Tuesday, June 30, 2015

Greece edges towards the precipice

 Jun 30, 2015


THE Greek government's decision to call a referendum on the terms of the country's bailout prolongs politically what essentially is an economic battle drawing to an end. The initiative undertaken by the leftist government of Prime Minister Alexis Tsipras seeks to legitimise its opposition to creditors' demands by registering the degree of popular angst over the austerity policies that his citizens are living with.

Greeks have endured five years of recession, total output has shrunk by 25 per cent and the country's standard of living has been eroded to the point where departure from the euro zone and even the European Union is not the unimaginable catastrophe that it would have been in normal times.

In these abnormal circumstances, Mr Tsipras has entered a game of brinkmanship with Europe's political and economic elite in which any Greek exit from the regional union would be blamed as much on them as on him. Greek banks are closed and capital controls are in place after the European Central Bank decided not to increase its emergency funding of local lenders. The crisis is fundamental to Greece's position in Europe. What have come to a head are irreconcilable differences between a European economic system run ultimately on principles of fiscal prudence and the profligate ways of politicians who believe that nations can enjoy unsustainable standards of living on the basis of debt whose repayment can be deferred politically. The policy gulf simply is too wide to be bridged by temporary concessions or by calls to preserve the EU by upholding the euro zone.

This is a tragedy, of course, as much for Europe as it is for prodigal Greece. Greece is the birthplace of democracy, the single principle that unites Europeans above all their linguistic, cultural and economic differences.

Also, for a continent that gave the rest of humankind two World Wars in the last century, it is no small thing that Europe perhaps is the first region in the world to have moved beyond war as an acceptable means of settling international disputes. No matter how great the provocation, members of the EU will not attack one another. The European practice of pooled sovereignty ensures that the stake of each member state in the survival and well-being of other members far exceeds the benefits that a country can hope to extract from the fall of a fellow-European nation. These achievements, a reality in Europe, are the stuff of which dreams are made elsewhere.

Well-wishers of Europe hope that the animating spirit of the EU will survive any interruption of its early evolution. The Greek crisis is a real challenge, but whatever the form its resolution takes, Europe must cohere.

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