Greece and common political sense

In December 2009 the European Central Bank, ECB, published a working paper, Withdrawal and expulsion from the EU and EMU; some reflections (recommended read, clear and intelligent), by Phoebus Athanassiou. As Athanassiou pointed out, talk of ‘secession’ from the European Union, EU and European Monetary Union, EMU would earlier “have been next to absurd, considering the EU’s contribution to lasting peace and stability in Europe,” not forgetting successful enlargement. Athanassiou concluded that “negotiated withdrawal from the EU would not be legally impossible… a Member State’s exit from EMU, without a parallel withdrawal from the EU, would be legally inconceivable; and that … a Member State’s expulsion from the EU or EMU, would be legally next to impossible.”   But legal aspects are one thing, economics another and politics yet a separate aspect.

The eurocrisis has hit EU’s economy; economists and the financial media have led the crisis discourse. But the euro is a political construction, built on political will and at the root of the crisis there are politics: there has been a political unwillingness in the EU to be more than fair-weather friends. Fearing a loss of sovereignty ministers have been unwilling to yield power to the various EU institutions (Athanassiou has some intriguing observations on sovereignty).  This is in essence what Mario Monti wrote in the summer of 2011 in a timely Financial Times article where he partly blamed the eurocrisis on the EU being too deferential and too polite to its member states.

With the crisis and hesitant action it has been ever more difficult to portray the EU as a success in spite of earlier glory. Much of the political demagogy on the left and right ends of the political spectrum in Europe is nourished by politicians from the established parties who have been far too willing to blame the EU for their own failures.*

Now Greece has voted in a new government who though critical of how the Troika, i.e. EU Commission, European Central Bank, ECB and the International Monetary Fund, IMF, has dealt with Greece makes no mention of Grexit and claims it wants to repay its debt. In a BBC interview minister of finance Yanis Varoufakis stressed that Greece was not going to toy with “loose or fast talk of Grexit” and fragmentation, which would only unleash destructive forces.

“Grexit is not on the cards,” Varoufakis said. At the same time, the government is hell-bent on finding a way to tackle what Varoufakis has called a “humanitarian crisis” in Greece, in addition to scutinising earlier privatisation and renegotiating, perhaps with an eye on the so-called “bisque-clause” from 1946.

Renegotiating, or whatever term will be found, is no mean feat also because all solutions are bound to be relevant for other problem countries. The Irish found a clever way though with their Promissory Notes, did it unilaterally with the ECB governor Mario Draghi commenting dryly that the ECB “took note” of it. The EU has always been brilliant at finding compromises though arguably its comprises have not always been brilliant.

*The original blog post was published in:

* You can read Sigrún Davíðsdóttir‘s blog here and follow her Twitter updates here.