Last stop on the way to the abyss
Outraged Greek prime minister calls referendum on bailout deal
BRUSSELS — It is rather late to be asking this question, with Greece hours away from being officially bankrupt, but what were the eurozone’s founding fathers thinking when they included Greece, Spain, Italy and Portugal in their common currency project?
Did any of these fantasists truly believe that by simply waving a wand it was possible to make these struggling southern countries as productive and prosperous as those of the eurozone’s thriving northern economies or that it was possible to put all Europeans on a common economic footing?
If so, the idea has failed spectacularly.
Yet even at this late hour, with Greece accumulating billions of dollars in fresh debt every month, the European Union is still trying to figure out whether there are any stop-gap measures that might prevent Greece from defaulting and keep it in the eurozone.
It is easy to liken what is happening to a Greek tragedy or even a farce.
Last night, the drama took another turn when Greek Prime Minister Alexis Tsipras announced he was calling a referendum for July 5, in which the EU’s latest proposals will be put to the people, perhaps a fitting forum for a such a decision in the birthplace of democracy.
In a televised address, Tsipras made no secret of what he thought of the creditors’ latest offer.
“These proposals, which clearly violate the European rules and the basic rights to work, equality and dignity show that the purpose of some of the partners and institutions was not a viable agreement for all parties, but possibly the humiliation of an entire people,” he said, according to reports.
He said he would seek an extension of the fast approaching Tuesday expiration of Greece’s current bailout program to hold the referendum.
Everyone denies an ultimatum had been issued, but that seems to be a matter of semantics.
German Chancellor Angela Merkel, who holds the keys to Europe’s vault, had declared she would not be “blackmailed” into providing a 1.54 billion euro loan by Tuesday so Greece does not default on a much bigger loan.
If it was only a matter of 1.5 billion euros, terms could probably be quickly worked out. But Greece must repay another 2.5 billion euros by mid-July. Then, it still owes 245 billion euros to the EU, the ECB, the IMF and other international creditors and has no obvious way of ever repaying much, if any, of the principal.
Greek and EU negotiators are so tired of each other — and remain so far apart on the key issues of cutting pensions and raising taxes on consumers, rather than on businesses — it is gets harder every day to see any way to avoid Grexit, as Athens’ ejection from the eurozone has been dubbed.
Earlier Friday, Tsipras gamely met Merkel on the sidelines of an EU summit that was supposed to be about the continent’s refugee crisis. Their tête-à-tête encouraged a blitz of reports the differences between the EU and Greece on how to satisfy the country’s many creditors might somehow be papered over. But as happened when the same kind of somewhat optimistic bulletins surfaced last weekend, hopes sputtered later in the day when Tsipras rejected a proposal that would have given negotiators another five months to try to come up with a lasting solution.
Visiting Athens and Brussels this week has been like travelling between two solitudes. The philosophical differences over how to collect and spend money and repay creditors are so profound the two sides talk past each other, rather than confront their differences head-on.
Seething with bitterness, vexed Greeks claim that as democrats they cannot allow outsiders to dictate financial terms. What they mean is that they elected Tsipras, who started his political life as a communist and remains a deeply committed socialist, because he promised to ease austerity and to protect their pensions, so he must be allowed to soften the terms of any deal with the EU. Of course to do that Tsipras needs a lot more EU money.
Fearing the worst, Greeks have removed billions of euros from their already teetering banks. The guessing is almost all of that money was sent out of the country. Almost certainly none of it will be coming back any time soon.
With increasing anger the northern Europeans, led by Germany, have rejected the idea they somehow owe Greeks a decent living. With increasing vigour, they are questioning the wisdom of throwing more money at what has become a black hole and have wondered out loud whether it might be for the best for Greece to sort out the mess itself.
To try to scare the Greeks into acceding to its terms, the EU has made no secret of what the Financial Times has called Plan B. Its starting point is that default equals Grexit. While Athens might receive some emergency humanitarian aid, the EU would isolate itself economically from Greece to try to prevent the contagion from spreading.
The biggest question is no longer how to try to fix Greece, but whether there is a way to prevent the fragile economies of Italy, Spain and Portugal from entering the same death spiral and to stop the aftershocks from destroying what remains of the common currency project that has formed the backbone of the European Union and is, to many Europeans, its raison d’être.