EDITORIAL

Is Grexit History?

The massive political and geopolitical debate held in the first part of this month, referring to the eventual financial bankruptcy of Greece gained the attention of the entire global public opinion. The possibility of such bankruptcy, accompanied by the likelihood of switching back to the previous national currency, simultaneously with Greece leaving the Euro area, could attract incalculable consequences for the EU and even question the continuity in existence of the organization. The global power structure could have been decisively stricken, and some of the consequences could be suspected while others not.

It is also a developing trend that the debate surrounding the file of Greek debt is part of the even more ample and still undecided confrontation between two theory based economical orientation of worldwide importance in the era of globalization. One of the orientations foresees that solving the financial – economical crisis that started in 2008 and the consequences of the accumulation of public debt of a state beyond  red line related to its GDP (usually, if it passes 100 pc of this indicator) is only possible under the circumstances of harsh austerity. This austerity – promoted by its theoretical and practical champion, Germany, which also bears a decisive influence in the EU ensemble, a fact that can also be seen in the functioning of the Central European Bank – requires major cuts in salaries and pensions, the sale / privatisation of valuable national assets with the purpose to have a cash flow to pay debt and, under the given circumstances, awaiting an improvement of the economical situation in order to initiate growth.

Criticism brought to this theory and practice has been constant, especially the objection that, this way, the population of a country is exposed to shock therapy and the key ingredients necessary to the economical relaunch of the state are missing, while the main concern is whether they are able to pay contracted debt. The second orientation is the so-called  Critica acestei teorii si practici a fost constanta, mai ales imputandu-se ca astfel este supusa populatia unei terapii de soc , iar ingredientele necesare relansarii economice a statului respectiv lipsesc , principala chestiune urmarita  fiind ca acesta sa fie in masura sa plateasca datoriile contractate.

Cea de a doua orientare is connected to the so-called Neo-Keynesian economy (frantically promoted by Nobel Prize winner Paul Krugman, an artisan of the solution applied by the US to exit the economical and financial crisis that broke out in 2008), stipulating that granting a sufficient volume of money in economy is the best remedy for economical relaunch  (quantitative easing). Paul Kennedy’s blog – he is simultaneously the economical and financial columnist of the prestigious NYT – provides plenty of explanations regarding the superiority of Neo-Keynesian economics under present  economical circumstances and in harsh criticism concerning the supporters of austerity. The debate does not lack connection to the left wing / right wing ideological binomial in political groups, nor with geopolitical competition at the level of the system.

The case of Greece has strongly developed this confrontation that, beyond its academic characteristics, has extremely powerful practical consequences on the respective society. As early as 2010, Greece was the beneficiary of a bail-out, due to its massive debt, which included a huge loan from behalf of international institutions (IMF, ECB, EU) and other investors. Its rescue from bankruptcy at that time was possible because of a plan of economical and financial draining based on austerity theory.

The positive results failed to appear and, therefore, in 2012, another loan was needed to grant an emergency payment of the debt and avoid bankruptcy, and also a new recovery plan was created, one that was based as well on the principles of austerity theory. By the end of the year 2014, it became obvious that, of variable reasons, and ideological partisanship prevents an objective evaluation, that Greece would not be able to face yet another emergency payment of foreign debt that was due in July 2015, so that a new loan was absolutely needed. According to the new calculations, the foreign debt of Greece reached EUR 320 billion and the value of the new loan was established at the mind blowing sum of EUR 86 billion for the next three years, in order to avoid bankruptcy. The economical – financial draining, under the circumstances of a recovery plan that would be also agreed by creditors – would have been finished in 2057, thus engaging future generations in paying the reckless debt of their ancestors.

Under these circumstances, the new left wing political party, Syriza, that appeared due to citizens’ discontentment on successive austerity programs, electrified the Greek electorate by promising, on one hand, the end of this period of crushing economical and social challenges, and on the other hand, that it would maintain Greece in the Euro Zone.

The means used by Syriza leader Alexis Tsipras to persuade the voters, who were already heavily expecting a rescue from the chronic economical distress was launching negotiations for the pardon of a considerable part of the foreign debt, while similarly launching a coherent and brave program of economical growth (difficult to mention how feasible it would be, though, because it was not yet applied.)

The negotiations initiated by the Tsipras Government with its creditors – the “triad” IMF – European Committee – European Central Bank – failed to bring the expected results. Under the influence of Germany, which was to provide most of the new loan, negotiations were extremely harsh, and the German Finances Minister, W. Schauble, even presented the proposal of temporary Grexit (five years of returning to the national currency, as its depreciation would have strongly stimulated economical increase and exports) with the promise of re-acceptance to the Euro Zone. Supposing that, outside the Euro Zone, it was scarcely possible to launch a program of economical growth that would be powerful enough to get him readmitted in five years where he was excluded from, and, also, confident that, under the pressure of European public opinion, Germany would be forced to give in, the Greek Prime Minister refused. Moreover, he tried to give the confrontation a flavour of systemic competition, by travelling to Moscow twice in a short amount of time (April – May 2015) as if trying to suggest that they were trying to identify a way out of the crisis by changing geopolitical orientation.

Faced with the creditors’ unwillingness to negotiate and the threat of bankruptcy, Tsipras decided a national referendum regarding the acceptance of creditors’ requests (on July 6) that showed his positions were backed up by a comfortable majority. Therefore, from that point on, the Greek issue was becoming a matter of national sovereignty as voters decided both to stay in the Euro Zone and to refuse the recovery plan conceived by creditors and refused by Tsipras already.

Terrible agitation followed in Europe, referring to the possibility of Grexit; and it did not end with the decision reached by EU “top-level” officials to accept the results of the Greek referendum, which was a new bail out for Greece, along with a recovery plan that was much harsher than the previous one (on July 11 – 12). It must be mentioned that Germany, by its Finances Minister, once again tried to impose a temporary Grexit, despite of the fact that both Paris and Berlin had agreed on maintaining Greece in the Euro Zone (French experts had collaborated with Greek experts at creating a plan that is being negotiated right now by Athens with its creditors).

The decision reached by the European Council on July 11 – 12, 2015, to accept the economical recovery of Greece inside the Euro Zone carries a very special meaning. It is the result of “top level” political agreement that establishes the authority of EU members’ solidarity concerning financial calculations related to the solution of austerity and it also casts away fears related to the durability of the European Union.

Besides, immediately after this decision, the French President instantly suggested the creation of an EU “economical government” with the right to monitor national budgets. Besides its motivations (there is no public plan of such proposal), as it was appreciated by French experts, the Hollande proposal seeks “to unite the pro-Europeans behind him while showing he can stand up to Germany” under the circumstances that “Europe is unpopular, but there’s a place for someone who defends the euro, because the alternative, an exit, is too scary. The lesson of the Greek crisis is that even a radical left government like Syriza does not want to take that risk.” ( Dominique Moisi).

This is the moment we have reached at this time. The triad’s negotiations  with Greece will be finished sometimes next month. Until that moment, signals are worrying. Therefore, on Friday, July 24, an opinion poll conducted by ZDF German Television showed that 73 per cent of the German electorate did not expect Greece to apply the economical recovery plan that was about to be finished, and there were just 24 per cent who were confident that the plan would happen. Despite of that, 50 per cent of German voters considered that Greece would stay in Euro zone, while 71 per cent declare that Greece will not be able to avoid bankruptcy, even if this third bail-out will be applied. It is easy to imagine the terrible pressure that appears under such circumstances – as Germany is the main supplier of the EUR 86 billion – on negotiators in Brussels.

Europe is overwhelmed right now, in this extremely hot summer, by contradictory political – ideological trends: right wing versus left wing, positions for or against the EU, for and against austerity – in which the Greek file has added an attitude of defiance against sovereignty being affected by international forces / institutions and even against decisions adopted by a legally elected national parliament, forcefully imposed on a different Government. Hinting to the students’ riots that occurred in Paris, in May 1968, and led to the globally developed grand Liberal revolution, with increasingly deeper meanings in today’s world, European Council President Donald Tusk, former Prime Minister of Poland, declared that “The atmosphere is a  little similar to the time after 1968 in Europe. I can feel, maybe not a revolutionary mood, but something like widespread impatience.”

Grexit is not history yet; it can still launch massive historical twists.

 

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