Unfortunately, Europe does not appear to have learned from its own mistakes. The inexplicable insistence on continued austerity and recessionary measures that are known to have failed during the past five years can only make things worse. It brings to mind a Greek proverb: As soon as I taught my donkey how to stop eating, the damn creature died. Without debt relief or extensive restructuring, and without additional emphasis on development policies, the best that can be expected from the recent agreement is the avoidance of a Grexit, only to end up with a ‘Grimbo’ (Greece in limbo), a truly Sisyphean task.
“Germany has no moral argument against debt forgiveness”
It almost looked like Europe was giving priority to punishment and making an example of Greece to avoid any similar demands by other countries’ political parties instead of looking for a permanent way out of the crisis. Furthermore, German Finance Minister Wolfgang Schäuble’s shock and awe tactics terrified and alienated several European leaders, as well as a number of German politicians, and opened a wound that will not easily heal.
Indeed, Germany has no moral argument against debt forgiveness, as it has benefitted in the past from the generosity of its lenders. It has also benefitted in multiple ways from the current crisis, as part of the Greek debt was used to finance its exports to Greece, often with a substantial corruption shadow; it has also been profiting from loans to Greece at a higher interest rate than it paid to borrow those funds; finally, it has benefitted from the brain drain of Greek professionals and the flight of Greeks’ deposits and savings.
It should also be noted that it took repeated warnings from Washington to remind Europeans of the wider geopolitical ramifications of a Greek exit from the eurozone. And it took spirited resistance by France and a few other countries to prevent that black page in Europe’s history. Furthermore, at a time of pressing international problems – Ukraine, Syria, Libya, ISIS – the image that Europe projects has not increased respect for the EU. European leaders spent endless hours resolving the problems of a member state that represents 1.8% of the EU’s GDP, only to impose recessionary policies that will barely allow Greece to stay alive but will not help the Greek economy recover.
“Europe does not appear to have learned from its own mistakes”
No one is seriously arguing for giving Greece another free lunch, and obviously none would be willing to. Instead, the EU should be looking for a highly pragmatic policy which would be reasonably effective in achieving Europe’s geopolitical and geo-economic objectives and promoting its interests. A policy seeking to support and engage a country in deep trouble is much more likely to succeed than policies intended to “punish”, as students of German history will know from the periods after the two World Wars. What is needed is a policy that goes beyond “bean-counting”, and tackles the Greek problem in the context of the EU’s regional and global role, not merely its economic policies.
In view of the dire geopolitical consequences of a Grexit and its impact on the future integrity of the eurozone, an honourable compromise is the only reasonable choice for Europe. First and foremost, Greek politicians should complete the implementation of necessary reforms, and its European partners should also learn from past mistakes regarding deeply recessionary policies offering little hope for development. Can self-defeating policies be reversed at the last minute? Can rational thinking and pragmatism prevail?
IMAGE CREDIT: CC/ FLICKR - Jan Wellmann