Tag Archives: Eurogroup

Giving Greece a chance, not just a tranche

It is a sad indictment of the manner in which the Greek crisis has been handled by all sides that for probably the first time since the economic unravelling began about three years ago, moderates in Athens as well as other eurozone capitals looked at each other in the wake of another inconclusive Eurogroup meeting on Wednesday and wondered: “Why did we ever get involved with these guys?”

The rest of the eurozone’s grievances with Greece – many justified, some the product of stereotyping – have been well documented but the inconclusive 11 hours of discussions between eurozone finance ministers in Brussels this week tipped the balance the other way. It was the turn of level-headed Greeks, fully aware of their own country’s shortcomings, to fume about their euro partners’ footdragging and failings.

Yet, just as it has been unfair for Europeans to have undue expectations of Greece, so it is excessive for Greeks to expect 16 eurozone countries to each easily overcome their national concerns and promptly agree a strategy that would make Greek debt sustainable.

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Unbelievable? Not anymore

Illustration by Manos Symeonakis

Brussels – The British indie dance band EMF had only one hit. It was with their first release in 1990, a single called “Unbelievable.” Twenty years on, the possible existence, let alone success of another EMF, the European Monetary Fund, seemed scarcely believable. But Greece’s descent into fiscal hell over the last few months has changed all that and on Monday the European Union essentially took its first, albeit tentative step, toward constructing its own version of the International Monetary Fund.

As far as historic moments go, Luxembourg Prime Minister Jean-Claude Juncker, who also heads the Eurogroup, and European Economic and Monetary Affairs Commissioner Olli Rehn, did their best to make their announcement that the other 15 euozone members had agreed to provide Greece with financial assistance as underwhelming as possible. The briefing room at Justus Lipsius building in Brussels must rarely have been as packed for a monthly Eurogroup news conference as it was on March 15 when journalists gathered to hear that eight years after the euro went into circulation and almost two decades since the signing of the Maastricht Treaty that laid the foundations for the single currency, those using it accepted that the framework needs to be strengthened.


Juncker and Rehn announced that a procedure had been put together by which a eurozone member in economic trouble, in this case Greece, would be able to rely on financial backing from its partners. From being one of the European members of the so-called PIGS economies, Greece could soon be handed the key to the EU piggy bank. The EU is not an organization that adapts particularly quickly to changing landscapes but Greece’s plight has caused a seismic shift that puts the very viability of the euro at stake. So, the Union has decided it needs to update its tools to ensure it’s not lost in this new financial geography.

Juncker and Rehn did not reveal exactly how the scheme, which bypasses the “no bailout” clause in the Maastricht Treaty, would work although it appears that it will take the form of bilateral or multilateral loans from other eurozone members or banks in those countries that will be funneled through the European Commission. Strangely, for a measure designed to ward off speculators who think they can still make a quick buck off Greece’s economic weakness, Rehn played down the landmark moment, speaking of “coordinated assistance” which “could be activated if needed” while underlining that any action would be in line with the “treaty framework” and “national law.” 

The EU specializes in technocratic double speak but this time there was a good reason for obfuscating. Any deal relies on the acquiescence of Germany, the eurozone’s most powerful and healthiest economy. Beyond any qualms that the Germans may have about giving cash to a country that has so flagrantly ignored the currency’s rules, the government is concerned about telling the country’s taxpayers they might have to cough up for Greece’s recklessness. Chancellor Angela Merkel leads a three-party coalition of her own Christian Democratic Union, the liberal Free Democratic Party and Bavaria’s Christian Social Union. Elected to power only last year, the so-called “black and yellow” coalition is suffering. Its popularity in opinion polls is sinking faster than Greece’s credibility on international markets and the FDP leader Guido Westerwelle, who is vice-chancellor and foreign minister is pursuing a populist agenda that makes it difficult for Merkel to consider Germany’s participation in an emergency fund for Greece.

This might explain why less than 24 hours after the meeting of EU financial ministers in Brussels, when the bailout was again given approval, Merkel was telling Germany’s Parliament: “We do not need a solution that helps in the short run but weakens the euro in the long run.” This double talk is part of the cat-and-mouse game that Merkel is playing with German voters but also reflects Berlin’s determination not to commit to the financial package before it is absolutely necessary as it fears setting a precedent that would make it easier for another struggling member – Portugal or Spain maybe – to call for assistance in the near future rather than itself taking measures to fix its public finances.

But in essence, the precedent was set on Monday night with the landmark breakthrough in the eurozone, which brought the creation of a European Monetary Fund a step closer. The EMF may be several years away because changes to the EU’s treaties are first needed but it appears to be a natural continuation of what was agreed this week.

Given the financial turbulence of the last couple of years, it makes absolute sense for the EU countries to have a fund that they can rely on to rectify economic problems. It means that the option of the IMF would be off the table and Europeans could be true masters of their own destinies. The IMF, in the view of many economists, provides a one-size-fits-all solution that does more damage than good in many of the countries that call on its help. With the EMF, the EU could adopt a more tailor-made approach based on European economic and social particularities. Also, the idea of each member state contributing toward this fund on an annual basis would make them real stakeholders in the future of the Union and take the EU closer to a more complete economic and political union.

The economic crisis has brought the EU to the point of no return. If Greece doesn’t get the financial help it needs and turns instead to the IMF, as it has threatened to do, then hopes that the Union could stand for more than a collection of common goals and practices would be in tatters. If Germany were to decide that it has had enough of the economic shenanigans of countries like Greece and considers reintroducing the Deutschmark, which would please some in Berlin, then the effect would be even more devastating.

Giving Greece a cash injection is a logical short-term decision to help it and the EU ride the current storm but if the Union is to safely navigate through this crisis then a more substantial solution is needed for the long-term. For all the coyness and brinkmanship on all sides, it is patently obvious that there are still powerful common interests at the EU’s heart and that its future depends on these outweighing individual designs or whims. That’s why the idea of an EMF is not so unbelievable anymore.

This commentary was written by Nick Malkoutzis and appeared in Athens Plus on March 19.

Sovereign territory

Illustration by Manos Symeonakis

“Sovereignty is rather like virginity: You either have it or you don’t,” a wise man told me some years ago. If this is the case, then, in an age when sexual morals are more lax, it seems fitting that there are only few, if any, states that can truly claim to be sovereign.

For the last few decades, a number of transnational factors — capital, migration, environmental degradation, communication, technology and even terrorism — have chipped away at states’ sovereignty. Rather than a case of “wham bam thank you ma’am,” it’s been a series of long, complicated dates that have led to the same, inevitable outcome.

Of course, there are still moments when sovereignty can be lost in a flash — for example, when Haitian Prime Minister Jean-Max Bellerive last Friday transferred operations at the airport in Port-au-Prince to the USA to speed up the earthquake relief effort. The scale of the disaster that hit the Western Hemisphere’s poorest nation meant that Bellerive had little choice than to put his faith in the Americans. Nevertheless, handing control of your country’s airport and air space to another state is a landmark moment when one assesses the withering sovereignty of nations.

Greece is inextricably linked to Haiti, as the island state was the first to recognize the Hellenic Republic as an independent country in 1822. But over the past few days, the two countries have had something else in common: Greece also saw its sovereignty vanish, albeit under less horrific circumstances.

While preparing its Stability and Growth Program, which was officially presented to eurozone members on Monday, Greece essentially gave up control of its economy, and therefore its sovereignty. The measures that Athens intends to adopt as part of the four-year economic recovery plan were written here but they were dictated from other European capitals, even though the onus is on Greece to solve the problem on its own. “It would be wrong to presume or let Greece presume that the other countries could solve its problems,” said Luxembourg Prime Minister Jean-Claude Juncker, the chairman of eurozone finance ministers or Eurogroup.

The death stare that Juncker fixed on Finance Minister Giorgos Papaconstantinou during Monday’s eurozone meeting was both humiliating and frightening. It was confirmation that Juncker, a career politician who has been at the heart of EU developments for many years, intends to watch the Greek government like a hawk. But he won’t be satisfied with just monitoring Athens’s movements. He’s already shown he’ll test the limits of Greek sovereignty. It was Juncker, rather than Papaconstantinou, who last week got in touch with International Monetary Fund (IMF) Chief Dominique Strauss-Kahn to discuss whether Greece could use some financial help. “We think IMF assistance to Greece would not be opportune or welcome,” said Juncker after the chat.

“It’s nice of him to let us know,” the Greek minister might have thought. Well, he’d better get used to it because Juncker won a fresh 30-month mandate as the Eurogroup chief on Monday and the 55-year-old is the kind of technocrat who believes Europe’s strength lies in closer integration, a concept that allows little prospect for EU member states to make decisions independently. In a letter circulated to the eurozone finance ministers this week, the Luxembourger said he wants the Eurogroup “to pursue broader economic surveillance” of its 16 members. Greece’s recklessness and untrustworthiness means other countries could soon suffer the ignominy of outside interference in their economies.

Getting its figures right, cutting costs and generating revenues were never Greece’s strengths — but even so, relying on its European friends to prescribe a way out of this mess seems a high price to pay. It’s difficult to know what’s more galling: the fact that Greece’s ministers are being hauled before Juncker and similar EU officials like errant schoolboys or that it’s now been confirmed in black and white, in page after page of reports, that Greeks are truly incapable of exercising their sovereignty.

If we are to take anything positive from this sobering experience it’s the hope that our European partners have a better idea of what to do than we ever did but, more importantly, that we now have a chance to regain trust and rebuild confidence. Although there are many trials and tribulations that come with a loss of sovereignty or virginity, a loss of dignity will always be more painful. But, unlike virginity and possibly sovereignty, dignity can be restored.

This commentary was written by Nick Malkoutzis and first appeared in Athens Plus on January 22, 2010.