Sunday, 17 May 2015

Europe’s tragedy close to climax

The temperature is rising in Greece, both metaphorically and meteorologically. On the one hand, it’s coming into the Mediterranean summer months and June will also mark the end of Athens’ existing bailout package forcing it to make what’s become an insidiously familiar decision.

The Greek crisis is moving closer towards the fourth act. The world watches as the actors and narrative structures reach a climax. It’s hard to know how this story will end, but if it is a tragedy the outcome is essentially foregone.

Next month’s question is whether Greece will ask the Eurozone for more money, kicking its debt can further down the road, or risk leaving the European Union altogether. A third option does not exist. Greece’s interior minister Nikos Voutsis said recently the country cannot make its June debt repayments to the International Monetary Fund unless it reaches a deal with creditors. Mr Voutsis sounds optimistic, but he does need to be explicit about the consequences of failed talks because no one gets away with defaulting on the IMF.

Greece wants 7.2 billion euros ($10.83 billion) of new aid to avoid bankruptcy. Its ruling Syriza party, despite heavy rhetoric about leaving the Eurozone, is presently more interested in staying in the supranational organisation than trying its luck on the outside.

Much of the world’s media believed that rhetoric during the January election when it threatened a referendum on Eurozone membership. A referendum was wielded as a political weapon in the battle against Greece’s creditors, but polls continue to show Greek citizens don’t want to leave Europe.

Essentially, Syriza’s empty words clashed against the immovable national imperatives and came off second-best. And once again, Greece offers a chance to assess the underlying issues of Europe. The EU’s mounting trials can no longer be simply defined as a financial crisis. It is much more dangerous than that.

In theory, Europe should have been robust enough to withstand an event such as the sub-prime crisis of 2008. But it wasn’t able to let a cyclical, and arguably routine, financial crisis slide past with minimal damage.

What should have been a predictable crisis in which the question about who bears the debt burden – the creditors or the debtors – was resolved with smooth decisions and powerful financial assistance, quickly transformed the narrative into asking political and existential questions instead.

From the very beginning, the teleology driving the creation of the European Union was a desire to keep continent from another immolation by encouraging an idea of a “European citizen”, rather than deferring to the status quo of citizens with national entities. The idea was supposed to be an impetus for common cause.

History aside, and the Greeks are as saddled with long memories as are their European neighbours, the geography of the European landmass made the EU idea laudable but extremely difficult. In the north lies fertile and prosperous land. But the south is broken by mountains and cannot compete on riches. In other words, it’s not just human history that divides Europe.

Going even deeper, Germany was whole the point of the EU. Its inherent geographic vulnerability (threatened by France in the West with Russia in the East) and dynamism (blessed by the arable North European Plain) led to a Germany lashing out for security twice over a single century. The EU now constrains a rich but vulnerable Germany by offering security and ample trade partners.

The EU allows Germany to earn 50% of its GDP from exports, most of which are bought by other European members. This is a phenomenal export figure. And there is little chance, when the United States languishes in low growth and with a China not ready to pick up the consumption slack, Germany could maintain such high figures if the EU reaches a fragmentation point.

If this is the reality of the EU, and the current distribution of debtors (in the South) and creditors (in the North) certainly suggests accuracy, then it’s clear why the EU crisis is more than simply financial. The political and social crises forming the decisions about austerity and bailouts are complicating what might otherwise be tough but manageable.

Recently, geopolitical realities have called Greece and Britain’s bluff about threats of referendums – for now. Yet no matter how many bailout bandages are placed over Europe’s wounds, the fundamental splits resulting from geography’s cruel favours will remain. This worries Greece and Germany alike, although for very different reasons.

Ultimately, if there were a solution for the Greek financial problems, then policymakers would have found one already. But the situation appears largely insoluble without serious restructuring of the narrative and how it is discussed in Brussels.

Germany does not wish to leave, but it also wants to export in ever greater quantities. It will need to accept limits on this. Greece and the periphery countries cannot compete economically so will need to accept a ceiling on their collective lifestyles.

But the splits in Europe cannot let the necessary concessions occur, at least in the current political framework. Greece’s deadline for new funds will arrive and will likely be met with some of the required funds. There is nothing else to do. But the gaps between the members will only grow wider, weakening the power of the EU institutions.

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