As Greece prepares to hold its referendum, the stakes are high for the 60-year-old project of a peaceful, united EuropeIf you believe political leaders in Berlin, Paris, Brussels, this Sunday marks a make-or-break moment not only for the eurozone but for the EU itself. An extraordinary state of affairs given that – on one level at least – the only thing happening this weekend is that Greece, a country representing just 2% of the entire EU population, will hold a referendum on whether or not to accept the latest deal offered by creditors. The rhetoric coming from Athens is as heated, where there is talk of European “blackmail” against the free will of Greek voters, as if Europe’s creditor nations don’t have voters of their own. If cool heads are to prevail, they must first reflect on how things have turned so sour. Unless a last-minute deal can be reached between Greece and its creditors, the only thing that can be hoped for is serious damage limitation. In the worst-case scenario of a Greek exit from the euro, it would pile disaster upon disaster if the country were to leave the European Union. Europe must stare into this abyss to prevent itself from falling into it.No side bears sole blame for the current mess. From the very start, the idea of a common European currency was built on a logical flaw. Put at its crudest, monetary union all but requires fiscal union, which in turn requires political union. Yet when the euro was launched, there were no such institutions or mechanisms, just the perennial but vague hope of ever closer union. What’s more, the world’s largest currency area was run on two unsustainable economic motors: Germany exporting ever more to southern Europe and the rest of the world, and southern Europe relying on cheap credit. That fragile system was crushed under the rubble of the financial crisis. Continue reading...
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