This Greek horror show wouldn’t be happening if only Europe had listened to Maggie
SuNDAy marked a turning point in the history of post-war Europe — the moment when the euro began its inevitable collapse, and the European project itself started to disintegrate.
The Greek ‘no’ vote restricts European Central Bank President Mario Draghi and the laughably incompetent European Commission President Jean-Claude Juncker to two options, both of them nightmarish.
They can either allow Greece to impose its own terms for staying in the euro and abandon the Eu- imposed austerity policies that have destroyed the national economy, or force Greece to abandon the euro and go back to its own currency.
Let’s examine the first of those two gruesome scenarios, and suppose that President Juncker and the ECB permit Prime Minister Tsipras — now enormously strengthened as a consequence of his bold decision to hold the national referendum — to loosen the national purse strings.
Immediately, Spain, Portugal, Italy, France, Cyprus — and all the other southern European states whose economies have been devastated by eurozone membership — would demand equal treatment. They, too, would insist on debt relief and the end of economic austerity.
Chaos
This in turn would cause chaos right across the continent. In particular, Germany, the economic dynamo of the Eu, could never allow the consequent explosion of spending.
German voters are already furious that, thanks to the eurozone, they are expected to finance what they view as the worthless lifestyles of corrupt Greek businessmen and bone idle Greek workers.
German Chancellor Angela Merkel is renowned for near magical powers. She is the most powerful politician in Europe today. yet even she could never convince her voters to pay for sweetheart deals for the rest of Europe.
So let’s now examine the second and more likely scenario. What would happen if the Greeks’ demands for a relaxation of austerity measures were rebuffed by the ECB, and the country was forced into what was, until recently, unthinkable — a return to the drachma, established as the national currency after Greece achieved its independence from the Ottoman Empire in 1832?
The re- emergence of the drachma would take the Eu into new and terrifying territory. All Greek banks are bankrupt anyway, and only kept afloat by European support. In the absence of that support, they would immediately collapse.
Greek economic production — already down by 25 per cent since 2010 — would fall even further. The Greek unemployment rate, now at a frightening 25.6 per cent, would surge.
Mr Juncker and his fellow commissioners in Brussels would be only human if they half hoped the consequences of leaving the euro would lock Greece in penury for ever.
It would help their cause of European unity if they could hold out Greece as a dreadful example of the punishment awaiting any country that was impertinent enough not to do what it was told by Europe.
In my view, however, there is a more optimistic scenario: that the country would start to recover after a period of chaos. The drachma would depreciate precipitously, making Greece far more competitive than countries still stuck in the eurozone. Tourism, for example, would boom because holidays in Greece would be so much cheaper.
Leaving the euro would certainly bring immense uncertainty to an already chaotic Greece. But at least with its own national bank, Greece could set its own interest rates and make its own spending decisions. No longer under the control of Brussels commissars and foreign bankers, the economy in time would have a fighting chance of flourishing once again.
Shackles
Crucially, this was the experience of Argentina after its national currency, the peso, sensationally decoupled from the u.S. dollar in 2002.
The economy grew at an amazing annual rate of 9 per cent between 2003 and 2007.
It would, of course, be a total disaster for the European project if Greece, freed from the shackles of the euro, mirrored Argentina’s success.
Rival European states stuck inside the stagnating eurozone would study the Greek economy at first with disbelief, then amazement and finally with envy. Then, one by one, they would follow the example of Greece and break away from the eurozone.
Perhaps I am being too optimistic. There is no denying that an unpredictable period lies ahead. Indeed, Europe could be about to enter possibly the most dangerous time since the Thirties, when it witnessed the rise of fascism in Germany, Italy and elsewhere.
Already it is being convulsed by some of the same problems: mass unemployment, economic degradation, out- of- touch elites and the consequent rise of extremist political parties, both on the far Left and the far Right.
This is also a very sobering moment for Britain. Europe is our largest market, and the economic consequences for us will be desperate indeed as the eurozone enters a vortex of decline.
It would, of course, have been much worse had Britain joined the euro when it was started — and there is an enormous irony here. The idea of European monetary union, i.e. a single currency, was first seriously discussed at the Rome summit of the Eu in 1990, almost 25 years ago.
Margaret Thatcher was then the British Prime Minister, and she spoke out defiantly against French President Mitterrand and German Chancellor Schmidt as they bulldozed their pet concept through.
Margaret Thatcher’s act of lonely but heroic defiance led directly to her downfall. Her opposition to the single currency provoked the resignation of Geoffrey Howe from the Cabinet, and then the leadership challenge of Michael Heseltine, forcing her resignation within weeks.
Today, however, Margaret Thatcher’s last stand looks nothing less than prophetic (and Howe and Heseltine’s roles appear beneath contempt).
Had other European states listened to her warnings, the continent of Europe would be a very different, less dangerous, more prosperous and much happier place today.
Back in the Nineties, Mrs Thatcher’s enemies, both in Britain and on the continent, dismissed what she had to say as shrill and bigoted.
In fact, her analysis was compassionate and profound. unlike almost everybody else, she understood that it was impossible to have a single currency without a single country as well. This is because a single currency requires the same borrowing and spending policies — and therefore an unchallenged political legitimacy — right across the single-currency area.
Tragically, European leaders refused to believe these warnings. They were determined, at whatever human cost, to create a federal Europe and obliterate national boundaries.
This explains their otherwise lunatic decision to impose a single currency across 19 different countries, each with its own history, set of institutions and special economic characteristics.
The British politicians who encouraged this demented project — including Heseltine, Howe, Blair and Kinnock — should hang their heads in shame.
Bullies
They, too, bear their full share of responsibility for an economic and political experiment which has driven tens of millions of people out of work, and destroyed the economies of not just regions, but of entire countries.
The critics of Alexis Tsipras say that he is a deranged Marxist academic. Perhaps. Compared to Juncker or his predecessor Jacques Delors, or even President Mitterrand and Merkel with their obsessive attachment to the euro, he is a model of common sense and sanity.
Marxist or not, his courage stands in a direct line of succession to that of Margaret Thatcher 25 years ago. Like Thatcher, Tsipras has been patriotic and bloody-minded enough to stand up for his own people against the bullies of the European union.
Terrible risks lie ahead, but he has already achieved something extraordinary. The idea of democracy was invented in Greece 2,500 years ago. Thanks to him, democracy inside the eurozone, snuffed out by the single currency, was reborn in Greece on Sunday.
We in Britain must give Mr Tsipras all the help and support we can as he sculpts a fresh future for his famous and wonderful country — and, let us all hope and pray, saves the continent of Europe in the process.