To avoid depression, Greece needs strategy for growth
TIMOTHY GARTON ASH
Let's be honest: if this eurozone did not exist, no one would now invent it. The key word in that sentence is 'this'. A smaller eurozone of more compatible, mainly north European economies - a nordozone or neurozone - could probably have weathered the post-2008 crisis of western capitalism, even with Maastricht's design flaws. Alternatively, a eurozone of the current size might eventually have followed from the creation of a political union, in institutions but also in hearts and minds, if and when that proved possible.
The Greek flag is reflected in the broken window of a bank in Athens (Beta/AP)
That would require a degree of fellow-feeling and, so to speak, inter-operability between Germans and Greeks comparable with that which exists between New Englanders and Alabamans in the United States, and (unless the Scottish nationalist leader Alex Salmond is to be believed) between Old Englanders and Scots in the United Kingdom. Still very different folks, but accepting large-scale redistribution of taxpayers' money from one place to the other; individually ready and able to move easily between and work in both places; having a common politics, budget, media and public sphere.
If only. If ever. But, as psychological counsellors tell depressed patients, you have to start from where you are. No obsessive rumination on what might have been. No regrets. Start from here. Make the best of it. Find a path towards something better.
That is what eurozone leaders insist they did this week. Their exhausting, day-and-night efforts must be acknowledged. They have worked hard to square many circles. It is easy to criticise from the sidelines. Nonetheless, this has to be said once again: they have not succeeded yet. It is not just, as the cliché has it, that they are still kicking the can down the road. Now they are kicking a Molotov cocktail down the road.
At the moment, there is still a solid majority in Greece for staying in the euro. Yet I find it hard to believe that the people of Greece can for months and years take the extreme pain demanded of them, with the only argument being 'to leave the euro would be worse'. The personal stories are already heartrending. The journalist, teacher, civil servant reduced to queueing at the soup kitchen. Students in a 'lost generation' who have left the country or are about to. Unemployment at 21% and rising. An estimated 150,000 businesses that have closed. The minimum wage to be cut by more than one fifth. Thousands sleeping on the streets. The homeless by night; demonstrators by day. The octogenarian musician Mikis Theodorakis - a favourite with generations of German tourists - has called for an 'uprising'. And the government has to implement a bunch of further austerity and liberalisation measures over the next week, before it can get the 130 billion euro bail-out.
Sitting at his regular table in the pub, his Stammtisch, the reader of Germany's tabloid Bild may still mutter 'well, they have only themselves to blame'. But he would be wrong. It is true that a very large share of the blame lies with irresponsible, deceitful and corrupt Greek policies and business practices. But the scale of this mess, and the difficulty of getting out of it, also result from the fact that Greece was accepted into a badly designed, over-extended eurozone; that the way bond markets and banks (including German and French ones) treated that eurozone positively encouraged such irresponsibility; and that this bailout is as much to help those banks as it is to help Greece. So the blame must be shared.
Even if you disagree with that, the responsibility for getting out of it is still shared. This is obviously true so long as Greece remains in the eurozone; but even if Greece leaves the eurozone, it will remain a member of the EU, and there will be a moral and historical responsibility that derives from having got into this mess together.
Then there's that troublesome thing we call, from the ancient Greek, democracy. Many European leaders privately agree with the German finance minister Wolfgang Schäuble that it would be better if Greece did not have an election scheduled for this April. Democracy? Ask the people? What an apalling idea. But the Greek people will be asked. Unless they are shown some realistic prospect of growth, parties opposed to the draconian terms of the bail-out may yet gain a majority. No one will then be able (though some may privately wish) to follow Bertolt Brecht's famous ironical suggestion: dissolve the people and elect another.
At that moment, German chancellor Angela Merkel will have more than a year to go to her own general election, which she is self-evidently determined to win. The eurozone will then be torn between the maximum pain that Greek voters will accept and the maximum price that Merkel believes German voters are prepared to pay. That dilemma - call it Merkel's fork - is just the most critical example of the deeper problem of this eurozone: the contradiction between already European policies and still national politics. You could have close, similar economies and still diverse politics (the nordozone that might have been). Or you could have fairly diverse economies if you had converged politics, with one eurozone election for one eurozone government. Those common politics would then allow for the financial transfers to compensate for differences, as in the United States, and work towards economic convergence in the longer term. What is unsustainable is to have, within a single currency zone, both divergent national economies and divergent national politics.
So far as I can see, there are only two ways out of this. One is that Germany, all other European governments (including Britain's), the ECB, the EU institutions, the IMF and every other relevant player work over the next few weeks, like Mozart in his most inspired frenzy, to do what every sensible political economist (including many in Germany) says is necessary: produce a strategy for short- to medium-term growth as well as fiscal consolidation and structural reform. For as Mohammed el-Erian, co-chief executive of the giant bond investment firm Pimco, has observed, this week's agreement 'leaves Greece's basic problem unresolved. The country still faces the prospect of too much debt and way too little growth'.
That strategy for growth must not only be found, it must be seen to be found - seen by Greek voters, that is, before the next election. The other alternative is that, sooner or later, Greece leaves the eurozone. The former is more desirable, the latter more probable.
timothygartonash.com
Timothy Garton Ash is Professor of European Studies at Oxford University, a Senior Fellow at the Hoover Institution, Stanford University, and the author, most recently, of Facts are Subversive: Political Writing from a Decade Without a Name
If only. If ever. But, as psychological counsellors tell depressed patients, you have to start from where you are. No obsessive rumination on what might have been. No regrets. Start from here. Make the best of it. Find a path towards something better.
That is what eurozone leaders insist they did this week. Their exhausting, day-and-night efforts must be acknowledged. They have worked hard to square many circles. It is easy to criticise from the sidelines. Nonetheless, this has to be said once again: they have not succeeded yet. It is not just, as the cliché has it, that they are still kicking the can down the road. Now they are kicking a Molotov cocktail down the road.
At the moment, there is still a solid majority in Greece for staying in the euro. Yet I find it hard to believe that the people of Greece can for months and years take the extreme pain demanded of them, with the only argument being 'to leave the euro would be worse'. The personal stories are already heartrending. The journalist, teacher, civil servant reduced to queueing at the soup kitchen. Students in a 'lost generation' who have left the country or are about to. Unemployment at 21% and rising. An estimated 150,000 businesses that have closed. The minimum wage to be cut by more than one fifth. Thousands sleeping on the streets. The homeless by night; demonstrators by day. The octogenarian musician Mikis Theodorakis - a favourite with generations of German tourists - has called for an 'uprising'. And the government has to implement a bunch of further austerity and liberalisation measures over the next week, before it can get the 130 billion euro bail-out.
Sitting at his regular table in the pub, his Stammtisch, the reader of Germany's tabloid Bild may still mutter 'well, they have only themselves to blame'. But he would be wrong. It is true that a very large share of the blame lies with irresponsible, deceitful and corrupt Greek policies and business practices. But the scale of this mess, and the difficulty of getting out of it, also result from the fact that Greece was accepted into a badly designed, over-extended eurozone; that the way bond markets and banks (including German and French ones) treated that eurozone positively encouraged such irresponsibility; and that this bailout is as much to help those banks as it is to help Greece. So the blame must be shared.
Even if you disagree with that, the responsibility for getting out of it is still shared. This is obviously true so long as Greece remains in the eurozone; but even if Greece leaves the eurozone, it will remain a member of the EU, and there will be a moral and historical responsibility that derives from having got into this mess together.
Then there's that troublesome thing we call, from the ancient Greek, democracy. Many European leaders privately agree with the German finance minister Wolfgang Schäuble that it would be better if Greece did not have an election scheduled for this April. Democracy? Ask the people? What an apalling idea. But the Greek people will be asked. Unless they are shown some realistic prospect of growth, parties opposed to the draconian terms of the bail-out may yet gain a majority. No one will then be able (though some may privately wish) to follow Bertolt Brecht's famous ironical suggestion: dissolve the people and elect another.
At that moment, German chancellor Angela Merkel will have more than a year to go to her own general election, which she is self-evidently determined to win. The eurozone will then be torn between the maximum pain that Greek voters will accept and the maximum price that Merkel believes German voters are prepared to pay. That dilemma - call it Merkel's fork - is just the most critical example of the deeper problem of this eurozone: the contradiction between already European policies and still national politics. You could have close, similar economies and still diverse politics (the nordozone that might have been). Or you could have fairly diverse economies if you had converged politics, with one eurozone election for one eurozone government. Those common politics would then allow for the financial transfers to compensate for differences, as in the United States, and work towards economic convergence in the longer term. What is unsustainable is to have, within a single currency zone, both divergent national economies and divergent national politics.
So far as I can see, there are only two ways out of this. One is that Germany, all other European governments (including Britain's), the ECB, the EU institutions, the IMF and every other relevant player work over the next few weeks, like Mozart in his most inspired frenzy, to do what every sensible political economist (including many in Germany) says is necessary: produce a strategy for short- to medium-term growth as well as fiscal consolidation and structural reform. For as Mohammed el-Erian, co-chief executive of the giant bond investment firm Pimco, has observed, this week's agreement 'leaves Greece's basic problem unresolved. The country still faces the prospect of too much debt and way too little growth'.
That strategy for growth must not only be found, it must be seen to be found - seen by Greek voters, that is, before the next election. The other alternative is that, sooner or later, Greece leaves the eurozone. The former is more desirable, the latter more probable.
timothygartonash.com
Timothy Garton Ash is Professor of European Studies at Oxford University, a Senior Fellow at the Hoover Institution, Stanford University, and the author, most recently, of Facts are Subversive: Political Writing from a Decade Without a Name
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