“If history shows anything,” writes anthropologist David Graeber in Debt: The First 5000 Years, “it is that there’s no better way to justify relations founded on violence, to make such relations seem moral, than by reframing them in the language of debt — above all, because it immediately makes it seem that it’s the victim who’s doing something wrong. Mafiosi understand this.”
The recent proliferation of financial crises has brought this reframing into sharp focus, not least in the cold abstractions put forward by Greece’s foreign creditors as solutions to the prospective ‘Grexit’ from Europe; solutions replete with austerity measures that neither could nor would ever be politically viable in the creditors’ own countries.
When the IMF, European Central Bank and European Commission first addressed themselves to the Greek debt crisis six years ago, they counselled a familiar regime of belt-tightening and loan repayments. This seemed most reasonable to the European banks whose imperilled loans were, effectively, being bailed out. Understandably it seemed much less so to the millions of impoverished Greeks expected to foot the bill. It soon became clear, however, that the troika’s predictions of the depth and severity of the crisis were gross underestimates. In the five years since, the loss of purchasing power resulting from austerity has “deepened the slump, creating Great Depression-level suffering and a huge humanitarian crisis” according to the economist Paul Krugman.
While problematic, Greece’s original debts were never irretrievable. From the outset, however, the government’s room for manoeuvre was constrained by the country’s involvement in the euro. This fact is often overlooked in discussions of the current crisis, even though it is an inevitable consequence of the complexities of the 19-country currency mechanism. The one-size-fits-all approach to membership in Europe’s currency has always looked better on paper than it has worked in real life. A strong currency that suits vibrant economies with low debt ratios presents obvious challenges to states with high rates of unemployment, large debts and faltering economies. Yet creditors consistently downplay this aspect of the situation, and their apparent indifference to the dilemma has alienated the Greek population who see the imposition of economic hardship as an act of deliberate hostility.
Undeterred by the prolonged failure of its own economic remedy, the troika has continued to preach from the high moral ground in its self-serving negotiations. According to the EU narrative, Greeks lived too high off subsidized state benefits for too long. From a purely pragmatic perspective, we are told, countries that mismanage their economies and run up unsustainable debts must face a day of reckoning and accept the medicine of economic reform, however bitter. Unpaid loans erode trust and undermine growth and investment, so it is time act like adults and stop throwing good money after bad. This lofty principle is admirable, but remote from political reality. For one thing, it treats abstractions — like debt and budget surpluses — as though they are more substantial than people. And yet, if the last five years of to-ing and fro-ing have demonstrated anything it is that a great deal of debt relief is essentially, in Krugman’s memorable phrase, “arguments about accounting fiction.”
The bottom line, in fact, is that what many of the EU’s prosperous members most fear is not the continued immiseration of the Greeks but the loss of confidence in their banking system and the political embarrassment that an untimely exit could produce. For all their tough talk, France and Germany fear a Grexit could trigger further, unforeseeable troubles as happened with the collapse of Lehman Brothers in the 2008 global financial crisis. That is a large part of the reason why a nation of just 11 million people has consumed the EU’s attention for so long. There is also the lesser fear of being seen as bullies, who ignored the democratic will of a member state and held a hard line to the end. Neither analysis flatters Europe, but even at this late stage there is still room for a compassionate compromise, if only the bureaucrats, whose meddling has already made a bad situation much worse, are prepared to grant the Greeks some much needed economic life after debt.
