EU LEADERS’ REAL FEAR? GREECE QUITS AND THRIVES
Every time eurocrats declare that the economic crisis is over, it comes back with a vengeance. For six years, the Brussels elites have been periodically assuring us that the eurozone has shaken off the bug; yet, like some chronic condition, it keeps returning. Usually in Greece.
Yesterday, Greeks voted for a party that, though it says it wants to keep the euro, rejects the conditions that the other members have set. In particular, it insists on a big debt cancellation.
The EU has made clear that it will not write off any more Greek debt. Doing so would, it fears, encourage other struggling eurozone states to default, and so cause the project to unravel. But Syriza, the party that won yesterday’s general election, is equally uncompromising. Its leader, the telegenic Alexis Tsipras, tells voters that he will cancel the austerity and repayment programme ‘on my first day in office’.
Both sides claim they want Greece to stay in the monetary union. But a game of chicken is now under way and neither player can easily swerve aside. For Mr Tsipras, any compromise with Brussels would mean a betrayal of his supporters and his convictions. He fought the previous election on an anti-euro platform, and seems genuinely relaxed about going it alone.
The EU has, if anything, even less room for manoeuvre. It has repeatedly eased Greece’s bailout terms, yet every such loosening produces more importunate demands.
Angela Merkel, the German Chancellor, has let it be known that she is prepared to let Greece leave the euro if necessary – a reversal of her position in 2011.
The bailout funds are now in place, she reasons. Many of the banks that had lent money to Greece have been repaid, and europe’s banks are in a stronger position than they were four years ago, and the EU has a large fund in place to support other eurozone states. In any case, she would hardly be human if she were not getting tired of being caricatured as a Nazi by the people she is subsidising.
Until now, I have thought a Greek exit – a Grexit – extremely improbable. The Brussels elites, I reckoned, were prepared to pay any price in order to keep the single currency together. Or perhaps I should say ‘inflict any price’ since they personally will receive lavish tax-free salaries in any event.
ON balance, I still think a Grexit is unlikely; but it is no longer impossible. These things rarely happen as a result of deliberate policy. They come about, rather, by mishap, by miscalculation, by misadventure. Bluffing is a dangerous business and Greece might end up slipping out of the eurozone accidentally.
Most Greeks say they want to keep the euro: the number insisting that they should stay in the monetary union ‘at all costs’ has risen to 74.2 per cent.
yet one almost never hears economic arguments for the single currency. The case, rather, is sentimental: the euro is cherished as a symbol that Hellenes are modern europeans rather than backward Levantines.
It would, indeed, be very difficult to make an economic case for euro membership.
The past six years have seen a greater depression in Greece than that of 1929 to 1935. Output is down by an almost unbelievable 25 per cent. A quarter of all Greeks – half of all youngsters – are unemployed, and tens of thousands more have emigrated in search of jobs.
Mr Tsipras talks of the policies that the EU has forced on Athens as ‘fiscal waterboarding’ and you can see his point.
Middle-class Athenians can be found rummaging in bins. Farmers are bringing supplies to their urban cousins. On cold nights, a pall of woodsmoke rises, because people can no longer pay heating bills.
Syriza airily promises to stop all this. It says it will increase pensions, hike the minimum wage, expand healthcare, give free electricity to 300,000 households and renationalise a chunk of the economy. Oh, and it expects overseas creditors to offer Greece substantially better terms while it does all this. In normal times, and in a normal country, Syriza would be a joke party on the furthest fringes of the ultra-Left.
It is a coalition of Trotskyists, Maoists, eco-protesters and Occupy types. Mr Tsipras has only recently removed the Che Guevara poster from his office ( his son carries the name ‘ernesto’ in honour of that bloodthirsty South American revolutionary).
But these are not normal times. Many Greeks have switched directly to Syriza from the Centre-right out of sheer despair.
And Mr Tsipras himself does not share his countrymen’s emotional attachment to the euro. If forced to choose, he would pick the drachma over more austerity.
What then? Well, given the rest of Syriza’s economic programme, Greece’s prospects would be dark either within or outside the single currency.
But at least a default and devaluation would offer a fresh start. Although the economy has been pummelled by six years of euro-austerity, some of the fundamentals have improved.
The bureaucracy has been slimmed, taxes are now collected and, if debt repayments were taken out of it, the budget would be in balance. In truth, this is what EU leaders fear. Not that Greece will leave the euro and collapse, but that Greece will leave the euro and prosper.
ACOMPETITIVE Greek economy, exporting its way back to growth, might inspire Spaniards and Italians, who have also been paying the price of the euro, to follow.
For those eurocrats who see the single currency as a component of political integration, that prospect is too horrible to contemplate.
We’ve been here before. Two years ago, when it looked as if Cyprus might leave the euro, Brussels went so far as to lift money directly out of private bank accounts to pay off the country’s creditors.
The extreme measure was necessary, the european Central Bank admitted, ‘ to prevent worries over the reversibility of the euro resurfacing’.
Mr Tsipras calculates that the EU will be unwilling to let Greece leave over what is, in terms of the overall size of the eurozone, a trifling sum.
We’ll find out soon enough whether he is right.