Commentary on global affairs and where they may be headed

Posts tagged ‘Greece’

Europe: more than fraying at the edges

The EU is teetering on the brink of Grexit as the two sides continue to play a momentous game of chicken.

On Sunday, Greeks will be voting in their referendum on whether or not to accept the conditions the EU and IMF have put on giving the country another bailout – and the polls are so finely balanced it’s too close to call.

Germany’s Chancellor Merkel has said no one should tell the Greeks how to vote, but then went on to make clear a “no” means Greece leaving the Euro, so no pressure there then.

Greece’s anti-austerity government on the other hand is pushing for that “no” arguing it will strengthen their negotiating hand. Prime Minister Tsipras seems to be banking on fear of the unpredictable effects of Grexit to force the rest of the Eurozone back to the table.

There has been much talk of Europe fraying at the edges if Greece is forced out of the Euro with some even suggesting Athens will be end up leaving the EU altogether.

But that risks understating the depth of the crisis facing the Union.

What is happening with Greece is a symptom of something that’s eating away at the EU’s very foundations and the glue that binds the 28 nations together is in danger of dissolving.

You have to go back and ask yourself why Europeans created their unique organisation in the first place.

Before 1945, the people of the continent had spent centuries killing each other in the name of king, then country and – in some cases – both and that’s not to mention the wars of religion.

After the devastation and slaughter of World War Two, European leaders – especially in France and Germany – finally woke up to the fact that there must be a better of doing things and started building what has now become the European Union by creating a common market for coal and steel which quickly became the European Economic Community.

In so doing they were appealing to enlightened economic self-interest, but behind the project there was a more altruistic impulse too – to end the threat of war between Europeans by appealing to a sense of solidarity. The idea that what Europeans have in common is much more important than what divides them.

And like Araldite, the glue holding the EU together needs two elements to make a strong bond – that combination of enlightened self-interest and solidarity.

It’s this that has brought many benefits like the ability to live and work anywhere in the EU, something I took advantage of in the early 80s when I left recession-hit Britain to work in Italy – how things have changed, as you see when ordering your cappuccino or latte in a London coffee bar.

But the Europe-wide economic crisis of recent years has chipped away at the sense of solidarity underpinning the EU.

The Greek debt saga has both exposed and fuelled this.

Basically, the German government is unwilling to ask its taxpayers to write off the loans they’ve made to Greece to keep it afloat while it tries to find a way to pay its debts, a form of solidarity that’s called fiscal transfer in economist-speak.

And you can understand why Germans wouldn’t want to do this. After all, Greece has been living beyond its means for years and when borrowing became easier after it joined the Euro because of lower interest rates, Athens continued splurging.

On the other hand, German and other banks were happy to lend to Greece knowing it had a dodgy credit history. This is a country that’s struggled to remain solvent ever since independence in 1832.

It’s also important to point out that the Greek bailout in 2010 was also a bail out for those banks as EU governments, the European Central Bank and the International Monetary Fund basically took on the Greek debt.

But this is a complex argument the German government for one is unwilling to make to its people, so they haven’t and instead blamed it all on profligate Greeks. So it’s not just the usual suspects of the nationalist and populist right like UKIP and Front National who are responsible.

Yet EU solidarity is not just being undermined by the Greek debt crisis

The influx of thousands of migrants crossing the Mediterranean from North Africa is also playing its part.

They are making for the nearest EU countries, mainly Italy and – by unfortunate coincidence – Greece, and they are struggling to cope with the numbers. The European Commission came up with a plan for all 28 countries to relieve the burden on Rome and Athens. After acrimonious talks, where calls for solidarity and responsibility were bandied about, most countries agreed to take a share of asylum-seekers, but some, including Britain, Denmark and Hungary, refused to play ball.

According to some in the room, Italy’s Prime Minister Renzi didn’t mince his words exclaiming at one point: “If this is your idea of Europe, you can keep it. Either there is solidarity, or you don’t waste our time”.

Which kind of sums it up.

If Europeans don’t rediscover the balance between self-interest and solidarity soon, the EU faces an existential threat at its core, which will make external challenges like a resurgent Russia and spill over from chaos in the Arab world look like local difficulties.

 

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Beware of Greeks …

A recent re-watching of the movie ‘Troy” got me thinking about the stand off over debt between the modern Greeks and the EU.

The film portrays the Greeks as a vainglorious bunch who have to resort to deceit to take and sack Troy.

Whether or not this is a misreading of Homer, I was left asking myself why, if the Trojans are so guilty of hubris and fated to get their comeuppance, the Greeks needed to employ tricks to win.

But maybe that is the way the Greeks are themselves fated to be portrayed.

Some commentary this week has characterised Greek Prime Minister Tsipras’s trip to Moscow as a ploy to put pressure on the rest of the EU to be more receptive to demands to renegotiate his country’s bailout.

The timing of the visit around Orthodox Easter was a gesture to the historic links between Greece and Russia and an unwelcome reminder to Germany in particular that Athens could prove awkward for the EU beyond wanting to ease its debt burden at Berlin’s expense.

But, however justified Mr Tsipras may be in undertaking his Russian visit or calling for Germany to pay reparations for its World War Two occupation of Greece, he may be underestimating the long pedigree of distrust with which his country is perceived going back to the story of Troy and long pedigree of the adage “Beware of Greeks bearing gifts”.

Greece’s EU partners are in no mood to give the Syriza-led government in Athens a win in the debt talks because they have much to lose – whether they are creditor governments like Germany or debtor governments like Spain’s which has implemented deep spending cuts and faces a similarly popular anti-austerity party, Podemos, in elections later this year.

By extension, is it going too far – as this piece does – to suggest that it is in the interest of the supporters of austerity that Syriza fail, and be seen to fail, to deliver on its promise to the Greek electorate, so voters elsewhere don’t follow their example?

If this is so, it isn’t the first time Greece has been held up as a negative example to keep others in line.

In the Italian historian Claudio Pavone’s epic account of the 1943-45 partisan war against the German occupation and its client fascist republican regime in northern Italy, Una guerra civile, he argues the Greek experience was used effectively as a negative example to the Italian resistance.

In Greece, the communist-led resistance against German occupation mutated into a civil war after the Nazi withdrawal in 1944 and fighting broke out between the communists and British forces backing the new government in Athens.

In Italy, the Communists were also a leading force in the resistance, but despite their admiration for their Greek comrades, they didn’t come to blows with the British, Americans and the forces of the new royalist Italian government who were advancing north to push the Germans out of Italy. One of things that held them back was the prospect of civil war “a la Grecque” being used as an effective deterrent by the more right-wing resistance groups.

And the deterrence of the Greek experience seems to retain its potency today.

The brinkmanship being employed by Mr Tsipras and his Syriza colleagues doesn’t seem to be working as the rest of the Eurozone has remained united – and is indulging in brinkmanship of its own, giving Athens six days to come up with acceptable proposals for an extension of funding.

Financial leverage has been added to diplomatic pressure with the European Central Bank restricting the ability of Greece to raise emergency cash while international investors and wealthy Greeks withdraw their money.

In a few short months, things have moved from a position under the previous conservative New Democracy government, which was being praised for restoring confidence in the Greek economy, to the current financial crisis facing the left-wing Syriza administration.

So it looks like the odds are stacked against Athens in the coming days as it plays a hand weakened not only by the mismanagement of Greece’s finances in recent years, but also the historically and culturally ingrained distrust of its European partners.

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Germany: risking its post WW2 modest image for little gain

When it came to foreign policy, the late Chinese leader, Deng Xiaoping, advised his countrymen to “keep a low profile and achieve something” by which he meant concentrate on the economy and avoid getting involved in disputes.

This week has raised the question – should Germany’s leaders heed Deng’s advice?

On Monday, Chancellor Merkel was in Japan and chose to issue her hosts some of her own advice in dealing with the legacy of Tokyo’s conduct in World War 2 which is still souring relations with its neighbours, especially China and South Korea.

Ms Merkel’s speech reminded us how much Germans pride themselves on coming to terms with the Nazis’ wartime record and reconciling with their neighbours.

As speculation grows that Japanese Prime Minister, Shinzo Abe, may use the 70th anniversary of the end of the war to water down previous Japanese apologies to its neighbours, Ms Merkel took it upon herself to urge the Japanese to follow Germany’s example.

Her hosts were polite and did not give away how they felt about Chancellor Merkel’s comments, but shortly after her speech events back home suggest it may have been wiser to avoid the risk of hubris and keep out of the debate about Japan’s wartime past.

On Wednesday, the very public row between Berlin and Athens over debt escalated with a reminder that perhaps Germany’s reconciliation with the victims of Nazi aggression has not been as successful as it thinks.

The new Greek government is trying to renegotiate the terms of its debt to the rest of the EU and IMF and wants to end the 2010 bailout – largely funded by Berlin – negotiated by its predecessor during the Eurocrisis which mandates economic austerity that Athens says kills any chance for growth.

German Finance Minister, Wolfgang Schäuble, has been using insultingly undiplomatic language to tell his Greek counterpart – with an eye to his own taxpayers – that Berlin has been generous enough already and will not countenance further debt forgiveness.

The Greek Prime Minister, Alexis Tsipras, responded – also with an eye to his political supporters – by reviving claims that Berlin pay reparations for Germany’s harsh wartime occupation.

But instead of trying to emolliate Athens, as German governments of the past might have, the response of Chancellor Merkel’s spokesperson, Steffen Seibert, was dismissive “the question of reparations and compensation is legally and politically closed”.

It is no secret to anyone in Europe that the Eurocrisis means Germany is now the continent’s undisputed political as well as economic leader. Berlin’s traditional policy of hiding its economic strength by letting France take the political lead is no longer viable given current French weakness.

It is also obvious when talking privately to Germans born since 1945 that they are increasingly tired of being reminded of what their grandparents’ generation did and feel others use the Nazi past to justify freeloading on their generosity.

But Germany is now risking undermining its newfound leadership by appearing arrogant and overplaying its hand.

It is not just the Greeks who are beginning to chafe at Berlin’s attitude. There is growing anti-German sentiment in Italy too. Outside the EU, Germany has taken the lead role in pressurising Serbia to accept the secession of Kosovo reviving many Serbs’ historical distrust and resentment of Berlin’s wartime record.

The EU works by consensus and goodwill to build common interests and Germany has prospered since 1945 by pooling sovereignty with its former enemies and appearing unthreatening.

But circumstances change and now demand Berlin take a more active leadership role in Europe because it is the only country economically strong enough to bail out its partners and save the Euro.

However, it is one thing to lead by force majeure and quite another to take people with you.

Germany and the rest of EU face tough enough challenges trying to revive economic growth and ensure the Euro has a future.

If Berlin abandons the modesty that has reassured the rest of the world it no longer harbours the desire to dominate and awakens the ghosts of the past by lecuring others and deliberately reminding its neighbours just how powerful it is, it will make the job of leadership even harder and risk undermining its newfound role before it takes root.

 

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