The Greek debt crisis dates back years. But recent weeks have witnessed an acceleration of anxiety in Athens and other European capitals as heads of state, diplomats, finance ministers and others scurried to avoid a “Grexit” — a Greek exit from the 19-nation eurozone. Finally, after a marathon negotiating session in Brussels over the weekend, a tentative deal was struck that would keep Greece in the monetary union.
Now comes the hard part.
Politically, Prime Minister Alexi Tsipras, who successfully urged Greek voters to reject the terms of a previous bailout plan in a July 5 referendum, now must quickly convince Parliament to agree to a deal many economists characterize as even less favorable. And Athens won’t be the only place with unhappy elected officials: Some Europeans reject the very notion of the third bailout of Greece.
Economically, newly imposed policies (assuming Athens acquiesces) would cut public pensions, raise taxes, reform banks, streamline government, loosen labor laws, and reduce regulations on some industries, among other requirements. While these may help Greece grow in the long run, more immediately they could further stress an economy that’s shrunk by 25 percent, and could increase unemployment even beyond the already Depression-level 25.6 percent rate (50.1 percent for younger Greek workers).
Yet as painful as the political and economic concessions are, they are likely better for Greece, Europe and the world than a Grexit would be, which raises the possibility of a chaotic contagion that could have global impact. So the best course of action, however unpopular, is parliamentary approval in Greece and follow-through by the creditor “troika” (the International Monetary Fund, the European Central Bank and the European Commission) that will shore up Greek banks and administer the broader rescue plan.
Beyond the immediate crisis, the best course of action is unclear. It appears increasingly probable that the euro actually may be an impediment to the laudable, even noble, goal of unifying Europe after the continent’s conflicts tore it (and much of the world) apart in the last century.
The euro discord, worryingly, falls mostly along north-south lines, with Germany once again perceived by some Europeans as an unwelcome, unyielding hegemon. This not only can increase friction between governments, but it can contribute to the rise of anti-E.U. parties on the left and right that increasingly are moving beyond the political fringe and into the mainstream. That’s a disturbing threat to the E.U.’s long-stated goal of an “ever closer union,” and to the more immediate unity needed to respond to Russian aggression, the Mediterranean migration crisis and other Pan-European challenges.
So E.U. leaders should continue to confer beyond the urgency of Athens’ challenges and consider options to make the eurozone more flexible for countries with enfeebled economies.
If consensus emerges that the eurozone can be reformed effectively, appropriate steps should follow. If not, however, it would be far better to examine the alternatives under relatively stable conditions than during the kind of crisis negotiations that spiraled Greece, and Europe, toward the brink.