Centre for European Progression is working on strengthening the voice of the young generation of Brussels professionals. We asked Roxana Nedelescu (Senior Academic Assistant in the Economics Department of the College of Europe), Bodo Ellmers (Policy and Advocacy Manager at Eurodad), David M. Garcia (UEF Policy & Advocacy Officer) and Marco Giuli (Policy Analyst at EPC) to share their opinion with us about the Greek crisis.
They all write on their personal capacity.
“While Europe acknowledged the Greek referendum results over the measures proposed by the EC/ECB/IMF, we should be aware that the Greek sovereign debt crisis is rather about creditworthiness and credibility, not democracy. So far, it seems that the Greek government has failed to come up with a credible roadmap for reforms, as a guarantee for creditworthiness, while Europe is not willing to make any further concessions. In fact, Greece and its creditors are in a negotiation deadlock and the question is how to get out of it? One possible answer is: first, a credible reform roadmap from Greece, and second, debt restructuring for Greece.”
“The Greek government did well when it decided to let the Greek citizens choose if the proposed agreement will be adopted or not. Eurodad has been critically monitoring the IMF’s structural adjustment programme in developing countries for more than two decades, and more recently the Troika programmes in Europe, which were basically just new wine in old skins. We found the same patterns everywhere: creditor institutions and governments make backroom deals at the expense of the most vulnerable parts of the population. Heavily indebted countries receive bailout loans that come with harsh austerity and structural adjustment conditionality attached. The money is de facto used to rescue the creditors and banks, not to rescue the country, its economy and population.
While ordinary citizens do not benefit from these ‘rescue packages’, they are supposed to carry the burden. The Greek government was right to let the people decide. It was to my knowledge the first time that people had the chance to approve a structural adjustment programme by referendum, and this was really good democratic practice that should be here to stay. And, while the ultimate consequences are hard to predict, the Greek citizens were probably right to say no. Greece is de facto insolvent. What Greece needs to get back on its feet is debt relief, not another bailout loan that will just further delay a sustainable solution to the debt crisis. And what the EU needs is an effective insolvency mechanism for sovereign debtors to tackle such cases.”
Read the full opinion of Bodo here.
David M. García
“Last week’s Greek referendum took most European actors by surprise. On the one hand, it constitutes the climax of the democratic tensions provoked by the way the Eurozone has been governed for the last years. On the other, it is questionable whether it constituted a democratic or sovereign act. What is sure, is that the way the European Council has dealt with the crisis so far is pitting European democracies against each other.
In the following weeks, European Heads of State and Government will have to find a solution to this problem, which does not only affect Greece, but the entire European construction. Grexit is highly unlikely, given the considerable costs and risks for Greece and the Eurozone as a whole. The most probable outcome will be maintaining the status quo. Indeed, there seems to be no agreement between major creditors regarding a potential “haircut” in Greece, and last night’s proposals from Athens confirm this scenario. However, a third way is gaining support and taking shape. Inventive formulas to circumvent the limitations of the Treaties in order to advance on the path of a federation of the Euro are put forward, and not only by pro-European activists, but also by national finance ministries. Only such initiatives could provide the Eurozone with a lasting solution. Only a strong European economic government would be able to mobilise sufficient European political, financial and human resources to heal Europe’s wounds.”
Read the full opinion of David here.
“Tsipras proved to be a very different negotiator for the creditors with respect to the previous Greek governments. He raised the stakes beyond what the counterpart frame as the realm of possible. He demonstrated deadlines can be missed, carefully selecting the IMF as the first “victim” and “sparing” – for the time being – the European institutions. The “yes” campaign was only built up on fear and threats, with no consistent message over whether the no vote would have been conducive to Grexit or not. Any compromise committing Greece to modernization in exchange for some form of debt relief would be the best solution for the future of all involved parties and the only workable option for the Eurozone. However, views are getting extremely polarized, to the extent that in domestic political terms both parties have something to lose from such a compromise. As tensions escalated, a healthy political discussion on Eurozone shortcomings can easily degenerate into nationalism. It is necessary to keep the momentum to realise that the Eurozone’s misfunctionings require a political solution, and no more outsourcing of responsibility to technocratic bodies. This only caused them reputational problems.
This is especially true when we look at the position the European Central Bank finds itself. The expansion of its competences – a result of member states unwillingness of taking tough political decisions – means that Central Bank can be pushed into a very dangerous political territory whenever political frictions emerge between members. To this extent, the decision of capping ELA to push the Greeks towards capital control ahead of the referendum was highly questionable, especially in light of the evaluation that the ECB itself gave of the Greek banks. This is something that clearly cannot go on, as the political risks it implies are far bigger than the economic risks.”