New Year, Old Problems in Europe | Stratfor
http://www.stratfor.com/geopolitical-diary/new-year-old-problems-europe[12/1/2015
2:51:06 ]
What is a Geopolitical Diary?George Friedman Explains.
More than six years into the crisis, Europe is once again
debating whether Greece will or should leave the eurozone.On Jan.
3, German magazine Der Spiegel wrote that Berlin thinks that if
left-wing party Syriza wins Greece's Jan. 25elections and seeks to
renegotiate the country's debt, Athens would probably have to leave
the eurozone. The report alsosaid, however, that the German
government believes the currency union is more prepared to
withstand a "Grexit" (Greekexit) now than it was before. Former
crisis countries such as Ireland and Portugal are growing again,
the European Unionhas a permanent bailout fund to deal with
potential crises and banks have cleared up their balance
sheets.
A German government spokesman declined to comment on the article
but said Berlin expected any new government inAthens to honor
Greece's commitments with the European Union and the International
Monetary Fund. German ViceChancellor Sigmar Gabriel said that
Germany wanted Greece to stay in the eurozone but that Greece's
departure wouldnot be as tragic today as it would have been in the
past.
Berlin is sending political messages to both the domestic and
foreign audience. It is telling Greek voters and politiciansthat
leaving the eurozone is a real possibility if Syriza pushes for a
renegotiation of Greece's debt. It is also telling Germantaxpayers
that their money will not be given to a country that refuses to
introduce reforms. The German government isstruggling to find a
balance between the need to preserve the eurozone and the need to
ensure that Greek authoritieshonor their promises. This is
precisely the struggle Berlin faced between 2010 and 2012, when
Athens was given twobailouts and was allowed by the European Union
and the IMF to restructure its debt.
Gabriel may be right when he says the risk of contagion is
somewhat lower thanit was in 2011 or 2012. But as the main
contributor to eurozone bailouts,Germany would be among the largest
victims of a Greek default. Moreimportant, Berlin is worried about
the political and psychological effects shouldGreece leave the
eurozone. If Greece departs, others could follow. In manycountries,
including Spain and Italy, popular political parties are
campaigning on debt restructurings and leaving the euro.Once the
taboo of leaving the euro is broken, the consequences are
impossible to predict.
It could be argued that Berlin has called the Greek politicians'
bluff. Like Syriza, the current Greek government hasrepeatedly used
the threat of default against the European Union, and Berlin wants
the Greeks to know that it is preparedto pay the price of Greece
leaving the currency union. But even if Germany is pressuring
Athens, one fact cannot bedenied: Greece's debt is unsustainable
and will continue to generate problems for the eurozone.
Spain is watching the situation closely. It will hold elections
by the end of the year, and the conservative administration
inMadrid is dealing with the rise of Podemos, a left-wing party
that shares Syriza's views on austerity and debt. Somesectors of
the Spanish government believe that a Syriza victory would lead to
political and financial chaos in Greece,indirectly hurting the
popularity of Podemos.
The weekend also offered a glimpse behind the scenes at the
political situation in the United Kingdom. On Jan. 4, PrimeMinister
David Cameron said he would be "delighted" to hold an early
referendum on Britain's membership in theEuropean Union if his
party won the general election in May. (The referendum is scheduled
for late 2017.) The electionswill probably lead to a fragmented
Parliament and difficult negotiations to form a government. Like
Greece and Spain, thetwo-party system is in crisis in the United
Kingdom, and the conservative government cannot rule out
cooperation with theEuroskeptical UKIP.
Cameron's statements are meant to keep the door open for some
kind of post-election cooperation with UKIP as well asto appease
the Euroskeptical factions of the Conservative party and bring the
European Union to the negotiating table.Most of Britain's demands,
which include reforming immigration norms and regaining sovereignty
from Brussels, wouldrequire a treaty change, which Germany opposes.
Cameron will meet with German Chancellor Angela Merkel on Jan. 7
todiscuss ways to keep Britain in the union without making
significant reforms to the continental bloc. One thing is
certain:The European treaties will not be reformed before 2017.
The weekend's moves in Germany, Greece, Spain and the United
Kingdom show that fear is one of the strongest forceskeeping the
European Union together arguably stronger than conviction. In some
cases, there is a deep fear of the
New Year, Old Problems in Europe | Stratfor
http://www.stratfor.com/geopolitical-diary/new-year-old-problems-europe[12/1/2015
2:51:06 ]
unknown consequences of leaving the euro, both for the country
that leaves and for the countries left behind. In othersthere is
fear of new political forces replacing the traditional elites that
built the European project. On Jan. 5, a spokesmanfor the European
Commission said eurozone membership was "irrevocable." The
statement was a combination of wishfulthinking and fear of the
unknown. Debt, financial assistance programs and membership in
international organizations arebasically contracts, and contracts
can be ended if one of the signatories feels that honoring an
agreement is more costlythan breaking it.
Send us your thoughts on this report.
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NOV 28, 2014
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