Many commentators have seen the Greek financial crisis as an exercise in stupidity. Former treasury secretary Larry Summers, for example, likened it last month to World War I, about which historians “still, a century later, are incredulous that it happened.”
But maybe the bitter confrontation over Greece’s continued membership in the euro zone will prove to be good for all concerned. That’s because the cruel brinksmanship and bank withdrawal lines may burn away, once and for all, the air of unreality that has accompanied the common currency since it was introduced 13 years ago.
I was living in France in January 2002 when the euro landed on tiptoes, packaged with unmemorable coins and bills. This was the innocuous new money of what proved, until the Greek crisis hit, to be an Alice in Wonderland monetary union.
Europeans didn’t vote on the new money, for the most part. They rarely get to vote on anything about the “European Project,” lest they make what the elites consider the wrong decision.
So it is with the plan for a Greek referendum Sunday. Just what the Greeks would be voting on is a mystery, at this writing, since so many bailout offers have been extended and withdrawn. But Euro-savants seem to hate the idea of a Greek vote, regardless. They treat it as a cop-out or betrayal by Greek Prime Minister Alexis Tsipras. The not-so-subtle implication is that he should toughen up and force a deal on his country.
Tsipras has shown he’s capable of devious maneuvers. But putting this issue to the Greek people strikes me as a sensible idea, precisely because it would provide an implicit referendum, up or down, on the euro and the sacrifices necessary to preserve it. Greeks who accept a harsh bailout to keep the euro as their currency will know what they’re suffering for — and they will own the decision. If they reject the deal and commit euro-suicide, they’ll own that, too.
The public spectacle of Greece’s suffering has had some perverse benefits, too, in destroying the magical thinking that has accompanied the euro. Greeks are learning the terrible consequences of imprudent debt. The rest of Europe is recognizing the moral hazard of giving Greece a slide — and encouraging debtor nations throughout Europe (and their left-wing radicals) to believe there’s an escape hatch from reality.
Commentators deride Germans (and Greeks, too) for mixing economics and morality. Sorry, but they are mixed. Money and finance require trust that the paper notes and electronic digits on the screen represent real value. When that trust vanishes, systems implode. Preservation of trust is in part a morality play.
What the euro needs is the public buy-in that the elites have been reluctant to seek. Europe has had too few referendums. The 1992 Maastricht treaty that created the euro was put to a vote in only three countries. In France, it was approved by the slimmest margin, 51.1 percent. In Denmark, it was rejected in a first referendum, then approved in a revote the next year. Only in Ireland, which knew it was getting a sweet deal that financed a huge (and nearly ruinous) lending bubble, was there a substantial 68.7 percent majority in support.
The European Union suffers from a similar lack of a democratic foundation. A proposed European constitution was put to a vote in just four countries in 2005. Two of them, France and the Netherlands, rejected it, by 54.9 percent and 61.5 percent, respectively, and the constitution was abandoned. It was sneakily replaced by the Treaty of Lisbon. That unity pact faced a referendum in only one country, Ireland, where it was rejected the first time, in 2008, and then approved the next year.
Not an inspiring record of democratic support. The elites have behaved as if these electoral setbacks have been a sign of regrettable populist sentiment — a political version of soccer hooliganism. So they have plunged ahead, ever deeper, ever wider — until Greece happened.
The euro in its initial years was like a teaser mortgage; it had a low initial rate of interest that masked a huge bubble payment down the road. Greeks loved being able to shop with a German credit card. Germans went along for the sake of European unity, but they resented having to pay the bills.
With the Greek crisis, it all got real. Bailouts, ultimatums, riots in the streets, defaults, painful soul-searching about how Europe wants to live and who will pay for it. In the long run, that’s likely to be a good thing. It will create real money for those who are willing to pay the price.