The headlines are dramatic this weekend as the Greek crisis reaches its endgame, yet the real story is that the viability of the Euro currency is now in serious peril. Europe’s elite are destroying their own project for selfish ends.
Friday 19 June, 2015 was probably the day when the prevailing neo-liberal western order lost its allure and the European project along with it. Amid the chaos, the Euro, as it's presently constituted, most likely reached the beginning of the end. All this after Frankfurt's ECB effectively promoted a bank-run in a country it is bound to protect via its regulatory function.
Bizarre? Not really. The European elite – the Tweedledee and
Tweedledum of center-left and center-right parties who now govern
almost every state – simply cannot give in to Greece’s Syriza
government. The reasons are existential. If they accede to Alexis
Tsipras’ mandate, in most nations, they themselves will be
replaced by non-mainstream parties. This is the reality and
Eurocrats simply won’t countenance what they would perceive as a
surrender to “extremist” politics.
There are two elections due shortly which prove this point. In
Spain, the pro-Brussels government of Mariano Rajoy’s Popular
Party is under severe pressure from the fledgling Podemos
party, which has soared as high as 30 percent in opinion polls
this year. The left-wing populists advocate an end to austerity
and even Spain’s withdrawal from NATO.
READ MORE: Greece likely to exit euro and EU without deal with creditors – central bank
Over in Ireland, the incumbent centrist Fine Gael-Labour
coalition faces a serious threat from Sinn Fein. Incidentally,
the latter has invited Syriza representatives to speak
at its conferences . Sinn Fein echoes Podemos’ demands to smash
austerity, while also pushing for the removal of Ulster from the
United Kingdom and its unification with Dublin . So enthusiastic is
Sinn Fein about this idea that it fought a 30-year war - via its
military wing, the IRA - against the British state. That conflict
ended little more than a decade ago.
Selfishness trumps fairness
The Irish and Spanish administrations – with self-preservation in
mind – simply will not support any bailout for Greece that sees
austerity loosened for Athens but not for Madrid or Dublin. In
fact, the latter might even spook them despite the obvious
benefits to their balance sheets. Naturally, Germany’s
notoriously parsimonious Angela Merkel wholeheartedly agrees with
their stance. Faced with an increasingly bolshy Die Linke bloc in
Berlin, Merkel’s CDU also refuses to “surrender” to “populism.”
However, there is a problem here. The European elite fancy
themselves as democrats. In fact, they rarely miss a chance to
lecture developing countries on the continent's fringe about the
topic. Think Ukraine, Serbia or Hungary . Nevertheless, their
current machinations are inherently anti-democratic. The fact is
that Brussels is ignoring Greek voters who delivered Tsipras a
mandate to reject further economic cuts.
READ MORE: Greek failure would mean eurozone end – Tsipras
Meanwhile, things look increasingly negative in Greece, which has
lost one-quarter of its national output since 2007. Unemployment
currently is at 25.4 percent and the figure for the nation's
youth is an astonishing 49.8 percent. The cost in ruined hopes,
dreams and lives is immeasurable. While fiscal rectitude has
delivered tangible reform and eventual progress in Ireland (and
to a far lesser extent, Spain and Portugal) the medicine isn’t
working for Greece.
Trapped in the Euro, the normal route to IMF-driven economic
salvation isn't open to Athens. That would be a cull of the
public sector allied to a major currency devaluation which would
inspire private sector job growth to pick up the slack. Sure, it
wasn’t available to Dublin either, but Ireland has, almost
uniquely in Europe, a positive demographic profile and its
economy is based on foreign-direct investment in its technology
sector, helped by its use of the English language. Greece has
neither of these advantages.
Much blame is Greek
Instead, Greece has some significant structural problems, ignored by successive pro-EU governments. Graft is a fact of life, tax-collecting has never been a national priority and cronyism stifles development. Additionally, due to a history of martial rule and difficulties with Turkey, its military spending has been outrageously high. For instance, Greek armed forces “boast” more active personnel than the British Army. This despite the fact that Britain has around six times the population and is vastly wealthier. The Hellenic Air Force has 244 combat aircraft at its disposal, mostly expensive US-built F-16s. By comparison, Ireland has no fighter jets. However, Ireland's total GDP – with half the population – is greater than that of Greece, according to data from the IMF.
Greece bailout talks sink, default & dra(ch)ma loom? http://t.co/PbDwkL1paxpic.twitter.com/KeDuIsuE4B
— RT (@RT_com) June 16, 2015
While Greece does need to cut its cloth and reduce superfluous
spending, the EU’s treatment of the country is outrageous.
Motivated by ideology, added to a desire to entrench the centrist
status quo general cross the club, Eurocrats are blinkered.
Since Tsipras assumed power a few months ago, Brussels has
insisted that Syriza impose cuts that they were elected to
reverse. Never mind that the previous regime was unable to
implement them anyway. Nevertheless, even if Tsipras changed tack
and repudiated his campaign promises, Greece would be just as
bankrupt in two years’ time as it is today – or was five years
ago. An endless cycle of low growth, with no possibility for
currency devaluation, would guarantee that.
Hence, the only solution for Greece is to default and exit the
Euro. This course of action will be painful beyond belief in the
short-term. Not to mention the fact that Brussels will actively
work to dismember any signs of Greek recovery. A rapid rebound in
Athens would act as a totem to other EU states trapped in
low-growth (or none) scenarios.
READ MORE: Grexit: Win for both EU and Greece?
On the other hand, if Greece had some access to cash from another
source, the pressure could be alleviated. This explains why
Tsipras was in St Petersburg on Friday. Russia, either with or
without the new BRICS bank, is his best option for funding.
However, Moscow currently faces numerous financial challenges and
any aid to Greece would have to be weighed against those.
The end of the Euro?
A Greek exit would open up a can of forms for the Euro,
especially if Athens was able to access cash from Beijing or
Moscow. A multi-nation currency, without political union, was
always a harebrained notion. Worryingly for Eurocrats, the move
towards more European integration has stalled. In fact, attitudes
are now going the other way with Britain, amongst others, calling
for less of it. Italy, in particular, would watch a Grexit
closely. Buried deep in a moribund state of arrested development,
with little or no growth, Rome badly needs an alternative to the
Euro.
If Greece leaves the single currency, expect to see capital
flight from the periphery, especially Spain, Portugal, Italy and
Ireland. Most wealthy investors, believing that these countries
will be next to bow out, will transfer their cash to Germany.
Others may see London as an even safer haven. Should this happen,
the states mentioned would be forced to initiate capital
controls. At that stage all hell would break loose.
Of course, Brussels may yet agree to another crippling austerity
package with Greece, perhaps mixed with a little debt
forgiveness. If this happens, the Euro should hobble on for
another year or two, but Europe’s terminal decline will gather
pace. Except in Germany, of course. After all, Berlin has been
the big winner from this mess.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.