Europe is once again in the midst of a standoff, a battle of wills and nerves over the issue of Greece’s unsustainable and insurmountable debt, and the growing possibility of a “Grexit” from the Eurozone.
A number of doomsday scenarios are being projected, including potential financial chaos, social unrest, even an eventual dissolution of the European currency union should contagion spread to weaker economies within the European Union (EU).
This is the latest round in a number of recurring crises since the 2008 global financial crisis that have plagued the Eurozone, a monetary union of 19 of the 28 EU member states.
On June 30, the Eurozone portion of Greece’s €245 billion ($276 billion) bailout credit expires and on the same day, the International Monetary Fund (IMF) is due a repayment from Athens of €1.6 billion ($1.79 billion) in loans. [1]
Despite a growing sense of urgency and calls for compromise, negotiators have failed to agree on the policy overhauls and spending cuts that Athens must agree to make, in order to unlock further credit. Unlike previous rounds of crises, negotiations, firewall measures, and eventually the damage-control outcomes that ensued, it is not clear if this time round all participants are actually preparing for an end-game option.
European leaders have spoken out, urging for a resolution of the crisis. German Chancellor Angela Merkel has said “Where there is a will, there is a way,” adding however, “that the will must come from all sides.” [2] French Prime Minister Francois Hollande has appealed to all parties that “We have to get to work… everything must be done in order that Greece remains in the eurozone.” [3]
On the other hand, long-time sceptics of the Euro, and those who argue Greece should never have been allowed to join the Euro in the first place due to its weak economic credentials, propose that a Grexit would finally bring to an end years of wrangling, brinkmanship, and blackmail. Allowing Greece to leave the Euro would be a catharsis (to borrow a term from Ancient Greek tragedy). One complication however, lies in the fact that there is no mechanism in place to expel a member from the currency union. The country has to want to leave voluntarily and current polls indicate that a majority of Greeks do not want an exit.
A number of sticking points have hampered talks between Greece, its two main creditors (the IMF and European Central Bank) and the European Commission. The leftist Syriza government in Greece, elected to power in January 2015, promised to resist demands for any further cuts to social spending.
Initially the Greek Prime Minister Alexis Tsipras, and his intrepid finance minister Yanis Varoufakis, toured through Europe expecting to raise support among other Southern economies, previously considered to be on the verge of bankruptcy. Instead, the economies of Spain, Portugal, and Ireland were not-so empathetic, given the tough reforms their government had implemented, and were thus unwilling to show leniency for another country’s profligacy.
The economic troubles in Europe have exposed entrenched historical rivalries, crude prejudices, resentments, and stereotypes. Right-leaning, nationalist, anti-immigration political parties in many European countries have capitalised on the sense of crisis, and there remains the pressing challenge of how to engage and enthuse a younger generation about the European idea, especially when faced with double-digit unemployment rates.
And herein lies the crux of the problem that faces a supranational project: how far should integration go to create a federation of Europe? Can a common currency really work given the vast differences in economic conditions and constraints across Europe and without a common fiscal or taxation system?
Originally, the European Economic Community (formed in 1958) aimed to raise living standards, to uphold and operate the principle of solidarity on a continent that, over centuries, had been ripped apart by religious wars, totalitarianism, nationalism, and civil war. The ideals of a single market, of the free movement of people, goods, services, and capital, were meant to overcome and prevent the historical excesses carried out, in part, by one of Europe’s very own political creations, the nation-state.
Yet today a number of the EU’s initial objectives are under attack—the economic union to spread prosperity, a political union to overcome prejudices, and a strategic union to enhance the EU’s bargaining power in the world as a trade giant and economic power.
Waves of migrants from failed states including Libya, Syria, and in North Africa, have risked their lives crossing the Mediterranean to reach a Europe that cannot decide on the bureaucratic formalities of how to act in the face of human desperation. Since 2014 the Crimean crisis and Russia’s operations have brought home the realisation that geo-strategy and military power remain instruments of global politics.
So long as the prospects for economic growth remain dim in the Eurozone, the European conundrum will continue. The crises are a necessary reminder that Europe should not take for granted its reputation as an island of peace and prosperity, a model for political union and soft power. Member states must introduce painful structural reforms. But to make Europe more competitive, the EU requires a vision that goes beyond bureaucratic coordination and bookkeeping, an outward orientation perhaps harking back to a time when Ancient Greece provided trade and cultural connections between Europe and India.
Jivanta Schöttli is a lecturer in the department of political science, South Asia Institute, Heidelberg University, Germany.
This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.
For interview requests with the author, or for permission to republish, please contact outreach@gatewayhouse.in.
© Copyright 2015 Gateway House: Indian Council on Global Relations. All rights reserved. Any unauthorized copying or reproduction is strictly prohibited
References
[1] Forelle, Charles, ‘Greece’s Fragile Banks Leave Alexis Tsipras Few Options in Bailout Talks’, The Wall Street Journal, 24 June 2015, <http://www.wsj.com/articles/greeces-fragile-banks-leave-tsipras-little-room-to-maneuver-in-bailout-talks-1435178635>, and BBC News, Greece debt crisis: EU leaders step up efforts for deal, 22 June 2015, <http://www.bbc.com/news/world-europe-33217910>
[2] Clark, Charles, Merkel on Greece: ‘Where there’s a will, there’s a way, Associated Press, 12 June 2015, http://www.businessinsider.in/Merkel-on-Greece-Where-theres-a-will-theres-a-way/articleshow/47645716.cms
[3] Markey, Patrick, France’s Hollande sees ‘little time’ to avoid Greek euro exit, Reuters, 16 June 2015, < http://in.reuters.com/article/2015/06/15/us-eurozone-greece-hollande-idINKBN0OV2MX20150615>