Two of the currently most popular hashtags on Twitter reflect Britain’s debate on whether to leave the EU (#Brexit) and the possibility of Greece leaving the euro (#Grexit). But although they differ only by their first letter, those two topics are by no means the same. In this post, Filipa Figueira, Teaching Fellow in Economics at UCL, explores how the two are nonetheless closely linked and how addressing one may help resolve the other.
A decision on being part of the European Union is very different from a decision on being part of a common currency. Although the word ‘euro’ makes the common currency sound like a core aspect of ‘Europeanness’, it is in fact only one of the EU’s many policies. And, as the British example shows, it is perfectly possible to be an EU member without participating in the euro currency.
Yet confusion reigns. When, in early July, a Greek exit of the euro seemed possible, many jumped to the conclusion that the country would need to leave the European Union too. This included, for example, the President of the European Parliament Martin Schulz – who really should know better, as that would of course not have been the case.
Nina Trentmann, UK Business Correspondent at Die Welt, takes a look at the EU and the Eurozone in the wake of the most recent Greek bailout. With key German political figures in disagreement about in which direction to move, what might this mean for David Cameron’s chances of successfully negotiating EU reform?
During the last couple of months, I have been asked quite frequently: what does Germany think? About Greece, about another bailout, about the Euro? I found that funny at times, given that Germany is a country of more then 80 million people who often have contrasting views, especially on topics which have been debated as hotly as the Greek debt crisis.
Although there is now some sort of agreement between Greece and its international creditors – the country remains in the Eurozone, there will be more emergency funds from the European partners, the ECB is continuing to support Greek banks – it has become quite obvious that this is only a solution for a short period of time. This has been amplified in the rift between Chancellor Angela Merkel and her finance minister Wolfgang Schäuble who, despite coming from the same party, the Christian Democratic Union, are now openly disagreeing on how to proceed in general with the Euro and with Greece in particular.
Ulrike Liebert, Professor in European Studies, looks at the tensions that are arising between the need for effective economic governance in the Eurozone and the need for democratic accountability, both of member states and the EU as a whole, particularly in the context of the outcome of the Greek referendum.
Eurozone leaders sometimes seem to forget that that they are governing an economic and monetary union that is part of the European Union of states and citizens, founded on common values such as ‘respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities’ (Art. 2 TEU).
The Greek population of 11 million represents a minority within the nineteen Eurozone states of some 300 million citizens, a minority which is deeply divided over the burdens which Eurozone rules require them to bear for the sake of the euro’s stability. The referendum of 5 July was an unprecedented instance of a plebiscite on Eurozone bailout conditions, and Eurozone leaders had no choice but to acknowledge it as a legitimate means of democracy. Greek voters turned out in unexpectedly high numbers and forcefully spoke their will.
Geoffrey Hosking, Emeritus Professor of Russian History at UCL’s School of Slavonic and East European Studies, gives his view of what went wrong before and during the Greek crisis, and of the challenges that now lie ahead. To him the problem is centrally one of a lack of trust.
The Greek crisis goes back a long way, and at several stages demonstrated the dangers of a loss of trust.
The epic began with the creation of the euro, which was set up without several of the trust-generating stabilisers of national currencies: a common fiscal policy, a central ministry of finance and a central bank empowered to act as a lender of last resort. Without these essentials, the euro lacked the full and credible commitment of all its members, an essential prerequisite of mutual trust. A member nation could no longer cope with serious crises by devaluing its currency, yet no provision was made for a solidarity fund (the euro equivalent of the IMF) to deal with crises collectively.
In this post, Nicola Countouris, Reader at the UCL Faculty of Laws, analyses the reasons why the Greeks may have rejected the creditor institutions’ economic and reform proposals. Arguing that frustration is not the only explanation for Tsipras’ win at the ballot box, and recognising the daunting challenge that lie ahead of the 19 Eurozone democracies, he argues that Europe’s constitutional envelope can be spacious enough to accommodate different versions of democratic economic and human aspirations.
For the second time in six months the Greeks have voted for a political project (which many have and will continue to describe as a ‘political adventure’) that runs against the grain of the unanimous expectations and imperatives of the EU institutions, the IMF, and the bulk of both centre-right and centre-left European governments. Against the odds, against the economic and reform instructions imparted by the lending institutions, and – many will say – against their best interest, the Greeks have refused to conform, and have flatly rejected on two occasions now, the politics of austerity.