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greece and the euro crisis has no equivalent of Greece’s left-right polarisation. Indeed it still enjoys some of the sense of solidarity of a small country which has lived in the shadow of a large one—its delight in membership of the EU and the euro is evident. Most important, says a former government official, is that the Irish have had a powerful sense of having enjoyed the fruits of the boom years together, and now have to share the pain together.
But Ireland is not yet safe, Greece considerably less so— and the bailout has left collateral damage at the heart of Europe. The rescue has left Germany sulking and confused about its future role in the EU. In December, as the crisis deepened, Chancellor Angela Merkel’s first instinct was to protect Greece. She talked of the “common responsibility” of EU countries to help each other. But she may be one of the last generation of German leaders to feel that commitment to the European cause—strengthened, in her case, by having grown up in East Germany. Not all her cabinet share it. And German voters have loathed the deal, failing to see why they should work until 67 to pay for Greeks to retire 12 years earlier, and why their country should hand over €120bn, which may be their eventual share of the rescue bill. “We are again Europe’s fools,” declared the mass circulation Bild. Merkel is seen to have been outmanoeuvred by French leader Nicolas Sarkozy and in the North Rhine-Westphalia elections on 9th May her Christian Democrats were beaten, losing control of the state and the upper house of parliament too.
t is hard to see the Germans tolerating any repeat of this rescue. But nor do they want to change their own ways to make it easier for the Mediterranean countries to grow faster. Germany has prospered because of its southern neighbours’ willingness to buy its goods with borrowed money. But the idea that Germany should persuade its own people to buy more and save less is dismissed out of hand.
ndeed, this crisis has highlighted just how little convergence there has been in the eurozone. Far from making the weaker economies more competitive, the euro has served as a kind of shelter under which Greece, and others, have used the benefit of low interest rates to fuel asset bubbles without reforming their economies. France, and many people in the ECB, now believe that if the euro is to survive it will require much more co-ordinated economic governance to prevent imbalances. Germany wants much stricter rules limiting budget deficits. Yet will countries tolerate the infringement of sovereignty which this would require? It seems unlikely.
he alternative to this convergence—and the more likely outcome—is the unravelling of the eurozone. Greece itself could still be the catalyst. Unless Greece begins to grow fast, it is hard to see how it can meet repayments without rescheduling its debt—indeed it would require a bigger adjustment than any in IMF history. Yet it is hard to see rapid growth without devaluation, and that would mean bringing back the drachma. There is no mechanism for leaving the euro. It is supposed to be a “Roach Motel”—you “check in but don’t check out,” in the slogan of the pest control device. Any exit might have to be done overnight, to avoid a run on the banks. It would be legally very messy, and the national currency to be recreated might exist only in electronic form for some time, said one banker in London who has considered the
It is easy to forget in the modern EU, where it is possible to live and work anywhere, just how different national cultures remain question in detail. But it is no longer impossible to imagine—indeed, across Europe, bankers and lawyers are beginning to test run the idea.
ven if Greece did devalue it would still face economic pain. Tourism would benefit but Greece has a weak export sector (“olives, ships and sunshine,” said one British banker disparagingly). The markets would allow the government to borrow only at punitive rates. Most of all, exit from the euro would be a national blow. The idea of leaving the euro flicked through many conversations in Athens before the bailout, but, for the moment, has disappeared.
ot so in Germany. The debate about whether the euro still benefits Germany, the country that did more than any other to bring it into being, would have been unimaginable a year ago. But it is now happening, as Germans begin to focus on the notion that the currency union will demand the steady transfer south of their hard-earned surpluses.
he crisis has changed the outlook not just for the euro but for the EU itself. After the long institutional wrangle of the Lisbon treaty many people hoped that the EU could look outwards again, but instead it may be plunged back into years of emergency summits and bailout deals. The crisis is also likely to prove a brake on future expansion, because it has exposed the limits of the richer countries’ willingness to pay for the poorer. Turkey and Ukraine, both big and poor, might now have to look instead to close partnership rather than full membership. Yet at a point when Russia is seeking to rebuild its influence, in places such as Bulgaria and Ukraine, Europe will suffer by seeming to pull away.
t is easy to forget, in the modern EU, when it is possible to take cheap flights anywhere, live and work anywhere, just how different national cultures remain—consider the reaction to the crisis in Greece and Ireland. Moreover, the EU has changed its poorer members less than its founders imagined. The crisis that started in Athens in October has delivered a profound shock to this EU vision—and above all, to Germany’s sense of its role in Europe. The failure by the commission, and by France and Germany in particular, to insist that countries observe the rules, sprang from their enthusiasm for the European project and the desire to indulge the smaller and poorer countries in their cultural differences.
erhaps this crisis—the most serious in the EU since its creation, according to Angela Merkel—will finally persuade Greece, and the other weaker economies, to make the reforms they have ducked since joining the euro. Their easy ride is over, as economic reality asserts itself over the political dream of a pan-European currency. In the case of Greece, this will demand profound changes to a culture whose roots stretch back for centuries. In the meantime, the crisis has already had consequences that are far from picturesque—and which still threaten the health of the entire union.
34 · prospect · june 2010 Performing Arts Visual Arts Film Studies Cultural & Media Studies intellect books & journals publishers of original thinking | www.intellectbooks.com Intellect Books
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