A nakedly German Europe

By Rosemary Righter

Greece has got what it deserved, and what Germany reserved.

“Brutal. …Violent. … A crucifixion.”  In Brussels, the world capital of circumlocution where “difficult” is as bad as it gets, such language is nothing short of unthinkable. Yet these words were blurted out by eurozone ministers and bureaucrats as they staggered out of Sunday night’s collective mugging of Alexis Tsipras. Notwithstanding the general, and justified, exasperation with Greek tricksmanship, there was an atmosphere almost of guilt. For something very un-European had happened. Under threat of expulsion from the club as a delinquent bankrupt, a member of the eurozone had been subjected to a Diktat whose terms effectively reduce Greece to the status of a protectorate of the European Union.
Forget the economics, for a moment; set aside the fact that Greece has been playing the EU like a fiddle for years and that the Syriza government has behaved like the worst kind of “can’t pay, won’t pay” payday borrower. When the grim details of this epic confrontation have been forgotten — and in all probability after a Grexit proves to have been delayed, not prevented — what will stick in public memory will be that this was the moment when the EU became a nakedly “German Europe.”

Many governments in northern and central Europe, many of which have put their countries through tough adjustments, now want it that way. Countries that take controlling their finances seriously — not just The Netherlands and Finland but ex-communist countries that have gone through change far more wrenching than anything Greece has yet contemplated — need Germany to be their champion. They are looking for a fix for one of the fundamental flaws in the eurozone, which is that without a common fiscal policy, profligate governments can tap into the savings of the prudent, and could until recently borrow at the same low rates.
The logic of monetary union is a high degree of fiscal integration: a “government of Europe,” they used to say in the heady days of the Maastricht Treaty that, back in 1992, created the single European currency. But there is no such government; and after seven lean years of slow, no, or negative growth, European publics are a lot less keen now than they were then to have rules thrust upon them by the fat bureaucratic cats of Brussels. If Europeans are not prepared to surrender fiscal sovereignty to Brussels, creditor countries reason, then the only way forward is for Germany to flex its political and financial muscle — enforcing just such an outcome, always in the name of “Europe.” This was the political gulf that opened last Sunday. What spenders see as an outrage against democracy and an affront to “solidarity,” savers see as farewell to all those bibulous free lunches.

You would never know from Syriza’s wailing that Greece has had far more debt relief than any other eurozone country.

Greece had become a test case. Toughness, admittedly, was in order. The EU rules have been time and again waived for Greece, from the moment in 2001 that it was allowed to trade in the drachma for the euro without meeting the entry criteria. From that moment Greece was able to go on a low-interest spending spree, living on the never-never, because financial markets reckoned that eurozone governments would do, in European Central Bank President Mario Draghi’s famous formulation, “whatever it takes” to save the euro.
They were not entirely wrong. When the music stopped in 2010, Angela Merkel deliberately treated Greece’s bankruptcy as a small matter of liquidity, supporting the first €110 billion bailout in 2011 because, as she told the Bundestag, “Quite simply, Europe’s future is at stake.” In 2012, even as private investors were being forced to take a 75 percent haircut — you would never know from Syriza’s wailing that Greece has had far more debt relief than any other eurozone country — Merkel was still repeating that “if the euro fails, Europe fails.”
As Jochen Bittner of Die Zeit has observed, that is probably the stupidest thing that Merkel has ever said. The euro has not worked at all well for countries such as Italy, Spain, Ireland or even Finland, and the strains of cohabitation are now splitting Europe. But she is stuck with it. Her redoubtable finance minister Wolfgang Schäuble was prepared to let Greece make its way outside the single currency, and pushed hard to have such an option inserted into Monday’s summit statement. Merkel still seems to believe that to let Greece go would cause Germany to be blamed yet again for destroying Europe. Yet she cannot surely believe that Greece, even under close EU supervision, will drive through an extraordinarily intrusive and detailed program of reforms, the very reforms that its government has repeatedly denounced and urged its voters to reject. Germany will then be blamed both for bullying, and for failing. Schäuble would probably have preferred the “clarity” of a Grexit, not least because the ensuing turmoil would almost certainly have accelerated the pooling of fiscal sovereignty. He may well soon be in a position to find out.

If the meaning of this deal eludes most people, it is because it makes little sense in the real world.

If the meaning of this deal eludes most people, it is because it makes little sense in the real world. On Greece, the EU has been kicking the can down the road for five years. This time it has set up a croquet game using leaking balls full of toxic waste. Syriza as a party, and Tsipras in particular, either misjudged their real position catastrophically, or cynically misled Greek voters, when they broke off a much politer earlier EU negotiation, called a referendum and won over voters by claiming that a No would strengthen their negotiating hand. The Greek demand that “Europe” harken to the voice of democracy was not just naïve but arrogant: Other voters’ voices also count. Since it was evident that, even on the brink of bankruptcy, Greece would lift whatever was not nailed down, nails had to be used.
But not on hands and feet. The EU summit text is not merely unbending, but couched in terms more like a probation sentence on a serial offender than an intergovernmental text. Greece must not only pass four major pieces of legislation, but “endorse all the commitments” in the document, right down to Sunday opening hours, before the Eurogroup of finance ministers will even consider authorizing the opening of negotiations on a fresh bailout. All future legislation must be vetted by the “institutions,” the hated EU/ECB/IMF Troika, before submission to the Greek parliament. And more in the same vein. This is a deal that shouts out loud that Greece’s sovereignty is forfeit. Greece has done much to deserve it. With luck, the very severity of the punishment meted out to Athens will ensure that the euro operates according to much clearer rules. But they will be German rules. That no one may question. This does not have the ring of “ever closer union,” somehow. The political implications of this extraordinary, and still fragile, deal are wider by far than the economic.