The Greek Crisis—Politics, Economics, Ethics: A Debate held at the Birkbeck Institute for the Humanities, Birkbeck College, University of London, 5 May 2010

It's a pleasure to be here, but not under these circumstances, obviously. I'd like to thank Costas Douzinas for organizing the event. What I intend to do here is to give you very briefly some elements of political economy of the current crisis from a report we put together in March with research funds at SOAS (School of Oriental and African Studies) on money and finance in relation to the Eurozone. Then I want to talk about the broader political issues invoked in this terrible situation unfolding in Greece and more broadly.

What has caused this crisis? What are the more proximate causes of this crisis? I'd like to argue that there are two. The first has to do with the structural nature, the structural bias of the Eurozone stemming from the way the Eurozone has been set up. I don't mean by this the contradiction between a unified monetary policy and a fragmented fiscal policy. I'll come to that, but that's not what I mean. What I mean is that the Eurozone has quite clearly become an area of structural generation of surpluses for the core countries, Germany fundamentally among them, and deficits for the rest, primarily the periphery. These surpluses appear on current account, and then they become transformed into export of capital in the form of foreign direct investment or bank lending (by German firms primarily) to the periphery and elsewhere. In short, the Eurozone has become an area of almost complete German domination when it comes to current account. This is an unprecedented period—and it isn't just in the Eurozone; there are the surrounding areas of Europe, but the Eurozone is at the core of it.

The reason why this has happened is no mystery. Loss of competitiveness on the part of peripheral countries is fundamental to this. This loss of competitiveness, again, is no mystery. It's got nothing to do with German efficiency, German technologies, and so on. It has to do primarily with the very high rates of exchange with which peripheral countries joined the Eurozone, ostensibly to keep inflation down. But more than that it has to do with the eye-watering, incredible wage suppression in Germany itself. It has to do with the fact that the German ruling class, the German employers, have been incredibly successful at keeping wages down, something that has been tried across the Eurozone, but with particular success in Germany for reasons [relating to] the political economy of the country itself. As a result, Germany has been able to gain competitiveness throughout this period, and it has managed to create, to generate, structural surpluses in the Eurozone. The Eurozone has become a mechanism for German domination of much of Europe.

The second reason for the current public debt crisis has to do with the gigantic financial crisis that emerged in 2007, which then became a recession by 2009. The state suffered from this for two reasons. First of all, because the state across Europe—to a lesser extent in Greece, but clearly across Europe—rescued the banks, and rescuing the banks is a very expensive business. More fundamental than that, however, is the fact that the recession that followed crushed tax revenue. As a result, state finances began to go into deficit and state debt began to rise. In other words, the public debt crisis, which is happening in front of our eyes in Greece and in the rest of southern Europe, has got nothing to do with state profligacy, a sudden wild bout of expenditure on the part of the Greek State. It follows from these two structural events, causes that I have already explained.

Why Greece, though? If these are general causes (and I think they are), they apply to the periphery, as we show in this report. Why Greece? Again there is no mystery. First of all, the productive structure of Greece—this structural imbalance between the core and periphery of the Eurozone that I've already...