Financial Times
November 4, 2011
Earlier this week, I wrote a blog which I headlined “Is Greece the most powerful country in the world?”
I tweeted the title and the url for the blog, and then sat back to wait. My provocative headline worked: it is now one of my best read blogs so far.
The thought behind it was simple. Up until this week, it has been generally assumed that all the power in Europe lies with Germany. Germany has the money, so that means it gets to call the shots – deciding how the bail-outs work and how. It has been all about what Germany is prepared to offer rather than what Greece is prepared to accept.
But Greek prime minister George Papandreou’s now reversed decision to call a referendum this week, while pretty unpopular with some of his colleagues, turned this conventional wisdom on its head. The announcement brought into sharp relief the fact that, if Greece refused to accept any of the stream of bail-outs coming its way – via referendum, change of government, military coup or whatever – we can pretty much say good bye to the euro in its current form, and we can be all but certain that the consequent banking crisis will lead most of us into recession.
That gives them a good amount of bargaining power – the last thing Germany needs right now is a recession. But Greece’s power over Germany is about more than just a generalised recession or depression. If you wonder why, you might ask yourself who has gained the most from the existence of the common currency.
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