Today’s editorial adds a note of calm good sense and level headed realism to the debate about the Eurozone crisis.
Eurozone Can’t Be Reformed
JUBILANT scenes in Athens enthused many socialists and trade unionists in Britain as thousands of people celebrated victory for the No camp on Sunday night.
Greeks rejected the hard line of the country’s creditors and reiterated opposition to further cuts in living standards.
Comments from the most powerful eurozone states, Germany and France, indicate differences in how to react to the Greek referendum.
But the first effect of the 61.3 per cent No vote has been to silence those politicians who insisted beforehand that No would mean that Athens had effectively excluded itself from the eurozone.
Neither Angela Merkel not Alexis Tsipras wants this. Nor, according to opinion polls, do three-quarters of the Greek people.
Following today’s meeting of EU leaders, the policies governing the zone will reflect the views of one national leader or the other, but they can’t reflect both.
Tsipras believes that the referendum result gives him a stronger negotiating hand, but he already threw in his wild card — withdrawal from the EU — before negotiations began.
Only about 10 per cent of the so-called bailout cash received by Athens since 2010 in return for higher taxes, mass unemployment, ravaged public services, cuts in pay and degraded pension schemes has been available for the economy.
The other 90 per cent has been devoted to recapitalising the private banks — mainly German and French — that engaged in reckless speculation in Greece.
Berlin and its allies deride the fecklessness of previous Greek governments, implying that life is one long holiday for workers in Greece, but they ignore the banks’ role and insist on full repayment of dodgy loans.
Tsipras wants to persuade other member states to back his vision of the EU as a bloc based on solidarity and to accept a chunk of his country’s debts being written off and the rest rescheduled.
Why should countries with lower living standards then Greece agree to this?
Will Ireland, Portugal, Spain and Italy, which have already writhed on the austerity rack, paying the price of ruthless loan conditions, support a softer approach for Greece?
It is ironic that, while eurozone states led by Berlin refuse to consider any debt write-off, the IMF is less rigid.
It often engineers creditors’ haircuts in return for new loans and conditions that involve revaluation of national currencies.
Eurozone members are denied this mechanism, with the value of the euro set to the advantage of the more developed states, especially Germany.
Germany’s huge overseas trade surplus, even with China, would normally push up the value of its currency, but eurozone membership precludes this.
When Merkel’s predecessor Helmut Kohl and French president Francois Mitterrand pushed through the single currency in 1992, many economists warned that economic union could only work properly in the context of political union.
This is exemplified by the reality of an undervalued euro favouring the richest members while the poorest are denied the benefit transfers and pooling of financial risk that exist in unified states.
Greece’s Syriza government seeks change, but the lacuna in its argument is that the most powerful member states benefit from current arrangements. Why should they change?
Syriza’s commitment to peddling illusions that the eurozone is reformable and could approve an alternative to austerity does not inspire confidence in Tsipras’s ability to win over his EU “partners.”
Whatever Greeks thought they were voting for, their government’s obsession with wearing the eurozone straitjacket makes attacks on living standards, including pensions, the likely price of Syriza’s negotiations.