In the run-up to new Greek elections on June 17 and with Greek citizens withdrawing billions of euros from their domestic bank accounts and transferring them abroad, many commentators have started a new round of speculation on the possibility off a Greek exit from the eurozone.
The scenario seems inevitable when the elections again produce a parliamentary majority that refuses to implement the bailout deal that was concluded by the previous Greek government. If Greece is not willing to live up to its side of the bargain, it seems likely that the EU and the IMF will do the same and will stop transferring money to Athens. Very soon the Greek state would go bankrupt, and chaos would reign. Don’t be surprised to see this nightmare script being highlighted by European politicians and analysts in the next couple of weeks, if only to put pressure on the Greek electorate to change preferences and give their vote to parties that are willing to stick to the deal.
If and when the Greeks decide to defy all the warnings and threats and will be forced to reintroduce the drachma, observers strongly disagree on the consequences of this financial and political shock for the rest of the eurozone and the EU. Some believe the other euro countries are well prepared, and the damage can still be estimated. Others are afraid that Spain and Italy will be next. All the new instruments and rescue funds would not be sufficient to cope with the financial fall out of a crisis in these two main European economies. On top of that, many fear that a monetary meltdown will be the beginning of the end for the EU in its present form.
With so many doomsday scenario’s being contemplated, it was heartening to hear some strong deviant voices last week. First, Wolfgang Schäuble, Germany’s finance minister, made a passionate plea for closer European integration. Schäuble is known for his pro-European views, and he used the occasion of the prestigious Charlemagne Prize award ceremony to live up to his reputation. He is considered to be the most important minister in Angela Merkel’s government, an experienced insider in Berlin and Brussels and the architect behind many of the current efforts to save the euro. According to Schäuble, the financial crisis proves that the existence of a common currency requires a much greater pooling of important parts of economic and financial policy by the eurozone states. “We must create a political union now,” he said. At the same time, “We must strengthen the democratic legitimacy of Europe.” One way of doing so, would be to give a face to European political union with a directly elected EU president. Candidates would be presented by all the parties represented in the European Parliament. Arguing against the skepticism that seems to be overtaking Europe, he said, “We must have the ambition to do more than simply protect the status quo.”
The same day, two other old European hands came to the same conclusion. Kemal Derviş and Javier Solana share a long history of holding key positions in leading European and global institutions. Both work now at Brookings, the most influential American think tank. In a long article that will be published shortly in “Europe’s World,” they present a solution for the Greek crisis that would tackle the acute problems but would also lead to a structural adjustment within the eurozone that should prevent similar calamities in the future. Derviş and Solana add to their recipe for recovery the same ingredient as Schäuble did in his speech: the need for more integration and harmonization, particularly in fiscal policies and financial sector supervision and regulation. They realize that further European integration may not be very popular because it means giving up power in matters close to the core of the nation state. “That will not be a trivial exercise and is why Europe is at the cross-roads. Either it moves ahead with greater sharing of sovereignty, or it may well disintegrate. Key to success is that this sharing has to take place through transfers of sovereignty to accountable institutions.” That means, according to the authors, strengthening common European structures and creating a decision making process that is not dominated by one of two powerful member states.
Schäuble, Derviş and Solana are right: The EU is and will continue to be an experiment which, as with all experiments, entails a degree of uncertainty. Let’s hope that these “old foxes” manage to convince a hesitant European population that the future needs more Europe and not less.