Wednesday 28 September 2016

One measure could end Greek crisis at a single stroke

Published 19/06/2015 | 02:30

Greek Prime Minister Alexis Tsipras
Greek Prime Minister Alexis Tsipras

One cartoon seems to say it all. It depicts the pillars of that monument to ancient Greek glory, the Parthenon, crumbling.

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But if you look higher, you see "EU" printed in large Roman letters. Higher still, several European bigwigs, Angela Merkel in the foreground, mill around. More is crumbling than the pillars.

It is midday on Thursday, June 18, 2015. Greek Prime Minister Alexis Tsipras has just arrived in St Petersburg. Tomorrow, he will meet Vladimir Putin to discuss the construction of a gas pipeline. They will also talk about a new bank called BRICS.

Nearby in the Baltic Sea, Nato is conducting war games. At one time, the Russians would have called that a provocation. In the present crisis, they have reacted somewhat differently.

Putin plans to respond by expanding his nuclear arsenal. No need: there are already enough nuclear weapons in existence to kill everybody on the planet twice over.

The Nato line is similarly dangerous and childish. The British defence secretary, Michael Fallon, says Britain can match any Russian "sabre-rattling". Nobody takes any notice. There won't be another world war. Not yet, anyway.

But a crisis of a magnitude only a little short of war has come into full view in the last days. It must be averted, or at least alleviated, by the end of this month.

The prospects grow worse with every hour that passes. Europe's patience with Greece has run out. But so has Greece's patience with the European Central Bank and the International Monetary Fund, whose chief, Christine Lagarde, insists that Athens must come to heel. According to the Greek parliament's audit committee, the behaviour of the EU has been "illegal, illegitimate and odious".

Their new friend Putin says that the country has been "deliberately deprived of any possibility of economic recovery."

There is much truth in these allegations.

Greece is devastated. Living conditions worsen by the day. It cannot meet the deadlines for paying its debts.

It must get another bailout, or default. And if it defaults, it will leave the eurozone - perhaps leave the European Union.

Why should that matter? Greece is a small, poor, unimportant, isolated country. Its departure would have little effect on the European economy.

The answer lies in a single word: contamination. Remind you of anything - or anywhere? It should.

There was a time when the EU (and the IMF, and the US Federal Reserve) feared that Ireland would default and that other countries might follow suit. To prevent that "contamination", they bailed us out. Thus did Ireland save the European currency - without reward.

This time round, contamination is a more real danger. Portugal or Spain - perhaps even Italy - could ponder the possibilities and decide that the "nuclear option" of default and departure might serve them better than more years of austerity, poverty and social breakdown.

Underneath lies the inescapable fact that the rulers of the EU are out of touch with their people. For example, there is a widespread belief, favoured in parts of the media, that special treatment for Greece would infuriate the Irish, the Portuguese and the Spaniards.

I don't know about the Portuguese or the Spaniards, but I wouldn't expect any Irish fury. Many of us sympathise strongly with Greece. And we are not alone.

A European Commissioner, Pierre Moscovici, says we don't want another Waterloo, "when all Europe lined up against a single state". Only a Frenchman could make a remark like that, with its mixture of style and exaggeration.

And perhaps only a German (with Germany, knowingly or otherwise, on the edge of the same precipice as the rest of us) could make a remark like that of Angela Merkel yesterday morning. She said she had measures in train to alleviate Greek suffering. What on earth did she mean? Food parcels?

At least the chancellor speaks calmly and smoothly - unlike her finance minister, Wolfgang Schaeuble, who has come to resemble a character from Grimms' fairy tales. European affairs should be conducted with some semblance of politeness.

In reality, one measure is available which would do much more than alleviate suffering. It could end the crisis at a stroke.

Debt relief is essential. One of the world's most respected economic writers, Martin Wolf of the 'Financial Times', calls it "inevitable".

Sovereign debt has been written off countless times through the centuries.

The most striking example is that of Germany, which had half its colossal war debts forgiven.

In case you had forgotten, Greece got some debt relief - though nowhere near enough - at one stage of the present crisis. And we would all love to know more about Irish property developers.

No moral principle is endangered. If you or I can't pay our debts, we go bankrupt and our creditors lose out.

Brian Lenihan wanted to burn bondholders. We don't know what stopped him. I look forward to hearing what Brian Cowen tells the Oireachtas Banking Inquiry.

The alternative is for the EU to stagger along, losing the last shreds of its credibility, devising more and more means of "extending and pretending" while Greece brings back the drachma, Britain leaves the EU and Vladimir Putin destabilises more borders.

There's not much time left in which to start doing the sensible thing.

Irish Independent

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