The Greek referendum can be interpreted as either the genesis of a nationalist political contagion that will destroy the European dream, or as a ruse of history to revive the common project. It is the responsibility of European leaders to realize its potential.
The Greek “No” came only two weeks after the presidents of the European institutions published a lifeless report on the future of the monetary union. Now that we have plunged into terra incognita, the document seems anachronistic, predicting that little will change in the euro area over the next few years. Only existing economic policy instruments will be used. In this shortsighted vision, reviving growth, employment, and investment pertains only to structural reforms, which each country should conduct by itself. Seven years of crisis show that this diminutive strategy is not at all sufficient for the governing of a complex and heterogeneous economy.
Each of us can judge Prime Minister Alexis Tsipras’ gambit in our own fashion. But everyone probably understands that the opinion of a people, so starkly expressed, is never irrelevant. It is a response to a question that implicitly lingers not only in Greece, but everywhere: Is the management of the euro area, as it currently stands, consistent with the consensus of its citizens? A “Yes” vote would have justified the “nothing new” approach endorsed by the document of the European presidents. The “No” instead calls for a much more ambitious answer. Despite the chaos that it is causing, Europe must grasp the institutional opportunity offered by this pronouncement of the people before the temptation of nationalism extends to other countries.
Three key steps
The first step is to immediately reopen negotiations with Athens. This does not mean giving up on negotiating principles. Rather, it would show respect for the involvement of citizens and lend credibility when we foreshadow an eventual political union. In addition, sitting at the negotiating table gives the European Central Bank an excuse to sustain the Greek banking system until a deal is possible, avoiding humanitarian consequences to its citizens.
Those who fear Tsipras’ moral hazard know little of the serious situation Greece is in due to this reckless showdown. The country will remain reliant on partners for many years. By sacrificing former Finance Minister Yanis Varoufakis (à la Iphigenia), Tsipras has finally opened the door to pragmatic language. EU leaders must also abandon hostile rhetoric, which engendered a “to each his own” attitude. In fact, Tsipras’ political victory engages him more than before in fulfilling his part of the contract. He has no more excuses: He can and must change his country, bring its institutions to a European level, and finally make politics fair and effective.
The second step for European leaders is to recognize that, since its inception, the European crisis has been a crisis of national policies. National governments have not understood the challenge of the euro and have held back European integration. Only a year ago, Greek gross domestic product was growing at a rate of almost 2 percent. In 2015, it was expected to grow by 3 percent. The Antonis Samaras government, taking advantage of the recovery, suspended reforms and allowed the deficit to grow. Syriza won the next election. Hostile to cooperation with the European institutions, it made the future of the country so uncertain that it plunged the economy into a deep recession and liquidity crisis.
Before the euro, currency devaluations allowed leaders like Samaras and Tsipras to conceal opportunistic or hostile moves. Now, such behaviors have become incompatible with the euro. The purpose of the single currency was to induce governments to be consistent with economies challenged by the difficult global environment. According to my estimates, based on CompNet data, countries which had neglected the global challenge since 2000—thus losing their positions in the value chains—are the same countries that later required financial assistance.
The third step is to admit that politics are not just about being competitive. Each time we make a political choice, we consider what we think is right and what is not. In their vote, the Greeks reacted to the injustices caused by the crisis in their country. Europeans would rather consider Greek governments as unreliable, untrustworthy, and tolerant of cronyism, oligarchies, and ineffectiveness. These are two different ways to pursue the same goal: more just political conduct. But they are by no means incompatible. The Greek problems originate in weak institutions—like in Italy—and European involvement could be useful for resolving them. Tsipras must prove that he shares the fundamentals of European civilization and involve European institutions in the joint endeavor to change his country. He cannot ask for financial aid without institutional control.
Before they all say “No”
As for European leaders, an equal dose of humility is required. Grexit would be a dramatic blow to the European project. Once possible, the option of leaving the euro would establish a financial hierarchy between strong and weak countries, one even more unbalanced than now. Weak states would fall back into the spiral of sovereign debt and banking debt that has crippled their economies. The hierarchy, already conspicuous in the years of the euro spread, would become a permanent power structure. One after the other, the troubled countries would see nationalist opposition to European “subordination” grow out of control.
There is therefore a crucial final step: to recognize that the European institutional weakness must be resolved in parallel with that of Greece. The euro area is not an arena for the survival of the fittest, but a complementary economic space in which different economies can benefit from their interdependence. Let’s open the debate on political union in the euro area, not behind closed doors in the Federal Chancellery or the Elysée, and not with documents made to buy time, but with the involvement of citizens in a project that affects them, before they all say “No.”