The Greek financial crisis is over. The European Commission gave Greece Sunday, July 12 2015, as the deadline to solve the problem. It was an open ultimatum. Greek Prime Minister Alexis Tsipras was first attacking Berlin and Brussels head-on but then gave up and agreed to make a deal with the creditors. The talks lasted for 12 hours, and on July 13 morning, President of the European Commission Jean-Claude Juncker and Chancellor of Greece Angela Merkel told journalists that there would be no Grexit.
At first glance, it seems that Tsipras has acted against the will expressed by most of the Greeks during the referendum of July 5. The deal he has accepted is even more binding that the one rejected by the Greeks on July 5. Some mass media have qualified it as Greece’s capitulation, the others call it a success. In any case, the compromise has been reached. And now that it has been reached, it has turned out that both the Greeks and the Europeans, mostly the Germans, were very much afraid of the possibility of Grexit. Now that the Europeans have found money, the Greek crisis has been put off.
The good thing for the Germans is that the Greek debt has been confirmed and will be repaid. The good thing for the Greeks is that they have already received a new multi-billion package of assistance.
The money will be provided by the ESM, a project approved by Germany in 2012. Standard & Poor’s reacted to this by upgrading Greece’s sovereign credit rating from CCC- to CCC+ but classified its bonds as vulnerable to nonpayment.
Germany is the biggest investor of the ESM and the biggest creditor of Greece. This is why it will get money from the ESM for Greece. In fact, the money will not even go outside the European Central Bank. Now the Greeks will get what they have claimed for years – European solidarity. And the cost of it is 86bn EUR. Just for comparison, this is by a third more than annual GDP of Serbia.
The political decision to finance Greece has been passed. Now, by the end of the next month, the parties will have to decide how this will be done.
While the ESM will be covering the Greeks’ debt, they will have to look for own sources to ensure their economic growth. Tsipras wanted more – he wanted to see the debt written off. But all he has achieved is deferrals and lower interests - and also respite for pension and tax reforms. The Greek referendum was the first step to prepare psychologically the Greeks for more unpopular decisions. The ruling party has not split as was expected as the Greeks have proved to be not inclined to resist.
In any case, the Greek crisis has become a political lesson for Europe. During the final night of the talks, Tsipras was forced to agree to sell national property worth 50bn EUR. It is not a fact that this money will be given against the debt. What is more important here is that the property will be privatized by a special Germany-controlled fund. Initially, the fund was supposed to be headquartered in Germany but later the sides agreed to deploy it in Greece. But, in any case, this is the hardest point for Greece as, in fact, it means that the Greeks are losing their sovereignty.
This point is the key result of the Greek talks – though it is not clear what consequences it will have for the EU.
The European Union is based on the principle of unity of sovereign nations. It is a union with no federation but with a center controlling sovereign states. Greece tried to use its sovereignty to force the EU into concessions. The new Greek crisis has revealed the defects of the Eurozone. Its key deficiency is that its currency union is not backed by a political union. As a result, the stronger can suppress the sovereignty of the weaker. The EU is becoming more and more like empire with a strong core and a weak periphery.
The last stage of the Greek crisis has shown that Germany is the EU’s leader and has enough strength to impose its will on its weaker partners.
Does this mean that the “European dream” died on July 12 2015? It is hard to say yet – for the German inspectors that have put Greece up for sale are just one element of Europe’s big picture. For us to be able to say what may happen, we need new facts. The Greek crisis has shown that Germany controls Central and Eastern Europe not only economically but also politically. Among those supporting Germany’s firmness with respect to Greece are the Young Europeans and “protestant” Netherlands and Finland. This is very much like the times of the Middle Age. “Catholic” France and Italy are on the Greeks’ side and are very critical of Germany’s attitude.
The key result of the last stage of the Greek crisis was that the EU faced no crisis of unity and continues to be a union with no exit. The hopes of the EU’s internal and external enemies proved to be futile. So, Russia’s friendly relations with Greece have no special prospects as long as the EU has money to overcome the Greek crisis. The next time Europe may face possible Grexit is the end of 2016. But unless accompanied by similar problems in other member states, this crisis may also be overcome.