system establishing an iron rule for the relative parities of the [different] currencies.(3) In reality, the euro is a regime of fixed exchange rates (as was the case under the Gold Standard) disguised as a single currency, given that there is no federalism – budgetary, fiscal or social. The construction of this economic federalism is a necessary condition for a single currency to function on a grouping of heterogeneous territories.(4)

The idea that the creation of the euro, even in the absence of federal structures, could spark the political movement that could advance the construction of such structures is simply spurious. I have the greatest respect for those who, especially amongst the economists, continue to argue for the building of these federal institutions. But it is a respect that is inspired more by their persistence than by their intelligence. They are stubborn, undoubtedly, but reality has overtaken them. There will be no federal structures, and the euro will be condemned to be only a monetary runt, whose perpetuation engenders only ongoing crises. And this demonstration we owe to the Greek Government.

  1. The euro, an ersatz ‘single currency’

But the Greek Government has provided us with a third demonstration – that of the intrinsic fragility of the euro. If there is anybody who is well aware of the extreme fragility of the euro zone, a point that I have highlighted in an article dating from 2006,(5) it is the President of the ECB himself, Mario Draghi. It is worth listening to and reading what he has said during a press conference that he gave in November 2014:

“So it should be clear that the success of monetary union anywhere depends on its success everywhere. The Euro is – and has to be – irrevocable in all its member states, not just because the Treaties say so, but because without this there cannot be a truly single money.”

This is a declaration of the utmost significance. Draghi affirms that a localized failure of the euro entails a systemic failure. Now, nothing in economic theory elucidates this claim. Previously, when the Irish Free State left the United Kingdom, that did not entail a crisis of the Pound Sterling. If, in the near future, Kashmir is detached from India and adopts its own currency, that will not endanger the rupee for the other States of the Indian union.

But, this which Draghi has admitted, if it is not supported by theory or matched in the experience of monetary unions, is effectively correct in the case of the euro. It is thus because the euro does not effect a comprehensive monetary union, and cannot become so in the real world. It is only a subterfuge to dictate to European countries a rule of stability of monetary parities of which Germany has the greatest need in order to expand its trade and its economy.

Short of mechanisms assuring the completeness of monetary union, and one knows that that implies significant transfers from the countries of Northern Europe (particularly Germany) to the countries of Southern Europe, the euro will remain imperfect, in fact a monetary runt.

Such is the reason why European leaders are so frightened by the prospect of a ‘Grexit’. This prospect is not that of an apocalypse, as claims the President of the Greek Central Bank – playing a political game that is easy to discern. Some, becoming more numerous, are starting to say that exiting the euro zone could be for Greece the lesser evil.(6) There again, we owe this demonstration to the Greek Government, to which we will be largely indebted in the years to come.

* * *

On these three points, it is clear that the Greek Government has already carried some key victories. These victories, and the example that it has given both at home with the decision of the Syriza’s leaders to ally themselves with the ANEL sovereignists and externally in its comportment vis-à-vis the ‘institutions’, will be the most precious benefits of the Greek crisis, and this whatever the outcome may be.


This article was published on the blog of Jacques Sapir, RussEurope, 20 June. It has been translated from the French by Evan Jones.

Sapir, and his political economist compatriot Frédéric Lordon, are relentless critics of the structures of the European Union, for which grievous sin they are consigned to the margins of the French media.


* [EJ] The label ‘sovereignist’ may appear alien to an English readership, to whom ANEL has been readily characterized as a typical right-wing populist Party. The label is not a substitute for ‘nationalist’. Sovereignty is a concept with much cachet in France (vive la République), with sympathizers spread across the political spectrum.

(1) Amartya. Sen, ‘The economic consequences of austerity’, The New Statesman, 4 June 2015; James Galbraith, ‘The IMF’s “Tough Choices” on Greece’, Project Syndicate, 16 juin 2015.

(2) Ambrose Evans-Pritchard, ‘Greek debt crisis is the Iraq War of finance’, The Telegraph, 19 June 2015.

(3) See Frances Coppola, ‘Mario Draghi and the Holy Grail’, Coppola Comment, 18 June 2015.

(4) Jacques Sapir, ‘Différenciation régionale et fédéralisme budgétaire en Russie’ in Critique Internationale no.11, avril 2001, pp. 161-178.

(5) Jacques Sapir, ‘La Crise de l’Euro: erreurs et impasses de l’Européisme’, in Perspectives Républicaines, no.2, Juin 2006, pp. 69-84.

(6) Wolfgang Munchau, ‘Greece has nothing to lose by saying no to creditors’, Financial Times, 14 June 2015.

Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s'est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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