The fall out of the Greek elections may prove one of the largest challenges to the supremacy of Berlin and Brussels since the creation of the Euro – and not a day too late.
The Greek tragedy cannot solely be blamed on the Euro or on the European Union. However, when the chips were down and after a number of years of an unsustainable boom, the failings of the Euro were laid bare. In blinkered eagerness to extend the scope of their power, the bureaucrats and political overlords of the EU decided to take on Greece, Spain and Italy and incorporate them into the Euro. This took place despite these countries failing to meet the convergence criteria regarding debt and deficit that was meant to prevent this situation in the first place. We were just waiting for the bust, and when the bubble finally exploded, it did so spectacularly.
The vow made by the new government in Athens to achieve a significant write-off of debt is very unlikely to be kept. Greece must pay their debts or it would otherwise send a simple, yet dangerous, signal to other indebted countries that their governments can spend unsustainably, endure a few years of austerity and then remove that debt. This would reinforce the reckless behaviour that threw Europe into one if its deepest crises since the Great Depression of the 1930s. A government is no different from any individual- if the governments spend too much and for too long they must cut their cloth according to their wallets. Cuts in Greece, Spain, France and indeed the UK, are inevitable until we have restored equilibrium. But what then is the solution for the Greek government to lessen the pain and to have a glimmer of hope of returning from the graveyard of dying countries?
Leaving the Euro would remove one of the heavier millstones hanging around Greece’s neck and would free the Greek economy. By giving up a significant piece of sovereignty when joining the Euro, the country lost its capacity to deal efficiently with long-term economic problems. Reverting to the Greek Drachma and devaluing it would give the Greek economy some breathing space, as well as giving its crippled tourism sector a well-needed injection. The underlying logic behind the Euro is fundamentally flawed for the simple reason that the distinct monetary and financial needs of 19 national economies, from Germany to Greece, are inherently different and simply cannot be compared. It is a failed experiment that should be dismantled, or reverted to a project operating on the basis of neighbouring member states whose economies are similar.
Drastic action is the only way the Greeks can escape a tragedy which is entirely of their own making. Their new government of unlikely bedfellows – the radical-left Syriza Party and the right-wing Independent Greek Party – will never be able to persuade the European Central Bank, the European Commission or the IMF to write off any of Greece’s massive debt. Leaving the Euro is the only viable option left, yet feared by the bureaucrats in Brussels for it potential creates a dangerous precedent. Countries can flourish after leaving the Eurozone – and all its difficulties. By leaving the Euro, Greece might actually have a chance of paying back what they owe to the world. Britain never accepted such a millstone – and because of that our economic strength relative to our European neighbours has been greater than for a very very long time. It is time for the Greeks to join us in the light.