Greek Referendum A Crisis of One's Own Making

The German government deserves respect for its crisis management, writes the chairman of Siemens. Together, Germany and France should work to keep Greece in the euro, but the country must agree to enact real economic reforms instead of trying to push the costs on its lenders.
The German government deserves respect for its Greece policy, the author argues.

European politicians have not shied away from trying to keep Greece in the euro zone over the past few years. Other countries hit by crisis – including Spain, Portugal and Ireland – are on a better path today because of Europe’s aid.

But that is not the case in Greece, and now the country faces insolvency. Is Greece’s path in Europe over? Does it mean that the euro and European integration are now in danger?

Certainly not.

Up to now, the necessary catharsis has been missing in this Greek tragedy. Athens needs that and it will come.

 

The country’s unworthy leftist government changed nothing by announcing a Sunday referendum on a compromise aid package.  It is holding its own people hostage and snubbing its creditors, rather than taking necessary steps out of the malaise by establishing real reforms.

German Chancellor Angela Merkel and her finance minister, Wolfgang Schaüble, deserve the greatest respect for their crisis management. They managed to unify European partners behind their position to require reforms in return for bailout money.

In the unavoidable blame game, it is not a question of whether “wealthy” Germany pushed the “poor” Greeks into a corner with exaggerated austerity demands.

The Greek government, instead, must finally accept the accusation that it demanded help from Europe but took no action itself so that Greece could stand on its own feet again. The populist anti-austerity government of Prime Minister Alexis Tsipras is doomed to fail because the other 18 euro-zone members and international financial institutions are no longer accepting it.

What happens next? There have been many well-meaning proposals in the past few weeks and months that might have worked in another setting. But proposals only serve a purpose if they also take into consideration economic and political realities.

One alternative now is the so-called “Grexit,” with Greece giving up the euro and leaving the currency bloc. The other is remaining in the euro zone and accepting the conditions of its creditors.

Though some want Greece out of the euro, it is not possible against the will of Greece. And so the regulations governing the euro zone are now being read through once again.

For Greece, voluntary exit from the euro would begin a long ordeal with many uncertainties. This path would be dramatic and lead to much larger upheavals than if Greece were to stay in the euro zone.

For many years, the country has not been served by adequate state and political structures. The Greek elites have failed down the line. Back when the euro zone was started, Greece embellished economic data and then neglected steps to make the country competitive.

We should not forget that Germany and France also sent false signals in the still-short history of the euro: Both of the largest economies in Europe also broke the stability criteria themselves.

But Greece remaining in the euro zone is the better option for the union – especially for geopolitical reasons, since Europe can’t afford instability on its southeast border.

Even if Greece decides to stay with the euro, it will be a difficult path. Ultimately, the country has lived for decades beyond its means. But with the European partners at their side, the country could have had a stable institutional framework to finally introduce reforms so its economy might grow again.

For Europe, either option will be costly. But Greece remaining in the euro zone is the better option for the union – especially for geopolitical reasons, since Europe can’t afford instability on its southeast border.

In the history of European integration, there have always been crises. The current one will unify Europe, if we once again reflect on the principles and rules that make every institutional structure healthy and robust.

There, a special role falls to France and Germany. If the two nations work together, they will give Europe important impulses in setting policies on foreign affairs and security, in addition to economic and currency matters.

I am convinced that the current crisis is an opportunity for both Europe and Greece to grow.

Gerhard Cromme is chairman of the board at Siemens. To contact the author: [email protected]