Democracy and the Eurozone Crisis

by Dr Alison Smith

I’m quite heavily invested in the idea of representative democracy.  Everyone has a chance to have their say, everyone agrees to live with the result.  There is no need to lock up dissenters.  When leaders pass their peak after two or three terms, democracies have a mechanism to replace them.  This ruthless cull ensures that almost all political leaders’ careers end in failure.  But things seem to have changed.  These days, politicians want to win votes so they can’t take tough decisions.  Or else the people are stupid and keep voting for idiots like Berlusconi.  That appears to be the logic behind installing economists to run Greece and Italy.

The installation of ‘technocrats’ is supposed to be a temporary solution, designed to push through austerity measures that democratically elected politicians have shirked.  On paper this sounds like a plan, but some dangers lurk in the small print.   Tough austerity measures taken by unaccountable economists, who many blame (rationally or not) for causing the crisis, may push voters into the arms of radical populists.  And there is no guarantee that technocrats will successfully introduce austerity where democrats have failed, at least not within a year.  But, most worryingly, it sends the message that some situations are too urgent, or too serious, to be left democratic chance.

In much of Europe, the bond markets and the credit ratings agencies have been setting the pace, leaving little time for debate.   According to the inexorable logic of the debt trap, a ten percent pension cut is more than swallowed by a rise in interest rates on government debt.  How does a democratic government try to sell that to its people?  Alternatively, how does a new democracy like Slovakia, admitted to the euro-zone only recently, persuade its people that they should bail out a relatively wealthy country like Greece?  It is hardly surprising that democracy is facing its biggest challenge in three generations.

Three euro-zone governments (Slovakia, Greece and Italy) have fallen in recent weeks.  Economic problems are starting to have political consequences, and this is only the beginning.    The most optimistic scenario is that adversity will revitalise democracy, and that both leaders and citizens will rise to the challenge.  The most pessimistic scenario roughly involves a re-run of the 1930s, something that should be concentrating minds more than it seems to be at the moment.  As ever, the most likely outcome is somewhere in between these two extremes.  This blog will track political developments across the European Union, analysing the interplay of politics and economics as the eurozone crisis runs its course.