Is This the Weekend That Greece Leaves the Euro?

EMMANUEL DUNAND/AFP/Getty Images

Is This the Weekend That Greece Leaves the Euro?

Unless you’re reading this article pretty soon after it was posted, you probably know the answer to this question. And you may well have clicked on this article just to laugh at me for being wrong. So I’ll say this right off the bat: Greece is probably not going to leave the euro this weekend (and even if the “last minute” negotiations fall apart, Greece could probably continue with the euro a while longer). But as eurozone leaders meet in Paris in yet another round of crisis talks, there is still an important point to make.

For instance: There probably won’t be a major earthquake in California over the weekend either. But over the next 10 years, there almost certainly will be. The fundamental cause of those earthquakes, the San Andreas fault, is still there.

The same is true for the euro. The latest argument is over a Greek proposal that would have bought the new Greek government and the rest of the eurozone six months to put together another deal. Even if the proposal is agreed on, the eurozone will be fighting the same battle a few months down the line.

And with each round of fighting, the divisions become more bitter. Consider the events of the last week. Greece’s new coalition was elected on a platform opposing the bailout conditions imposed on it by the rest of the eurozone. It failed to reach an agreement on February 16 that would give Greece access to the euros it needed to prevent it from going bankrupt. If Greece runs out of cash, it will have no choice but to leave the euro and print its own money to pay its bills.

A couple of days later, on February 18, the financial world was both shocked and relieved. Greece had unexpectedly drafted a new proposal that would give Germany and the other nations lending Greece money almost everything they wanted. “[T]he letter sent by Athens suggests the Syriza-led Greek government has capitulated in all but name,” wrote Vincenzo Scarpetta, political analyst at think tank Open Europe. “Greece Is Making an Offer Germany Can’t Refuse,” wrote Greek journalist Yannis Palaiologos in the Wall Street Journal. Crisis over. Problem solved. Everyone could relax.

Then the financial world received a second shock—German Finance Minister Wolfgang Schäuble abruptly and bluntly refused the proposal.

Now we have yet another crisis summit where all bets are off and many fear that this could be the weekend Greece leaves the eurozone.

Almost as surprising as the rejection is the reaction of the German public. Many assumed Schäuble was striking a controversial pose by acting so forcefully and that the left-wing party in the ruling coalition, the Social Democratic Party, would not stand for it. Instead, public opinion seems solidly behind him.

“Finally someone says ‘No’ to the bankrupt Greeks. Germany says: Thank you Wolfgang Schäuble!” ran the headline of the popular tabloid Bild. The more intellectual papers, both on the left and right, supported Schäuble. The same day, tv channel N24 published a survey showing that 52 percent believe the demands of a bailout renegotiation from Greece are “outrageous” and 41 percent say they are “naive.”

And it’s not just the German public. “Suck it up or return to the Drachma” was Friday’s headline on the front page of De Telegraaf, the Netherlands’ most-read newspaper.

The German position is so extreme that economist Paul Krugman wrote that it looks like Germany is trying to force Greece out of the euro. “To be fair, I think news reports describing the Greek letter as a complete U-turn and capitulation are wrong,” he writes.

“[I]f the German complaint is that Greece is not agreeing to lock in total surrender to the preexisting austerity plan, this appears to be right,” he wrote. “Instead, Greece appears to be seeking to buy some time to put together an economic strategy (remember, this is a new government without a deep bench of technocrats), and to negotiate terms later. Germany, on the other hand, is trying to force Syriza into complete abandonment of its election promises right now, today.”

“Do the Germans really think that’s a likely outcome?” he asked. “I suspect not. This looks to me like an attempt to force Greece out of the euro, right now. German policy is objectively pro-Grexit.”

Spiegel magazine reported that the European Central Bank was also secretly preparing for Greece to leave the euro.
Maltese Finance Minister Edward Scicluna—a man who has participated in all the recent crisis meetings—made a similar point in an interview with Malta Today: “I think they’ve now reached a point where they will tell Greece, ‘If you really want to leave, leave,’” he said. “And I think they mean it because Germany, the Netherlands and others will be hard and they will insist that Greece repays back the solidarity shown by the member states by respecting the conditions.

“The question at this stage is how to find a way for Greece to exit ‘nicely’ with its electorate accepting the program, while showing that they are going to change something,” he said.

Germany’s Spiegel magazine reported that the European Central Bank was also secretly preparing for Greece to leave the euro.

After seven years of the euro crisis, the Greeks have voted for a radical left and—prior to the crisis—completely insignificant party, while the German people don’t want to give the Greeks another inch, no matter what the cost.

And remember what we’re talking about here. It’s easy to discuss Greece leaving the euro academically from the United Kingdom or the United States, but this is about a real possibility that, come Monday, banks will remain closed while people lose access to their savings and have them forcibly converted to a new currency. It is entirely possible that some will never see those savings again, or they will be significantly reduced. This isn’t the type of crisis that only affects obscure financial markets; it could be very painful for many people.

A big part of the problem is that each nation’s position is perfectly reasonable—from its own point of view. I would not wish to be in the Greeks’ shoes and have unelected foreign bureaucrats ruling over my country, ignoring the wishes my countrymen, and even dismissing my elected leaders when it suits them. But neither would I want to be in the Germans’ situation: perpetually bailing out a country even as I read reports about how little tax its inhabitants pay, how its public officials live the high life, and that everyone there will be retiring earlier than I will, and on a much more generous pension. How much truth there is in these statements is up for debate, but that’s how the situation is covered by much of the German media.

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And so we reach the perpetual crisis. One day it’s Greece, the next week it’s Spain, then France or Italy. With each round the divisions get more bitter. The crisis probably won’t come this weekend, or the one after that, or even the one after that. The cause of the crisis—the inherent design flaw in the euro that countries cannot share a currency without sharing at least some form of common government—remains unresolved.

Once that crisis hits, European leaders will have no choice but to address it, or see their precious euro fall apart, either all at once or bit by bit.

Properly addressing that crisis, forming that united supranational government, will fundamentally reshape Europe. Some nations might quit the euro in the process, but that’s where all these weekends of crises are leading. Until then, we’ll have to keep asking, Is this the weekend that Greece leaves the euro?

For more information on the causes of this crisis, read Trumpet editor in chief Gerald Flurry’s article “Did the Holy Roman Empire Plan the Greek Crisis?