Greece has won Europe a respite – now it must use it

by Gideon Rachman

Financial Times
June 18, 2012

The night before the Greek elections, Athens exploded in joy. The Greek national team had won an unexpected victory at the European football championships. In the next round, with delicious symbolism, Greece will play Germany.

The main significance of the Greek elections, however, is that it actually avoids the need for a showdown between Greece and Germany. A clear victory for the far-left Syriza party might have provoked a crisis, by nullifying the Greek bailout deal. Under a centrist coalition, Greece will probably cut a deal that allows the country to stay in the euro and to limp on with a modified austerity programme. The financial version of the Greece-Germany match will therefore go into extra time – with the hope that both sides will ultimately settle for a face-saving draw.

A respite in the Greek part of the euro crisis does not mean that Europe is off the hook, however. On the contrary, it is increasingly clear that Greece is no longer at the centre of the problem. The fate of the euro will be decided in Spain and, above all, Italy.

Europe should be using the brief respite brought by the Greek elections to rethink its whole approach to the euro crisis. At present, the debate is stuck. Politicians, particularly in Germany, are being urged to take dramatic steps towards banking, fiscal and political union to save the single currency.

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