Editorial: An uncertain road ahead for Greece and EU

Source:Global Times Published: 2015-7-6 4:24:28

More than 60 percent of Greek voters on Sunday rejected the terms of an international bailout in a referendum, signaling the country’s official rebellion against the EU. The EU is facing a painful choice.

The results of the referendum is not Greece saying ‘no’ to staying in the eurozone, but rather a ‘no’ to austere measures imposed by the EU on them. It is Greece’s intention to stay in the eurozone while refusing to accept the austerity measures, and continue to receive EU aid. Now they have kicked the ball onto the court of the EU, betting Brussels would not take the risk of kicking Greece out of the eurozone.

European integration is facing an unprecedented challenge. To the EU, appeasement to Greece is to encourage default and rebellion, which will result in negative consequences in the long term. But kicking Greece out would mean a serious regression of the EU, another unaffordable result.

Greece is a part of Europe geographically. If chaos happens to it, the trouble will still be the EU’s. Greece has rejected the bailout terms in a democratic way, overwhelming the EU spiritually. Not compromising means the EU has to confront huge risks ahead. EU leaders may not necessarily want to take them.

An old saying goes, in a narrow road, the braver one wins. Greece has made the final decision. The EU has to make a choice between bending the rules or losing a eurozone member.

There has been no exit strategy for the eurozone. If Greece exits, it remains unknown what the procedures are. The Greece crisis has revealed underlying problems of the EU. What is the nature of the organization? What obligations and rights do EU member states have between them? What should they do if someone defies the group?

The EU, usually considered a confederation, appears to be evolving toward a federal system, slowly and voluntarily. However, any unity is formed at some cost and it means those that are strong have to help and assist the vulnerable. Yet Germany and France seem to be stingy in offering aid to Greece.

The EU appears to have given Greece massive aid, but the money has mostly been allocated to pay off the interest on previous assistance and therefore only a limited amount of money was eventually injected into the Greek economy. The proportion could be just 3 percent of EU’s new assistance, according to statistics. Since Germany and France do not want to write off some of Greece’s debt, the Greek economy is unlikely to fully operate due to a lack of liquidity.

The Greece crisis is actually caused by low integration and a high amount of selfishness of relevant parties that refused to weather through the hardships together. If major EU members like Germany and France can’t unite, they will face a dead end that even hope remains transient.

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About Uy Do

Banking System Analyst, former NTT data Global Marketing Dept Senior Analyst, Banking System Risk Specialist, HR Specialist
This entry was posted in Crisis, Debt Crisis, Default, Editorial, EU, Eurozone, Greece and tagged . Bookmark the permalink.

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