If you believe political leaders in Berlin, Paris, Brussels, this Sunday marks a make-or-break moment not only for the eurozone but for the EU itself. An extraordinary state of affairs given that – on one level at least – the only thing happening this weekend is that Greece, a country representing just 2% of the entire EU population, will hold a referendum on whether or not to accept the latest deal offered by creditors. The rhetoric coming from Athens is as heated, where there is talk of European “blackmail” against the free will of Greek voters, as if Europe’s creditor nations don’t have voters of their own. If cool heads are to prevail, they must first reflect on how things have turned so sour. Unless a last-minute deal can be reached between Greece and its creditors, the only thing that can be hoped for is serious damage limitation. In the worst-case scenario of a Greek exit from the euro, it would pile disaster upon disaster if the country were to leave the European Union. Europe must stare into this abyss to prevent itself from falling into it.
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No side bears sole blame for the current mess. From the very start, the idea of a common European currency was built on a logical flaw. Put at its crudest, monetary union all but requires fiscal union, which in turn requires political union. Yet when the euro was launched, there were no such institutions or mechanisms, just the perennial but vague hope of ever closer union. What’s more, the world’s largest currency area was run on two unsustainable economic motors: Germany exporting ever more to southern Europe and the rest of the world, and southern Europe relying on cheap credit. That fragile system was crushed under the rubble of the financial crisis.
Nor is there much dispute that creditors have mismanaged the Greek dossier ever since the first bailout in 2010. The troika of creditors – the European Central Bank, the EU commission and the IMF – told Greece that the only way to fix its economy was to adopt severe austerity, medicine that felt to Greeks like the shredding of cherished labour rights and benefits. This programme not only failed to make the debt sustainable; it has recreated the kind of poverty that western Europe thought it had left behind. Meanwhile, the bulk of the €240bn (£170bn) total bailout money Greece received in 2010 and 2012 went straight back to the banks that lent it money before the crash.
Source: the Guardian