Greek debacle a dark episode in EU’s evolution

The sorry tale of Greek bailout is a damning indictment of European monetary union

Alexis Tsipras, Greece’s prime minister: Syriza’s disastrous negotiating strategy also means the Greek public is being offered a deal they would have probably secured anyway. Photographer: Yorgos Karahalis/Bloomberg

Alexis Tsipras, Greece’s prime minister: Syriza’s disastrous negotiating strategy also means the Greek public is being offered a deal they would have probably secured anyway. Photographer: Yorgos Karahalis/Bloomberg

 

When the definitive history of the European Union is written, the closing weeks of June 2015 may stand out as one of the darkest hours. With Greek teetering close to an exit from the single currency after five years of crippling austerity, the sorry tale of the Greek bailout is a damning indictment of European monetary union and the inherent flaws of the single currency project.

Certainly, no one in Brussels predicted this outcome when Syriza swept to power in January. Privately, many governments and senior EU figures were happier a party of the far-left rather than far-right had assumed government, given the strong performance of right-wing parties in countries as diverse as France, Denmark and Hungary in last year’s European elections.

Better to have Alexis Tsipras than Marine Le Pen said many. But, as the months wore on, any goodwill that Tsipras’s government had, particularly from centre-left governments in Italy and France, gradually evaporated.

An important part of the choreography of the last few months has been both sides’ communication strategies. The entire negotiation process has been dogged and undermined by leaks, spin and misrepresentations.

As the main atrium in the European Council building in Brussels emptied out on Friday night, leaving just a few journalists filing their last words of copy, the unmistakable shadow of Yanis Varoufakis could be seen, giving yet another TV interview to one of the hordes of media outlets that have decamped to Brussels over the last week.

Just hours later, his government would call a referendum, taking the creditors, and many representatives of the Greek government, by surprise.

Alienated Greeks

Jean-Claude Juncker’s speech on Monday was evidently a move by the lenders to wrest the public narrative from Greece, though his intervention, and particularly his remarks about suicide, may have alienated Greek voters even further. The decision to publish the final bailout proposal as it stood on Friday was an unprecedented move by the commission to clarify the lenders’ position.

It was a wise decision, with the document becoming the fulcrum around which the negotiations and counter-proposals were conducted right up to yesterday.

Both sides can be accused of playing hard and fast with the truth. Juncker’s claims the proposal contained no pension cuts was disingenuous – officials stressed afterwards he referred to nominal pension levels. There has been constant misinformation from the Greek side too. The claim that Angela Merkel “reportedly” told Tsipras to “shut up” at last week’s summit has been quoted by commentators over the past few days, without anyone questioning the veracity of this supposed interchange and provenance of reports.

Much of the truth is a matter of perception. On the much-discussed VAT rates for example, while Greece’s plea to keep the hotel and tourism industry out of the higher rate is understandable, officials in Brussels point out Greece’s complex VAT system – which involves six different rates – is costly and must be reformed.

Political deal

But ultimately, the last few months are not about the detail. The tragedy of the whole debacle is that there was very little separating the sides last weekend, and a deal could have very easily been reached. The ultimate decision about Greece’s future was always going to be political and made by politicians in Athens and other European capitals.

How Tsipras, who was elected on an anti-austerity platform, was ever going to sign up to another austerity deal, was always unclear. While virtually every observer can see Greece’s debt burden is unsustainable, the political reality is that a writedown would directly affect the other euro zone countries that have lent billions to Greece during its bailout.

The roots of the problems in the Greek bailout that Syriza has identified lie much further back and were not going to be solved in a few months of negotiations. Syriza’s disastrous negotiating strategy also means the Greek public is being offered a deal they would have probably secured anyway, without having to suffer capital controls and bank closures.

Whatever the outcome, the damage to relations between Greece and the EU may never be undone. The breakdown in trust and rampant sense of betrayal on both sides flies in the face of the EU’s doctrine of solidarity and collectivism.

As the blame game begins over the latest debacle, much responsibility lies with the single currency.

By putting a creditor/debtor relationship at the heart of the euro project as countries were forced to bailout troubled friends when times got tough, the currency has a lot to answer for.

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