By Martin Sandbu, 

A desire to keep the euro but with different policies is unacceptable to the EU’s elite, writes Martin Sandbu

The biggest question raised by Syriza’s election victory last January was not about Greece. It was whether any national population that has adopted the euro can meaningfully express a democratic choice.

This is a test case of the euro itself. If monetary union and democracy are incompatible, even the euro’s most committed friends need to choose the latter. Fortunately, they are not. But European policy is premised on the opposite view. Without a change in approach, it must lead to failure. 

The list of pressures on Greeks’ self-determination is uniquely long. It includes, first, the extraordinary micromanagement of policy by creditors. Second, the shameless intervention in Greek elections by European leaders who both in 2012 and in 2015 made abundantly clear they wanted Greeks to re-elect the same discredited elites. Third, the huge efforts made to avoid any plebiscitary upset, or even support, of the eurozone’s policy programme.

In November 2011, Angela Merkel, the German chancellor, and Nicolas Sarkozy, France’s then-president, bullied Prime Minister George Papandreou out of an attempt to establish Greek ownership of the second rescue loan (and the attached conditions) through a referendum. While the eurozone failed to scare Syriza off from holding a ballot this June, it was not for the lack of trying. Why this astonishingly prickly attitude to letting people make a choice? The answer is as obvious as it is worrying. Europe’s leaders fear that the people will choose wrongly.

In Greece, opinion polls have been remarkably consistent about two things: most Greeks want to keep the euro as their currency, and most also reject the policies imposed by the creditor institutions previously known as the troika. That is what the “no” landslide this summer meant; and it is what Mr Papandreou’s referendum would also have shown had it not been aborted.

It is the expression of this particular preference — keep the euro, but with different policies — that the eurozone political elite has done everything it can to prevent. Is this justified? There are three interpretations: one disingenuous; one charitable; and one cynical. All are deeply troubling for any democrat.

The disingenuous account is that the Greek population voted to get more of other people’s money for free. That is not something democracy gives anyone a legitimate option to choose. But Greece’s government has made ends meet since 2013; and even before that only one-tenth of the loans went to covering primary spending. At most “in the euro with alternative policies” means a default within the eurozone.

The charitable interpretation is that eurozone leaders believe there is no alternative — beyond the euro’s complete unravelling — to the policies they have rallied behind, which buy financial support from Germany and other creditor countries in return for tight fiscal and monetary policy and structural reforms imposed from the centre.

Mario Draghi, the European Central Bank president, is the clearest exponent of this idea. He argues that all eurozone members have an interest in reassuring that no member would be better off leaving the monetary union, and are justified in demanding structural reforms to make the euro work better.

The uncharitable interpretation is that having tied their credibility to policies that can fairly be blamed for holding back Europe’s economic growth, the established elites cannot afford to admit that they were wrong. The claim that there is no alternative cannot survive the demonstration of an alternative that works. So the political imperative is to insist that the euro requires the cash-for-control consensus to be respected — and that challenging it is tantamount to abandoning the euro.

But it is not true. Early sovereign and bank debt restructurings in Greece would have removed the need for massive official rescue loans. The shift to austerity and monetary tightening in 2010-11 was a policy choice; different ones could have been made. And the reform agenda that now forms Europe’s hegemonic ideology may or may not be good for long-term growth — the International Monetary Fund’s research gives a mixed verdict — but is hardly a sine qua non for the euro’s survival. If one country chooses less growth-friendly policies than others, it must simply accept being a laggard. This is as it should be in a union of democracies.

Yet untold numbers of independent observers have uncritically bought into the “no alternative” rhetoric, without realising that if true, it is a terrible indictment of monetary union. The euro’s goal was to smooth cross-border trade and investment and reinforce the political bonds that prevent a return to past enmities. It was not to remove any choice over the economic models under which different nations wish to live.

That fact that alternatives exist is cause for relief, but also for despair. By pretending they do not — and in Greece, trying to make this true by closing down the banking system rather than forcing its restructuring — Europe betrays its own values. One of the most precious was articulated by Voltaire: to defend someone’s right to express, and to live by, a view one deeply disagrees with.

Europe should hold that principle more highly than its justified scepticism of Syriza’s agenda. Doing the opposite is a betrayal that can only increase support for extremists left and right.