On July 5, the Greeks voted no. No to the austerity measures demanded by Greece’s lenders in return for loans. No to making any compromises with the European Union. No to turning around the Greek economy. And no to fundamental and long-overdue institutional reforms of the Greek state.
In short, Greeks said no to turning Greece into a modern and competitive country.
Alexis Tsipras, Greece’s radical left-wing prime minister, had campaigned for a no vote in Sunday’s referendum on whether to accept the terms of a new international bailout package. So he was naturally jubilant over the result, in which over 60 percent of the voters turned their back on the EU.
Not that Tsipras interpreted it that way. He tried to put the best spin on a result that could inflict even further damage on his country. He said it was not a vote against Europe. Instead, he maintained, the vote would allow Greeks greater leverage in their negotiations with the International Monetary Fund, the European Central Bank, and the European Commission. He could now return to Brussels with a much stronger hand.
Were it as easy as that. The other eighteen eurozone countries are in no mood to be blackmailed by Greece. That is how several of them see it. The Greeks, for their part, believe that Angela Merkel, the German chancellor, and Wolfgang Schäuble, her finance minister, never wanted to give ground over the extent of Greece’s austerity measures. Schäuble had been demonized by the Greek popular press.
Yet the leaders of the other eurozone countries have been just as tough on Athens. Latvia, which almost went bankrupt during the 2008 financial crisis, was in no mood for making concessions to Greece. This Baltic state bit the bullet by introducing radical reforms to overcome the crisis. So did Ireland, Spain, and Portugal. Slovakia recently introduced major changes to its labor law by postponing the retirement age.
Having introduced and endured such hardships, are these countries really prepared to soften the terms for Greece? Were they to do so, then their own electorates could turn around and ask why they had to accept such harsh terms in the first place.
The reality then and now is that these countries knew they had to modernize their economies by introducing more flexibility, more oversight of their banks, more transparency, and a restructuring of their state institutions.
The short-term impact of such reforms has been high unemployment, especially among the youth. The parliamentary election in Spain that takes place later this year will reveal the full impact of Greece’s no vote. The populist Podemos party, which opposes Spain’s own austerity measures, will surely try to exploit the Greek result.
Greeks said no to turning #Greece into a modern and competitive country.Tweet This
Yet the Greek no also has much wider and more strategic implications for Europe. Eurozone leaders, who will hold a summit in Brussels on July 7, will have to decide if it is worth letting Greece default and, by implication, allowing the country to leave the eurozone.
Much has already been written about what that would mean for the Greek economy and the hardships that would follow. The EU could even be forced to provide humanitarian assistance to Greece if the country can no longer afford essential food and medicines. That shows the depth of the Greek economic and social crisis.
If, however, eurozone leaders made some compromises over Greece’s debts, Tsipras’s gamble of holding a referendum would no doubt be vindicated. But any compromise without major institutional reforms would delay Greece’s transition to a strong, modern, and competitive economy. Any compromise that did not address the need for governance would undermine the legitimacy of monetary union.
After all, that union was set up on the basis of stringent rules on budget deficits, a tight monetary policy, and low inflation to make Europe competitive.
Several countries, including Germany under the former Social Democratic chancellor Gerhard Schröder, flouted those rules. The European Commission as well as other member states lacked the courage and commitment to take Berlin to task. At least Schröder, who saw how the German economy had become the sick man of Europe, then went on to introduce major reforms to the labor market, a decision that cost him Germany’s 2005 parliamentary election.
It is reforms like these and many others that Athens was being asked to implement to turn around its economy. None of these issues was raised during the short run-up to the July 5 referendum. None of these issues was ever tackled at all by Tsipras since he became prime minister in January 2015.
It is hard now to see Tsipras ever considering such fundamental changes to the Greek state. The longer the delay in addressing the acute deficiencies in Greece’s state structures, the greater the risk that Greece could mutate into a failing state.
The Greek no has wider and strategic implications for Europe.Tweet This
The strategic implications of such a slide would be immense. Greece’s democratic institutions would have to be strong enough to withstand the rise of ultranationalists and Euroskeptics. The institutions would have to resist pervasive corruption even as investment dried up.
As if that were not enough, Greece’s stability would be called into question. This part of southern Europe is already vulnerable and exposed to the turmoil in the Middle East, to the refugee crisis, and to the Western Balkans, whose leaders can only look with trepidation at what is happening to Greece and the EU. Somehow, neither eurozone leaders nor Tsipras have been prepared to see the bigger picture.
Maybe the resignation on July 6 of the Greek Finance Minister Yanis Varoufakis—who did everything possible to destroy the trust between Athens and its international creditors, particularly Berlin—might provide a glimmer of hope in the coming days. It’s a big maybe. If not, the future of European political and economic integration could be doomed.
Comments(6)
The people of Greece voted no for continued hardship. The EU was drawn into playing poker and allowing egos to influence a mutually acceptable agreement. To leave the table now will tantamount of kicking Greece out of the EU. Germany and France are the big brothers perceived to bully the younger one. The cost of writing debt off now may well be much cheaper of dealing with a Split Europe and Nato.
How win in this case? Turkey. 90% of its export goes to Russia and it gives good opportunities to exert influence on the Turkey's geopolitical concern over Greece. Turkey can invest vital industries of the Greece economy through Russian companies and after this to intervene all Greece politics both internal and external. Greece made a great step from the EU to the Turkish bondage. may be somebody prompted to do this?
This piece is full of so much right-wing dogmatic drivel that I cannot do a point by point analysis of each of the unsubstantiated claims, but I will attempt to scratch the surface. This piece is published by a think tank, so naturally both its assertions and its conclusions are complete gibberish intended to sound "intelligent." The author asserts that the Greeks voted against modernizing their economy, but does not elaborate on this dramatically sweeping statement. "Were it as easy as that?" This is a good example of what I like to term think tank-speak, where things that people commonly say ("If only it were as easy as that.") are altered in order to sound smarter and more technical/academic, but any thinking person clearly knows what is really going on. The author, an American, spends about half of the piece trying to impose what she deems to be good austerity measures, on the Greek people I might add. It is a classic case of blaming the victim and not the culprit (the bankers). "It is reforms like these and many others that Athens was being asked to implement to turn around its economy." Just one problem: the author does not mention a single one of these reforms or even link to what purported reforms of the previous German government she is referring to.
The EU is a twentieth century solution to twentieth century problems. A modern competitive economy may well be more likely outside the debt ridden, slow growth, high unemployment and statist Eurozone.
Dear Ms Dempsey, Contrary to what may seem here as a fact ,Greeks did not vote 'No to making any compromises with the European Union. No to turning around the Greek economy. And no to fundamental and long-overdue institutional reforms of the Greek state.'. They did vote though against, new ,more severe austerity measures. Indeed Greek economy is in dire need of an overhaul, both to the mentality and institutions of Greece alike. They should have changed long ago, in order for Greece to be a more competitive economy and a progressive nation. It is not in Greece's interest to leave the Euro and the EUrozone, as consequences that might follow are unpredictable and might lead to long instability in Greece and the Southeast Mediterranean in general. But sometimes enough is enough and policies that lead nowhere, should be abandoned or at least consider major restructuring, as in the case of Greece's debt . Austerity during the last five years has lead only to furher impoverisation of Greece, no wonder why the Greeks are fed up. Change is the requested key element here. Change to prosperity and a glimpse to a better future through reforms to be implicated. Yes, indeed Tsipras has been delaying significantly in proceeding to any reforms, but do not forget what Greece managed to pull through the past five years. No other country of the so called western world has managed to reach a GDP surplus in such a short time and to push to such reforms. Just look at the OECD economic surveys about Greece. In OECD words, 'Greece has made impressive headway in cutting its fiscal deficit and implementing structural reforms to raise labour market flexibility and improve labour competitiveness'. Greece's debt is not sustainable and unless European Leaders and policy makers fail to see what is coming after kicking Greece out the Eurozone window, I fear the the EU is doomed in collapsing and then repeating the same mistakes of the past. The same mistakes that lead to two World Wars. Call me a pessimist, but we are already following the same footsteps and stuborness from both ends can lead nowhere, but to further hatred and division. I hope I am proved wrong, but right now, there is but a narrow glimpse of hope in reaching a deal. Let us hope that these people that want to call themselves leaders, indeed take action and be responsible for once before its too late.
It's completely foolish to think that this debt can simply be written off. Greece needs to look within and stop pointing fingers at banks and other Euro zone countries. Spending and excessive entitlement were at least contributing factors in the current economic situation. Any attempt to claim that Greece has an economy that even approaches modern or competitive is a joke. Setting up am economy which is conducive to job creation and growing the GDP should be Greece's main concern. Enough with the cushy do-nothing government jobs and having far more citizens than jobs in general. Handouts caused this crisis.
Comment Policy
Comments that include profanity, personal attacks, or other inappropriate material will be removed. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, steps will be taken to block users who violate any of the posting standards, terms of use, privacy policies, or any other policies governing this site. You are fully responsible for the content that you post.