The canary in the mine
We Greeks might not be too happy about the reasons that have recently thrust us into the international spotlight but the truth is that anyone who is even remotely interested in the fate of the united Europe has much to thank us for. Little Greece, with its statistical shenanigans, haphazard institutions and wily maneuverings has become a battleground for the greatest challenge that the European Union has faced since early 2003, when Tony Blair and some of his pals tried to tear the EU apart because not all of its members wanted to invade Iraq. The Greek crisis highlights the imperfections and cracks that arise from the fact that economic union has far outpaced political unification. The question is whether this crisis will inoculate the union against more potentially harmful developments or whether it is the first act in the collapse of the European experiment. At first glance, it would appear that Greece’s problem could serve as a small jab that causes a slight fever but also leads to the creation of useful antibodies. The Greek economy accounts for less than 3 percent of that of the EU. Whatever happens – even if Greece were to sink without a trace – the European economy would hardly notice the difference. The most important factor at play, then, is not the size of Greece’s problem but the conclusions that will be drawn from how it is handled. The Europeans (meaning officials in Brussels and in countries such as Germany) are afraid that if Greece’s behavior is tolerated, other countries will follow it down the slippery path of fiscal irresponsibility, undermining the foundations of monetary union. International investors, seeing that the EU is at a loss as to how it will cover Greece’s sins, are milking the Greek economy further through exorbitant interest rates on Greek debt. The Europeans’ dilemma is that if they support Greece they may curtail the rise of interest rates on Greek debt but, at the same time, they will encourage fiscal recklessness. On the other hand, if they let Greece hang, all member-states may get the message that they will have to clean up their mess alone but the feeding frenzy of international speculators will destroy any gains of economic union. When political and economic interests do not converge, they clash. Because EU countries moved toward economic union with greater passion than they did toward political union, today economic union is threatened by political incoherence. Each country remains responsible for its own economy, for whatever reforms are introduced or neglected. But the success or failure of each country weighs on the rest, which means that the EU is obliged to intervene with greater decisiveness. The economic crisis has made the challenge that European leaders face clear: Will they accept the need for greater political union so as to be able to influence developments in member-states, or will they decide to loosen the ties that bind them, acknowledging that monetary union was premature and wrong? Governments are caught between having to appease Brussels as well as their voters, who are not keen to lose benefits. This raises another question: What mechanism will be created to handle the dangers faced by Greece, Spain, Portugal and other countries? We know about the excessive deficit procedures and sanctions set out in the Maastricht Treaty; what remains to be seen is the level of solidarity that member-states are prepared to extend each other and the interventions that they can tolerate. The necessary austerity measures will entail enormous political and social cost, as will every intervention that appears to undermine national sovereignty. It is crucial to find the right balance between the support offered by the EU and the responsibility that each country’s leadership and unions must show in order to get troubled countries back on their feet. That’s why Greece served as a canary in the mine: The collapse of our small economy revealed a great, invisible danger that larger economies face – the combination of deficits and high interest rates. Now we must see whether we can get the canary back on its perch and what measures are capable of saving not only countries in jeopardy, but also political and economic union and ultimately social harmony.
