Writing in Foreign Policy, Philippe LeGrain laments the sack of Athens by the Berlin Bulldozer and asks who's next? He now casts the EuroZone as a "glorified debtors' prison."
Greece’s submission to the conditions that Germany demanded, merely to start negotiations about further funding to refinance its unsustainable debts, may stave off the prospect of imminent bank collapse and Greece’s exit from the Eurozone. But far from solving the Greek problem, doubling down on the creditors’ disastrous strategy of the past five years will only further depress the economy, increase the unbearable debt burden, and trample on democracy. Even Deutsche Bank, one of the German banks bailed out by European taxpayers’ forced loans to the Greek government in 2010, says Greece is now tantamount to a vassal state.
But this is much bigger than Greece. It is clearer than ever that Europe’s dysfunctional monetary union has a German problem, too. As creditor-in-chief in a monetary union bereft of common political institutions, Germany is proving to be a calamitous hegemon. Paris may have tempered Berlin’s petulant threat to force Greece out of the euro, but German Chancellor Angela Merkel undoubtedly calls the shots. The deal that Greek Prime Minister Alexis Tsipras capitulated to mirrored German demands, not the proposals he drafted with French help last week. By pointing out the futility of resistance if Greece wished to remain in the euro, Paris has, in a sense, acted as Berlin’s agent in securing Athens’ acquiescence.
Let’s be clear. What Berlin and Frankfurt have done to Greece, they can — and will — do to others. In 2010, they blackmailed the Irish government into imposing 64 billion euros in bank debt on Irish taxpayers. In 2011, they forced out the elected prime minister of Italy, Silvio Berlusconi. They would surely hammer a future Portuguese government, itself flirting with insolvency. And yes, they’d bully Slovakia and the others currently cheering them on.
That’s the point of brutalizing Greece: to deter anyone else from getting out of line. Why vote for parties that challenge the Berlin Consensus if they will be beaten into submission, too? Created to bring Europeans closer together, the Eurozone is now held together by little except fear.
...Greeks ought to use their extended stay in debtors’ prison to better plan their escape. To default safely within the Eurozone, Greece needs to secure its banks. On prudential grounds, of course, Athens ought to force them to keep their holdings of bonds guaranteed by the Greek government to a minimum and recapitalize them with assets more tangible than tax credits on future profits. That way the ECB cannot shut them down again.
The Eurozone as a whole remains an economic basket case and a democratic disgrace. It is trapped in a nightmarish limbo where politics precludes the creation of common institutions that would cage German power and put the ECB in its place, while fear prevents its victims from leaving. So much for the European dream.