Democracy in Europe: Looking Toward the European Elections
Speech by George Papandreou delivered at Science Po (Paris)
Thank you Sean, thank you all for being here this evening.
It is an honour for me to be here at Sciences Po this semester.
There is no better opportunity to be studying politics than during a crisis.
Only a few days ago I was in Korea.
Meeting officials, policymakers and academics from the region to discuss the future of Asia and the rise of China.
It is obvious that we are witnessing a re-balancing of global power.
And this may take on the form of a struggle for global supremacy.
But beyond this power struggle what may be more important, more important than who is more powerful, will be the struggle on what this new balance of power will represent in values.
What values will characterize and dominate our global community tomorrow.
This struggle may not be a violent clash of civilizations but it will be one of competing models of governance.
-Issues concerning democracy
-Issues concerning welfare
-Issues concerning the environment and decarbonizing our economy
-Issues of peace and war
This is the magnitude of what is at stake.
Europe has traditionally been a ‘force of good’ supporting these humanistic principles.
But the Asians, although sympathetic towards our accomplishments in maintaining peace on our continent, will not wait for us.
Our impact on the world, on which values will dominate the future governance structures, depends on the success of our model of governance.
And today that has been put in question.
As by the way it has been with gridlock in the US.
In speaking in the US recently I often would get a question that surprised me.
Is democracy the right system, or can democracy work?
Maybe the question is a sign of the times.
I was also in Turkey last week.
In contrast there I met with the Syrian opposition, many Arab politicians, the Arab league, as well as members of the Gezi Park movement in Istanbul that mobilized large numbers of youth asking for a more profound democracy.
All of them, in one way or other, are attempting to democratize or deepen democratic practices their societies.
Yet I was deeply aware of the absence of Europe.
I don’t mean officials such as our High Representative who are active.
I mean the full force of Europe being present.
To assist our close neighbours in their vital and historical struggles for peaceful transition.
A transition to more free and open societies.
And what will happen in these societies will profoundly influence our lives.
My dear friends, as we are consumed with our own crisis in Europe, history is passing us by.
But I would also contend that this European crisis is not simply ‘time consuming’ – which it also is – but the handling of the crisis, the way we have dealt with this crisis, has undermined the basic values that we have represented.
And therefore we have weakened our very values both globally and in the consciousness of our citizens in Europe.
From my personal experience, our reaction during this crisis was more of fear and ignorance.
And we became insular, defensive.
We chose to find refuge in dogma, that of ‘austerity’, rather than think critically, imaginatively of realistic and more effective alternatives.
We placed our fate in high priests and magicians – we call them ‘technocrats’ – rather than believing in the potential of our societies.
We gave up power to the more powerful, in this case Germany, rather than collectively engaging our nations and our citizens.
And as the problem became more complex and the pain deeper we often looked for scapegoats rather than facing the real problems of our Union.
So the point I am going to make tonight is that the crisis in the Eurozone is not a just financial, economic or even institutional one.
It is of politics.
It is a fundamental crisis of democracy.
Many of you in this room are European citizens.
Those of you who aren’t may feel that Europe stands for something greater than the sum of its parts.
What does Europe mean to you today?
What values does Europe represent?
Is Europe still relevant?
If you are having a hard time formulating answers to these questions, you’re not alone.
Last year, I spent some time teaching in the US.
A Spanish student of mine said to me:
‘My parents were 25 when the dictatorship fell in Spain. They were waiting for a different and democratic Spain.
Europe was what guaranteed democracy and brought prosperity.
Yet today, they feel disempowered, they feel they no longer control their fate.’
In today’s 28-member EU, almost half the population that now live in democracies once lived under dictatorships.
The EU was instrumental in this transition.
So I will argue that European leadership can, and must, use this crisis as an opportunity to reinvigorate European democracy.
But let’s go farther back in history, to the ancient Greeks.
I am sure you are well aware that the ancient Greeks invented the word and concept of politics.
Historically, scholars will tell us that ‘politics’ was not simply an invention but a revelation.
It was a liberation from fear.
Fear of high priests, awe of magicians, fear and submission to kings and tyrants.
Politics became a liberating concept. We could imagine to be masters of our own fate.
Liberating our human capacity to freely imagine a better society and create a better life.
And democracy was an innovation to make sure no one again could concentrate so much power or wealth.
It is this spirit of politics that we need to recapture today in our democracies.
It is necessary to clarify and redefine the some of the challenges we face.
Let’s see what are the challenges to democracies around the world.
I’ll give you five, plus one.
First, is the traditional fight, which I lived through when I was a kid, fighting a dictatorship, fighting an authoritarian regime. Overthrowing dictators.
It is a fight for freedom.
Second, there’s the challenge of the transitioning to democracy: countries or societies that have new born freedoms.
How do they protect them from new authoritarianism or fundamentalisms, or types of ideologies that may enslave rather than liberate?
A third has to do with our mature democracies. It involves reclaiming democracy. Where even in developed economies we have the capture of politics that undermining of our democratic institutions.
We have a concentration of wealth and power that is unprecedented and it influences or even corrupts our democracies.
A fourth challenge is democratizing globalization. The global economy allows for capital to move beyond national borders. Beyond the norms that pertain to us as citizens.
So regulating financial capital (tax havens, off shores); making our international institutions more accountable, whether it’s the IMF, the rating agencies, the ECB, the World Bank; dealing within cross border phenomena that are increasingly beyond our national control, drug trafficking, human trafficking, refugees, climate change; is what we need to do to globalize our democracy.
Finally, a fifth challenge is to reinvent, to rethink democracy.
How do we have democracy beyond borders in a way that will allow for legitimate representative decisions for a larger planetary public good?
With the French revolution, the freedom that was found and the democracy that was developed was based on a sense of national solidarity. A common identity.
Can we have this common identity in more diverse societies?
How can we unite people, citizens in solidarity when we have so many minorities, multicultural differences, religious differences?
Can we create a patriotism of values?
And isn’t this exactly what Europe is attempting? Isn’t this the European challenge?
But also in rethinking democracy I would add to this the need to assess the use and the abuse of our technologies that give, or take away, power.
We can have the NSAs, or we can have ways to incorporate social media into our democratic institutions for deliberation and crowdsourcing problems.
Finally, plus one:
The fight for social justice in our nations was a basic bargain, a collective bargain between the workers, the employers, and the state. And that guaranteed cohesion, security, participation, basic services in education, in welfare, in health.
But today in a globalizing economy, where capital can disappear into the stratosphere, who are we bargaining with?
How do we promote universal rights?
The fact remains that globalisation may have brought us all closer together in some ways, but ultimately it has created increasing inequalities in and between our societies which has led to a sense of helplessness.
We need to rethink our institutions, to guarantee our democracy and peaceful resolution of conflict and participation for all.
A redistribution, if you like, of power.
But let’s look at the crisis in Europe and see how the way we dealt with the crisis undermined these basic values.
The economist, Dani Rodrik, puts it quite well.
He says there are two narratives:
The first one says ‘it is their fault’.
The fault of the periphery countries.
We, the PIIGS misbehaved. We borrowed too much, private or public, had rigid labour markets, and low productivity.
But there is a second narrative that says ‘it is our collective fault’.
We have an incomplete currency union.
Lack of a banking union.
No common fiscal or economic policy.
A single currency but multiple bond markets with diverging rates.
Absence of any common legal order in dealing with debt or bankruptcies.
And therefore, these were ample reasons for contagion and further market unease around the euro.
Of course it is a combination of both narratives that is closer to reality.
I always said, Greece has a problem but Greece is not the problem.
But why is a narrative important?
Because a narrative defines the problem and by doing so it limits the possible solutions.
So if Greece was the problem, as was the initial narrative and understanding, or if the periphery was the problem, then they alone must carry the burden of adjustment.
And that is what happened.
Austerity became both a prescription and a punishment for bad behaviour.
But there are two problems with this approach:
First of all, austerity did not address the real problems of the countries in the periphery.
Certainly not of Greece.
No, debt and deficits were the tip of the iceberg.
The symptom rather than the underlying cause.
The real problem was a problem of governance. I again would say a failure of our democratic institutions.
– Lack of monitoring,
– Lack of transparency from taxation to welfare spending,
– Bad allocation of funds rather than lack of funds,
– Unequal distribution of money rather than profligate spending by all,
– Clientelism rather than meritocracy,
– Politics captured by vested interests,
– Graft rather than the rule of law.
So the priority of the so-called troika and our creditors should have been on reforms rather than austerity.
And they have belatedly understood this.
Secondly, austerity was and is no solution for the structural problems of the Eurozone – indeed it has exacerbated them.
Let me just mention a few of these more systemic problems of the eurozone:
1) Lack of oversight and monitoring from the Commission.
Had there been oversight, I wouldn’t have been burdened with a deficit of 15.6%.
2) The European Central Bank was created with the idea that only inflation matters, and that a market-led Eurozone would be self-corrective.
Such a policy was doomed to fail.
Compare that with the FED in the US, where employment is also a basic priority.
3) It is 2013.
Five years after the crash on Wall street. Yet we in Europe have not resolved our banking problems. We have not yet put our financial system in order.
And furthermore, our banking union, which had been promoted in the European Union, now seems to be stalled.
That has meant little investment in the real economy, as banks are preoccupied with their internal accounting problems.
And the way we dealt with Cyprus, a relatively small economy, by hitting depositors, has further exacerbated fears in our financial system.
4) Another example: take the divergences between North and South.
We have high surpluses in the North (exceeding the surpluses of what China has today) excessive deficits in the South.
Such a North-South economic divide has always been part of the Eurozone. But it has become much worse.
And moralizing about this problem avoids the obvious solution.
Deep austerity in countries under adjustment programs has not been offset by what would have been a positive development – expansionary fiscal policies in the European core.
In fact, the European Commission has launched a review of Germany’s large current account and export surpluses.
There is real concern: excessive surpluses and weak domestic demand in Germany is exacerbating the imbalances in Europe’s economy.
The Commission is also concerned that the German boom is dependent on the flight of capital and skilled workers from crisis-hit countries like Greece, Portugal, Italy and Spain.
Of course, Germany’s economic achievements should be admired.
But does that mean we all can become Germany in a few years?
Germany had a difficult adjustment process after re-unification.
But it took two decades to adjust. Many of the peripheral countries need the time to make deeper changes.
And changes during a deep recession are politically more difficult.
Gerhard Schroeder often told me that he could not have made reforms and austerity at the same time.
There is of course another more profound issue.
Not whether we can but whether we should all become Germany.
Within a common framework of rules and principles isn’t it important to have diversity?
So that each country or region may develop comparative advantages.
If we understand that our economies will be driven by research, knowledge, innovation, then diversity will be an asset.
That brings me to two more global issues that I faced as PM.
One is that Europe’s recession and loss of competitiveness to emerging economies, has much to do with what model of growth do we want to emulate?
Will it be a race to the bottom?
And secondly, I also faced wider financial imbalances: tax havens which helped tax evasion, offshore companies, speculation in global markets, and ratings agencies, which had more power than our parliaments. We would take measures and the next day they would downgrade us, as if we had done nothing, and they would have more impact on our economy that we, as the democratically elected leaders of our country.
And these were challenges that Greece could not solve alone.
This is where Europe could have played an important role.
But ignoring these issues ensured that they would return to haunt us. And they did.
Let me now mention but three of the consequences of the false narrative.
One consequence was that in not dealing with these deeper issues we in Europe created the impression that we ourselves mistrusted our own project.
This was linked with constant rumour about a Grexit or exit from the Eurozone.
And what happened?
The results were devastating on the Greek economy.
A fear of returning to the Drachma meant that people withdrew their euros from the banks, sent them to other countries or put them under their pillows.
Banks stopped lending, consumers limited consumption, and investors waited to see what would happen.
Our economy simply froze.
Making the adjustment program even more difficult.
A second consequence had to do with recession and unemployment.
Greece has had major achievements in both fiscal consolidation and competitiveness or current account deficits.
The current account deficit—a key indicator of competitiveness – will be less than 1% of GDP in 2013 – down from 15% in 2009.
We will also have a primary surplus this year.
This is one of the fastest fiscal corrections achieved by any advanced economy.
By the end of this year, Greece will have regained all the competitiveness we had lost since we joined the common currency.
Portugal and Ireland are on similar paths.
Ireland should regain access to the market by the end of the year.
But does that mean the crisis is over?
Far from it.
Grinding austerity may have restored fiscal health, but it has had devastating impacts on the heath of the real economy.
And very serious consequences for social welfare.
In the last four years, Greece’s economy has shrunk by 27%.
Unemployment is now above 27%.
Youth unemployment is a staggering 60%.
Youth unemployment has reached unsustainable levels in other austerity-hit countries too: 55% in Spain, almost 39% in Italy.
Youth unemployment (and the social problems it brings) is costing the European Union over 150 billion euros a year – or 1.2% of GDP – in state welfare and lost productivity.
This is both inefficient and unfair. We have an educated, motivated, but unemployed younger generation that is rapidly losing faith in our European institutions and values.
The cost of a lost generation (those known as NEETs—not in education, employment or training) is much higher than helping our youth into employment through vocational training, apprenticeships or continuing education.
Why not create a scholarship fund for the unemployed to train in whatever country they wish?
Why not extend the most popular program of the EU? The ERASMUS Program.
Why not an ERASMUS for the unemployed?
But there’s a bigger question here:
As we transition to more competitive economies does this mean that we should accept a lost generation?
And what type of employment or prospects are we providing for the next generation?
Many of you in this room have chosen to advance your studies to pursue your career goals.
But around the world, higher education is no longer a guarantee for a job—as it was in the past.
It’s partly because our technological advances. Technology is replacing labour.
It is also partly because we now face increasing competition from emerging markets.
And we have made it expedient to remove the job security and basic benefits that once constituted the basic bargain of our societies.
We will compete with emerging markets, but are we going to compete on their basis, when they themselves do not want to emulate their own model?
China, for example, with its reforms is looking to change its model of growth, its pension system, its consumer rights, the rights of migrants in the cities, the issue of corruption and the degradation of the environment.
The American writer Bob Kuttner calls today’s economy the “Task Rabbit economy” after the freelance-for-hire website by the same name.
Kuttner writes “The move to insecure, irregular jobs represents the most profound economic change of the past four decades. The question is whether this collapse reflects a shift in fundamentals or a shift in political power.”
His question is rhetorical.
Regulation, or the lack of it, in favour of global finance over the past decades have redrawn the political landscape, establishing the political supremacy of capital over labour.
So when the crisis hit, the political response was one sided: unravel any real sense of a safety net as a solution to both competitiveness and unemployment.
Now, is there an alternative?
I would say yes, there must be.
Actually last July, here in Science Po, a conference called “An innovative Society for the 21st Century” examined this exact topic.
Some said that our growth model as we know it is dead.
That we not only need sustainable green growth but that because of technology we need to rethink the entire notion of prosperity and decouple labour and income – guaranteeing the social right to work.
I participated and described what I had proposed as PM in the European Council of 2009, just before we negotiated our positions on the Copenhagen Climate Change Summit.
I proposed that Europe become an engine and an example for green growth.
Leveraging private capital through green eurobonds and regulation, investing in the necessary green energy grids, transportation and information infrastructure for a green economy, but also in human capital – in education, research and innovation.
This would have a triple effect:
First of all, Europe would take the lead in the world on the most crucial issue humanity is facing, which is climate change.
Second, Europe would become competitive by investing in quality, rather than racing to the bottom.
Third, Europe would essentially solve its unemployment problem and prepare a new generation for the challenges ahead.
Furthermore, this project would attract capital from around the world.
What was the response? Conservative. Fearful.
Eurobonds of any sort means pooling our risk in the European Union.
(Although I would say that it means pooling our strengths)
And that is something many fear.
But the experience of Greece, Cyprus, Portugal, Ireland and Spain suggests that no country is “immune” when it comes to our monetary union.
Today’s weak link may be tomorrow’s load-bearer.
Aesop would remind us of his fable of the mouse and the lion.
Back in 1999, The Economist wrote a critical analysis of a European country that was tugging down European economic performance – a country with (and I quote): “a byzantine and inefficient tax system, a bloated welfare system and excessive labour costs.” The country in question? Germany.
So one of the clear lessons from this crisis is that Europe cannot survive without some degree of pooled risk.
Although we have taken a step in this direction with the creation of the EFSF and later ESM, we need deeper and more proactive solutions that can minimize economic turbulence.
Converting outstanding national debt into Eurobonds would not only end the Sisyphean task of trying to pay off a growing mountain of debt, but it would make it much easier for countries to make structural reforms.
This would also make the euro as a whole more competitive and a safer bet for investment.
However there is a third consequence of the euro-crisis which is deeply political.
It is becoming a political impediment to change in Europe.
Since the dominant narrative around the crisis, in the media and politics, was that ‘you southerners are to blame’ for the crisis, or that ‘you northerners are simply too austere’, the debate has been transformed from one of rational deliberation to emotional moralizing and scapegoating.
Stereotypes are dominating our politics.
Blame games are the easy rhetoric of populists.
This further fits in with the fact that many conservative parties have been playing into the hands of far right movements – desperate to win back votes as people lose faith in mainstream political parties.
It also weaves into the anti-migration and xenophobic politics.
Managed migration and the will for managed integration of migrants in the EU is also critical to ease the strain on our pension and insurance systems.
But an anti-migrant populism, born from the crisis, has put this goal even farther out of reach.
And while there is a real issue concerning our capacities of our societies to incorporate large numbers of new populations, this rhetoric is a very dangerous game.
It represents a real lack of visionary leadership at the national level and an absence of coordinated strategy at the European level.
It is undermining our European identity. Which by definition is characterized by diversity.
Of course, it is easier to look for scapegoats than search for solutions to complex problems.
But the problem in Europe is not the Greeks or the Germans. Turks or Muslims. The southerners or the northerners.
The problem is our rhetoric, our narrative.
We need the courage to change this.
We need to complement our patriotism to our nations with a patriotism to our common values.
Habermas calls this ‘constitutional patriotism’.
Otherwise Europe will be unable to empower its citizens.
And a basic value is to make the European project not one that is by the elites, but one of the citizens.
This one of my main reasons I called for a referendum.
But of greater interest was not my decision but the reaction to it.
My dear friend Nicolas Sarkozy was especially furious by this decision.
In Cannes, I repeated my conviction that a referendum was essential to win public backing for Greece’s tough reform program.
Sarkozy felt differently. “The markets are going to go crazy!” he said.
“Well,” I replied: “Market confidence won’t last unless we have the confidence of our citizens.”
And this is the heart of Europe’s problem today.
As Prime Minister of Belgium, Elio Di Rupo, told me a few days ago in Istanbul – we cannot have a common market without human values.
If our democracies cannot guarantee that then something is wrong with our democracies. And it is logical that voters are turning their backs to us.
So what is at stake in next May’s European elections?
Opinion polls suggest that around 70% of eligible voters will abstain.
That leaves greater opportunities for anti-European and extremist parties to make inroads.
Who is going to govern Europe at this critical juncture?
Who will write the new EU Treaty?
Will it be the Euro-sceptics?
How will that dictate the future of Europe?
How will it define Europe’s place in the world?
This brings me to my final point.
The European Union was built on a strong commitment by France and Germany to overcome the divisions of the past. That Franco-German alliance has shaped 60 years of peaceful cooperation, economic and political integration in Europe.
France today can and should play a vital role.
It is both a northern and a southern country.
Francecould be the key player in reshaping the political narrative in Europe.
Unfortunately I feel that France has become a victim of a psychology I encountered when I was PM.
No one wanted to be identified with Greece, or the periphery, for fear of catching the plague.
But France needs to bridge the differences in the EU. Help convince Germany to change its entrenched position on the causes and cures of the Euro-crisis.
That means abandoning its moralising stance and accepting for example that higher inflation and strategic investment programmes are essential to reboot the wider European economy.
Despite the difficulties I believe Europe has the capacity to evolve, to overcome its limitations, to live up to its promise.
We need both to democratize our union but also democratize and help humanize globalization.
Otherwise we will see globalization dehumanizing our European project.