Greece and Germany have more in common than you might think

Concerns over Greece’s ability to pay the debt it owes to the European Commission, European Central Bank and IMF continue unabated. While a great deal of coverage is given to Greece’s ability to meet the conditions set by its creditors, there is another underlying dynamic of the crisis – who is responsible for it and who it is affecting.

It is often argued that citizens of richer countries are paying for the “profligacy” of citizens from indebted countries. Cultural arguments of apparently “lazy Greek” workers as the cause of the crisis are put forward despite the fact that Greek workers are work some of the longest hours in Europe.

Rather than the result of Greeks living above their means, the crisis is a reflection of the highly uneven European political economy. While Germany and other countries of the European core have pursued a growth strategy based on exports, countries in the European periphery – including Greece – followed a strategy of demand-led growth often financed with loans from abroad. Nevertheless, it would be wrong simply to blame the Greeks entirely for this situation.

Eurozone success and failure

The recurrent distinction between credit-led and export-led economies is misleading. Firms in core European countries would not have been able to pursue export-led growth strategies if global demand had not been supported by the real estate and stock market bubbles that occurred as a result of lending. German export success, in other words, depended on Greece’s increasing indebtedness.

Yet it is not the Greek, Portuguese, Irish or Cypriot citizens and their health and education systems that are being rescued. It is the banks that had organised the lending of super profits to these countries and who were therefore exposed to their private and national debt when the financial crisis happened. Indeed, German and French banks were particularly vulnerable to the Greek debt crisis.

The bailout packages for Greece came at a high price. Support is dependent on austerity policies including cuts to the funding of essential public services; cuts in public sector employment; a push towards privatising state assets; and undermining industrial relations and trade union rights through enforced cuts in minimum wages and a further liberalisation of labour markets. The implications for Greece have been disastrous.

Unemployment is currently at 25%, with youth unemployment almost 50%. Since the onset of the eurozone crisis and the imposed austerity the economy has shrunk by 25%.

Winners and losers

It would be wrong, to regard the conflict over the way out of the crisis as one between Germany and Greece. German workers for example have not benefited from the export success. In fact, increases in German productivity have to a significant extent resulted from drastic downward pressure on wages and working related conditions.

German employers have relentlessly squeezed their workers and the country’s export success has been built on increasing inequality within German society. Hence, the real conflict here is between workers and big business. This takes place across the EU, as employers have abused the post-crisis environment to lower wages, increase zero hour contracts and undermined trade unions' collective bargaining rights, all the while preserving their profits.

German solidarity with their Greek counterparts.EPA/Michael Kappeler

Despite the draconian imposition of cuts, Greek workers have not settled for being victims of the crisis. For several years now, they have successfully established neighbourhood support groups and community clinics, which provide health care for those pushed out of the official system by austerity. It is these grassroots movements which provided the foundation for Syriza’s electoral success back in January.

These local self-help groups were not all organised by Syriza itself, but party activists have been key members of these groups. While many political parties elsewhere have transformed themselves into purely electoral machines, Syriza is tightly integrated into its social basis of activists and voters. It is for this reason that Syriza cannot and will not abandon its anti-austerity election pledges in exchange for a new agreement with its lenders. It is for this reason that there are talks about the need for a referendum on any deal struck in Brussels.

Importantly though it is not only Greece that is under pressure as a result of the current stand-off. Europe’s finance ministers must think twice before they let Greece go bankrupt. Not only could it wreak havoc with eurozone finances, but if Greece is able to demonstrate a viable alternative to austerity outside the euro, the citizens of other debt-ridden countries may follow their example and the whole austerity project may fall apart. Unsurprisingly, Syriza and Greece represent hope for an alternative future for many on the left across Europe.

Andreas Bieler is affiliated with the University and College Union (UCU) and a member of its National Executive Committee.

Jamie Jordan receives funding from ESRC.