Two questions inhabit the already dark scenario that is unfolding in Europe: the Greek question and, in a subtle but more determinant way, the German question.
The upshot of the fierce controversy raging over the terms to save Greece from bankruptcy is nothing less than survival of the monetary union that was stitched together principally by two countries, Germany and France. The French president at the time, François Mitterrand, pushed for the implementation of the Maastricht Treaty with the objective of tying the destiny of Germany to that of Europe and thus limiting the reestablishment of German power on the continent.
We all know what happened: the European currency, the euro, has in fact become the German euro and Germany has profited from the euro to grow exponentially. On the other side of the ledger, the Greeks and others profited from the low interest rates instituted by the new financial system of the European Union to splurge on buying German and other consumer products. But while Spain, Portugal and Ireland bit the bullet and accepted the harsh conditions of the so-called “troika” — composed of the EU, the European Bank and the International Monetary Fund — the Greeks rebelled and voted for a leftist party that promised a stop to policies of austerity and the liberation from the “troika” in order to solve the “humanitarian crisis” of the Hellenic people.
What is at stake now is not just a salvage operation for Greece, whose humongous debt (176.3 percent of its gross domestic product as of last December) can be relieved only by loans up to 240 billion euro tied to painful structural reforms. The institutional system of the European Union is also challenged as many members — from the powerful ones such as Germany and Holland to the weak ones such as Spain and Portugal — stand firm in defending the existing rules.
There are good reasons for not allowing the debtors to escape such rules. In Spain, the government cannot let the challenge of the Greek party Syriza succeed, for fear that the local Podemosprotest movement may unleash a similar political upheaval. The same danger is shared by the government in France while in Italy two minority parties are clamoring for the abandonment of the membership in the monetary union.
Germany is determined not to let Greece off the hook, while France and Italy take an ancillary position to Berlin. Negotiations to reach a compromise will of course continue but the likely extensions of the financial salvage operation for Greece are merely a palliative.
The Greek premier has already started to swallow the impositions from Germany and company, for the simple reason that he has nowhere to go to find money. Borrowing in the private fund market would cost him over 10 percent, an impossible option. The alternative is “Grexit” — that is, the exit of Greece from the monetary union. In such a case, the inevitable consequences would be devastating for a large part of Europe, and Germany itself, whose economy is propelled by export, would pay a price.
One result that some political forces would welcome, however, would be to put the brakes on the growth of German hegemony in Europe. Across the Atlantic, the United States thus faces a huge dilemma in Europe since it cannot discount the serious consequences of the possible collapse of the euro and the system of European financial and political institutions. At the moment, the Ukrainian crisis has shown that Germany calls the shots in Europe while French President Hollande stands idly alongside German Chancellor Merkel.
The disarray in Europe cannot but help the expansionist and disruptive strategy of Russian President Putin. Hell may then break loose in Europe, to America’s chagrin. This is the danger lurking in the Greek Trojan horse that threatens Europe, unless and until Europe proves once again to be the land of unstable compromises.