July 10, 2015 12:00:00 am
Recent developments in Greece — with the rise of Syriza (a coalition of the radical Left) under the leadership of Alexis Tsipras, the persistent stalemate in the country’s debt negotiations with its creditors, its default on the latest payment of its IMF loan, the closure of banks and the imposition of capital controls, and, more recently, the resounding victory of the No vote in an ill-framed and -timed referendum on a draft proposal by the European Commission — may take on momentous significance for the future of Europe and the global system of international relations.
By global standards, Greece is a small southeast European country, accounting for 2 per cent of the eurozone’s GDP and 0.4 per cent of world GDP. Yet, it is a core member of some of the world’s largest regional blocs, such as the European Monetary Union, the European Union, and Nato. Therefore, the ramifications of a potential “Grexit”, or Greece leaving the eurozone, which, according to legal and political experts could very well lead to an exit from the EU, are potentially disproportionate to the country’s economic size and geopolitical clout.
Tsipras, a firebrand university activist turned soft-spoken leftwing populist paying lip-service to European ideals, has already paid several official visits to Russian President Vladimir Putin from the start of his tenure in office this past January. Some of the radical leftist ministers accompanying him are Russian-educated and well versed in Kremlin politics, something rather unusual for mainstream Greek politicians. According to widespread speculation, such moves (including public allusions to the possibility of Greek participation in the BRICS Development Bank) signal the geopolitical reorientation of Greek foreign policy towards Russia (also a Christian Orthodox nation), as well as other non-Western rising powers. The Greek government’s instant threat to veto EU sanctions towards Russia may portend a future obstructive strategy of subversion through the nuclear use of the national veto in the context of the European Council and the EU’s foreign and defence policy, thus acting as a Trojan Horse for the interests of its newly acquired foreign allies.
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Tectonic shifts in the global system of power and international relations are already in motion. Greece is a tinderbox about to implode internally and explode externally with unfathomable repercussions for the structures of global governance. The implosion of Greece’s economic and political system could arguably accelerate that process, and Europe will be the first to feel its effects on different levels.
The recent closure of banks and the imposition of capital controls have sunk the economy into a state of utter asphyxiation and illiquidity. There is already a humanitarian crisis unfolding, and current estimates project a collapse in Greek real GDP from 5 per cent to 10 per cent this year. On the external front, sanguine estimates place the immediate cost of an imminent Greek default on its European debts in the area of 90 billion euros. The possible knock-on economic spillovers to the global financial system may mean that the chain set off by Grexit will be even more painful than events following the Lehman Brothers bankruptcy.
Yet, economic pundits argue that the new financial firewall policies put in place by the European Central Bank (in terms of the policy of quantitative easing), the European Stability Mechanism and the emerging European banking union are potent enough to contain economic contagion in Europe’s southern flank.
However, the political contagion effects on the rest of Europe will be hard to stave off. If Europeans believe that they can contain the political fallout of Grexit, then that would also imply that they already have institutional enforcement mechanisms in place in order to mitigate the moral hazard considerations of another Greek bailout, or even a new Marshall Plan. Politicians should not overestimate their ability to quarantine the “virus” of an impending Grexit. The Wolfgang Schäuble disciplinary doctrine of austerity, imposed through the “carrot” of quantitative easing and the “stick” of threatened expulsion from the union, is bound to meet with strong resistance from the anti-austerity forces brewing in the European south.
Nationalism seems to be on the rise across Europe, and social democracy in a state of retreat and fragmentation. The rise of populist leftwing parties in the south (such as Syriza in Greece, the Five Star Movement in Italy and Podemos in Spain) on the one hand, and Europhobic nationalistic parties in the north (such as the UK Independence Party, the National Front in France, the Dutch Freedom Party, the Austrian Freedom Party, and the Danish People’s Party) on the other, all form part of the same picture of political interconnectedness. European politics is becoming increasingly polarised between southern populism and northern nationalism. It is starting to look like the 1930s all over again, but the cleavages are different and a lot more complex.
The potential repercussions of Grexit, in terms of economic ripple effects, political contagion effects and geopolitical shifts, are potentially devastating. The structure of the monetary union is deeply flawed and, as a result, many of the societal rifts and cleavages created by the debt crisis are starting to come to the surface. This is a momentous and extremely critical time for the future of European integration.
People assumed that the regional and global institutions in Europe and beyond would come out of the deepest financial crisis in the era of globalisation politically unscathed.
Alas, economic and political integration has created deep social fissures and pockets of dissension that have started to scrape the surface. Integration between nation-states is like trust between people: It takes time and laborious piecemeal efforts to construct, but any steps in the opposite direction often lead to abrupt disintegration and total collapse.
Let us only hope that Greece is not one brick in a fragile house of cards or, at least, that global leaders will show the necessary will and far-sightedness to reinforce its foundations.
The writer is university lecturer in international political economy, University of Cambridge, and member of the Greek Public Policy Forum.
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