Orderly exit from single currency the best option for Europe’s future
DOES democracy trump debt? Of course not, not even in Europe. No bank clerk here would be impressed if a family told her that they had voted to have the terms of their housing loan renegotiated — that’s not how loans, either personal or international, work.
Yet leaders gathered for a special summit in Brussels on Tuesday because the Greeks have done exactly that: voted against conditions the eurozone demands for a third bail-out programme for their country.
Of course, negotiations are a good in themselves, especially in Europe. But even in Brussels, there comes a time when losing your nerve is a rational choice. I don’t say it lightly, but I believe this point is here now. Europe has more to lose from a Greece that remains part of the eurozone than from a controlled exit, in which Greece softly steps out of the single currency.
Europe is a contract-based community of states that permanently agree on mutually beneficial rules, with the finest privilege (for those who do economically well enough) being membership in the euro club. What now is the greater threat to this project: the loss of a currency club member that, in the eyes of many, had been brought on board by mistake? Or, in scrambling to keep it in, the spread of an attitude whereby contracts count for little, and rules for even less?
There was a point when things looked promising. After the EU and the International Monetary Fund stepped in with their first two bailouts, Greece made considerable progress on closing its deficits. Between 2010 and 2014 it implemented spending cuts virtually unprecedented in a developed country.
Those cuts meant hardship to many in Greece. But they began to pay off: by the end of 2014, Greece was spending less than it was collecting in taxes (if you leave aside interest payments).
But the cuts to social-welfare programmes and publicemployee salaries also drove up support for the radical left Syriza government, which took over earlier this year. It stopped the reforms and demanded other, bigger changes, including a “new deal” for all of Europe — whatever this is supposed to mean.
It may well be that most of the 61% of the Greeks who voted “no” last Sunday to the latest demands for cuts by the eurozone countries merely want changes in the details of a new bail-out deal with Brussels. Sure, such demands could be up for debate. Yet it has become hard for those seated across the negotiating table from Prime Minister Alexis Tsipras to believe he is interested in a pragmatic solution.
The radicals who back him in parliament want changes to the currency system and Europe’s economic model itself. And while he may yet have a trick up his sleeve, Tsipras appears intent on using the outcome of the referendum to fuel his crusade against the chimera of a “neoliberal” Europe.
True, Tsipras sacked his controversial finance minister, Yanis Varoufakis. But one ideologue fewer doesn’t make this government less ideological. As childish as it sounds, Tsipras and his fellow fighters are still raging against the triviality that you can spend only what you earn.
Leaving aside Syriza’s NaziMerkel comparisons and accusations of “terrorist” behaviour by creditors, over the past five months Europe has heard way too much from his government about the impossibility of further cuts and way too little about possible sources of new income.
A big part of the blame for this mess rests on the shoulders of the chancellor of Germany, Angela Merkel herself. Her statement that “if the euro fails, Europe fails” was understood by Athens as a carte blanche: Greece’s euro membership is obviously priceless to Europe’s most powerful leader. From then on, all credit negotiations between Athens and the eurozone resembled a poker game with the German cards in the open. The fail-fail sentence was easily the most stupid public statement that the usually cautious Merkel had ever made.
Still, patience with Greece in her party, the conservative Christian Democrats, is waning rapidly, as it is in Germany’s staunchest economic allies, the Netherlands, Finland and the Baltic states. To many Northern Europeans, both the Greek government and the Greek people have demonstrated that, according to them, no given rule is ever fixed. This mentality is not just alien to the rather Protestant northerners, it also holds a danger for Europe’s political fabric.
Many observers are fixated on the risk of Greece’s exiting the euro. But the risk of keeping it in at all costs is even higher.
Consider this scenario: unemployment in Italy, Portugal and Spain remains high, and anti-EU populists are on the rise in all three. The conclusion that people there could draw from a third bail-out programme for Greece would almost certainly be that voting for radical parties and obstructive behaviour are eventually rewarded. You just have to be cocky enough.
And if that happened — if, say, a Syriza clone came to power in Spain, or if the leadership in those countries expressed a strong sympathy for Greece’s position — the counter-reaction in the creditor countries could be harsh, even hostile. Europe could end up with a calamitous north-south divide along camps known from the Cold War: the “socialists” there, the “capitalists” here.
Neither the eurozone nor Europe is best served by holding on to Greece. Instead, the EU needs to come up with a smooth way out of its dilemma, namely an orderly exit by Greece from the euro.
This solution will be expensive, too — among other things, the EU will have to make sure that Greece’s posteuro currency isn’t so cheap that Greeks can’t afford vital imports, like oil and medicine. Yes, Greece still must be rescued. But no, it need not be rescued within the eurozone. — © The New York Times
Bittner is a political editor for the German weekly Die Zeit