Time to end failed experiment

Euro has done nothing to help EU nations in the global race for markets

Alexis Tsipras says the deal his European partners, principally Germany, and the IMF want Athens to agree to is “humiliating” and “undemocratic.” To “prove” his point, the Greek Prime Minister is organising a referendum on it fully four days after the latest repayment to the IMF falls due. By then, with a run on the Greek banks already well under way, it may be too late anyway.

If being asked to pay your debts on time is being humiliated, then pretty much every nation on earth has been thus humbled, including Britain. Of course, you have to feel sympathy for the average Greek pensioner or teacher, who has no great personal responsibility for the crisis.

Yet, the Greek nation as a whole does have such responsibility. They got into the euro by publishing some massaged statistics on the health of their economy. Athens borrowed – public and private sector – vast sums at “German” low interest rates that had previously been unavailable.

Then they had a decade-long party on the proceeds, failing to invest in the productive capacity of the Greek economy, spending instead on cushy early retirement deals in the public sector and German cars – with widespread failure to pay taxes. Hence the mess Greece, Europe and the IMF find themselves in now.

Undemocratic? What Greece seems to be telling the world is that it should be relieved of its debt obligations because that’s what the Greek people voted for. Even if the referendum was not too late it would be an irrelevance, and certainly not the product of a mature democracy, which Greece, above all others, really ought to be.

The television news cameras seem permanently trained on every cash point machine in Athens and Salonika, waiting for the first disappointed Greek account holder to reel back in despair as his or her request for a few euros is refused. And yet the silent, invisible run on the Greek banks as funds are moved electronically out of accounts began months, even years ago.

That is why the banks are entirely dependent on the European Central Bank to stay solvent, and why they could collapse in a matter of days if the German-dominated ECB Council in Frankfurt willed it. No one can be sure what it and the IMF will do, but waiting for a referendum result seems the daftest thing of all. There is no incentive for most Greeks to vote for further austerity, and every reason for them to carry on rejecting it until the EU, the ECB and the IMF get tired of asking and buzz off.

The EU should not cave in again to Greece, because of the appalling example it sets. It is easy for the Tsipras government to portray the EU, IMF and Angela Merkel in particular as the bad guys (and no doubt mistakes have been made on all sides in this long crisis) but still, the Greeks are mainly responsible for the debts they ran up as a nation, and, collectively, they have failed to build a competitive economy in an increasingly tough world.

Whether Greece leaves the euro is almost neither here nor there. The fundamental point is that Greece needs trade and industry that sustain its living standards without having to borrow from foreigners – whichever money they happen to use. If they leave the euro, their debts will still be there, and even more unmanageable as they will then be a foreign currency burden having to be paid out of devalued unwanted New Drachma or whatever it will be called.

The wider lesson is that the single currency experiment has been a general disaster and done nothing to help EU nations in the global race for markets. If any good is to come out of the Greek tragedy it is that Paris and Berlin will face the fact that François Mitterrand and Helmut Kohl’s grand plan to force European unity through economic means has failed. It is time for the euro to be basically broken up, with the Dutch and Finns sticking with the Germans and everyone else devaluing and restructuring. Maybe we could all have a vote on that?

By SEAN O'GRADY