It is yet another anticlimax in Athens as yet another austerity deal fails to bridge the gap between Greece and its creditors.Despite the dramatic cuts to government spending negotiated by Prime Minister Lucas Papademos and Socialist Party leader George Papandreou, leaders in Athens and Brussels continued to lock horns over the debt crisis. Mere hours after the announcement, skeptics spoke up. Germany’s finance minister, Wolfgang Schaeuble, voiced doubts about whether the deal merits the proposed €130 billion bailout. Luxembourg’s Prime Minister, Jean-Claude Juncker, chairing the Eurozone meeting to vet the plan, also stated before the proceedings “there are still a lot of uncertainties.”Uncertainties there were; the Europeans rejected the Greek plan, demanding additional cuts. And in Greece support for the existing plan began melting even as politicians tried to shore it up to meet the EU objections. A deputy labor minister promptly resigned in protest after realizing that state-subsidized housing programs had been cut. Greece’s two major labor unions have staged strikes and rallies outside the capitol to demonstrate against the new austerity package. And though the crucial Sunday vote in Parliament will be the first test of Greek popular will toward the deal, it will not be the last. The leader of Greece’s New Democracy Party, Antonis Samaras, is now calling for fresh elections. Depending on the magnitude of public dissent, the plan’s wavering endorsement by a majority of the country’s notoriously fractious politicians may evaporate, opening a new chapter of infighting. George Karatzaferis, the leader of the Popular Orthodox Rally, already scents blood—he is the first coalition leader to state his opposition to the package, seeking a pretext to focus potential future electoral retribution on Mr. Papademos.As March 20 looms—the date by which Greece must have secured a bailout to redeem €14.5 billion of bonds—Germany and its northern allies are hanging tough. As we’ve noted on Via Meadia, increasingly EU leaders think that Greece is a unique case and that a Greek collapse won’t take the whole European financial system down with it. (Also, the other debtor countries who might be expected to side with Greece think that letting the Greeks go down means more money for them.) As a result, the rest of the EU seems willing, even eager, to push the Greeks to the wall.This calculation may be correct as a matter of economics. Greece is a small economy and with two years’ warning Europe’s banks have had plenty of time to prepare for default. And there is something to be said for it from the standpoint of ethics as well. Few people in Europe have lied and cheated as systematically and as brazenly as the Greeks. Greek voters need to realize that electing politicians who behave like this has consequences, and Europeans have an understandable interest in ramming that lesson home. (Less credible motives for letting Greece twist in the wind include the desire of bankers and politicians in the north to bury their own stupid mistakes before the public realizes just how clueless and culpable the political and financial establishments of Europe have been.)Whether Europe is ready for the political fallout from a true Greek meltdown is something else. PASOK and New Democracy, respectively the main center-left and center-right parties in Greece, are slime-infested sinkholes of corruption and cronyism to be sure, but they are also the chief forces in Greek political life committed to the forms at least of modern democratic governance. Forcing these parties to endorse the bailout terms in a formal parliamentary vote may be forcing them to sign their own death warrants.Greece has some very far left parties; at the moment, the three largest combined would get 24 percent of the vote in new parliamentary elections. This is more than either of PASOK (at 11 percent) or New Democracy (21 percent) would get according to recent polls. As the WSJ has pointed out, the parties that back the EU deal would not have a majority in parliament if new elections were held and the results echoed these latest polls. With the right wing Orthodox party dropping out of the coalition, it’s easy to see a Weimar-like parliamentary system appearing in Greece in which pro-democracy parties don’t have a majority.The reality may not be so dire. Greece’s dominant parties have formidable and well oiled election machinery in place, and the reality is that (assuming as seems likely that any Greek exit from the euro would be disorderly) Greece would still be worse off outside the euro than in it — at least for now. It’s possible that the center left and center right parties can make this case effectively, leading disgruntled voters to stick with them one more time.But continuing austerity in Greece with no hope for an exit is not going to strengthen Greek democracy. And there are signs — in Romania, Slovakia, Hungary and elsewhere — that democratic culture and institutions in a number of EU states are weak.Ultimately, the political shortcomings of the European monetary project are more worrying than its economic failures. Europe’s first task wasn’t to build a stable monetary union after 1990; it’s first task was to build an enduring democratic order. Monetary union should have been the capstone of a process of European integration rather than its foundation.As it is, Europe has some heavy bills to pay — and the non-monetary costs are likely to be higher and more expensive than the cash transfers. Foolish leadership and bad decisions at the top have been Europe’s greatest curse for more than 100 years of failure and decline. From 1950 through 1990 Europe’s leaders made smarter choices and had better results; it looks increasingly as if Helmut Kohl and Francois Mitterand put all these achievements at risk when they made the decision to make monetary union Europe’s grand project with the end of the Cold War.
Money The Least Of Europe’s Troubles
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