The political consequences of Grexit

by George Hatjoullis

Much has been written and spoken on the economic aspects of a Greek exit from the eurozone but little has been said about the political implications. My previous blogs have touched on some issues. The failure of the eurozone to contain the crisis and enable Greece to return to self-sustaining path within the monetary union reflects badly on the institutions of the eurozone and speaks directly to its fundamental authority. The lack of flexibility and the rigid adherence to ‘rules’ and ‘agreements’ has a Kafkaesque quality. If the eurozone cannot grow beyond this state it has no future as such a structure will sooner or later crack and crumble. It make take the EU down with it.

The immediate problem is within Greece. The latter may today be forced to wholly capitulate or begin the path towards ultimate exit. Capitulation will be politically disastrous to Syriza and its leadership but will change little in Greece. The failure to capitulate is the problem. Greece cannot be formally expelled from the eurozone. The only sanction is to allow it to default, to cease ELA to the banking system and to suspend its clearing rights within the eurosystem by suspending access to TARGET2. De facto exit is ensured by the latter. It will however remain formally a member of the eurozone and the EU and capable of all sorts of mischief. This is hardly a desirable situation with the EU needing to give attention to Ukraine. Harsh treatment of Greece will bring Russia into play and no one knows where this will end up.

The more serious risk is to the stability of Greek democracy. Post-war Greece was ravaged by a civil war with one side actively supported by Great Britain. The British attacked people who had saved them from German troops in Crete. This was the thanks that the Greek resistance that styled themselves communists received from the west. The British troops supported Greeks that had in some cases been collaborators. This is why Syriza and many Greeks are so sensitive to WW2. A quick tour of google search will reveal what Portugal, Ireland, Spain and Italy did during WW2. Today Greeks see a large Nazi party thriving in Greece as a direct result of the Berlin-imposed austerity. They are not being sensitive without cause.

During my lifetime Greece had a military junta running the country. Between 1967 and 1974 the cradle of democracy had no democracy. It took an abortive coup in Cyprus to restore democracy to Greece. It is recent and fragile, which leads to the serious and sensitive question; will the Greek élite allow Greece to exit from the eurozone? Could there be another coup? Can such things still happen in modern europe? Most would like to think not. However, 1974 is still vivid in my mind so nothing can be ruled out. When Tsipras came to power I was immediately reminded of Allende. What if it came to this or some variant of this? What would this do to the authority of the eurozone and the wider EU? A lot of rhetorical questions to which I hope never to receive any answer.

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