On Monday night, June 22, at Europe's highest political level, a predominately technocratic attitude lingered on weighing upon the anxiously awaited august summit of the European leaders in Brussels. Urgently brought together, purportedly to help resolve the Greek credit crisis, those present share responsibility for Greece continuing to teeter on the brink of disaster -- already causing wider financial instability after the closure of its banks for a week following a sudden imposition of capital controls.
Previously interrupted, the discussions between Eurogroup finance ministers have since resumed. These discussions ended without reaching an agreement on Thursday, June 25, despite the German Chancellor's insistence that a compromise solution was necessary before markets open on Monday, 29 June. The presumption here was that the embattled Greeks might acquiesce, perhaps in a week or so, to the masochism implicit in the EU's additional draconian measures demanded in return for releasing emergency finance to Greece -- badly needed at present.
As it turned out, matters were further complicated over the weekend from the surprise move of the Greek prime minister who sought and obtained parliament's approval to hold in Greece a referendum on Sunday, July 5. Apparently not minding to suspend the government's constitutional executive responsibilities -- in the midst, too, of critical negotiations with its creditors.
Bewilderingly asking instead the Greek people at large to pronounce judgment on the highly complex technical issue of multiple and (admittedly) excessive demands from Greece's lenders for resuming emergency financial assistance to Greece. Which, as it happens, expert officials from both sides have remarkably failed to resolve after five months of endless discussions including unnecessary recriminations. Still worse, with no due mediation anywhere in sight as yet.
All of these proceedings ignore classic events in modern European history. As, for example, Charles de Gaulle's timeless pronouncement after World War II, endorsed by Europe's political leadership at the time, including Sir Winston Churchill and even Joseph Stalin, when the General solemnly declared before the French National Assembly "I salute in awe the monumental struggle of Greece, and its heroic achievements during the Second World War, creating unique and inalienable rights for the Greek people within Europe."
The survival of Europe, indeed, owes much to Greece. Also in earlier periods there were occasions of great courage and sacrifice of the Greek people. There have been other defining moments of Greece's grand contribution to the development and the defense of European culture and western civilization. The Greeks in Thermopylae and Marathon, though vastly outnumbered, repelled and forced back myriads of invaders from the East -- poised to conquer the entire continent subjecting Europe to their impertinent rule. A didactic message for Europe to this day.
Destitute of vision that crucial first night in Brussels, the European leaders simply fantasized the Greek sovereign debt to stand at €320+ billion, instead of agreeing at the right moment on a considerable scaling-down to reflect the massive economic, financial and social damage that Europe's poorly researched policy of blind austerity has inflicted upon Greece for years -- flawed both in design and execution. And thus continuing to undermine implementation of the serious structural reforms currently needed to put the Greek economy on a sustainable growth path.
And so, with the necessary correction of the Greek sovereign debt still missing, fears of Greece defaulting keep on rising. As it is, the country is exiting the bailout program -- and will thus no longer enjoy access to the remaining balance of €16.3 billion. So that a double default is now likely. First, on the €1.6 billion repayment currently due to the IMF (whose funding will also automatically cease) in addition to a €472 million installment of a loan the Bank of Greece issued to the Greek state in 1994. And, without a new bailout agreement, Greece will also not be able to pay, on July 20, €3.5 billion to the ECB for its purchases of Greek government bonds.
With its fresh and harsher measures, always reigning intransigently supreme in the foreground, the EU still insists upon more widespread cuts in public expenditure, pensions and wages. Bound, if adopted, to starve the Greek economy into deeper recession due to an already collapsing aggregate demand in the system -- exacerbated by a set of yet steeper rates envisaged both in direct and indirect taxation.
In short, Greece has been forced (by its creditors) to make immense sacrifices. Sacrifices probably set to continue on an enhanced level. And these sacrifices are not being made to save Europe (or its values), or to ensure its survival. Rather, the sacrifices serve to ensure the survival of the ill-conceived eurozone single-currency arrangements, as well as to save the IMF from serious embarrassment.
Furthermore, Greece and its war-time allies voluntarily waived their well-substantiated claims on post-war Germany in respect of the war-time damage done by Germany -- an inspiring act of "debt forgiveness." Today, Greece in contrast is expected, in completely altered circumstances, to "forgive" the very damage caused by its official creditors.
It is no longer wise, therefore, for the European Union, a superpower currently in limbo, with recessionist circumstances prevailing, to continue tormenting the Greek people in its strategic southern periphery instead of offering to us all a real chance to spark off prosperity both in Greece and the rest of Europe. Particularly in the promising context of the US government's intensified and widely acknowledged efforts in recent months to dampen hostility and unnecessary internal confrontation in the eurozone.
__________________ Nicos E. Devletoglou, Emeritus Professor of Economics, University of Athens, is author of the books Academia in Anarchy: An Economic Diagnosis (Basic Books) written jointly with Nobel Prize Laureate in Economics James Buchanan; and Consumer Behaviour: An Experiment in Analytical Economics (Harper and Row).