Greece Has United Europe Against It — Except France

No one but François Hollande still sympathizes with the Greeks. But what can he do?

French president François Hollande welcomes Greek prime minister Alexis Tsipras in Paris, February 4
French president François Hollande welcomes Greek prime minister Alexis Tsipras in Paris, February 4 (Elysée)

A Greek exit from the euro would be less divisive now than half a year ago. The antics and demands of Greek prime minister Alexis Tsipras have exhausted nearly every other European country’s patience. It seems only France is still in favor of continuing support to keep Greece on board.

Since the Greek crisis began in 2010, the country has been a proxy for a wider discussion among countries about what sort of Europe they want.

Germany and its allies in the Baltics, Central Europe, Finland and the Netherlands took a hard line from the start, largely ruling out debt forgiveness and conditioning financial support for Greece on economic reforms and spending cuts.

The aim of shrinking the Greek state and liberalizing its economy was to boost the nation’s competitiveness, see it converge more closely with the rest of Europe and avoid — at all costs — a “transfer union” in which rich member states would permanently bail out the poor.

The three Baltic republics, Slovenia and Slovakia worried less about transfer union than they did about the unfairness of having to bailout out a country with higher living standards than their own.

Having gone through similarly deep recessions, they also wondered why Greece should get respite when they cut public spending, reduced wages and improved their business climate to revitalize their economies. Austerity created more hardship for their people in the short term but allowed their economies to recover within only a few years. Why should they now help bail out Greece when it refuses to do the same?

The perception of lazy Greeks begging for support while constantly failing to make good on their commitments also informed sentiment in the richer north where Finland and the Netherlands were the most adamant that Greece should not get debt relief nor financial support if it failed to reform. Their stance helped Germany portray itself as slightly more compromising.

The German line won out and the Greeks were subject to an austerity regime they have come to resent.

Chancellor Angela Merkel never tires of pointing out that Europe’s high social spending and the protectionism of some countries is unsustainable in a global economy. The only way to keep Europe prosperous, she believes, is making it more “German”.

For others, this is exactly the problem. They see Germany as representing a “neoliberal” world order that puts profits before people. They argue that the bailouts didn’t help Greece so much as German banks that had lent to Greece. They blame austerity for pushing Greece’s economy deeper into recession and leaving one in four of its workers unemployed.

Southern European and socialist-ruled countries like Cyprus, France, Italy, Portugal and Spain were initially sympathetic to this line of thinking. Even if they didn’t agree with all the criticism of Germany, they advocated higher government spending to stimulate growth and big public initiatives to reduce especially youth unemployment.

The debate was never as simple as markets versus the state. For one thing, Germany isn’t neoliberal at all. When it talks of “competitiveness”, it means competing with other nations, not competition within. The German economic model prizes labor and market stability. It explicitly seeks a middle way between American and British free markets and the dirigism of countries like France and Russia.

Nor did all Southern European states reject the need for reform. Italy, Spain and Portugal recognized they needed to cut back. They overhauled their pension and welfare systems to make them more affordable. They made efforts to improve labor flexibility and remove impediments to job creation. Even the ruling Socialist Party in France has lately started making some cuts and labor reforms.

So when the far-left Tsipras went around Europe earlier this year seeking support from fellow Mediterranean member states for Greek relief from austerity, he didn’t find many leaders willing to back him.

When Portugal and Spain didn’t help, Tsipras lashed out, accusing them both of trying to wear down and “topple” his government “before our work begins to bear fruit and before the Greek example affects other countries.”

Down to two, Tsipras made friends in Rome in Paris. But he now seems to have exhausted the patience of Matteo Renzi as well who is determined to strengthen the Italian economy by making the sort of business and labor reforms Tsipras rejects.

In a recent interview with Il Sole 24 Ore, Renzi admitted that he and Merkel didn’t always see eye to eye. But blaming her and Germany for what is happening in Greece is a bad “alibi,” he said.

Always putting the blame on the Germans can’t be a policy. It can boost morale but it doesn’t boost the economy.

It seems Tsipras’ “last hope,” as Le Monde put it this week, is François Hollande. The French president has tried to calm everyone down, saying Greece’s rejection of austerity in a referendum on Sunday shouldn’t be interpreted as a vote against the euro and calling for more “solidarity” within the eurozone.

He appears to have the French people behind him. A poll published in Le Parisien shows 55 percent supporting debt forgiveness for Greece. But it also shows that half of France now favors a Greek exit from the eurozone, up from 39 percent only a month ago.

Hollande is unlikely to persuade his fellow leaders to give Greece another chance. His previous calls for a pan-European jobs effort went nowhere. His inability to bring down unemployment in France has weakened him at home. The growing imbalance between France and Germany has weakened him in Europe.

Merkel still insists on bringing Hollande along and pursuing policies in tandem with the French. But this only reflects Germany’s reluctance to take charge. If it has the rest of the eurozone behind it, there is little doubt Germany will make its own decision on Greece — and France will fall in line.

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