Europe Still Searching for Solution to Weak Greek Economy
There’s been yet another gathering of European leaders to try to stave off Greece’s economic ruin, and safeguard the rest of the euro zone against a potential collapse of the single currency. On Wednesday, there was the usual talk of austerity, and of Greece needing to stick to its commitments. There were also a few mentions of the need to couple austerity with a plan to get Europe’s economies growing again.
“Solidarity” and “growth” have joined “austerity” as European leaders’ favorite words to utter in public these days.
But as leaders fumble for a working solution to Europe’s debt crisis, skeptics are more inclined to use terms like “Grexit” – short for “Greek exit” – or even “Drachmageddon.”
In Brussels, euro zone leaders continue to downplay the idea that Greece should, or will, exit the single currency. Newly elected French President Francois Hollande pledged before meeting with his counterparts to do everything he could to persuade Greeks to choose to stay in the euro zone, “and everything to convince Europeans who might doubt the necessity of keeping Greece in the euro zone.”
The first part isn’t that hard; polls indicate a majority of Greeks want to remain in the euro.
The second part is tougher.
There’s more and more talk in Brussels of countries readying their own national economic plans in the event of Greece’s departure from the single currency.
European leaders also discussed creating a Europe-wide set of bonds that would help the bloc distribute and manage its debts more effectively.
France is in favor. But Germany – the euro zone’s largest economy – isn’t. And there’s also still wrangling over the focus on austerity.
France’s Hollande is pushing for measures to stimulate growth and employment, and the Germans have indicated that they are now willing to discuss growth.
“For the German government, austerity is not everything,” said Guido Westerwelle, Germany’s Foreign Minister.
“We know that budget discipline is one pillar. Solidarity is the second pillar, and of course, growth as a result of competitiveness is the third pillar.”
Okay fine, sounds like there might be some common ground, right?
But Europe’s leaders haven’t put forth any real plans, according to Vicky Price, a former adviser to the British government.
“There’s nothing concrete about how to resume growth. The talks about Greece are – we’re interested in keeping Greece in the euro, but what does that mean?” Price said. “What it does do is that it gives the wrong impression, and the Greeks will think they do have to leave the euro, and therefore, they’re withdrawing their deposits, and that will happen increasingly, and the banking system may collapse even before we have the next election.”
And those Greek elections happen in less than a month.
On the streets of Athens, some are fed up with the political wrangling in Brussels.
“I’m counting on French President Hollande,” said one man. “Maybe he can persuade the Germans.”
The man went on to say that he wants Germany to give Greeks more time, and be more flexible. “We are the ones who lose,” he said; “the politicians always win.”
Peter Bofinger, an economic adviser to the German government, said what’s happening now is a game of “chicken” between Greece and the euro zone.
“I think they have the smaller car, and we have the bigger car. But if these two cars collide in the end it’s a very dangerous thing for both sides and that’s why I hope that this game of chicken will find a solution,” Bofinger added.
It seems an apt metaphor.
Many here in Europe say they feel like they’re watching a slow-motion car crash, especially in the run-up to next month’s elections.
Neither driver, it seems, is inclined to turn the wheel or stomp on the brakes to avoid it.