European Union Intransigence on Greek Debt Crisis Risks the Entire European Project

With last ditch talks on Greece’s attempt to renegotiate the penury inducing ‘bailout’ loans from the EU, ECB and IMF on Friday, we stand on the edge of a potentially devastating crisis, not only for Greece but for the Euro currency and the wider European Union project which has brought stability to Europe for the best part of 50 years.

Some northern European members of the Euro currency have refused to budge on the terms of the ‘Memorandum’ which commits Greece to huge cuts in public spending and the privatisation of what’s left of the Greek public sector. Wages and pensions have been cut in half, taxes increased, unemployment up to 25% (50% for the young), suicides up and everyone with the get up and go (given the chance), has got up and left. All of this for the last five years and Greece’s debt has actually gone up. Clearly, and apart from all the misery this has caused to the Greek people, the policy is not working. Greece now owes even more than it did when this ‘rescue package’ was forced upon them with their GDP shrunken by about 25% since 2008.

The thinking of the powers in the EU is completely irrational, because the way they are heading, Greece’s debtors will not get their money back by insisting on these conditions anyway, so it is in everyone’s interest to put together a new package which encourages growth rather than squashing it.

Greece is only about 2% of the European economy, and some in the north of Europe seem to think it is expendable, and would be happy to see Greece exit the Euro, and under the rules exit the EU itself. 

This attitude is further bolstered by worries that Spain and Italy most notably would look for a loosening of the strings around their ‘bail outs’, and perhaps France too. This becomes a much more serious situation then, and so Greece must be made an example of.

If the EU stick to this line, then Greece would be mad to stay in the Euro, better to quit and rebalance their economy independently, although it would be tough, but at least there would some hope for the future. Presumably, some kind of managed exit could be staged.

But for the EU the financial problems in other southern countries would remain and politically and economically Europe would still be on very wobbly ground. The problems in Spain are similar to Greece and they may be the next country to buckle, which would be a bigger problem for the EU. If France gets caught up in this too, which is far from unlikely, the Euro train really will come off the rails.

And there could be even worse news. Where will Greece turn once spurned by Europe? My guess would be to Russia. Although Russia has its economic problems of its own, I think they might see an irresistible opportunity to get a foot in the door of Europe, given its concerns over EU (NATO) encroachment into their back yard in the Ukraine.

For the price of a longer term growth led solution to Greece’s debts, which would surely be more successful than the present attempt, we could see Europe become the most unstable region of the world like it was back in the 1930’s.

Why risk of all of this for a failed economic model? Because logic has gone out of the window and the shibboleths of neoliberalism must be observed.

There is an emergency rally organised by the Greek Solidarity Campaign at 6.30pm Parliament Square, London on Thursday 19 February