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| Europe must save Greece to save itself | Europe must save Greece to save itself |
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| Europe must save Greece. The consequences of keeping Greece within the eurozone will be bad, but those of its leaving would be worse. They would be not just economic, but human, geopolitical and historic. Europe would never be the same again. | Europe must save Greece. The consequences of keeping Greece within the eurozone will be bad, but those of its leaving would be worse. They would be not just economic, but human, geopolitical and historic. Europe would never be the same again. |
| I was in Greece two weeks ago, and grasped this at every turn, from standing on the ancient Pnyx, the birthplace of democracy, through talking to business leaders, journalists and academics, many of who were witheringly critical of the current Syriza government. But since then I have been back in northern Europe, in England, Belgium and now Poland, and in the north I find not just relative indifference (Greece is more often the subject of jokes than of deep concern) but also two dangerous illusions. | I was in Greece two weeks ago, and grasped this at every turn, from standing on the ancient Pnyx, the birthplace of democracy, through talking to business leaders, journalists and academics, many of who were witheringly critical of the current Syriza government. But since then I have been back in northern Europe, in England, Belgium and now Poland, and in the north I find not just relative indifference (Greece is more often the subject of jokes than of deep concern) but also two dangerous illusions. |
| First, there is still a widespread assumption that this Greek-German game of “chicken” will somehow end in a last-minute, classic Brussels-style incomprehensible compromise. Second, and sometimes alternatively, there is the view that Grexit would not matter that much anyway: Greece represents less than 2% of the eurozone’s economic output, and the eurozone now has firewalls to prevent the flames spreading to other southern European countries. | First, there is still a widespread assumption that this Greek-German game of “chicken” will somehow end in a last-minute, classic Brussels-style incomprehensible compromise. Second, and sometimes alternatively, there is the view that Grexit would not matter that much anyway: Greece represents less than 2% of the eurozone’s economic output, and the eurozone now has firewalls to prevent the flames spreading to other southern European countries. |
| Why should hardworking people, from Ireland to Latvia, who have taken the pain of structural reform and austerity, go on paying for those who have not? Maybe in the end, Grexit would be better for all concerned. | Why should hardworking people, from Ireland to Latvia, who have taken the pain of structural reform and austerity, go on paying for those who have not? Maybe in the end, Grexit would be better for all concerned. |
| Francesco Giavazzi, an economics professor at Bocconi University in Milan, even dares to write: “We should ask ourselves whether it is really so important to keep Greece inside the EU.” | Francesco Giavazzi, an economics professor at Bocconi University in Milan, even dares to write: “We should ask ourselves whether it is really so important to keep Greece inside the EU.” |
| Let’s take these two illusions in turn. First, it could happen tomorrow. Greek bank deposits are sinking like water from a cracked water tank: reduced by more than €500m (£362m) on one day alone, 5 June, after the government had aborted a scheduled payment to the International Monetary Fund. The rich have already taken much of their money out of the country and the poor are stashing it under their mattresses. One more panic, a run on the banks, and you would have capital controls and a bankrupt government issuing IOUs to pay wages and pensions. Zeus alone knows what would follow. Perhaps it could still be saved, with a kind of negotiated default inside the eurozone, but only the most irresponsible playboy game theorist would count on it. Grexit could happen by Graccident. | Let’s take these two illusions in turn. First, it could happen tomorrow. Greek bank deposits are sinking like water from a cracked water tank: reduced by more than €500m (£362m) on one day alone, 5 June, after the government had aborted a scheduled payment to the International Monetary Fund. The rich have already taken much of their money out of the country and the poor are stashing it under their mattresses. One more panic, a run on the banks, and you would have capital controls and a bankrupt government issuing IOUs to pay wages and pensions. Zeus alone knows what would follow. Perhaps it could still be saved, with a kind of negotiated default inside the eurozone, but only the most irresponsible playboy game theorist would count on it. Grexit could happen by Graccident. |
| And why would it matter if it happened? For starters, the markets would know that eurozone membership is not irreversible. Contagion to the government bonds of the next weakest eurozone debtor nation would probably not be immediate, but any new crisis in a weak economy could potentially trigger aggressive speculation. | And why would it matter if it happened? For starters, the markets would know that eurozone membership is not irreversible. Contagion to the government bonds of the next weakest eurozone debtor nation would probably not be immediate, but any new crisis in a weak economy could potentially trigger aggressive speculation. |
| Then there is the economic and therefore human cost in Greece. It is pointless to go over all the past mistakes: there are enough to fill all the confessionals in all the churches in the great Polish city of Wrocław (where I write these lines), and I can tell you that there are a lot of people waiting to audit the sins of others. Needless to say, Greece should never have joined a eurozone which should itself never have been introduced with such a flawed design. Needless to say, clientelist Greek governments able to borrow at German interest rates made an already bad situation worse during the early years of the euro, in cahoots with their oligarchs; the post-crisis medicine prescribed by Germany and the IMF was almost bound to worsen the condition of such a sickly patient; the patient only pretended to take some of that medicine; and so on. But this is not the moment to be quarrelling over history. | Then there is the economic and therefore human cost in Greece. It is pointless to go over all the past mistakes: there are enough to fill all the confessionals in all the churches in the great Polish city of Wrocław (where I write these lines), and I can tell you that there are a lot of people waiting to audit the sins of others. Needless to say, Greece should never have joined a eurozone which should itself never have been introduced with such a flawed design. Needless to say, clientelist Greek governments able to borrow at German interest rates made an already bad situation worse during the early years of the euro, in cahoots with their oligarchs; the post-crisis medicine prescribed by Germany and the IMF was almost bound to worsen the condition of such a sickly patient; the patient only pretended to take some of that medicine; and so on. But this is not the moment to be quarrelling over history. |
| Apportion the blame where you will, the fact remains that many Greeks have suffered terribly. In cold figures, real spending in the Greek economy fell by roughly a third in seven years, with close to one in every two young people out of work. A colder figure still: the number of suicides increased by more than 35% between 2010 and 2012. I cannot get out of my head the story of Theodoros Giannaros, the head of Elpis hospital in Athens, exhausted, chain-smoking, working 20 hours a day with drastically cut medical resources. As Giannaros worked to save lives, he received news that his 26-year-old son had taken his own life by jumping in front of an underground train. | Apportion the blame where you will, the fact remains that many Greeks have suffered terribly. In cold figures, real spending in the Greek economy fell by roughly a third in seven years, with close to one in every two young people out of work. A colder figure still: the number of suicides increased by more than 35% between 2010 and 2012. I cannot get out of my head the story of Theodoros Giannaros, the head of Elpis hospital in Athens, exhausted, chain-smoking, working 20 hours a day with drastically cut medical resources. As Giannaros worked to save lives, he received news that his 26-year-old son had taken his own life by jumping in front of an underground train. |
| Related: The case for radical change in Europe can’t be left to the nationalist right | Seumas Milne | |
| If Greece fell out of the eurozone, nobody knows exactly what would happen, but the Nobel prize-winning economist Christopher Pissarides reckons the result might be the most dramatic fall in living standards in recent economic history. And every Greek would cry: “For what did we take all this pain?” Since the country still has the political system invented in ancient Athens, and practised on the Pnyx, this mixture of fury and despair would be expressed through the ballot box. Unless some miracle intervened, that would surely result in an even more radical, populist, nationalist government, whether of the left or the right. | If Greece fell out of the eurozone, nobody knows exactly what would happen, but the Nobel prize-winning economist Christopher Pissarides reckons the result might be the most dramatic fall in living standards in recent economic history. And every Greek would cry: “For what did we take all this pain?” Since the country still has the political system invented in ancient Athens, and practised on the Pnyx, this mixture of fury and despair would be expressed through the ballot box. Unless some miracle intervened, that would surely result in an even more radical, populist, nationalist government, whether of the left or the right. |
| This would have grave consequences for the whole European Union and its place in the world. Whether or not in strict legal theory an exit from the eurozone should entail an exit from the EU, in practice fellow member states would try to keep it in – and, in the worst case, the practicalities of disentanglement would take years. Meanwhile, a post-Grexit radical Greek government could, for example, start by vetoing a further extension of sanctions on Russia over Ukraine. | This would have grave consequences for the whole European Union and its place in the world. Whether or not in strict legal theory an exit from the eurozone should entail an exit from the EU, in practice fellow member states would try to keep it in – and, in the worst case, the practicalities of disentanglement would take years. Meanwhile, a post-Grexit radical Greek government could, for example, start by vetoing a further extension of sanctions on Russia over Ukraine. |
| While Moscow would not actually put up much money, it would be more than happy to play the political card of solidarity between two great nations of the Orthodox faith. As for those thousands of refugees from the Middle East and Africa already coming across the Mediterranean, Athens would have no incentive not to pass them straight on to those richer Europeans who (as most Greeks would see it) had left Greece in the lurch. | While Moscow would not actually put up much money, it would be more than happy to play the political card of solidarity between two great nations of the Orthodox faith. As for those thousands of refugees from the Middle East and Africa already coming across the Mediterranean, Athens would have no incentive not to pass them straight on to those richer Europeans who (as most Greeks would see it) had left Greece in the lurch. |
| I asked a former Turkish minister how Turkey would react. Well, he said, with the devalued neo-drachma, Greece would offer Turkey’s tourist industry more competition on price, but geopolitically Grexit would further weaken the attraction of EU membership. Instead, Turkey would look to be a regional power in its own right. | I asked a former Turkish minister how Turkey would react. Well, he said, with the devalued neo-drachma, Greece would offer Turkey’s tourist industry more competition on price, but geopolitically Grexit would further weaken the attraction of EU membership. Instead, Turkey would look to be a regional power in its own right. |
| Meanwhile, China already owns the container port of Piraeus in Athens and has designated it a vital entrypoint into Europe in its hugely ambitious “One Belt, One Road” strategy, sometimes known as the “new silk road”. Beijing, with its vast foreign currency reserves, would be more than happy to pick up some more of the pieces – and thereby also gain further influence inside the EU. | Meanwhile, China already owns the container port of Piraeus in Athens and has designated it a vital entrypoint into Europe in its hugely ambitious “One Belt, One Road” strategy, sometimes known as the “new silk road”. Beijing, with its vast foreign currency reserves, would be more than happy to pick up some more of the pieces – and thereby also gain further influence inside the EU. |
| The place that was once the cradle of both Europe and democracy – the Greek fleet that defeated ancient Persia at the battle of Salamis sailed from the harbour of Piraeus – would now be just the tip of the Chinese dragon’s tail. And sooner or later, there would be a sting in that tail. | The place that was once the cradle of both Europe and democracy – the Greek fleet that defeated ancient Persia at the battle of Salamis sailed from the harbour of Piraeus – would now be just the tip of the Chinese dragon’s tail. And sooner or later, there would be a sting in that tail. |
| Thus, even if you have not a drop of sympathy in your heart for the Greeks, not even for Giannaros and his lost son, so long as you have a brain in your head and care at all about the future of Europe, you will understand why we must save Greece. | Thus, even if you have not a drop of sympathy in your heart for the Greeks, not even for Giannaros and his lost son, so long as you have a brain in your head and care at all about the future of Europe, you will understand why we must save Greece. |