The euro came into existence in January 1999, but with the Greek monetary crisis close to breaking point, the idea of a eurozone currency has doubtless been brought into question — and with that of Europe as an integral socio-political unit to which Mikhail Gorbachev had once longingly looked, speaking of “our common European home”.
With the collapse of the Soviet Union, the decades-long process of European integration gained a boost and pretty wild sentiments, such as “fortress Europe” — which pointed to the ambition of the old continent’s ability to stand up without American prop-up — doing the rounds. Thus came into being the euro, the new global currency. Debate was rife if the upstart unit of exchange would outstrip the dollar in global significance.
The Greek tragedy pretty much settles the debate in favour of King Dollar. The US, of course, is no one’s idea of budgetary restraint. America’s imperial reach and outlook, and its propensity to send out troops overseas, have made its deficits balloon dangerously. But the US is no Greece. Its enormous economic size, and the country’s multi-dimensional leverages arising from its technological, military and political power, still help it retain more influence than any other country.
Countries and institutions that buy into US debt — notably China — cannot dictate terms to Washington.
Athens is an altogether different story. Even so, it is far from settled that European leaders, when they meet on Sunday to deliberate, would be able to persuade Greece to down more of the bitter medicine of austerity. Essentially, this means more money should be lent to Greece — the proposed “bailout” — to make it capable of servicing its previous debts before the Greek finance ministry can take any steps to get the engine of the economy going.
Greece is too broke to pay its creditors. A serious messy situation lies ahead, not only for the banks and other institutions, including the IMF and the European Central Bank which have lent it money in the last five years, but for the Greek people themselves. If Athens broke free of the euro, it could devalue its currency and buoy its tourism sector, economically its most productive, although strong inflation will become a concern. Last November, the ECB forecast 2.9 per cent growth, but the story was the opposite. Youth unemployment now stands at 57 per cent and the GDP-debt ratio has become worse than previously under the doses of austerity prescribed under Germany’s tutelage. Some in Europe are also hoping that Greece will leave the euro circuit, though we will know better on Sunday. What that does to the idea of Europe is still uncertain.
