The reason politics is a hard trade is you have to make hard decisions. Greece, is a marginalised country, playing a weak hand, writes Gerard Howlin
THE difference between Greece today and Ireland in 2008-2010 is that allowing our banks, led by Anglo Irish, to collapse could have triggered a systemic banking crisis in Europe.
The bank guarantee in September 2008 was a pre-emptive Irish strike to shore up confidence.
Temporarily successful, it left the Irish State in an unsustainable black hole of debt. In hindsight it was the last major, truly independent, decision of a sovereign Irish government until we exited the bailout in December 2013.
However, European pressure had been actually applied before the bailout in 2010, and this is now part of our banking inquiry - the net point is Ireland then was economically and politically a European problem.
Unquestionably, Greece is a major European political problem, the most acute since the fall of the Iron Curtain. But Greece’s economic problems are no longer a systemic economic threat to the eurozone, at least not in the short term. That is the core political weakness of the Greek government’s position. They can huff and puff but they can’t bring the house down; immediately at any rate.
For any negotiations to succeed, there must be commitment and trust. Instead there are real questions over the commitment of the Greek government, to deliver any agreement which, by definition, would threaten Syriza party unity in Athens.
Brian Cowen, due to appear before the banking inquiry tomorrow, ultimately put his country before his party. Given his and the far longer involvement of Fianna Fáil in the economic policies that cumulated in that crisis, he can expect no thanks.
But, as Taoiseach, he repeatedly took the least-worst options, in an escalating crisis. The judgement of history will likely be critical of Cowen’s time as Minister for Finance. Eventually I believe there will be a kinder reckoning of his tenure as Taoiseach.
Given how negotiations were conducted by Alexis Tsipras over recent months, who unlike Cowen is unburdened by previous responsibility, it is not clear he is willing to take a similar responsibility for correcting the course of history.
As I write, there is feverish speculation of a last-minute compromise. If not, a man billed as a political matinee idol, will not merit the accolade of “cometh the hour, cometh the man” - more is the pity for Greece.
His putative partners doubt his political commitment to compromise. Trust was seriously eroded by the precipitous way he called next Sunday’s referendum.
Compared to the usual banality of European Union politesse, the accusation on Monday by commission president Jean Claude Juncker of betrayal by Tsipras, was stunning. As Fine Gael MEP Brian Hayes put it, presumably reflecting government thinking: “You cannot make concessions or reach out to the other side if negotiations have been conducted in an atmosphere of bad faith.”
Perhaps, we will wake up to good news this morning. If not, the Greeks are doubly exposed, by having walked out of negotiations and no immediately credible economic threat. Ultimately, states have no friends, only interests.
The wider European economy is now largely quarantined from Greek default. In resorting to a referendum, to bolster his mandate, he has effectively issued a head-on challenge to the mandates of other European leaders. Greece may be the ancient home of democracy, but it doesn’t have a monopoly on it.
The fact is, and it is an uncomfortable compromise, the EU is based on sharing sovereignty. Ultimately it works on the basis of shared agreement, or hardly at all. The tragedy is that a shared agreement was close. The Greek government, refusing to take the consequences, cut and run. They don’t bear all the responsibility but, ultimately, it is the Greek people that have been left in the lurch.
Culturally, Greece is at the core of the modern European vision. It is no longer clear, if they can remain part of the European political family, or at least the eurozone.
The crisis in Greece is acute. Yesterday I spoke to a cousin, who went on holidays to Greece years ago, met her Greek husband, got married and is living on a small, beautiful Greek island since.
They have a café-bar with rooms for guests. This summer started well, after several poor seasons which reflected the downturn in the rest of Europe. Now calls are coming in from guests asking if the ATMs will work. There are two banks, and four ATMs on the island. Nearly everything has to be imported and the word from Athens is suppliers may not ship out goods this week. She just wants to get past next Sunday, get a decision, and get the country going in some direction, somehow. And as she explained, people on the islands are not the worst hit. Even a poor tourist season means some income.
In Athens, jobs gone and with no alternative income, people are literally destitute. Ultimately, nobody can live indefinitely on other people’s money. We couldn’t, and now the Greeks can’t either. There is a bigger story about how that money came to be lent, and about how the pain is being shared. But that comes back to states having only interests, not friends.
What happened in Ireland, wasn’t fair. But faced with immovable realties, successive Irish governments, including the previous one, consistently took the least-worst options, and their unpalatable political consequences.
Much is made of Ireland’s supposed lack of solidarity with Greece, especially by those on the left who supported Syriza on its election. But our interests are not aligned with Syriza, who were expected to lead Greece to default last night and perhaps to Grexit on Sunday. Our still highly leveraged state is almost fully funded until next year.
If there are serious consequences of higher interest rates on international money markets, thereafter, for future budget arithmetic, we are safe for now. Initially at least, those markets on which we depend, are differentiating between us on one hand, and Spain, Portugal and Italy on the other.
Now a ‘semi-core’ state in terms of the markets appraisal of our credit worthiness within the eurozone our vital interest is to accentuate the difference, the better to borrow into the future at a lower cost.
The reason politics is a hard trade is you have to make hard decisions. Greece, is a marginalised country, playing a weak hand. The underlying political issues are, however, sharp. It exposes the economic dichotomy of a currency union, without fiscal union.
In opposition to that conundrum, what is at play this week in Greece is the related dichotomy between an ever closer European Union and the national sovereignty which Syriza is staking everything on.
The EU is founded on the premise learnt from the early 20th century that national states alone can never be fully secure or enjoy lasting prosperity, unless their interests are institutionally interwoven successfully. It is this fundamental principle of the last 60 years that is being tested.
Grexit this week and Britex next year.
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