Greece is a symptom of Europe’s crisis

By Guy Verhofstadt

Both sides have been clinging on to the wrong policy choices for far too long.

Let’s first of all recognize that the Greek “conundrum” is a shared responsibility. We are in this mess because the Greeks never made a real reform package, or a clear break with their mistakes from the past. But also because Europe has followed wrong policies — policies of pure accountancy that slowly but steadily choked the Greek economy. Everybody can make the wrong policy choices, but we have been clinging on to them far too long. The IMF itself has made it clear that the current strategy could never deliver a long term solution. Instead of acting like children on the playground, we should all take responsibility for our failures.
The only way out of this crisis is a completely new and comprehensive approach which provides solutions to Greece, but also to the rest of the EU, so that these dramas cannot re-occur. The European people, both in the North and in the South, deserve better than what we have seen up until today. They deserve a stable eurozone: to work in, to invest in, to live in. What they do not deserve are bickering politicians in a paralyzing stand-off. They don’t deserve panic stories by leading German politicians about the installation of a “technical government” in Greece, or a Grexit accompanied by the re-introduction of the drachma. Such alarmists should know they cause harm to our economies and they should think twice before opening their mouths.
The Greek government now needs to map out how they will bring about profound and structural reform. How they will make sure everybody pays their fair share of taxes; how they will rid health services of corruption; how they will end the clientelistic system and the political nomenclature controlling that system; how they will open up the labour market and give young Greeks a fair shot at a job; how they will dramatically downsize the public sector and reduce the overweight of public banks. In short, they should show the rest of Europe that they will install the rule of law in Greece.
Greece might very well be the cradle of democracy, but it does not make them the centre of good governance today. Structural reform for Greece does not entail what we have read in most of the proposals of the last few weeks: more taxes for companies and households. These proposals were job killers instead of job creators. Real reform creates jobs. Tsipras has to open up the markets and privatize the corrupt state enterprises. In exchange, we need to give him the necessary liquidity to get the Greek economy going again. This should be the main concern for the ECB. As counterpart, we also need to provide a long-lasting solution for Greece’s debt.
Because the EU has to become the second responsible partner. We claim we have saved Greece by handing it a multi-billion euro rescue package. In reality, we have burdened the country with a lot of unsustainable debt. We need to use this crisis to create a structural solution, one that eliminates the risk that erodes the stability of our European economy, day after day. A debt redemption fund can do that: It pools the refinancing needs of our 18 euro-economies in return for reforms that spur growth. It anchors the principle of reform into the eurozone and drastically brings down the servicing costs of our public debt at the same time. Win-win instead of lose-lose.
Next to such a redemption fund, we need to introduce so called “automatic stabilizers” at a European level. All developed economies have them: They kick in from the moment the economy takes a hit and soften the worst effect of a crisis, thus bridging the most difficult moments.
And of course we need further integration of economic policy at EU level. A proper governance for the euro — or better yet, a proper government for the euro; just as the dollar, the yen and the pound have behind them.
To summarize, we need a drastic new approach for the negotiation teams, both Greek and European. One that recognizes that we need a paradigm shift: real reform in Greece for real European cooperation. A global package that works beyond today’s crisis, but that will deliver growth and prosperity for the years to come.