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France, Germany, Greece

The German Chancellor and Grexit

By Jacques Sapir

A Greek exit from the Euro, following the election on 25 January, is no longer unthinkable, Chancellor Angela Merkel admitted in the German weekly “Der Spiegel” on Saturday.  This is an important statement, which can be analyzed in two different ways, neither of which are opposed to the other.

The first reading is that Herr Merkel, with Germanic subtlety, has decided to put pressure on Greek voters. Yes, if you “vote the wrong way,” an exit from the Euro in your country is possible. So, be prudent. If unsubtle, it is certainly more effective than the call by Pierre Moscovici, the European economic and financial affairs commissioner (and former French finance minister) to vote for the continuation of reforms.

These people have no shame. As if the Greeks had even the slightest doubt that these reforms have sunk their country to its knees and caused a sharp increase in mortality. In reality, these reforms have not had the desired result, which is quite normal in view of the realities of the economy. The latest figures showing an exit from recession with feeble growth (+ 0.7% in the third quarter of 2014, after a six year recession) can only be explained by a good tourist season. [1] Exports continued to decline in 2014, a process accelerated by the embargo imposed by Russia on agricultural products as a result of sanctions imposed by the European Union. But Merkel risks commiting a “gross” error assuming the Greek population is still wedded to the Euro. In fact, a survey conducted by Gallup International in December 2014 gives some interesting – and unsuprising – results:

Opinion Poll (December 2014)

The EU   To Euro
Do you feel close to 10% Do you wish to keep the Euro 32%
Do you feel distant from 52% Do you wish to return to a national currency 52%
No Change 35% No view 11%
No Response 3% No response 5%

Fieldwork conducted by WIN/Gallup International – www.Gallup-international.com

There is therefore no evidence to suppose that the threat by Herr Merkel, who incidentally demonstrates how much she respects democracy, will have the desired effect on Greek voters.

A second reading of the German Chancellor’s statement is that is represents the breaking of an absolute taboo: you cannot leave the Eurozone! Such stupidities have been uttered on this subject in recent times. In the absence of a comprehensive anthology, we can cite:

  • “an exit from the Euro would double the weight of French debt” (Nicolas Sarkozy, who despite being a lawyer ignores international law and the fact that a security issued in France is repayable in the currency of France)
  • “a devaluation of the Franc by 20% means a 20% increase in fuel prices, at the pump” (the world price of oil has dropped by 50%, have you noticed an equivalent decrease at a gas station?)
  • “an exit from the euro would cause a rise in unemployment of 1.5 million,” (Montaigne Institute) – all the economic calculations show, to the contrary, a strong improvement in employment within three years after the dissolution of the euro zone and a depreciation of 20% of the France’s recovered Franc [2].

Merkel’s breaking of this taboo must have been a real shock to the euro-enthusiasts of all colours,whether right-wing (eg former prime minister François Fillon) or “left.” One can imagine the discomforted looks, the devastated air, the creeping panic. We have already heard enlightened comments, such as those pronounced by the inexorable Pierre Moscovici, “but that is just lining up with the Front National” … Horresco referens. Of course, the idea does not come to any of these “great minds” that it is precisely by dissolving the Euro that we deprive the Front National of one of its best arguments.

It remains to be understood the reasons that have led the Chancellor to break this taboo:

  • Is it because she understood that the Eurozone is actually dead? There is no banking integration, contrary to what one says, as demonstrated Anne-Laure Delatte and Vincent Bouvatier in a paper on the site VOX CEPR [3].
  • Is Merkel conscious that behind Greece is looming a crisis of rather more importance in Italy, which could be quickly followed by Spain and France?
  • Is this statement the product of “fatigue” with propping up the country; we know that the Greek problem is bound to resurface regularly on the agenda of the European Council of heads of state.

Or perhaps it is an awareness of the accumulation of both economic and political problems that will quickly make the Euro zone unmanageable? It is not impossible, in this case, that Herr Merkel, who wants to avoid the political weight of a Eurozone break-up falling on the shoulders of Germany, to seek in a “prepared” crisis the opportunity for a dissolution of the Single Currency that is becoming inevitable.

The impact of such a statement on the French government must also be assessed. Does Paris understand that it has in its hands the last, the very last, chance to regain control? If our government showed the lucidity and courage that events impose, it would take the lead and, instead of being condemned to a reactive posture it would seize the opportunity offered by Merkel and propose a managed dissolution of the Euro.  We should fear being confined in a political and economic autism that does is nothing and leaves us heading into the crisis of the blind in such a world full of turmoil.

[1] J. Bastian, « Is there (sustainable) growth in Greece? », published 19 Noevember on the blog Macropolis, 14 novembre 2014, http://www.macropolis.gr/?i=portal.en.the-agora.1720

[2] See the pamphlet by Sapir J., Murer P. et Durand C., Les Scénarii d’une dissolution de l’Euro, Fondation ResPublica, Paris, septembre 2013.

[3] Vincent Bouvatier, Anne-Laure Delatte, Eurozone bank integration: EU versus non-EU banks, 14 décembre 2014, http://www.voxeu.org/article/eurozone-bank-integration-eu-versus-non-eu-banks

Russeurope Blog

Translation/edit by Revolting Europe

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Writer on Europe's Left, trade union and social movements @tomgilltweets or @revoltingeurope

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