Greece and the euro: the crisis continues

Guardian
Editorial
February 10, 2012

What's Greek for constructive dismissal? Because that's an apt term to describe how Greece is being treated by the other members of the eurozone. Consider: party leaders in Athens have spent days agonising over how to make €3bn (£2.5bn) of extra spending cuts (or over 1% of Greek GDP), apparently essential to qualify for the next round of loans from the EU and the IMF (these are relatively high interest loans, not a free bailout). After drawing up a list of painful reductions, including a 20% cut to the minimum wage and public sector job losses, the Greeks were told this week to go away and find another €300m. Or consider the insistence by Luxembourg prime minister Jean-Claude Juncker that Greece's politicians must turn these cuts into law, without allowing the public a vote. This is reminiscent of the disclosure last month that Germany wanted to install a European commissar in Athens to oversee Greece's budget-setting process. And here's the clincher: consider the number of briefings in Berlin suggesting that were Greece to leave the euro it would not be such a calamity.

Official or unofficial, on the record or off, the message from all these communications is much the same: Greece does not deserve the full suite of democratic policymaking; nor does it merit the kind of consideration that would be given to any heavyweight economy. At one level, of course, this is simply what happens to bankrupt countries. Countless Asian and Latin American nations have undergone the same torture at the hands of the IMF. The big difference here is that this is happening in Europe, within a single-currency club that was meant to protect its members from such indignity. There are two main problems with this constructive dismissal strategy. First, it is indefensible to the Greeks – and indeed to anyone else who follows the economics. Second, if these tactics don't come off the very existence of the euro will be imperilled – all over again.

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