Euro zone: smaller and less democratic?

Joachim Becker The European Union increases the pressure on the Greek government and parliament to adopt even more severe austerity measures day by day. The Greek democratic institutions are systematically disempowered. For the Greek parties, the limits of the bearable seem to be reached. For the Greek public, these limits are clearly exceeded. There are first indications that some political forces in the EU core countries would possibly like to squeeze Greece out of the euro zone. The present Greek government is not legitimated by elections. It is the result of EU pressures to form a government of national unity with the aim to push through the austerity agenda of the creditors. The government is headed by Lukas Papademos. As the ex-chief of the Bank of Greece and former vice-president of the European Central Bank, he enjoys the confidence of the financial world and the leading political forces in the EU. For the first time since the fall of the military dictatorship in 1974, Papademos included members of the far right-wing LAOS party in government. It was only the leftwing parties which stayed outside this national unity government. In Italy, the EU exercised likewise strong pressures in order to replace Silvio Berlusconi by Mario Monti, a former EU commissioner. In contrast to Greece, the Italian government is presented as a technocratic government. It is packed by ministers who had held managing positions in banks before. It could be described as a bankers government. The installation first of Papademos and then Monti can thus be considered as bloodless coups, conceived and administrated by the euro zone leaders and the bankers, whose authorized representatives they are, concludes the Greek philosopher Stathis Kouvelakis. The policy space of the South European governments is severely circumcised in the case of Greece and Portugal by very detailed agreements with the IMF/EU, in the case Spain and Italy by the usual EU procedures as well as pressures by the banks. Giorgos Kassimatis, professor emeritus for constitutional law and political science, points out that the Greek credit treaties with the euro zone countries and the IMF violate principle of a state of law (Rechtsstaat, pravn stat) and human rights principles. The treaties restrict the national sovereignty and the powers of elected national bodies to a degree that they would require the consent of parliament. However, they have neither been discussed nor passed by parliament. Kassimatis underlines that property rights pertain as well to wages and pensions. Legally codified social rights have been abrogated without any transitional arrangements. German officials recently proposed to install a special budget commissioner with veto powers over Greek spending decisions. It was followed up by the ideas of a special escrow account which would give the EU and the IMF even stronger control over the use of bail-out funds. The ad hoc governance that emerges for European debtor states is not without precedence in the most recent European history. It has common traits with the type of governance which the Western governments installed in their collective de facto protectorates Bosnia and Herzegovina and Kosovo after the wars. The political and economic balance sheet of Western governance in these two territories is extremely poor. The European Stability Mechanism would institutionalise what is already practiced in an ad hoc manner: the (temporary) suspension of budgetary autonomy of countries that ask for support in terms of crisis. A number of new EU rules and the proposed fiscal pact likewise reduce the budgetary powers of parliament in a drastic way. The President of the German Federal Constitutional Court,

Andreas Vokuhle, is deeply preoccupied. He underlined that it would be fatal, if democracy would be damaged for rescuing the euro. It is more than doubtful that the non-democratic austerity policies will ensure the cohesion of the euro zone. The Greek economy is in free fall. The official unemployment rate increased from 13.9% to 19.2% between October 2010 and October 2011 the fastest growth in the EU. Likewise Greece displayed the most rapid growth of the public debt burden 20.3 percentage points between 3 rd quarter 2010 and 3rd quarter 2011. This can be no surprise. It is the inevitable consequence of the deep recession which results from the austerity policies. The EU/IMF policies are obviously not suited to meet the self-proclaimed target of alleviating the debt problems. However, they are well suited to reducing imports and the current account deficits and to destroying the welfare state. The most recent round of EU/IMF austerity demands, especially severe wage cuts, strain the endurance of the Greek governing parties to the limit. In protest against the austerity measures, including a drastic cut of the minimum wage and mass lay-offs in the public service, ministers of the far right-wing LAOS party and, against the line of their party, ministers of the centre-left PASOK resigned. The EU-imposed government of national unity begins to crumble. There are mass protests against them. One might get the impression that some European officials want to inflate the demands to a point when Greece would leave the euro zone. It is telling that Neelie Kroes, an EU commissioner originating from one of the EU core countries, recently said that the euro zone could cope with a Greece exit. Squeezing Greece out would increase the pressure on the other Southern euro zone countries. The rationality behind forcing Greece (and possibly other countries) out might be the unwillingness of the EU core countries to consider a more balanced development model for the EU and to accept substantial transfer payments to the periphery for a prolonged transition period that might be necessary for attaining more robust industrial development in the periphery. The price of forcing Greece, Portugal and possibly other countries out of the Euro zone might be higher than Ms. Kroes thinks. Democracy and the welfare state are first casualties of the EU crisis management. The euro zone might be another one.