Wednesday

21st Feb 2018

Opinion

Greece has bought itself only a little more time

  • "The euro was always going to be about furthering the aims of a federal Europe, rather than economic development" (Photo: Valentina Pop)

Faced with the option of a communist who wanted to stay in the euro and tear up the deal with the Troika, or parties that want to stay in the euro and maybe tinker around the memorandum's edges, the Greek people chose the lesser of two evils.

Like many from the Left and Far Left across Europe, Syriza were trying to sell the people a lie. It's these kind of 'have your cake and eat it' policies from the left that landed us in a debt crisis in the first place. Had Syriza been elected, Greece would have been summarily ejected from the euro. In the commission they are cagey about admitting to it but there are now clearly contingencies in place to prevent capital flight should Greece leave. The actions that Syriza had proposed were simply incompatible with the requirements being placed upon it by the Troika.

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The reality is that Greeks are no longer masters of their own destiny. Many are frustrated by the policies being pursued but they also do not seem to wish to leave the euro. Either way, they are between a rock and a hard place, having to decide whether to accept crippling austerity and rule by the Troika, or being expelled from the eurozone, which they feel would remove their safety blanket.

Whichever way you look at it, Germany is the one with all the cards.

The Greek people bought themselves a bit more time at the weekend. However, I fear that we are still kicking the now infamous can a little further down the road.

I have a lot of sympathy with the German taxpayers. They have made difficult reforms and I understand why they are reluctant to become the paymasters of less competitive countries. Likewise, I have a lot of sympathy with the Greeks as their socialist government plundered their futures.

But had German voters been told the truth at the beginning, we would never have had a euro with Germany at its centre. They were sold a lie. Had the Greeks known about the effect the straitjacket of the euro would have on their ability to devalue back to competitiveness, they would never have joined either (and nor should they have been permitted to given their situation). But the euro was not about economics, it was about politics.

The euro was always going to be about furthering the aims of a federal Europe, rather than economic development.

My region in North East England benefits from fiscal transfers from London and the South. My country has a strong central bank. And of course, we have a political union. This is, in effect, what is being advocated for the EU now - especially in the European Parliament. Previously there were calls for 'more Europe' from the other political groups, now they are unashamedly calling for a federal Europe.

Fiscal transfers work in the UK because we consider ourselves to be part of a single demos. Even then there are many grumbles. Across Europe we all enjoy very different cultures and traditions. Brussels cannot create a single demos artificially from above, and Berlin cannot turn Greeks into Germans overnight. If you try to impose identities on people then you are cooking up a recipe for revolt.

However, you cannot have democratic rule without a demos, and continuing to shift powers upwards to the European Commission will only further alienate the voters and explode the legitimacy crisis facing the EU. The disconnect between politicians and voters across Europe is at a dangerously high level partly because they are putting their political project ahead of good economic sense.

My party has been opposed to the UK joining the Euro for the past 15 years, principally for the above reasons. Had it not been for the Conservative party's fierce opposition to us joining the euro, we would probably have been members by now and facing the quandary of choosing between our national economic sovereignty, or the failure of our currency.

But thankfully we are not. However, that is not to say that we are not affected by the crisis, and we want to see a permanent solution to this dichotomy.

Germany is understandably resisting efforts to mutualise the euro zone's debt - be that through a redemption fund or eurobonds. The southern nations' voters are growing increasingly weary of policies being imposed on them from Berlin and Brussels. Democracy and the euro are antonymous institutions. The people are not happy to cede their national parliaments' ability to determine economic policy to commissioners and ministers from other nations. They would never have agreed to it in the relative boom years of the 1990s. But the EU has never been one to let a good crisis go unexploited and it is wasting no time using this crisis to attempt to extend its own remit.

In short, Germany doesn't want to pay. And Club Med doesn't want to be ruled by Brussels and Berlin. The birthplace of democracy is understandably finding it difficult to stomach rule from a faraway land, rather than by the Greek demos.

Given the current situation, it is still my opinion that it would be in the best interests of Greece, the euro zone, and national democracy if Greece were to leave the euro in as orderly a fashion as possible. When I first suggested this back at the start of the year, I was derided for it. Only a few months later, it is no longer taboo.

Little has changed since I first made that suggestion. The crisis has of course gotten worse, but the options available to our leaders remain fundamentally the same.

Greece continues to stare into the abyss. The last bailout was based on such optimistic projections that a third bailout will eventually become a distinct possibility given the worsening growth figures.

The ECB has bought time with the injection of cheap money into the banks, but it has merely produced a sugar rush, followed by a nasty hangover. The bailout of Spanish banks hardly lasted 24 hours before the markets turned.

We cannot go on with policies that seek to buy a bit more time and prolong the inevitable. The tough decisions are going to have to be made. They can be made today, or they can be made further down the line. But the longer we wait, the worse the political, social and democratic consequences of this crisis will become.

Angela Merkel is right that there is no quick fix solution to this crisis. But the problem to date is that all of the solutions were

merely temporary sticking plasters. The markets see right through them. Today the attentions are focused on Greece. Tomorrow they may be on Spain or Italy. But there is one clear constant running through this crisis and that's the role of Berlin. If Germany is not prepared to put its full weight behind the euro then it needs to start considering the alternatives. The EU faces a long-term competitiveness crisis. Every ounce of political capital should be invested into solving that. Instead we continue to dither.

The sooner Germany plays her hand, the better. Pay the price for your political project, or let countries have the freedom to devalue their currencies.

The writer is the chairman of the European Conservatives and Reformists group in the European Parliament

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