A bimonthly magazine on international affairs, edited in Germany's capital

Halftime in the Greek Crisis

The giant consensus machine that is the EU is still running smoothly enough, but Europe – and Greece – will continue to suffer from the euro’s flawed construction.

Contrary to French President François Mitterand’s hopes, Europe’s single currency has not impeded German economic dominance. But eurozone membership is not a German blank check for economic stability of other member states, and the Greeks must shoulder responsibility to reform their stagnant institutions.

© REUTERS/Alkis Konstantinidis

© REUTERS/Alkis Konstantinidis

You can read about the European Union’s horrible setback anywhere. At fault is the obstinate and callous austerity policy of Angela Merkel and especially Wolfgang Schäuble. The EU has deteriorated from a warm community of peace and prosperity to the cold detachment of an accountant’s office. One editor-in-chief described the chancellor, in a southern German daily, saying, “Merkel is a phenomenon. Without any apparent talent, she has managed to get far in life by doing nothing at precisely the right moment.” That is clearly nonsense –recall the sheer number of German and EU decisions she has negotiated or imposed since the beginning of the financial crisis. Certainly, one can disagree with her, but one cannot fairly accuse her of inactivity.

Why is this prejudice so persistent? It is likely Merkel’s deliberate and inconspicuous political maneuvering that is so provocative. In fact, the criticism isn’t really directed at Merkel personally. Rather, its target seems to be the complexity and general dullness of political events. Endless summit meetings, always in the routine Brussels setting, with the same morose journalist reporting endless negotiation, bargaining, and further negotiation – the inevitable impression being that a lot of energy has produced very little. It goes without saying that EU politics are especially unattractive.

The giant consensus machine that is the EU is clearly not immune to individual states with a predilection for breaking rules. And that appears to be a strike against the EU. For six months two Greek politicians harangued the rest of Europe, forcing many busy politicians to take part in incessant meetings on the same problem. On the one side, the Goliath EU – and on the other, the tiny Greek David. Naturally, the giant failed to leave a good impression.

That is not an entirely incorrect summary, yet impertinence didn’t quite win outright either. With a surprising and steadfast patience, the EU displayed its greatest strength. From a historical perspective, it is not that long ago that a conflict like the one that pulled Greece out of line would have exposed serious faults and forced nations into bilateral alliances against one another, into military skirmishes, and perhaps even into war. There was not one moment in the past six months where anything of that nature was at stake. The Greek attempt to mix up the EU shattered on the stability of EU institutions. Never did it come to bilateral alliances; the EU remained a unified front. There was no recourse to archaic, 19th-century acts. And not only the governments, but also the peoples of Europe were unconvinced. They did not rise up against Greece’s hubris, but at least accepted (albeit unenthusiastically) the patience of their leaders. Here is the 21st century at its best!

Although Grexit was avoided through last-minute compromise, Europe is not necessarily in a good place. EU representatives, who negotiate so devotedly, have made their bed and now must lie in it. There were many excellent arguments against monetary union and the common currency. The euro was born of will, not necessity – an excellent example of the sovereign power still possible in politics today. It was a half-cooperative, half-antagonistic German-French axis that ensured the euro’s existence. François Mitterrand wanted a common currency to both integrate and control the newly enlarged, economically strong German state. Helmut Kohl, chancellor of a country displaying humility despite an awareness of its resurgent power, agreed – in part because he wanted Europe’s blessing for German reunification.

Today, Greece is undergoing the terminal moraine of this decision’s fatal flaw – the compromises formed in the euro’s construction. Two economic and developmental philosophies were forcibly married, even though they were clearly not compatible: free market orientation and interventionist policy, liberalization and regulation. Much of the euro treaty was left intentionally vague in the hope that the dynamic of the euro would cause these contradictions to simply evaporate. This was only possible because the Germans holding the euro negotiation reins were not “Ordnungspolitiker” (politicians with a strong sense for order and procedural policy-making, such as then Finance Minister Gerhard Stoltenberg), but instead were European integrationists (Kohl and German Foreign Minister Hans-Dietrich Genscher). The Stability and Growth Pact from 1997, underpinning the euro, was an attempt to reconcile these two contradictory goals even in its very title, but has actually conjured dissent.

It has not been quite as Mitterrand had hoped. Germany’s economic strength did not decline; instead it continued to flourish despite turbulence surrounding reunification and the turn of the century. The cleft between north and south grew; in the latter, the introduction of the euro created a spending bubble that harmed economic strength. The EU, now more powerful given its eastern enlargement, today experiences exactly the north-south problem that philosophers and practitioners never envisioned, with folk psychology having been banished to the dustbin of history. These amicable EU agreements have contributed to “Olive Belt” states assuming giant debts they cannot shoulder themselves or even with EU aid. It must be a difficult pill for the Greeks to swallow that today, the leading German politician touting “more Europe” is also the leading Ordnungspolitiker, in contrast to 20 years ago. In trying to do the right thing, Wolfgang Schäuble worked out the central eurozone dilemma with relentless acuity.

It is in no way assured that Schäuble’s path is passable for every eurozone country, even those with the best intentions. In 2009 Germany’s Constitutional Court ruled on the constitutionality of the Lisbon Treaty and was scolded by many for answering maybe. Yes, it is constitutional, but only in a restricted sense: “Unifying Europe on the basis of a treaty between sovereign states cannot be realized in any way that does not allow each of the member states enough room for the political organization of its economic, cultural, and social living conditions,” the court pointed out. Greece chose to follow the eurozone path. While many in the north knew exactly what they were getting into (but held their tongues for the sake of peace), the Greeks clearly had no idea. They believed they had entered a community of guaranteed economic success. Now they are realizing that their desire for the euro has likely cost them any room for the political organization of their economic, cultural, and social living conditions. Neither the EU nor Schäuble should take this condition lightly.

There is little to suggest that Greece, as it lives and breathes, has either the will or the power to rebuild its state. Prime Minister Alexis Tsipras faces a Herculean project in which there will be a strong desire to let the situation degrade further, to delay land registry reform and taxation of the rich, and to rely on both the forgetfulness and the clemency of the EU. Tsipras may wield a lot of power, but any attempts to reform Greece will have to contend with ingrained traditions and mentalities that have stymied progress so far.