Greece’s vote, and Europe’s options
Thousands of Greeks spent Sunday celebrating their overwhelming rejection of their creditors’ terms for assistance in managing the country’s massive debt. It was a picturesque reaction, but raised the question: just what, exactly, were they celebrating?
They awakened Monday to find themselves citizens of a country that is in default of 240 billion euros ($335.7 billion), and so broke it couldn’t even manage a payment of 1.7 billion euros that would have kept it afloat. The banks are closed and may stay that way, if the European Central Bank decides to cut off the emergency supply of cash that kept them solvent while there was still hope of a deal on repayment. Greeks are limited to daily withdrawals equivalent to about $100; even that may soon end, as banks run out of cash. Even for those with the cash, food and medicine are in increasingly short supply. Businesses are failing, tourists are leaving, lenders are disaffected and the international institutions that are key to its future are furious. The finance minister made himself so unpopular with his European colleagues that he quit just hours after the referendum, aware that his mere presence was an impediment to any progress. Hey, let’s have a party! While it may have felt satisfying to tell Europe where to put its terms, the effect is certain to be temporary and the hangover deep and eminently painful. Athens has given other members of the European Union every reason to wash their hands of a country that is small, sparsely populated and has demonstrated it can’t be trusted to keep its word or repay its debts. While firebrand Prime Minister Alexis Tsipras may claim the 61 per cent vote to reject the previous offer (in reality, it was no longer on offer) strengthens his hand, it’s difficult to follow his reasoning. Reaction in Germany, the EU ’s leading economic power, was swift and negative. Deputy Chancellor and Economics Minister Sigmar Gabriel said new ne- gotiations were “barely conceivable” and that Tsipras had “torn down the last bridges on which Greece and Europe could have moved towards compromise.” The Greek leader, he lamented, is “leading the Greek people on a path of bitter abandonment and hopelessness.”
For Europe, the strategy now should be clear: it must do what it can to protect the future of the EU and the integrity of the euro, whether or not either goal continues to include Greece. The Greek people, for better or worse, have made their decision, and will have to deal with the consequences. Europe’s interest should be Europe, not Greece.
New talks over a settlement need not be ruled out, but Europe has less reason than ever to trust Athens to follow through. Where once it was willing to demonstrate leniency, it will now be aware that any agreement is likely to mean new billions poured after bad unless strictures are built into the deal to ensure Greek compliance. Europe’s other troubled economies — Italy, Portugal and Spain among them — cannot be given a signal that intransigence is rewarded with better terms, or a repeat of the Greek crisis is certain. It may well be that the best solution for both sides proves to be Greece’s departure from the euro; that, too, should be accommodated, but on conditions daunting enough to preclude others from wanting to follow.
This is not to say Greece must be punished. The confrontation here is not between Europe and Greece, whatever bitter feelings have been aroused. Rather, the crisis pits reality against wishful thinking. Put simply, if Greece won’t play by the rules, it can no longer expect to be included in a community with those who do. In that event Europe will have no choice but to let Greece go its own way, while doing everything possible to protect itself and the broader international economy from the fallout.