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The euro and the perpetual Greek tragedy

Greece, the sick man of Europe, continues to dominate the headlines as the latest chapter in the Greek economic tragedy has seen Syriza, the radical anti-austerity party rise to power and ruffle more than a few feathers in Europe’s corridors of power.

But, many Greeks who supported their rise to power now say they have already betrayed their mandate, by agreeing to new terms with the Troika.

A disaster in the making

The truth is that Greece should never have come near to being allowed to join the euro zone in 2001. But given the country’s historical significance and contributions to Europe – developments in civilisation, mathematics, philosophy and literature, to name a few areas – they were given a pass.

Since the Global Financial Crisis of 2007-09, increasing evidence came out that Greece “cooked their books” – essentially lying about the country’s financial health in order to comply with the European Union’s prerequisites to joining the common currency. Some say it still went on up to 2012.

The South European country was never in a fit enough state to join the then 11-member currency bloc (now 19) at the beginning of the millennium.

Syriza and the EU’s game of brinkmanship

It remains to be seen what effect Syriza’s election will have on Greece and indeed the euro. The party swept to power on a mandate of an overhaul of austerity and bailout terms, a debt haircut, and an end to towing the Troika line.

But so far, these election pledges are yet to materialise, and if anything, the party is in danger of doing exactly what they said they would not – getting into bed with the Troika.

The Greeks are in a tricky position but so too is the euro zone, and both parties know what is at stake for the other.

The Greek government knows that Europe wants to avoid a Greek exit and would go to great lengths to do so, but they also know that Grexit would be a disaster for Greece too, and would plunge the country into recession, and possibly depression, for the foreseeable future in all likelihood. Europe is fully aware of what is at stake for Greece too.

It is a high-risk, high-stakes game of brinkmanship that has been played out between the two sides.

The best outcome for all

The current proposal tabled by Greece and approved by the EU needs to be approved by Europe’s parliaments. Should this occur, it will buy Greece four months to get together a real plan of action without worrying that the country will run out of money.

Then they will go back to the Troika to renegotiate once more. Grexit will rear its head again at this point and will probably be more likely an eventuality than it has been in this first round of negotiation.

The main possible finish to these future negotiations is three-fold: one, the EU gives in to Greek demands, which would almost certainly set off a chain reaction of social, political and economic repercussions; two, Greece gives in to Troika demands, which would seriously dent Syriza’s legitimacy back home; or three, both sides compromise, so political face is largely saved all-round. The EU would be able to say that they did the only thing possible to save the euro from Grexit, while Syriza could say that the new terms of austerity mean Greece is better off than before.

Nevertheless, I believe that none of these paths would be correct, for Europe or for Greece. The only viable path for a strong, united euro zone is to move forward with reliable partners.

If Greece cannot get their house in order, they should be asked to leave in a controlled, timed manner and should they wish to rejoin in future, they would have to prove their reliability. This would allow Greece to rebuild its economy and for the euro zone to focus on what it was designed for: making Europe a global economic powerhouse.


*European Union flag, provided under Creative Commons licence, taken by Yanni Koutsomitis

European Union Flag

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