Alexis Tsipras/Facebook
World News /05 Mar 2015
03.05.15

Fault of their Own: Grexit, Russia, and the EU

The European Union was created to promote democratic ideals and economic cooperation after the death and destruction brought on by extreme nationalism during World War II. Economic cooperation would help create a common identity, a feeling that the peoples of Europe had a common destiny. The evolution of the institution is indeed something to be admired. However, contradictions existing within its guiding framework may bring about its sudden conclusion; and it all starts with Greece.

We must begin with 1957 and the Treaty of Rome which based integration on coal and steel markets among participant countries like France and West Germany. Founders wanted to create a mechanism where individuals would perceive their economic interests and political identity as tied up with European institutions rather than with the state and nationalism. Integration would take place as a result of domestic political pressure to enhance regional institutions and have spillover effects into other areas of life. Economic integration would remove the need for an independent political economy. Conditions for expansion and spillover into other sectors of life would develop through Free Trade Agreements, Customs Unions, Common Market, Monetary Union, Fiscal Union and finally Political Union. Of course, we know that Europe has still no fiscal union and certainly no political union; it has only achieved monetary union.

This has damaged the strength and longevity of a European identity and has created a political crisis. Supposedly, crises would help push integration, as founder Jean Monnet would remark: “crisis is the best mechanism for unity and further integration.”

As a result, integration has become prescription for everything: more integration is the answer to the problems of integration.

This is the faulty conceptual cornerstone of the European Union. Framers did not consider that crisis, and power asymmetries within the union, may actually stall, or destroy altogether, integration. In other words, the current crisis is hindering the gradual process of integration which is needed for the union to survive. Driven fundamentally by a self-sustaining process by which one sector of integration spills into another, any thought of further integration is now over. The momentum has stopped altogether.

This week, Europe finally decided to kick-start the economy through quantitative easing. Many hoped that this would be able to give some much needed help to Greece. The buying of bonds would assist in lending and economic growth. However, it there were limits to purchasing: Greece would be barred from the bond purchasing until further notice. This could not have come at a worse time as the Greek people were gearing up for an election. The Leftist SYRIZA party used this fact to enhance their Anti-European platform. Ultimately, they had a point which accounts for their astounding victory: Germany has been talking down to them for too many years. Europe has punished the Greek people instead of the government that cooked the books and mismanaged funds which created this entire situation. Perceptions created out of these events showed EU members, and the world, that the union is indeed not one of equals.

The other issue of interest is that far-right movements across Europe have been gaining popularity over the past few years. If the European Union fails to act to create better growth and solve the democratic deficit, there may be more withdrawals which may force Germany to take one hell of a haircut. The interesting fact in this almost eight year long drama is that it is the Germans, the very architects of austerity, that have the most to lose if Greece and other heavily indebted countries default. Whether or not the left wins tomorrow is ultimately a moot point: the union is still very broken. If Greece leaves the Euro and defaults, the country will be allowed to further restructure its debt. They may have to raise taxes further and cut expenditures, but at least they would have the monetary autonomy necessary to hopefully generate growth. Default would not change anything for Greece save one thing: they would deal a blow to the union which has squeezed them for years. Would this worsen the situation and force other countries to leave? Possibly. It is certainly too early to tell.

The other issue worth mentioning is the Greek/SYRIZA-Russian relationship that may serve to undermine the foreign policy of the EU. The EU must be able to present a united front against their expansionist neighbor. Russia needs Greece to establish a foothold in Europe and circumvent American and European sanctions and Greece needs financing denied by their EU allies. Because of this, Greece is readily willing to sacrifice the autonomy of the European Union to gain any assistance. Hence, Greek interests and EU interests are increasingly diverging while Greek and Russian interests are quickly converging. If Russian assistance to Greece proves successful, will other EU countries join with Russia to reap similar benefits?

The European Union was invented to link states together, to tie their hands together in community and create interdependence in order to limit state autonomy which would prevent war. German economic power allows them to almost dictate economic policy to others. Because of the enthusiasm to unite monetarily, mechanisms to manage fiscal discipline, that would assist in the strength of the monetary order, were ignored and glossed over. Greece’s fiscal mismanagement was not solely the failure of Greece; it was the failure of Europe.

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