The Greek deal is a bad one. We really need to understand how serious the situation is. By ‘we’ I mean committed pro-Europeans: people, like me, who strongly believe Britain’s place is at the heart of the European Union.
Let us think about what happened in Greece, and how it all started. As Mariana Mazzucato argues brilliantly here, the problem arose because the whole issue was tackled based on an entirely false premise: that it was a cash flow issue when it was not. Over the years, Greek banks received a lot of cash from German banks. They took the money and used it to fund Greek businesses so they could buy, among other things, German products. By doing so, Germany increased demand for its products and boosted its exports. Greece, on the contrary, built up its debt. That, coupled with the lack of public sector reform and investments in innovation, meant that when the crisis arrived, Greece was totally exposed.
At that point, the EU leadership failed to realise that Greece’s problems were about lack of long-term investment. Instead it treated the problem as purely a cash issue, and demanded the cash back. Of course, Greece was not in a position to give it back, but tried. Pensions, welfare and the public sector were cut to find more money.
The rest of the story is well known because we have seen it displayed on our screens. Alexis Tsipras throwing the ball back to the Greek people with a referendum, and the negotiations that went on over the weekend to try and find an agreement.
If only Germany had allowed Greece to do what it had done for itself: boosting the economy by investing in (not shrinking) innovation and technology and increasing wages.
If only Germany did not have to flex its muscles so much. It has rocked the boat so much that American firms signing contracts with firms on the continent are now including eurozone clauses, determining what would happen should the euro fail.
If only the situation could have been sorted with less short-termism and without damaging the future of generations of young Greeks.
If only Angela Merkel had listened to Barack Obama and the International Monetary Fund supporting more generous conditions for Greece, including restructuring the debt.
Frankly, I think that Angela Merkel has done the Eurosceptics across Europe a huge favour.
With a referendum looming here in the United Kingdom my opinion is that we should get ready to face the backlash that this is going to have in our country.
We on the progressive side need to keep clear in mind that our pro-EU stance must not be watered down. That would be a huge mistake.
Responsibility for what happened lies with the leadership that is currently in charge in the eurozone. For a monetary union to be sustainable, countries cannot have such huge discrepancies in their level of competitiveness – that is why Greece should have been helped to boost its economy through investments, and therefore be in a position to pay back its creditors.
Instead of shying away from this reality, pro-Europeans should now stand firmly together demanding that Europe changes course. The current EU leaderships are not Europe, and the Europe we see now is the outcome of who has been in charge in the last few years – mainly conservative, rightwing governments who have supported the politics of austerity with no grip on growth. But that is not set in stone, as it is not set in stone that the Tories have to continue being in power in Britain – it is up to us to provide an alternative which sets out what it means to be Labour in this century, both in Britain and in Europe as a whole.
That is why I am worried that some on the left claim that we should leave Europe because it implements policies of austerity. How would that help our fight at home?
In fact, we need our internationalist approach now more than ever: we need to lead (not leave) a different Europe, which invests in innovation, human capital, research and development. We need to encourage the countries in the eurozone to create the stronger union they need for it to succeed and to help remove the obstacles which prevent them from achieving it.
That would be not only in our own interests as a commercial partner – but in the interests of Europe as a whole. And on this we should challenge the Tories.
Instead of dreaming of a fantasy world where we prosper in isolation, we should now ask David Cameron whether he will show the leadership Britain is capable of, or whether he will once again put party management ahead of the interests of our country.
Progressive centre-ground Labour politics does not come for free.
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