To tackle present challenges Greece and its euro zone partners need to overcome antagonism over past wrongs

In the epic of Greece’s adventures in the euro zone a small measure of encouragement  can be drawn from the agreement of the Syriza led government to pay its debt servicing instalment due to the IMF on April 9th and its ability to find the funds to do so. But the country is likely to stagger from one funding crisis to another every few weeks over the coming months so long as it is unable to negotiate a comprehensive new programme with the EU institutions and other euro zone countries. Such a programme mst inevitably bear some resemblance to the hated Memorandum between the previous New Democracy government and the hated Troika (IMF, ECB and EU Commission), which Syriza pledged to renounce. But there also can and should be differences, otherwise the democracy which the EU would claim as fundamental to its values has become a sham.

 

Troika arrangement is flawed

For a start the Troika itself should be re-appraised.  Although it is not sure that it will be able to continue to do so, Greece has rightly felt an obligation to meet its IMF obligations (IMF debt being about 10% of the total) given that the IMF pools the funds of countries from all over the world, many much poorer than Greece. But for that reason the IMF should not be a lead player on what is a euro zone problem and one which the euro zone which taken as a whole commands enormous financial resources. Its role should become purely advisory. The ECB’s role should also be changed. In financial terms it is the motor of the euro zone and so has to be fully involved in the discussions but it is not a political institution and as such should not be taking decision except ones which strictly entail the sound functioning of the euro system. The Commission should continue to play a central role since the 28 commissioners are almost all formerly elected national politicians put forward by their national governments and are accountable to the European Parliament.  Clearly however the other national governments of the euro zone are a key part of the picture. The chair of the euro group of finance ministers, Jeroen Dijsselbloem, the Dutch finance minister, has a key co-ordinating role, and it is appropriate that he is from a country which has been close to Germany in its economic thinking but is not Germany.

 

Time for a programme of economic recovery

Secondly, after six years in which Greece has suffered more economic pain than any country in the EU since the 1940s, the programme must be focused on economic recovery. This must include further pursing measures to facilitate business growth and expansion some of which such as labour market reform the new government wanted to reverse. It should also encompass a much more active investment programme from the EU budget and European Investment Bank. Jean-Claude Juncker’s €315bn EU-wide investment programme a centrepiece of his programme before and after being elected by the European Parliament as the new Commission president seems to have gone off the radar. It would make good sense for Greece, as the most troubled economy in the EU to take a pioneering role as a showcase for what can be done if the funds are used imaginatively and appropriately in tackling the existing situation and future prospects of Greece rather than being hidebound by the thinking of a generation ago when the EU’s spending was expanded under Jacques Delors.

 

Stakes are very high

The future of Greece is a key political issue for the EU. Apart from the anomaly of Greenland (an autonomous part of Denmark) no country has so far left the EU or euro zone.  If Greece were to leave or be forced out of the euro zone it could still be part of the EU, but it would be an embittered country whose continued membership would be tenuous. It would be a potentially disastrous precedent for other countries.

The high political stakes have been highlighted by the trip of Alexis Tsipiras, the Greek prime minister, to the Kremlin and apparent attempt to curry favour with President Putin, at a time when the latter is provoking the EU by fomenting civil war in Ukraine in punishment for Ukraine having wanted an association agreement with the EU. Insofar as he is looking to Russia in order to emphasise the geo-political implications of what happens in Greece, that is a reasonable way to remind EU politicians that there is more at stake than whether EU countries get back the money they have lent. However, in seeming to condone Russia’s de facto invasion of Ukraine he risks losing sympathy for Greece. Bad as Greece’s situation is, unlike Ukraine (a poorer country than Greece and one that also has a debt problem), its territorial integrity is not seriously threatened despite its age-old concerns with regard to Turkey. If Greece is not willing to show any solidarity with Ukraine it will struggle to argue that its fellow euro zone member states should show solidarity to Greece.

 

Greece’sEU partners need to take long term view

If Greece needs to take a more enlightened view of its self-interest, so do its euro zone partners. The position of Germany and the tensions between Greece and Germany are of huge importance but it also must be remembered that other countries in the euro zone have also lent to Greece  and that many of them take a harder line even than Germany.

Given that the future of Greece is of historic importance in the story of the EU, German politicians should realise that history cannot be ignored. With most of Germany’s western  EU partners, a process of reconciliation took place in the late 1940s and 1950s, in connection with the formation of NATO the Council of Europe. the European Coal and Steel Community and the European Economic Community; and a similar process took place with central and eastern Europe in the 1970s as part of the Ostpolitik initiated by Willy Brandt and then in connection with the unification of Germany in 1990 when Germany accepted its loss of territory to Poland in 1945 and the expulsion without compensation of millions of Germans from Poland and former Czechoslovakia. This process of reconciliation does mean that relations between Germany and these countries is about the present and future, and to bring up the Second World War in relation to today’s politics is regarded as against unwritten rules.

No such process ever took place with Greece one of the countries to suffer in terms of loss of life and economic damage from German occupation.

Moreover an aspect of the Greek crisis is whether the new Greek government has to be regarded as responsible for the behaviour of previous Greek governments and whether over the coming decades Greece should be able to look to future not overburdened by the consequences of the past mistakes.

It should be added that Germany is not the only country with historical issues in relation to Greece. After the Second World War, the British supported the Greek right in two civil wars against the Greek Communist-led left which had led the resistance to Germany.

 

Historical wrongs do not take away responsibility to address the challenges of today

Once all that has been said, the Syriza led government of Greece needs to realise that its main challenge is not to settle historic grievances or to negotiate with its creditors but to prove that it can make a success of its decision to try to remain in the euro zone. That does require the understanding and help of rest of the euro zone but the main responsibility rests with the Greek government itself: to manage the public finances on both the revenue and expenditure side much better than in the past and create the conditions for economic recovery. The Syriza government may be suspicious about the merits of foreign business investment, but that is all the more reason that it must encourage Greek businesses to invest through measures such as attacking corruption, reducing unnecessary regulation and improving the legal system.  It would not be in the interest of Greece for its partners to take a nonchalant attitude to these matters as they unfortunately did in the period after Greece joined the euro zone. But Greece’s partners should also not provide an excuse for the Greek government to avoid its main task by making demands which understandably make the Greek electorate resentful.