In front of them are advice and proposals prepared by the brightest civil servants at their ministries. But reading the newspapers and watching news programs on television, the ministers cannot but have noticed that many economists, considered as bright as their own assistants, have come up with suggestions that totally contradict those being debated in Brussels meeting rooms.
Despite all the differences among them on specific conditions that Greece has to meet, the general aim of these EU ministers is still to lend Athens enough money to allow the country to pay its creditors and prevent default. These plans are based on a presumption that if Greece were to go down financially, the consequences would be horrible, for Greece, for the EU, for all big banks and for the international economic and monetary system in general.
By the way, Turkey would also suffer if things go wrong in Greece. Most foreign direct investment (FDI) in Turkey is European. If that flow were to stop because European banks and companies face recession, Turkey's already uneven growth could come to a halt quite drastically.
At the same time, renowned economists keep asking the question whether Greek bankruptcy should be avoided at all costs. They are afraid that after all these new EU loans, the debt burden for Athens will simply be too big. In order to get these loans, the Papandreou government has to make drastic budget cuts. The austerity measures that are meant to make the Greek economy more competitive in the future are in the short-term hurting much-needed growth. How will Greece be able to pay back all these loans within agreed time limits if economic activity is decreasing?
On top of that, how long will the Greek population accept these policies that have such draconian effects on their daily lives. When will the point come when the pain is just too much to bear? With economic specialists fundamentally disagreeing on the best exit strategy, I feel pity for the ministers who have to decide on the least worse option and afterwards go before the cameras and try to convey the message to their citizens that their justified misgivings are not correct and that the ministers are sure their decisions are going to be effective this time around.
While struggling with the present euro crisis, the EU is implementing sweeping measures to prevent a new one in the future. Two years ago, no one could have imagined the radical proposals now being discussed and accepted in Brussels. EU member states using the euro will have to put up with intrusive controls by the EU on their budgets.
If Brussels is not happy with the plans, they will have to be changed. A financial stability mechanism will be put in place to help eurozone countries that face liquidity problems. The seemingly untouchable Lisbon Treaty will be amended to avoid any legal ambiguity. As Guy Verhofstadt, a former Belgian prime minister and now the leader of the Liberal and Democrat group in the European Parliament, put it: “All eurozone countries have realized that effectively they are in the same boat. If the boat springs a leak, everyone sinks.”
Verhofstadt was always in favor of stronger economic governance at a European level but his plans were seen by most European leaders as naive and not acceptable for a growing number of Eurosceptics in many EU member states. Ironically, as a result of the Greek crisis, Verhofstadt is enjoying his finest moment and he is happy to underline the unpopular truth: “If European countries are to emerge stronger from the current crisis, they need to think bigger and put more faith, not less, in the collective enterprise that is the EU. After all, European unification was conceived as a project of pooled sovereignty, not surrendered prosperity.”
