February 18, 2015 6:58 pm
Keeping Greece in the euro is about far more than money
The price of Athens staying within European order is probably worth paying, writes Marc Chandler
When European leaders talk about Greece they speak the language of economics, no matter what their mother tongue. I am a financial analyst, and I know that language well. Still, it seems to me that the continent’s politicians have chosen the wrong lingua franca. Geopolitics, far more than economics, is what is at stake. The cost of a blunder would be incalculable.
Russia’s actions in Ukraine would always have been difficult to foresee. But the lens of economics was the wrong one to choose, as diplomats scouted out the lie of the land. This is a mistake that Europe cannot afford to repeat in Greece.
Finance ministers are debating Athens’ demands for a loan that would tide the country over until June, allowing time to negotiate a permanent solution for Greece’s economic woes. The sums involved are large, and the Greek demands raise questions about the monetary and macroeconomic framework of the entire eurozone. They should not be agreed too hastily. But these issues, important though they are, should not blind politicians to Greece’s outsize geopolitical significance.
This is a country that bridges north and south, and east and west, like no other. It forms Nato’s southern tip. And the relationships it enjoys with Russia, Iran, China and others are unique within the alliance. Even if keeping Athens securely inside the European political and security order were to come at a high price, it is one that is likely to be worth paying.
Greece is responsible for securing a large and volatile part of the EU’s external border. This role is only likely to become more important, given the conflicts unfolding in north Africa and the Middle East.
The country’s strategic importance as a gateway to Europe has grown — even as its economy has shrunk by a quarter. It is one of the few eurozone countries that meet their Nato commitment for military spending (because of which, incidentally, it ranks among the most important customers of German and French weapons makers).
Politicians elsewhere in Europe are understandably concerned that their taxpayers will be made to pay for Greece’s past fiscal profligacy. But they should also remember that the country’s valuable contribution to the common defence of Europe goes largely uncompensated.
Events in Ukraine have shaken those in Europe who once took for granted that the postwar territorial settlement would be respected by all its neighbours. In what promises to be a protracted western confrontation with Russia, the geostrategic assets represented by Greece are irreplaceable.
Yet European leaders persist in discussing Greece’s financial position as if its geopolitical allegiances were immutably settled. Events may yet prove them right. But it is a risky bet. It would be a tragedy if a narrow-minded analysis of the situation led them to place that wager accidentally.
If the game of brinkmanship now unfolding between Athens and other European capitals leads to Greece’s leaving the eurozone, the costs will be far more serious than unpaid debts and economic stresses.
Mario Draghi, the president of the European Central Bank, has said he will do everything it takes to save the euro. Europe’s politicians should be willing
to do far more to keep Greece in the euro, and squarely in Europe’s political order.
The writer is global head of currency strategy at Brown Brothers Harriman
Recall that, as recently as 2013, EU officials were negotiating a trade association deal with Ukraine. No doubt diplomats were aware of the geopolitical ramifications of this endeavour; indeed, ushering Ukraine into the EU was seen in many quarters as a long-term goal. But Brussels, absorbed in the technical complexities of an agreement to open markets, may have taken its eye off the strategic situation.
Russia’s actions in Ukraine would always have been difficult to foresee. But the lens of economics was the wrong one to choose, as diplomats scouted out the lie of the land. This is a mistake that Europe cannot afford to repeat in Greece.
Finance ministers are debating Athens’ demands for a loan that would tide the country over until June, allowing time to negotiate a permanent solution for Greece’s economic woes. The sums involved are large, and the Greek demands raise questions about the monetary and macroeconomic framework of the entire eurozone. They should not be agreed too hastily. But these issues, important though they are, should not blind politicians to Greece’s outsize geopolitical significance.
This is a country that bridges north and south, and east and west, like no other. It forms Nato’s southern tip. And the relationships it enjoys with Russia, Iran, China and others are unique within the alliance. Even if keeping Athens securely inside the European political and security order were to come at a high price, it is one that is likely to be worth paying.
Greece is responsible for securing a large and volatile part of the EU’s external border. This role is only likely to become more important, given the conflicts unfolding in north Africa and the Middle East.
The country’s strategic importance as a gateway to Europe has grown — even as its economy has shrunk by a quarter. It is one of the few eurozone countries that meet their Nato commitment for military spending (because of which, incidentally, it ranks among the most important customers of German and French weapons makers).
Politicians elsewhere in Europe are understandably concerned that their taxpayers will be made to pay for Greece’s past fiscal profligacy. But they should also remember that the country’s valuable contribution to the common defence of Europe goes largely uncompensated.
Yet European leaders persist in discussing Greece’s financial position as if its geopolitical allegiances were immutably settled. Events may yet prove them right. But it is a risky bet. It would be a tragedy if a narrow-minded analysis of the situation led them to place that wager accidentally.
If the game of brinkmanship now unfolding between Athens and other European capitals leads to Greece’s leaving the eurozone, the costs will be far more serious than unpaid debts and economic stresses.
Mario Draghi, the president of the European Central Bank, has said he will do everything it takes to save the euro. Europe’s politicians should be willing
to do far more to keep Greece in the euro, and squarely in Europe’s political order.
The writer is global head of currency strategy at Brown Brothers Harriman
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