Why Europe, and Greece, may survive this crisis

There are no good choices with Greece: regardless of how the country votes in a referendum on Sunday, Greece will remain a constant problem in Europe. But far from threatening the stability of the continent, the Greek tragedy may reinforce some European principles.

As the old saying puts it, each nation gets the leaders it deserves. And some nations, such as the Greeks, get worse leaders than they merit. There is a growing realisation in European capitals that, regardless of how this Greek referendum on Monday concludes, the problem of Greece’s participation in the Eurozone won’t go away. For even if the Greeks accept to continue with their current austerity in order to retain the Euro as their currency, a country which defaults on its debts to the International Monetary Fund will remain a constant trouble, a reminder that regardless of all the institutions which the European Union has created, there is still no substitute for good governance at the national level.

Give Myths a Miss

European leaders have every reason to be furious with a Greek government which has persistently distorted the nature of its problems. It’s simply not true that Greece is being abandoned by its European partners; the Greeks have benefitted from the biggest bailout package ever put together, worth €240 billion.

Nor is it true that the problem is Greece’s huge debt. The Greeks currently spend less on servicing their debts than almost any other European nation; the Greek government is merely using the debt question as a decoy to justify its refusal to adjust current national budgets in order to avoid falling into the same debt trap in the future. Even if half of the Greek debt was written off, that won’t resolve the country’s problems, unless the rest of Europe is ready to provide Greece with a further injection of cash, and allow it to accumulate further debts in the future. This is a battle about Europe’s future, which the Greeks want to cast as a fight about the past.

And, finally, it’s simply a lie to claim, as Greek Prime Minister Alexis Tsipras does, that by insisting on continued economic austerity, European leaders are ‘ignoring’ the ‘democratic choice’ of Greek voters. For, quite apart from the fact that it’s never up to the debtor to decide unilaterally how to repay creditors, the EU bent over backwards to make compromises. Yet all were ignored by Mr Tsipras who gambled that the Europeans would ultimately blink and give him money without demanding anything in return.

If anything, the ‘democratic mandate’ which is constantly being ignored is that given by European electorates to their governments to spend taxpayers’ money wisely. The continent is now put in the ridiculous position of relatively poor countries such as Slovakia subsidising relatively rich countries such as Greece. In fact, Greece is richer than 8 out of the remaining 18 countries in the Eurozone; if the discussion is about ‘justice’, then it’s the poorer countries in Europe, now being accused by Prime Minister Tsipras of ‘plotting’ against his regime, which should feel most aggrieved.

The whole negotiation between Tsipras and Europe was, as EU Commission President Jean-Claude Juncker aptly put it earlier this week, a ‘game of liar’s poker’, one ‘not worthy of the great Greek nation’. And one from which it’s difficult to see how Greece can extricate itself.


Greece’s default on its €1.6bn loan to the International Monetary Fund (IMF) not only puts the country in a ‘select’ club of only a handful of the worst-governed African nations, but also has the potential to set off a domino effect of cross-default clauses.

The event will also have deep implications on the IMF itself. The institution, which has been dominated by Europeans since its creation at the end of World War II, stands accused of spending far too much on a relatively wealthy European country, and far too little on its truly poor nations. That won’t be forgotten when Christine Lagarde, its current boss, seeks re-election next year; the Greek episode may cost the Europeans their commanding seat on one of the world’s most influential bodies.

Meanwhile, ordinary Greeks are guaranteed years, if not decades of misery. If they vote ‘no’ in Sunday’s referendum, their country will be ejected from the Eurozone within days. For most ordinary Greeks, the Euro is not simply a currency; it’s a symbol that their country, which often languished on Europe’s geographic and political margins, has succeeded in becoming an equal member in the club of rich nations. Eviction from the Eurozone will, therefore, not only be a deeply humiliating event; it will also be seen as the failure of an effort undertaken over almost two centuries to transform Greece into a mainstream European nation.

Massive demonstrations against a political class which is seen to have betrayed this dream are inevitable. A seriously weakened Greece will blow a hole in Europe’s immigration policies; many illegal immigrants already pour through its porous borders. It will also spell a vast expansion in European corruption and organised crime: a Greek government which is already incapable to collect its own taxes is unlikely to succeed in imposing capital controls over a nation rendered penniless by the crisis.

Tensions between Greece and Turkey, historic rivals for many decades, will also rise. And then, there is Russia, which relishes the opportunity to embarrass and split Europe. If European leaders find Greece annoying now, they’d better be prepared to discover what true annoyance really means.

Yet even if the Greeks vote to accept the austerity package currently on offer, it’s difficult to see how this would resolve matters. Having campaigned against accepting the deal, the Tsipras government will have neither the credibility nor a political stake in implementing the austerity.  Chances are high that Prime Minister Tsipras will resign and call new elections, something which will only plunge the country into bigger mayhem. And it’s a certainty that, even if elections are avoided and even if the bailout package is accepted, Greece will come back with the begging bowl in a few months from now, when it again runs out of cash because it had not implemented any of the obligations it has undertaken.

The Greater European Project is Not Under Threat

Yet as strange as it may seem, the difficulties which Europe will encounter are not necessarily an argument for accepting any compromise to save Greece from bankruptcy, for that too also carries with it the risks of contagion, albeit one of a different kind.

The Greeks have persuaded themselves that they shoulder almost no responsibility for their disaster, that the crisis is due to the devilish plots of foreigners – and particularly Germans – who somehow persuaded previous Greek governments to borrow and now have the effrontery of demanding their money back.  The current Greek government won power on the dishonest proposition that Greece could keep the Euro, but pay nothing for it, that the expectation of the Greek voters should trump those of other Europeans, whose tax money is now being used to prop up Greece. Giving in to such a Greek government will merely encourage other populist movements which are arguing the same thing in Spain or Italy.

And if Greece is allowed to get away with this defiance, the chances of imposing any discipline on other countries in the EU disappear. In short, the argument that evicting Greece out of the Eurozone is too risky tends to ignore the fact that keeping Greece in the Eurozone is equally risky.

Yet far from threatening to unravel the European Union project, the Greek crisis may reinforce it. No other continent has spent so much time and money on protecting a country as Europe has done. And even those Greeks who would vote ‘no’ to austerity on Sunday, will do while believing in their place in Europe. Greece is not a harbinger of things to come, but an exception.

The views expressed here are the author's own and do not necessarily reflect those of RUSI


Jonathan Eyal

Associate Director, Strategic Research Partnerships

RUSI International

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