I never cease to marvel how people get used to living in a state of economic turbulence and give little thought to the possible distress that could affect them if their political leaders failed to stir their countries out of troubled waters. The EU structural weaknesses are evident to anyone who understands the basic requirements for a monetary and political union.
The resolution of the Greek economic crisis is going to be an acid test for the robustness of the EU leaders’ political will to underpin the union’s cohesion with sound political, monetary and economic policies. So far there is no clear indication of how the Greek crisis will be resolved. The EU and Greece face an ‘economic show of horrors’ if the stalemate persists.
The German government faces substantial internal pressure not to cave in to Greece’s escalating game of brinkmanship. Eurosceptic elements in the German coalition insist that no further concession should be made to Greece, which owes billions to German banks. They seem to be backed by Warren Buffet who suggests that “Europe might emerge stronger after a salutary purge of its weak link in Greece”. This view is not only finding increasing support among economists, but is also forcing Angela Merkel to take a more determined stance in getting the Greek prime minister Tsipras to honour his country’s obligations towards its creditors.
The European Commission’s president Jean-Claude Juncker continues to indulge in the wishful thinking that has characterised the attitude of EU leaders in the last eight years since the inception of the economic crisis. Juncker frets about the risks of a Greek exit from the eurozone as this could lead to “irreparable loss of global prestige for the whole EU and crystallise Europe’s final fall from grace”. For Juncker and many other EU leaders, a semblance of a political union – even if not supported by the substance of a sound economic, fiscal and monetary union – is all that matters.
We are seeking an honest compromise, but don’t expect an unconditional agreement from us
The radical-left Syriza movement in Greece understands the EU leadership weaknesses and divisions and tries to exploit it as best it can. Greek defiance in the last few weeks has become increasingly strident. Greece is again resuscitating claims for compensation for damages suffered under the Nazi regime in World War II. Now Greece is courting Russia and China – a move that has already been adopted by Viktor Orban in Hungary – much to the irritation of the EU political leadership who see the continuation of geo-political trouble in the Ukraine as the most destabilising issue that could threaten economic growth.
Tsipras believes that the EU powers cannot tolerate any further growth of Russian political and economic influence in the Union. So he is calling the EU leaders’ bluff. “We are seeking an honest compromise, but don’t expect an unconditional agreement from us,” he told the Greek parliament recently.
On another occasion he told the Russian news agency Tass: “We disagree with sanctions against Russia. The new European security architecture must include Russia.”
But Tsipras has his own troubles. Most Greeks are not prepared to leave the eurozone and revive the drachma. They also know that the Kremlin has its own troubles trying to rescue Russian companies struggling to repay their own debts.
They also know that if the EU were to cave in to Greece’s demands for a partial write off of debt, other countries like Portugal would expect to be treated in the same way. Like in all brinkmanship games a breaking point is reached when reality sets in and the showmanship ends.
We are still in the chicken game stage. When the Greek government presented its latest list of reforms to the EU aimed at unlocking badly needed aid, it stated that Greece wants to forge a new relationship based on “solidarity, resolve and mutual respect”. This is hardly going to impress creditors who lent money to Greece in the past and are now being urged to write off at least a part of what they are owed.
The Greek officials in charge of negotiations feel besieged by EU bureaucracy. “They keep saying the Greeks are not well-prepared, they haven’t done their homework, their proposals are vague, all of which are grotesque and preposterous lies,” one Greek source said to the Financial Times.
This economic show of horror needs to end. The mindsets of northern European and southern European governments seem so diametrically opposed. This is not good for the EU.
johncassarwhite@yahoo.com