European Disunion: Merkel Has Lost

Merkel looking eternally disappointed. Courtesy of the Telegraph.
Merkel looking eternally disappointed. Courtesy of the Telegraph.

The Greeks are in revolt. Despite the pressure of the most powerful economic forces on the continent, they voted OXI on Sunday: No. No to the austerity Europe demands of them, and no to the conditions on their bailout loans.

Although Greeks want to stay in the EU and with the euro by a large margin, they may have revoked their membership despite themselves. The consequences could be dire for the country that gave the euro its name, but another country may suffer alongside them, the leaders of the opposition: Germany.

In the negotiations over Greece’s debt, Germany has been inflexible. Their belief is simple: Greece must pay.

For the past few months, Europe has fallen in line. Threats from ECB, IMF, and leaders in of all Europe’s powers claimed a reckoning is coming for Greece if they voted No on Sunday.

But now the vote has been cast, the cracks that have always run through the consensus have begun to show. Reports suggest German Chancellor Angela Merkel remains intransigent, but others are breaking away. Belgium’s finance minister made an early call for negotiations to begin again. Italy also seems keen on getting Greece back into the fold.

Germany’s biggest partner, France, has never been entirely convinced that the German strategy is the right one, and even as the Germans continues to threaten Greece with visions of an economy straight from a Bosch painting, the French are reconsidering giving the Germans the lead on this one.

Merkel has lost. Germany has lost,” says Benoit Hamon, an ally of Hollande.

Britain also seems less than eager to see Germany tighten the screws, although it remains typically aloof from the issue.

According to the Washington Post, Greece’s Prime Minister, Alexis Tsipras, has been trying to engineer this sort of uprising since he took office. He “has been scrambling to win the support of Europe’s leaders. Together, he argues, they can ignite a revolution against Merkel’s fiscal tyranny, which is also crimping spending from Lisbon to Rome, Paris to Dublin.”

Up to now, he’s had little success. But perhaps that is changing.

Spain or Portugal may be the first to outright break ranks.  The Spanish government has been vociferously against Syriza and Greece in recent weeks, but main rivals Podemos made gains in local elections this year, and they are all about congratulating their comrades around the bend of the Mediterranean, saying the election was “good news” for Greece and Europe.

Podemos and its twin out-of-power anti-austerity party, the Socialists in Portugal like what they see in Greece. Both parties are gaining in the polls and both countries have elections later this year.

As Europeans increasingly  become dissatisfied with German economic leadership, politics on the continent continue to drift away from the consensus towards extremes. In Greece, Syriza has warned that their failure is likely to lead to a neo-Nazi government under Golden Dawn. Similar parties are nipping at the heels of major governments everywhere.

As Europe wakes up to the possibility of a Greek exit, that carefully stitched consensus is increasingly coming apart at its seams. Many of the leaders around the continent, prominently Italy, want to see a move towards more integration, meaning at least some accommodation for Greece. Others, led by Germany, seem to have thrown up their hands over the whole thing.

Which is bad, because without better leadership, time may be running out on the European project. The crisis in Greece is not just serious for Greeks, the fear of spread is significant enough that Spain, France, Italy, and Portugal have come out and said there is 100% nothing similar about their situations.

But investors may not believe them. And even if the Mediterranean states can reassure the money, those anti-austerity parties are gaining in the polls. 

Germany and France have agreed to an EU summit on Tuesday where Tsipras will reveal his new proposal for a deal. But the damage may already have been done. Greece is most likely to be the loser of whatever agreement or disagreement comes out of Paris. But it may have someone to share its misery with.

Tsipras has been trying to rally other nations against the German leadership for months. He’s unlikely to help his cause Tuesday, but the signs are there for more to follow his lead farther down the line.

On the grander stage, whether Greece stays or goes at this point may be unimportant. Germany has staked out its position on countries that can’t make their payments: suffer or get out. That has worked well this time around, but Merkel may find herself with far fewer friends than she thought soon enough. Once business is done with Greece, Germany may be the next country to find itself isolated. 

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