Berlin should be careful what it wishes for

10/5/2016

By Mark Mazower

There is no good alternative to helping the Greeks in the task before them, writes Mark Mazower

Greece’s parliament this week approved reforms to the country’s creaking pensions and tax system by a larger margin than had been anticipated. But significant differences remain, notably on how large a primary budget surplus should be targeted over the next few years, and above all on the question of debt relief. The disagreement between the International Monetary Fund and European governments on the latter point has come into the open. On this, the IMF is right and those Europeans who oppose relief are wrong: there can be no solution to the Greek crisis without it.

Germany, driven by Wolfgang Schäuble, its finance minister, remains doggedly opposed, but even within the German government, open opposition to Mr Schäuble’s hard line has come recently from Sigmar Gabriel, economics minister. Chancellor Angela Merkel may be tempted to ignore Mr Gabriel, whose Social Democratic party is polling poorly and whose own future as its leader is in question. German public opinion sees relief as a favour the Greeks have done little or nothing to deserve, and asks whether it will stop with Greece. The issue is not a winning one for a chancellor already under siege. Nevertheless, she would be wise to recognise the stakes for Europe as a whole.

Berlin’s tenacious enforcement of austerity across the eurozone mistakes a symptom — the continued difficulties of countries like Greece — for a disease whose main cause is now Germany’s own current account surplus. The Germans have been able to persist in this illusion because without the low interest rates that Germany’s affluent voters now complain about it is doubtful whether the eurozone would have weathered the last six years at all. Mr Schäuble might believe that the eurozone is safe come what may, even if his hard line leads to Grexit, but saving the euro will count for little if the cost is massive damage to the EU itself.

Is this putting it too strongly? Perhaps it was two or three years ago but things have moved on since then. The refugee crisis has mushroomed and openly authoritarian Eurosceptic parties have profited and threaten some of the EU’s core values and principles.

Euclid Tsakalotos, the Greek finance minister, warned his European counterparts recently of turning the country into a “failed state”. Even though some of his frustrated partners might think it already is, he is right: things could get much worse. It is not just about the refugee crisis although that is one factor.

There is a good deal of wishful thinking right now on this in much of central and eastern Europe. The Greeks, who despite their own deep difficulties are actually doing a great deal to help the refugees, know better: the neo-Habsburg military frontier going up across south-eastern Europe to keep out refugees will not work. There is no good alternative to helping the Greeks in the massive task that confronts them.

Then there is the question of the Balkans as a whole. In Bosnia the Dayton peace settlement did one thing: it stopped the fighting. But two decades on, Bosnia remains a genuinely failed state, and Kosovo and Macedonia, too, are deeply fragile polities. The EU needs Greece to serve as a force for growth right across the Balkans and not as some kind of confirmation that the EU has decided to abandon the entire region.

The Syriza government might have won the vote on pension reform but it will be unable to win many more unless Germany and fellow northern Europeans budge on debt relief. So why not watch it go down, and welcome in a more emollient partner? The centre-right New Democracy party has a new leader, Kyriakos Mitsotakis, whom many European politicians would prefer to Alexis Tsipras, the prime minister.

The reality, however, is that the Greeks are reaching their limit — and not just as Europe’s condescending north would like it, because they are finally having to pay taxes. Whatever happens, an entire generation faces life without work. This is a country whose social fabric has been devastated.

At this point the blame game is pointless: what counts is what lies ahead. A vote against austerity will mean more than exit from the euro. It will signal that a people who were recently among the most ardently pro-European in the EU have come to despair of its leadership. No one can say what will follow, but it is precisely when political institutions create this kind of antipathy that they are most vulnerable. Feelings of this kind are the last thing EU leaders can afford to ignore right now. The EU has been an immense political achievement, the work of decades, but we can no longer take its existence for granted.

The writer is professor of history at Columbia University

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