Greece and the Eurozone find themselves on the brink, yet again. Deadline after deadline has passed. Talk of last-ditch talks is no longer believed. Although there is a very real threat that if Greece defaults on its repayment to the ECB on 20 July that really will be the end. After yesterday’s meetings it seems the hardliners are even suggesting the end of this week is “make or break”.
In the latest instalment of this epic, Greek citizens voted overwhelmingly no last Sunday in a referendum hastily called by Alexis Tsipras over the terms of a new bailout programme which was no longer available to them.
Many criticised him for gambling with the future of Greece in the Eurozone. But Tsipras seems to have understood his own population well enough – and better than the European officials who tried to influence the outcome – to play them against his European partners, exposing the latter to their contradictions and forcing them to face up to their own responsibilities.
The resounding “OXI” of Greek voters puts the ball back in the camp of the Eurozone governments. Although several finance ministers lined up to hit it immediately back to Athens.
It is clear though that Tsipras’ choice to organise – and win – a referendum has placed Greece’s creditors in a rather uncomfortable situation.
Difficult, indeed, for the members of a Union founded on the principle of democracy to admit that it is the European Central Bank, a non-elected body, which possesses the ultimate “life and death” power over a Eurozone member’s economy – rather than the citizens.
Tsipras has played on this and used his substantial domestic support to reveal the fragility of having a common currency without a political union. He successfully joined the poker game that the participants of Eurogroup meetings have been playing for the past 5 years, regularly suspending Greece’s fate to “decisive” summits, and then never coming up with a genuinely sustainable plan.
Getting so much accustomed to uncertainty is probably the most dangerous thing governments (the Greek one included) have done. What worst signal to send to businesses, investors and partners when you are at the same time trying to re-launch your economy?
Yet, between Heads of State invoking a Greek “destiny” (and thus something supposedly out of their hands), unrealistic proposals from the Greek government and irrational declarations from the ECB encouraging debt markets to “get used” to volatility, all parties have played with fire.
Will the real Europeans now stand up and be counted?
Yes everyone agrees that successive Greek governments have been profligate. No, no one wants to admit to their taxpayers that more liabilities will have to be shared. I may agree with them but what is the outcome if the fiscal hawks win?
Coming up with a long-term plan that would help Greece not only to reform its economy but also give it a solid basis to generate growth is surely the objective. Whether we like it or not, these negotiations will have be to carried with Tsipras as the current coalition formed around SYRIZA remains the only one possible for Greece.
The vote at the weekend reinforced that and put to bed – for now at least – the hope of some northern European officials and politicians that putting enough pressure on Tspiras would force his citizens to throw him out.
It will be a difficult balancing act. The Greek government needs to act fast – faster than it seems to be – and others need to cool the rhetoric and think about what is really important. And let’s not forget, it is not, as many people like to caricature, only the Germans who have to move. Baltic eurozone members have taken a hard line for example, as has Malta.
Athens and its creditors now have four days, until an emergency European Summit on Sunday, to reach the outlines of a deal with its creditors or face bankruptcy on Monday morning. Even the French and the Italians have gone along with this, although it is clear they have doubts. Could Greece be forced out of the Eurozone against the wishes of Paris and Rome?
Much is at stake. The credibility of the Eurozone, its governments, and the EU as a whole.
It remains to be seen in what shape the European Commission will come out of this crisis. President Juncker has invested much political will in recent weeks and months, yet he has put himself in a difficult position now, having argued so much that Greeks should vote yes and talking of the dire consequences if they didn’t.
The EU has given a poor image of itself to its international partners over the past 5 years while trying to negotiate grand trade deals, and maintain its role on the world stage. This lasting crisis is also a drag on other ambitious EU projects such as the EC’s plans of turning the Mediterranean into an energy hub.
The Franco-German integration motor is also broken. It has lacked energy to power the EU in the way it did in the 1990s. This is a risk for the EU, particularly given the inability of Italy, and unwillingness of the UK, to bring about consensus.
Last, and not least, fragmentation and disunity within and between governments over the issue of Grexit and the expression of a Greek fatigue do not bode well for upcoming discussions around Brexit. One can almost hear the schadenfreude of the growing ranks of Eurosceptics around Europe.
Surely that is enough to galvanise the real Europeans into action?