Greece's sovereign debt drama keeps dragging on. How long will the European Monetary Union let Athens give it the runaround, asks DW's Zhang Danhong.
The Greek government has reached its goal: An EU summit has been called to discuss yet another of its last-minute offers. They have managed to gain a further week of time. And time is money. In this case, another week without a deal could mean a multibillion euro bargaining chip for Athens. Last week alone, Greek citizens withdrew some 5 billion euros from their bank accounts for safekeeping. And to keep the Greek banks from collapsing, the European Central Bank (ECB) has expanded their emergency credit line to 90 billion euros.
And if Greece does leave the eurozone, the other euro countries will be left holding the bag. In other words: the longer negotiations last, the greater the liability for the euro partners - and the stronger the negotiating position of the Greek government.
Thus, two developments - both of which have become more prominent over the last several months - are increasingly becoming a headache: firstly, that a country that is utterly insignificant economically can blackmail the entire monetary union; and secondly, that the ECB is heaping ever more liability risk on the eurozone countries.
The faulty design of the euro itself has made these developments possible. The monetary union was lifted from the baptismal font without a trace of federal character. In the system, sovereign states with their own economic and fiscal policies all share the same currency. Neither insolvency statutes, nor exit rules exist. Such a union could be successful if it were homogeneous and all of its members had similar attitudes toward fiscal and social policies. Instead, the mantra of irreversibility is chanted.
The initial success of the euro led to cockiness - though indeed many politicians and economists had nagging doubts when Greece was allowed into the monetary union. But they couldn't imagine that such a small country would ever set the eurozone teetering.
That was clearly a miscalculation. For five years now, the monetary union has been wrestling with Greece's debt crisis. Greek Prime Minister Alexis Tsipras' new government doesn't have a plan for reviving the Greek economy, either. Clemens Fuest, president of the Center for European Economic Research (ZEW), is correct in saying, "Tsipras' only plan is to hire more civil servants, to nationalize private corporations and to let the citizens of other countries pay for it all."
Instead of continuing to negotiate with Athens, the eurozone's political elite should think about whether it might not be time to give up on the principle of irreversibility. If Greece were to leave the eurozone it would neither signal the beginning of the end of the currency, nor would Europe fall apart. On the contrary, the rest of the eurozone could grow closer and perhaps dare to take larger steps toward integration. Greece would remain a member of the EU, and could rejoin the monetary union later, after modernizing itself, and restoring competitiveness through the Exchange Rate Mechanism (ERM). There are, after all, nine other EU member states that do not use the euro as their currency.
However, at the moment it does not seem that the eurozone has the courage to take that step. And thus, the entire world watches as a tiny country blackmails and paralyzes the whole of Europe. Meanwhile, EU institutions and elite politicians quibble with Athens over whether or not hotels should enjoy reduced tax rates. They all seek the smallest of compromises in the hope of presenting them to voters as major victories.
The Greek government is playing coy, and managing to raise its threat potential over euro partners a little bit every day. As long as EU politicians shy away from making a decision, Greece can count on the ECB, and as long as the European Central Bank continues its policy of delaying bankruptcy, both sides will have plenty of time to keep negotiating.
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