European Union

Why No One Else in the Eurozone Had a Referendum

In 2015 the globe was faced with the possibility of a first-world country running out of money.  The illusion of immutable western economies was shattered as Greece was faced with defaulting on its international loans, which were undertaken in 2010 to alleviate the government debt crisis.  The Greek default crisis was highlighted by a series of increasingly befuddling moves by the Greek government, which were met with frustration from the European Commission, IMF, and European Central Bank (ECB) leaders. Eventually Greece accepted continued austerity, and the troika was stone-faced and oddly silent. The Greek government’s decision to put further austerity to a public vote was the crowning moment in Greece’s awkward handling of what was essentially more of the same.

The Greek referendum was fundamentally flawed because it applied a democratic tool to a nondemocratic entity.  The Eurozone, and in fact the European Union (EU) as a whole, was not created to be a democratic organism, but to be the ties that bind on a continent where all earlier attempts had failed. The Greek referendum was nothing short of a distraction and a mockery which highlighted the underlying tensions between elective member governments and authoritative economic institutions. However, it was precisely because Europe’s institutions were not beholden to democratic process that they were able to swiftly deliver a feasible bailout plan.

On August 14th the Greek lawmakers voted to accept the latest bailout proposal from the ECB.  Immediately following the vote in Athens, the financial ministers of the Eurozone member states officially endorsed the plan. While it took the Greek parliament over a month to agree to the terms of the bailout, the financial ministers took only hours to validate its terms.  This speed shows the urgency that was felt throughout the Eurozone as the default crisis lingered, as well as demonstrating the expediency that Europe’s financial institutions are capable of.  Since the Eurozone representatives were financial ministers and not elected officials, they were able to quickly commit to the bailout plan, which approved the first tranche of loans to Greece for this fall.

The financial ministers of the Eurozone countries were responsible for committing to the terms of the €86 billion bailout, but these officials are not elected. They are political appointees that report to their heads of state, and have the authority to give loans from the treasury without needing approval from lawmakers. Of the eighteen Eurozone countries responsible for funding the Greek bailout, only eight held parliamentary votes while the other ten gave decision making authority entirely to their financial ministers. Not a single Eurozone country held a referendum on whether or not to endorse the bailout, not even Greece. The fact that it was the financial ministers who were responsible for approving the Greek bailout highlights the undemocratic nature of Europe’s financial institutions, as well as the intention for democratic processes to be bypassed for the sake of expediency.

The Greek referendum on July 5th was not a vote on the bailout plan, it was a non-binding opinion poll of the Greek citizens.  Following the overwhelming “no” vote to what can only be called a dubiously phrased ballot, Greek Prime Minister Alexis Tsipras hoped to have a stronger position to renegotiate the terms of the bailout. However, the new bailout package still contains many of the austerity measures which were meant to be renegotiated away after the referendum. The current bailout plan was approved by the Greek Parliament on August 14th, and it was not an easy vote with many of Tsipras’ Syriza party members voting against it.  The referendum did not accomplish what Tsipras had wanted, to shake the troika into easing its harsh demands.  The thought of having another referendum would have been preposterous, because the result is predictable and undesirable for the Greek government. Despite everything, Greece needed a bailout; there was no need to bring democratic formality into the process, and Tsipras’ decision to do so has only worsened his relations with bailout funders.

The Eurozone was not designed to be democratic, and frankly it would be nearly impossible for it to operate if it was. The bureaucracy of pan-European institutions is designed to bypass the public as much as possible in order to expedite crisis management. Organizations such as the ECB would be unable to function if they were beholden to the rigmarole of domestic politics.  What the Greek referendum has exposed is the underlying problem that EU member states are elective democracies, clashing with authoritarian structure of the EU and ECB.  The Eurozone countries did not approach the Greek bailout discussions in a democratic fashion because it was unnecessary. If the debt crisis was being managed in the democratic manner that Tsipras’ referendum implies it should be, Europe would still be in entrenched in the minutia of bailout term negotiations instead of already preparing the first tranche of loans.

Blythe Brady is a second year graduate student at the School of Diplomacy and International Relations at Seton Hall University. She graduated from DePaul University, where she studied political science and economics. She has interned at the European Parliament in Brussels, and currently interns at the New York Peace Institute. At Seton Hall she is specializing in global negotiations and conflict management and international organizations. This is her second year as an editor with the Journal of Diplomacy and International Relations.

Follow Blythe on Twitter: @blythe_brady

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