The Crisis Is in Brussels, Not Athens

by Jacques Attali

New York Times
June 19, 2011

The Greek financial crisis is neither Greek nor financial any more. It is a political crisis of the whole of Europe. Its solution is no longer financial, but political. It is no longer a matter just for Athens, but for Brussels. Indeed, it is now a Franco-German problem above all since their banks are most exposed.

Greece will never repay its debts. The numerous aid plans, even if they have so far succeeded in avoiding default, failed to clear the long-term liabilities. One must face the facts, which have been known for a long time: No common currency area can last without a dominant country or without some form of federalism (as in the United States).

The current crisis cannot be resolved by Greece exiting the euro zone, as some have suggested. This would undermine the European banking system within days and increase the public debt of other European countries. And, we cannot expect a miracle from Greece, as if it could undo the results of 30 years of lax policies in a few months.

Now that the consequences are manifest, it would be easy to dwell on the mistakes that got us to this point. We should not have let Greece enter the Economic and Monetary Union with falsified figures. We should not have let the debt grow so large given the country’s weak economic fundamentals. We should have forced the Greeks to establish effective fiscal and economic institutions long ago.

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