Papandreou's choice: Scylla or Charybdis

And yet the Greeks remain pro-European.

When we thought we had seen it all, as the latest EU summit had produced a deal that was supposed to draw a line under the debt crisis in parts of the eurozone and set the foundations for a healthy future for the single currency the unexpected happened. The Greek PM called a referendum and shocked the whole world as much as he shocked his own government.

European Union leaders are left speechless in disbelief, the markets fell in an existential depression and the Greeks are trying to make peace with the idea they will have to chose between Scylla and Charybdis.

George Papandreou's decision has been described, in equal measure, as blackmail, madness, suicide, even treason? He has obviously run out of political capital. His EU partners do not trust him. At home, many within his own party seem prepared to vote against the new bailout plan (and the new austerity measures that come with it).

So in a moment of desperation he has decided to pose the most impossible of questions to the Greek people. Punishing austerity or certain bankruptcy, humiliating poverty or real starvation, a place in the EU or relegations to the margins of Europe? His hope is that they will support the new bailout plan, offering him political legitimacy to continue implementing the measures imposed by Greece's international creditors in return for loans, financial guarantees and a reduction in the overall size of its debt.

But there lies the problem. The reason why we are still here after two years is that the IMF programme has failed. The remedy used requires violent reduction in the size of the state, deep cuts in spending on public services and relentless privatisation, despite how depressed the value of national assets is.

But those measures have led to the suffocation of economic activity. Unemployment has gone up dramatically, those who still have a job have seen their wages cut significantly, consumers' purchasing power has fallen exponentially, confidence in the economy has disappeared and higher taxes have wiped out what was left.

As a result Greece has been locked in a recessionary vicious circle with no credible plan for growth. If you couple that with a strong sense of injustice among the Greek people who see the political and business elites go unpunished for administrative incompetence, corruption and tax evasion, then we have an explosive mix. As a result there is no guessing when Greek society will explode.

So with a population at the verge of suicide, the outcome of any plebiscite is unpredictable, to put it mildly.

The irony is that the Greeks remain pro-European. They would chose to stay part of the eurozone everyday of the week. What they have come to resent is not so much the EU but the political and economic orthodoxy that is currently in power across Europe. They have been confronted with a set of neo-liberal economic policies that are religiously obsessed with austerity.

As economic growth in Europe is stalling the effects of this ideologically driven economic model are becoming obvious. The European south is stagnating, even big economies that enjoy the confidence of the markets (and have been allowed by them to print money at will) find it difficult to achieve and maintain even the most anaemic levels of growth.

And because the European economy is very interconnected and depends on intra-EU trade as much as it does on extra-EU trade the effects of that stagnation are starting to be felt even in the most affluent, and fiscally healthy, parts of the EU as well.

There is a solution though and it is based on an alternative economic model. Austerity must be replaced by investment. Not just at the national but at the European level as well. There are economies of scale to be achieved, there is added value in spending at the EU level and there is huge need for investment across the continent.

Furthermore, indebted countries must be given more time and better terms to repay their debts and balance their books. That balancing act needs to happen across the EU. In a single market the existence of deficit countries has a direct relation with the existence of surplus countries. If we are to have a common market, with a single currency we also need an integrated economic policy that evens out imbalances, reducing the distance between surpluses and deficits. In addition, the banking sector needs to be cleared out.

European banks are in effect global banks so IMF funds should go into re-capitalising these global banks and ridding them of bad debts, imposing loses on investors that make bad investments. EU funds should be invested in the real economy, in education, research and development, green technologies, telecommunication and energy infrastructure that will help the EU deliver growth and jobs.

Last but not least, efforts to restructure the architecture of the eurozone must be redoubled, with emphasis on economic convergence and common governance via supranational and directly elected institutions. A common currency deserves a common government, one elected by the people and for the people.

The Greeks have been asked a question. But as they are deliberating their answer they pose an even more important question to the EU as a whole. After two years of failed economic policies it is time the EU considered a different plan. One that invests in its people, in its social economic model, in its future as an unified continent.

The stakes could not be higher, not just for the Greeks. But for the EU as a whole.

Petros Fassoulas is the Chairman of the European Movement UK.

Petros Fassoulas is the chairman of European Movement UK

Photo: Getty
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What price would the UK pay to stop Brexit?

The EU could end Britain's budget rebate and demand that we join the euro and the Schengen zone.

Among any group of Remain politicians, discussion soon turns to the likelihood of stopping Brexit. After Theresa May's electoral humbling, and the troubled start to the negotiations, those who oppose EU withdrawal are increasingly optimistic.

“I’m beginning to think that Brexit may never happen,” Vince Cable, the new Liberal Democrat leader, said recently. A growing number, including those who refuse to comment publicly, are of the same view. 

But conversation rarely progresses to the potential consequences of halting Brexit. The assumption that the UK could simply retain the status quo is an unsafe one. Much hinges on whether Article 50 is unilaterally revocable (a matter Britain might have been wise to resolve before triggering withdrawal.) Should the UK require the approval of the EU27 to halt Brexit (as some lawyers believe), or be forced to reapply for membership, Brussels would extract a price. 

Guy Verhofstadt, the European parliament’s Brexit co-ordinator, recently echoed French president Emmanuel Macron's declaration that “there is always a chance to reopen the door”. But he added: “Like Alice in Wonderland, not all the doors are the same. It will be a brand new door, with a new Europe, a Europe without rebates, without complexity, with real powers and with unity.”

The UK's £5bn budget rebate, achieved by Margaret Thatcher in 1984, has long been in the EU's sights. A demand to halt Brexit would provide the perfect pretext for its removal. 

As Verhofstadt's reference to “unity” implied, the UK's current opt-outs would also be threatened. At present, Britain (like Denmark) enjoys the right to retain its own currency and (like Ireland) an exemption from the passport-free Schengen travel zone. Were the UK to reapply for membership under Article 49 of the Lisbon Treaty, it would be automatically required to join the euro and to open its borders.

During last year's Labour leadership election, Owen Smith was candid enough to admit as much. “Potentially,” he replied when asked whether he would accept membership of the euro and the Schengen zone as the price of continued EU membership (a stance that would not have served Labour well in the general election.)

But despite the daily discussion of thwarting Brexit, politicians are rarely confronted by such trade-offs. Remaining within or rejoining the EU, like leaving, is not a cost-free option (though it may be the best available.) Until anti-Brexiteers acknowledge as much, they are vulnerable to the very charge they level at their opponents: that they inhabit a fantasy world. 

George Eaton is political editor of the New Statesman.