EU leaders split over Greece’s euro future
European leaders have returned to the negotiating table once again in a final attempt to cobble together a deal that would keep Greece in the euro. Should EU leaders cut Greece adrift?
Will Greece remain in the euro and submit to the EU’s demands for drastic spending cuts? Or will it quit the single currency and go it alone, potentially sparking a continent-wide economic crisis? Ever since Greek voters elected the anti-austerity Syriza party in January, this question has dominated European politics, sparking months of feverish speculation and debate. Until this week, the decision appeared to rest with Greece itself. Today, it is Europe’s turn to choose.
On Sunday, Greek citizens were asked for their opinion on whether their leaders should accept their creditors’ ‘final offer’ of a bail-out deal — European Union leaders along with the international financial institutions the IMF and the ECB. The result of the referendum was an emphatic ‘no’: Greece would rather risk bankruptcy than accept Europe’s terms.
Last week, European leaders like Germany’s Angela Merkel and France’s Francois Hollande insisted that a ‘no’ vote would amount to a rejection of the euro. Now, at an emergency summit in Brussels, they must decide whether or not they meant it. Greece is putting together a reformed proposal for more limited cuts to government spending, possibly including a request for some of its debts to be forgiven. If the EU rejects it outright, the dreaded ‘Grexit’ is in sight.
Europe’s elite have long been fearful of a Greek departure from the euro, and for good reasons. For a start, it would establish a dangerous precedent. If Greece defaults on its debts, investors would know that other countries could do the same; that would discourage lending to eurozone states. That could throw doubt over the long-term viability of the euro — and even the EU itself.
In recent weeks, though, that consensus has begun to fray. The German newspaper Bild ran its own ‘referendum’ last week, asking readers whether Germany should keep sustaining ‘bankrupt’ Greece. The result — unsurprisingly, given Bild’s uncompromising hostility to the bail-out — was resoundingly ‘no’.
Time to let go?
Plenty of people in wealthier European countries agree with the readers of Bild: why, they ask, should financially responsible countries continue indefinitely to support a basket case like Greece, especially when they refuse to make sacrifices of their own? Enough is enough — it’s time to cut Greece off and face the consequences, whatever they are.
That attitude is all very well, say those who are still hopeful of a deal. But it is far from the spirit of solidarity that the European project depends on. A currency is not something countries can opt in and out of at will — either it is permanent or it is meaningless. We must keep Greece in, regardless of the cost.
- If you were in a country that had the euro, would you be happy for your government to lend money to Greece?
- ‘There’s no such thing as a national crisis — every disaster is global.’ Do you agree?
- Role play: in pairs, act out a discussion in which a Greek citizen tries to persuade a German that richer European nations should continue to support Greece.
- As a class, come up with three arguments for and three arguments against the euro as a currency. Which do you find more persuasive?
Some People Say...
“The euro is our common fate, and Europe is our common future.”Angela Merkel
What do you think?
Q & A
- Is the EU really going to collapse?
- That scenario is still several steps away yet. But it’s not unthinkable. The EU has at its core the idea of gradual progress towards closer union, and the euro was an important part of this. If the euro collapses, the argument goes, the European project will have failed. Many commentators within the UK — including the UKIP leader Nigel Farage — are pronouncing this crisis the beginning of the end.
- And what if the EU did fall apart?
- Nobody knows. The desire to guarantee peace in Europe has always been at the heart of the EU’s mission, and some people predict that war would return to the continent without it. Others, on the other hand, believe that the EU is now a source of discord rather than harmony.
- The International Monetary Fund was created after World War II, in theory to prevent conflict arising from a country’s dire financial woes — as had happened with the rise of the Nazi party in Germany during the depression.
- The European Central Bank, based in Frankfurt, Germany, is the institution which sets the monetary policy for the eurozone. It is responsible for controlling the supply of euros and also provides assistance to eurozone countries that struggle to pay their debts.
- That is, they will not have to repay. Some Greeks point out that German war debts were forgiven in 1953, which helped the country’s economy to recover. But the creditors say they will only consider debt relief once a bail-out deal has been agreed.
- This German tabloid is very similar to the British newspaper The Sun.