Eurozone crisis: The people have become a nuisance
24 April 2012
A spectre is stalking the financial markets: what if the army of unemployed and poor no longer rubber-stamp the policies of the powerful? No wonder neither politicians nor business leaders want to risk too much democracy.
The euro crisis is dormant; the trillion loan from the European Central Bank has calmed the waters. A new threat to the financial markets, though, has been spotted: democracy. “The French and Greek elections as well as the referendum in Ireland are sparking concerns among investors, businesses and consumers,” says Elga Bartsch of the U.S. investment bank Morgan Stanley.
The euro countries are asking for huge sacrifices from their people. To bolster financial markets’ confidence in their creditworthiness they are laying off hundreds of thousands of state employees, increasing taxes, slashing state funding and rolling back pensions.
And to increase the states’ international competitiveness, wages are being forced down, job security weakened, and the power of unions eroded away. What’s more, rising numbers of people are losing their jobs. In countries such as Greece and Spain, half of all young workers have in the meantime joined the unemployment lines.
“The biggest risk for Europe right now is probably less a rise in interest rates on government bonds and more a political and social crisis due to the spectacular rise in joblessness,” believes Patrick Artus, an economist at the French bank Natixis.
At regular intervals, as required by the rules of democracy, the victims of the crises can vote in elections on the actions to be taken – and to refuse them. That this might happen is creating uncertainty in the markets. In recent months, therefore, politicians have done much to neutralise the will of the electorate. In Greece in November a referendum on the austerity measures was obstructed by the German and French politicians, who openly threatened Greece with its exclusion from the eurozone should the Greeks have voted against the measures.
Cut back on the tempo of austerity
In Greece and Italy the crisis forced elected leaders out of office. Into their chairs moved “technocratic” politicians who had not been elected and therefore did not depend on the will of the voters.
“The policy during the crisis resembles a permanent coup d'etat,” criticises literature professor Joseph Vogl. Informal circles of bankers, politicians and central bankers are increasingly setting those policies. “Financial Soviets,” as Vogel puts it, are making the decisions.
Yet the people are still being asked to vote – in Ireland, for example, where at the end of May they will vote on whether to join the Fiscal Pact. The Irish, however, are not being offered a lot of leeway. The country depends on funds from the euro bailout packages – and that money will only come through if Ireland signs up to the pact.
In early May the Greeks will vote in a new parliament. To immunise the austerity programme against the will of the electorate, the likely winners – the parties Pasok and New Democracy – were forced beforehand to commit themselves to continuing the reform course. The problem, however, is that the small opposition parties are getting stronger, and this is creating anxiety among investors, who want to avoid political controversy.
On Sunday the first round of the French presidential elections finally took place, and saw the socialist Francois Hollande emerge with a small lead over the incumbent Nicolas Sarkozy. Hollande wants to tax the rich more heavily, cut back on the tempo of austerity, and renegotiate the Fiscal Pact. The markets are already handing him the bill, and in a bond auction on Thursday France was forced to pay higher interest rates.
Freedom of markets vs freedom of democracy
Sarkozy for his part has sworn to keep the French on the path to reform. That means sacrifices for the people, but without reforms, Sarkozy warns, France risks “turning into Greece or Spain.” There is simply no alternative. Put in plain English, the French can indeed vote, but they have nothing to choose from.
“The talk about alternatives is a form of speech and thought control,” criticises the business ethicist Ulrich Thielemann. “If you can no longer talk about alternatives, it’s the end of democracy.” Formally, the vote will indeed then be taken. “But people are no longer to choose anything, just to rubber-stamp the fixed policy. That’s democracy as a statement of approval.”
The electorate is currently being disempowered by the markets, which come up with the credit needed – or refuse to give it. “It’s loss of sovereignty,” says Thielemann. Politicians bow down before the markets as before a force of nature. At the same time, “that capital they have to beg for so desperately today they could have also gotten simply by confiscating it: through taxes.”
The freedom of the markets runs counter to the freedom of democracy, Thielemann believes. “If the purpose of a state is only to become more competitive, then the central question of democracy is forbidden: how do we want to live?”
Translated from the German by Anton Baer