Compromise on the Greek Question

The compromise which European leaders reached last week on aiding Greece may struck many foreign observers as evidence of the EU’s ineffectiveness at settling its internal discord, but it was in fact a minor victory for “President” Herman Van Rompuy and his campaign for greater economic governance from Brussels.

Van Rompuy, former prime minister of Belgium, became the first permanent president of the European Council last year, which is the regular conference of EU government leaders. The election of a relative unknown from one of Europe’s smallest of member states wasn’t particularly hailed as a great step forward for the union. Van Rompuy, critics dreaded, would allow himself and the EU presidency to be overshadowed by more powerful figures, including France’s Nicolas Sarkozy and Germany’s Angela Merkel.

Newsweek‘s Anita Kirpalani was quick to point out that the cautious choice for Van Rompuy was also a wise one, for he had actually a chance at fostering consensus. “What looks like timidity might just lead to a stronger Europe after all,” she predicted last November.

The Belgian’s ability to balance French and German interests was revealed in recent weeks. France, along with Italy, vehemently resisted the notion that withering Greece should seek support with the International Monetary Fund, believing that such a move post an embarressment to Europe’s economic integration. Germany on the other hand had no desire to bail out a member state that had repeatedly violated European budget rules and argued for tougher sanctions instead to punish eurozone members that made a mess of their finances. Chancellor Merkel even suggested that violators should eventually be denied the common currency.

Both parties compromised on Friday, agreeing that a Greek rescue plan should include the IMF. That Sarkozy was forced to give in is something of a personal victory for the Fund’s managing director, Dominique Strauss-Kahn, writes The Wall Street Journal. He might be running for the French presidency in 2012.

The IMF isn’t likely to act immediately. Both Europe and the Fund prefer to wait to see whether the aid announcement on itself will suffice to reduce Greece’s borrowing costs.

Comments

  • I heard a vilification of Germany on the BBC for not wanting to help Greece, in reality though they are taking the conservative route and probably want to avoid bailing out countries like the US has been bailing out the private sector.

  • Of course much of the bailing out the US government has done was unnecessary and avoidable if they wouldn’t have intervened in the private sector previously.

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