Europe’s future depends on the success of a Greek deal

‘The Taoiseach’s hardline rhetoric on Greece is short-sighted, because the consequences of failing to strike a deal with the new Greek government could be catastrophic for Ireland’

It came as no surprise that the new Greek government, swept to power on a mixture of hope and despair and composed of radicals and academics with no experience in office, should get off to a rocky start. The tough response from Berlin, Frankfurt and Brussels to prime minister Alexis Tsipras’s opening demand for a debt write-down was also predictable, although the manner and the timing of the European Central Bank’s announcement that it was pulling the plug on some Greek bank financing was clumsy even by the standards of that accident-prone institution.

Nobody expected the centre-right governments of Portugal, Spain and Ireland to welcome Syriza’s victory in Athens but the Taoiseach’s decision to become an outspoken advocate for strict euro-zone orthodoxy after the Greek election was as unusual as it was short-sighted. Perhaps his head was turned by all the flattery he received at Davos, where he was told that Ireland was now viewed as a fiscally responsible northern European state rather than a peripheral basket case. One way or another, Enda Kenny has abandoned the time-honoured – if not especially honourable – Irish diplomatic tradition of keeping out of other people’s disputes for as long as possible and hoping to benefit from whatever the outcome might be.

The Taoiseach’s hardline rhetoric on Greece is short-sighted, not only because it creates needless tension with a European partner but because the consequences of failing to strike a deal with the new Greek government could be catastrophic for Ireland. A refusal to compromise with Athens on restructuring its debt and easing the conditions of its bailout funds risks driving Greece into default and out of the euro. The exit of one member-state from the single currency could spur market speculators to start the hunt for other weak links. As we discovered during the European Monetary System crisis of 1992, when the Irish currency was unceremoniously ejected from a “basket” of northern European currencies, northern Europeanism can be in the eye of the beholder.

Beyond the economic consequences, a fatal collision between a democratically elected government in Athens and the European institutional system carries profound political and even strategic risks for Europe. Such a confrontation is less likely to benefit the parties of the political centre than to drive voters towards the xenophobic, anti-European populism of the far-right. It would also fuel the impression shared by many European citizens that the EU is undemocratic and insensitive to the needs of citizens.


Despite its clumsy handling of a vote on EU sanctions against Russia, the new Greek government has made clear that it does not see Moscow as an alternative ally and benefactor. That could change if Greece leaves the euro, however, and both Syriza and its right-wing coalition partners include members who are sympathetic to Russia.

A deal between Greece and its lenders is far from impossible and the Greek government has already softened its central demand, dropping its insistence on a debt write-down and calling instead for a restructuring of its debt that would link repayments to economic growth. The early steps taken by the new government – restoring the minimum wage to €751 per month (it had been cut to €586); promising to reinstate thousands of sacked public service workers; and freezing some planned privatisations – are scarcely revolutionary, even if Brussels disapproves. And Tsipras’s call for the troika to be replaced by a different oversight body could be accommodated without undermining the effectiveness of that surveillance.

This week’s encounter between the German and Greek finance ministers has been reported with a pleasing simplicity, as Europe’s leading deficit hawk Wolfgang Schäuble and the libertarian Marxist Yanis Varoufakis could not even agree to disagree after their meeting. The tone of their joint press conference was, however, strikingly polite and even warm, despite sharp differences of view on how to deal with the Greek crisis.

Poles apart ideologically, what both men share is a commitment to political union in Europe and a capacity – not always on public display – to see beyond narrow, national interests. Schäuble is one of the few surviving true believers in the European project active in German politics and the most powerful conservative voice in Europe for deeper political integration. In 1994, he co-authored a groundbreaking paper calling for a core of EU states around France and Germany to push ahead with political union and he has always understood that the creation of the euro was an essentially political project.

Varoufakis, in common with Tsipras and other leading figures in Syriza, also sees his country’s destiny in Europe and favours a politically integrated EU. Indeed, Syriza and its Spanish counterpart Podemos are overtly pro-European movements, in sharp contrast to populist, eurosceptic parties of the right such as the French Front National and Britain’s Ukip, or the eurocritical Sinn Féin in Ireland.

German public opinion is hostile to showing leniency towards Greece and the response of parts of the German media to the election of Syriza has been little short of unhinged. Two weeks ago, the conservative Frankfurter Allgemeine wrote that the Greek situation could not be compared to that of Germany during the 1953 London Debt Conference which wrote down most of post-war Germany's debts because "Greece's crisis was self-inflicted". The article was later amended online to acknowledge that Germany had plunged the world into war.

Nonetheless, a compromise can and must be found that respects both the sovereign choice of the Greek people and the legitimate concerns of creditor countries such as Germany. If the Taoiseach does not wish to help in finding such a solution, he would be well advised to remain silent.

Denis Staunton is Deputy Editor