Time to Let Greece Go: It Doesn’t Belong in the Euro

Greece is culturally and economically too backward to share a currency with the rest of Europe.

Greek flags are seen in Athens, February 16, 2015 (Lefteris Heretakis)

Despite Greece’s resounding “no” to more austerity, European leaders are trying one last time this week to get the country to sign up to another bailout and keep it in the eurozone.

They shouldn’t bother.

If Sunday’s referendum made one thing clear, it’s that Greece just doesn’t belong. After more than 60 percent of Greeks allowed themselves to be deluded by far-left leaders who said the vote wasn’t about the euro at all but rather a chance to stick it up to the faceless institutions that have “humiliated” this nation of eleven million for five years by trying to make it see reality, the generous thing to do would be to prepare for an orderly Greek exit from the single currency.

This also makes strategic sense. A messy divorce could push Greece into Russia’s arms at a time of heightened East-West tensions. Greece can and should remain part of the West — as a member of the European Union and NATO.

But it’s not really “Western” enough to share the same currency with countries like Finland, Germany and the Netherlands. It does not have the same culture of compromise, of individual initiative and personal responsibility, the same deference to the law, rather than to leaders.

The majority of Greeks, if Sunday’s vote is any indication, never accepted they were ultimately responsible for the situation they found themselves in.

When the country stood on the brink of economic collapse in 2010, there was scant self-examination. Rather, Greeks blamed politicians who had cooked the books and lied for years to bring the country into the euro in the first place. It did not dawn on many that their own voting behavior — electing whoever promised them the biggest perks — and tax evasion might have been to blame for driving Greece into bankruptcy.

Five years later, the recriminations have only gotten worse. Rather than accept the need for liberal economic reform and greater self-reliance, Greeks blame their creditors for imposing cruel austerity measures. A combination of labor reforms, privatizations, budget and pension cuts was rejected as “absurd” and, consequently, Greece never came out of its depression when other European countries that made similar reforms, like Ireland, Italy, Portugal and Spain, are now growing again.

In January, the Greeks elected a government that promised to renege on the terms of their €240 billion bailout — and did.

Yet it seems Greeks voters never imagined that if they broke their compact with the rest of the European Union, the rest of the European Union might withhold support.

From a Western European perspective, it is hard to see the Greeks as anything but entitled.

They still have the relatively most expensive pension program in the eurozone. Three out of four Greek workers find a way to retire before they even reach the age of 61. Yet the incumbent government rejected recommendations from its creditors that it raise the retirement age. Instead, it budgeted an additional €600 million to finance a thirteenth month of pension benefits.

Before the bailout forced them to cut it, the Greeks enjoyed a higher minimum wage than the Spaniards and the Portuguese, let alone workers in the rest of the Balkans. But Greek productivity was among the lowest in the euro area. Rather than recognize that a lower minimum wage has made Greece more competitive, the government plans to raise it again.

In the years leading up to the crisis, Greece expanded its public sector by an estimated 150,000 workers to over one million, or 21 percent of the workforce. Under its bailout, it was supposed to take them all off the payroll again. It didn’t — and the ruling Syriza party of Prime Minister Alexis Tsipras came to power on promises to expand hiring in the public sector.

Immediately after taking office, Tsipras canceled the privatization of Greece’s largest seaport and its public power utility. His government said privatizations had “spectacularly” failed and were now “over.”

But they were a key condition of Greece’s financial support package. Under its first bailout plan, the country was supposed to raise €50 billion by selling off state property. That number was cut in half and the target date postponed to 2020 when Greece got a second bailout. Yet almost no progress has been made.

Greece could theoretically eliminate much of its debt by selling all the real estate and shares it owns in publicly-traded companies. This would also be a huge boon to the private economy.

The Greek state still owns, or partly owns, casinos, docks, hotels, resorts, railways and utility companies. Yet it has stalled and blocked privatizations at every turn.

In part, that’s because the state doesn’t even know what it owns. Nor does it want to. Dutch experts who were supposed to help Greece set up a reliable national land registry office were simply dismissed after months of work.

Attempts to establish a truly independent tax administration were similarly frustrated by politicians and bureaucrats.

In his negotiations with the creditors, Tsipras reiterated a long-standing Greek promise to improve tax collection. But his only concrete proposal was to raise taxes on corporate profits — something the International Monetary Fund in particular was wary of, fearing it would only make it more difficult for Greek businesses to recover.

Corruption and tax evasion remain widespread. Even anti-corruption officials take bribes and the vast majority of Greeks hide income from the taxman.

Their culture of cheating and mistrust is extreme. Surveys show 80 percent of Greeks believe it is all right to claim government benefits to which they are not entitled. 20 percent would disapprove. In most of Europe, the ratio is almost exactly flipped.

Years of austerity haven’t changed the Greeks’ something-for-nothing mentality. Nor have they taken advantage of the crisis to thoroughly shake up their economy and society.

Instead, the Greeks bit the hand that fed them by bringing to power a government that unilaterally pulled out of their bailout agreement with the European Union and the IMF.

Not only did it ask for more money after violating the terms of its financial aid; it demanded World War II reparations from Germany and threatened to let Islamic terrorists from the Middle East into Europe if it didn’t get its way. So much for the European “solidarity” Tsipras likes to appeal to.

The ultimate blackmail was Greece’s calculation that the other members of the eurozone wouldn’t allow it to exit for political reasons.

Greece’s economy, at 1.4 percent of the European Union’s, is insignificant. 90 percent of its debt is owed to official creditors since banks and private investors were forced to write off the bulk of their Greek bonds in 2012. Other high-debt nations in the periphery of the single currency union, like Italy and Portugal, are in a stronger position now than they were five years ago. The eurozone could withstand a Greek exit.

The reason European leaders are still reluctant to let Greece go is that its departure would raise uncomfortable questions. If the Greeks can’t cope, does it mean other underdeveloped societies like Bulgaria’s and Hungary’s are better kept out of the euro as well? Does it mean democracy and liberalization are not all it takes to weed out corruption and entitlement? Does it mean there is a limit to European integration and that, in fact, sometimes Europe needs to take a step back to move forward?

Ardent European federalists don’t like to ask themselves such questions, let alone answer them. But the last seven years of European crises have shown that the answer to all of them must be “yes”.

It’s time to recognize as much. The best way to start is to let the Greeks out.

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