Conventional wisdom says the best way to ruin a friendship is to lend money to someone. Does that make the euro the worst idea the architects of the European Union ever had?
Until recently I’d have said don’t rush: The quarrels among the union’s 28 member-states over the Greek debt crisis have actually been helpful, I believed. They generated a new frankness in the sometimes all-too-consensual bloc. But what is happening now is going beyond healthy ventilation. It is starting to smell in Europe.
Anne-Marie Slaughter, a former Obama State Department official, may have been exaggerating slightly when she said that Europe was facing a “civil war” without physical violence. But what is true is that, suddenly, after 60 years of movement toward closer union, we in Europe are confronting an unsettling feeling we never wanted to know again: how easy it is for countries to fall away from one another, and where that falling away can ultimately lead.
There are two opposing narratives in this feud, two closed systems in which one side is completely right and the other is always the culprit. These aren’t just dry political arguments, either, but emotional tales laden with pride, prejudice, stubbornness and ideology.
On one side is the tale of Germany destroying Europe’s democracy, as told by Europe’s left and heated up by numerous American commentators.
We’re told that the current mess has one simple driver: self-righteous, rules-obsessed Germans. After Greece joined the eurozone in 2001, German banks began lending excessively to its citizens and businesses, and these Greeks spent the money on German cars and machinery.
In Germany, producers started to love the euro: It filled their order books, because German goods became much more competitive than in the days of the mark. But when Greece approached bankruptcy in 2010, the Germans helped out merely to salvage their own banks. They, not the Greek citizens, benefited most from the bailout. Moreover, the austerity measures forced upon Greece by Germany wrecked its economy, leaving 25 percent unemployment.
When the Greeks held a referendum, demanding to end this madness, Germany responded by blackmailing them: Accept an even tougher austerity program or leave the euro. The same Germany that had its debt written off after World War II is willing to smother Europe’s south unless it bends to Berlin’s will. The European Union as an economic Fourth Reich? Europeans, resist!
That’s one story line. The other is a tale of Greece driving the eurozone to ruin, as told by Europe’s right and trumpeted by northern European commentators.
The debt crisis, they say, is a direct result of Greece’s prolonged political incompetence. Athens cooked its books in order to enter the eurozone and was rewarded with the opportunity to borrow money at 5 percent interest, compared with 18 percent during the times of the drachma. But instead of investing the cheap money, the Greeks happily spent it.
At around the same time, Germany introduced harsh cuts to its social benefits and liberalized its labor market. This, together with wage restraints, is what made German goods competitive.
When Greece faced default, Germany helped mobilize emergency loans worth 120 billion euros, even though the European Union treaty explicitly forbids bailouts. In addition to this generosity, foreign investors agreed to a haircut of 105 billion euros.
This, and careful budget cuts in Athens, began to bear fruit. In 2014 the Greek budget showed a slight surplus, leaving aside interest payments.
Then the leftist Syriza government came to power. It, not Germany, was the blackmailer, threatening to disrupt the eurozone with a destabilizing referendum. And that simply doesn’t work — what would happen if lender countries held their own referendums on whether to help Greece?
Yes, Germany had its debt largely written off in 1953. But back then Germany wasn’t part of a monetary union whose members had agreed to a specific set of rules. Chancellor Angela Merkel has already been too lenient, paving the way for yet another bailout package for Greece. A eurozone in which bankrupt socialist governments dictate the terms of their own rescue? Europeans beware!
These two narratives may sound like caricatures, but unless something changes they will continue to influence public opinion, and elections, and therefore European politics for the foreseeable future.
Is there a way to stop the centrifugal forces? Fortunately, yes. The Greek crisis has exposed deep fissures among Europeans. Yet a friend is someone who knows all about you and still loves you, as the American essayist Elbert Hubbard famously said. This precisely is the level of mature friendship Europe needs now.
Germany could start by recognizing the dire facts and agreeing to new debt relief for Greece. Such a gesture may be seen at home as a sign of weakness, but framed properly abroad, it would be a strong gesture of generosity from a position of strength. At the same time, to avoid moral hazard, the European Union should create an option for nations to leave the eurozone in an orderly way should they prove unable to recover within it. Combined, these steps would bring the crisis to an end while also creating breathing space should another one emerge.
And maybe we can all agree on one lesson from the Greek crisis, namely that, to maintain a friendship, you should lend only as much money as you are ready to give away anyway. From there, we Europeans could finally start growing together like grown-ups.
Jochen Bittner is a political editor for the weekly newspaper Die Zeit.