The Crisis of Europe and Colonial Amnesia

Recent commentary on the Eurozone crisis has started to pick up the grammar of colonial rule. The centre for Research on Finance and Money at SOAS, for example, has published an influential report wherein northern Europe (Germany especially) is framed as the core and southern Europe (especially Greece) as the periphery. Meanwhile, Ulrich Beck, European cosmopolitan par excellence, wonders whether the European Union will become “a European Empire with a German stamp”. Beck notes that Merkel’s sense of power “conforms to the imperial difference between lender and borrower countries.” At stake, agree many prominent European intellectuals in the pages of The Guardian, Eurozine and Der Spiegel, is no less than the promise of freedom and democracy immanent to the European project itself. All variously agree that, against the imperial sclerosis spread by capitalist and bureaucratic functionaries at the highest levels of governance, what is needed is a rejuvenation of meaningful democracy at a grass-roots level.

Faced with a dismantling of democracy Jürgen Habermas mounts a plea to save the old “biotope of Europe”. The constitutive components of this threatened ecosystem are freedom and democratisation, and its genesis lies in the Second World War and the fight against fascism and “internal” barbarism. The president of the European Central Bank has himself proclaimed that Europe now faces its “most difficult situation since the Second World War”. Alternatively, for many social democratic and leftist commentators, the danger of the situation lies in the loss of the “internal” struggle of labour and capital that defined the Cold War landscape. In the new context of EU institutional “empire” and its neoliberal tentacles, the defeat of labour quickens the erosion of social democracy, thus deciding the fate of the European project.

Europe, then, is perceived to be “colonizing” itself and in the process destroying freedoms and democratic structures that had been hard fought for by the general populace against political oppression and economic exploitation. But this angst-ridden imaginary of European crisis has very little to say about the substantive historical and global dimensions of European colonialism. Does cosmopolitan and social democratic angst cover these legacies and contemporary effects? In fact, in most recent treatises on the crisis the struggle for decolonization is given no integral status, even though these particular struggles were inseparable to and spanned the formative time period of the European project – the Second World War (and the Cold War). Some do mention current issues of migration and xenophobia. Nevertheless the implication, in general, is that colonial legacies are derivative of, or additional to, the core struggle for democracy and freedom in Europe. Fascism, Cold War, class struggle: yes; colonization, imperialism, decolonization and liberation struggle: not really.

Not all intellectuals suffer from this colonial amnesia. A number of scholars including Robert Young, Pal Ahluwalia, Paige Arthur and Alina Sajed have argued that in some key strands of post-War French thought, the issue of colonialism and decolonization was integral to discussions of European re-democratization and humanist concerns. This engagement reached a peak in the Algerian war of independence in the late 50s before falling into abeyance. And this was precisely the same time, we should note, as the Treaty of Rome, which bound European countries together in a tighter economic union simultaneoulsy sought to re-bind (post-)colonial African polities, peoples and resources into this union.

More generally, there has accumulated a significant amount of scholarship that reveals the colonial influences that shaped and were woven into quintessentially “European” intellectual/political movements such as Enlightenment and modernity. Continue reading

The Irruption of the Event

As the inevitable Greek exit from the eurozone seemingly approaches, it’s worth comparing current statements about Greece to how the financial press and regulators considered Lehman Brothers the week before its collapse set the global markets into panic mode. (See below for a selection of illuminating comments from officials about Lehman Brothers pre-collapse and about Greece pre-exit.) Reading these misplaced predictions, one thing becomes clear: the contemporary financial system is far too complex and opaque for anyone to determine the precise consequences of a Greek exit. Add into that the unpredictable nature of crisis politics (e.g. today sees rumors of Greek governing coalitions flying all over the place), and one has a system that quickly surpasses our capacities for forecasting. In this regard it’s interesting to read reports about the current Greek exit fears versus the reports in February when it also looked like Greece might leave (prior to the second of ECB’s long-term refinancing operations (LTROs) that managed to calm markets for a short while). In the earlier reports many commentators considered that French and German banks had largely separated themselves from Greek exposure, while the initial LTRO had purportedly given the financial system the flexibility it needed to survive any temporary disruption. Intriguingly, today’s fears about Greece, after the failure of the LTROs to significantly improve the situation and combined with fears over Spain’s banking system, are much more apocalyptic than in February.

The unfortunate truth is that while a Greek exit will be devastating to the Greek people (of this everyone is confident), it is still a better option than the continued austerity regime. Even the most optimistic IMF estimates of Greece’s economy under the austerity regime only see them returning to 120% debt-to-GDP ratio by 2020 – i.e. the same level that so worries commentators about Italy today. What is being asked of Greece is a state of permanent austerity and permanent social chaos. 

Milos Bicanski/Getty Images

September 9, 2008 –

Unlike Bear Stearns, which effectively collapsed when customers fled for the exits and the firm could not finance itself, Lehman Brothers has more sources of long-term financing and like other broker-dealers, access to emergency financing from the Federal Reserve. Mr. Fuld said that the existence of that lending facility should take any question of Lehman facing a liquidity crisis “off the table.

September 12, 2008 –

While the crisis at Bear stunned the markets, other financial institutions have had six months to prepare for the possible failure of Lehman. In the Bear crisis, the risks were extreme in part because they were unknown and unmanaged. The New York Fed has conducted extensive stress tests in order to attempt to evaluate the impact of a Lehman failure on markets such as the CDS market and it believes the systemic risk is quantifiable and lower than the risk that was posed by the imminent collapse of Bear back in March. Regulators have also evaluated the risk mitigation strategies put in place by other banks and the authorities believe them to be robust. That suggests the risk that a Lehman collapse could trigger a domino effect of failures at other financial institutions ought not to be great.

September 14, 2008 –

Mr Paulson believes that the systemic risks associated with the potential failure of Lehman have been reduced because the market has had time to prepare for its possible demise, and a new Fed funding facility would assist an orderly unwinding of its positions.

February 15, 2012 –

All the while, the chatter in euro policy circles, as I wrote on Monday, is that the Greek rot will not infect the rest of the euro area. A default could be managed. Even the odd French bank has managed to dispose of much of its exposure. We’ve had months to prepare. And, so the Lehman moment comes full circle. Three and a half years ago we were told exactly the same by Hank Paulson and co re Lehmans: The system, we were told, was strong enough. Finns, Dutch and some Germans increasingly think the same about a Greek default.