A New Deal for Greece?
This week, as Greece hurtles toward a likely exit from Europe’s common currency area, the Eurozone, Americans will be surprised to learn that Greece’s ruling Syriza party has turned to American liberalism for inspiration. Speaking on television Sunday, Greek Prime Minister Alexis Tsipras told his people that there was “nothing to fear except fear itself,” quoting Franklin’s Roosevelt’s memorable 1933 inaugural address.
Tsipras invoked F.D.R. to calm the nerves of Greeks who had rushed to their banks en masse to withdraw their savings, marking the beginning of what has become a full-scale banking panic. The European Central Bank (ECB) has now imposed capital controls that limit withdrawals to 60 Euro per person. Once the ECB permanently cuts short its emergency cash flow for Greece, a program inelegantly called Emergency Liquidity Assistance, which has propped up Greek banks during the country’s negotiations with creditors, Greece will likely be forced to remint its previous national currency, the Drachma. This new national money will almost certainly devalue substantially against the Euro, hence the lines at the ATM.
During this historic moment of economic crisis, Mr. Tsipras is not the first Greek politician to draw inspiration from Franklin Roosevelt’s “New Deal for America,” implemented during the Great Depression. Earlier this month, Yanis Varoufakis, Tsipras’s unorthodox finance minister, resurrected Roosevelt’s memory during negotiations with Eurozone finance ministers over the terms of yet another Greek bailout agreement. When ministers ostracized Varoufakis, turning to the press to voice their dissatisfaction with his negotiating style, he tweeted a quotation from F.D.R. “They are unanimous in their hatred of me,” wrote Varoufakis “and I welcome their hatred,” recalling Roosevelt’ 1936 speech excoriating America’s business elite and its opposition to his sweeping economic reforms.
But Syriza’s appeal to the New Deal runs deeper than rhetoric. Like Roosevelt’s 1932 Democratic coalition, elected three years into a global depression, Syriza was elected with a mandate to reverse the direction of their nation’s economic policy from strict debt service and balanced budgets (in Greece’s case, budget surpluses) toward government-led efforts to stimulate economic growth.
For the Roosevelt administration of the 1930s, this took myriad forms: from minimum wage laws to price manipulation; from programs for unemployed workers to state-led infrastructure projects like the Tennessee Valley Authority. In a similar spirit, Syriza came to power in January after five years of economic depression in Greece, promising to reverse austerity policies enforced by Greece’s creditors: a combination of tax increases and budget cuts. These policies were enforced and monitored as conditions for loans to Greece that went largely to reimburse previous private creditors, primarily northern European banks. Embattled Syriza has spent the last six months trying to convince its more politically powerful European partners, especially Germany, to abandon austerity and instead use European institutions to encourage investment and employment growth in the Eurozone....