The Greek ‘settlement’: the lesser evil, but still a disaster
The Greek settlement, or perhaps better the eurozone’s Diktat, is outrageous. It reflects such an intrusive, dictatorial, dirigiste, centralising mindset on the part of those in the control room of the EU (not just of the eurozone) that it will force many to revisit their enthusiasm for Britain’s EU membership. If Europe’s leaders show as much contempt for the residual independence and national sovereignty of the Union’s member states as the debt-collectors have shown for Greece, Cameron begins to look justified in seeking a UK opt-out from the “ever closer union” of European Holy Writ. UKIP is already crowing, and no wonder. Eurozone leaders’ treatment of Greece is a priceless gift to those campaigning for Brexit (UK exit from the EU) at Britain’s in/out referendum in or before 2017. The creditors’ conditions for a bail-out and debt re-structuring constitute a gross interference in “matters which are essentially within the domestic jurisdiction of any state”, contrary to Article 2(7) of the United Nations Charter . The monitoring and enforcement provisions are insulting, reducing Greece to little better than colonial status, and there’s no ethical, financial or political basis for the creditors’ careless assumption that repayment of debts (to themselves!) takes precedence over all considerations of humanity, the relief of human distress and deprivation, social and political cohesion, national pride, and respect for the clearly expressed wishes of the people of a democracy, not to mention the strong western strategic interest in maintaining Greece’s commitment and loyalty to Europe and the west.
In joining the EU or its predecessors, each member state voluntarily exchanged some elements of sovereignty for the benefits of collective action for the greater good. But it’s unlikely that any state would have agreed to join if the advertised price in terms of the sacrifice of political independence had been anything like as high as that now forced on the Greeks. In ordinary circumstances a borrower chooses whether to accept draconian terms offered by a lender or to seek better terms from a different lender, or in the last resort to do without the loan. No such options are available to the Greeks. No one else is going to lend if the Troika won’t. The Greeks’ sole alternative to the Troika’s mindlessly harsh terms is penury and social collapse.
It’s true that the Greeks and their elected governments over the last several decades are largely responsible for their own calamitous situation (although not for the global financial crisis which has aggravated it), and that some (but by no means all) of the domestic ‘reforms’ being imposed on them are necessary for economic recovery and thus in Greece’s own interests. It’s also undeniably true that Greece could probably have secured marginally better terms from the creditors if it had not been for the erratic, contradictory, antagonistic, amateurish and often insulting behaviour of the Syriza leadership in the negotiations, including the ill-conceived referendum to reject the terms of a settlement that were anyway no longer on offer. But allowing their (understandable) irritation at Tsipras’s behaviour to harden the terms of the eventual settlement is little short of wicked: this is the perverse justice of the nursery.
Paradoxically, there’s a broad consensus among respected economists that the austerity régime being imposed on the Greeks against their will is likely to hinder and delay Greece’s eventual recovery and return to prosperity, not promote them. When lack of aggregate demand in the economy is a factor in the recession, making the Greeks increase VAT is crazy. An attack on widespread tax evasion is one thing: reducing the pensions of people who are among those with the highest marginal propensity to spend is manifestly counter-productive, something that even voodoo Osborneconomics hasn’t attempted in Britain. Policies such as privatisation of national assets and progressive versus regressive tax regimes should be for the Greeks and their governments to decide, not foreign financiers and politicians.
So this is a rotten deal. The sole reason for agreeing to it and seeking to conform to its terms is that the only available alternative for Greece would be even worse. A great injustice is being done; the great European idea is badly damaged. In exam question form:
“The single currency project was intrinsically flawed from the start. Its survival now will entail a degree of integration of economic, political and fiscal policies under central eurozone control and discipline, with implications for non-eurozone countries as well as for the rest, that many EU countries, including some eurozone members, will find it impossible to accept. Moreover, in the new two-speed Europe the discrepancy between the two speeds may prove too great to accommodate. Discuss.”
President Hollande almost alone comes out of this well. Although Cameron, as head of a non-eurozone government, could never have played a central role, a more committed European could have discreetly given invaluable support to French efforts to tone down Mrs Merkel’s and her domestic political supporters’ harsh, rigid and doctrinaire zeal. The partial discrediting of the European enterprise is a disaster for Britain, and a still greater one for the eurozone members. But once again, thanks to weak and clumsy Tory European diplomacy, Britain stands helplessly on the sidelines, incapable of influencing events even when its own interests are indirectly involved. Our government’s sole current concern is apparently to avoid any British contribution towards the cost of the new Greek bail-out. How shaming is that?
Postscript (1800 hrs., 15 July 2015): For comments on new developments and replies to initial responses, please now see my comment below at https://barder.com/4482/comment-page-1#comment-208704.
 Update (16 July 2000): In two comments on this post (see below) Mr Vine has correctly pointed out that strictly speaking the wording of Art. 2(7) of the UN Charter, to which I refer in this post, prohibiting intervention in matters essentially within the jurisdiction of any state, applies to the UN itself and not explicitly to individual member states. In mitigation I would just plead that the greater must logically also embrace the lesser, and that individual states or groups of states must by implication also be barred from doing what the UN itself is prohibited from doing under its own Charter. Otherwise Art. 2(7) becomes virtually meaningless, since it could so easily be circumvented. Please see Mr Vine’s comment here and my apologetic response to it here.