Has Greece taken the exit ramp from the Euro?
June 29, 2015
Over the last 48 hours we have seen a dramatic turn of events in the five-plus-year saga between Greece and its creditors. The last minute compromises and referendum threats made over the past several years have de-sensitized governments, markets, and Europeans to the possibility of an actual Eurozone exit. Most believed until the very last minute that negotiations would ultimately produce a temporary resolution to the Greek debt crisis. But now both sides have greatly reduced the parameters for compromise and the immediate collateral damage has been a complete break-down in trust between Athens and its creditors.
Greek Prime Minister Tsipras’s choice to hold a referendum on July 5th was in essence the “exit ramp” option. Had he decided to hold this referendum a few weeks or even a few months ago, it might have lent some democratic support to Greek’s negotiating position one way or another. But instead the referendum will be held after Greece goes into technical default on Tuesday, and even though the referendum question asks if “…the draft agreement submitted by the EC, ECB, IMF to the eurogroup on June 25…be accepted,” in reality the only thing the Greek people will decide is whether or not to accept their government’s charted course out of the Eurozone. Thus in many ways, this referendum is about the government’s future staying power.
What has been most surprising about the past three days is the relative calm in Greece and among the Greek people. While there have been some demonstrations in support of and against Prime Minister Tsipras’ conduct, it appears as if most Greeks have resigned their fate to others after five years of endless recession. Snap polls suggest that 47.2 percent support additional austerity measures if it means remaining in the Eurozone; 33 percent do not support further austerity measures which means effectively leaving the Eurozone. There are no legal procedures to leave or to temporarily suspend Eurozone membership.
Did it have to end this way? No, it did not. When the new Greek government was elected, European leaders realized that greater accommodation would be required as Greece began to show some promising signs of economic growth. The tactics employed by the Syriza government, however, quickly soured this mood and left Europe with a stark choice: to extend funding to Greece without any pretense of structural reform, or not. Clearly, Europe has decided that it is more important to have a stronger currency union in the long-run, but what it may achieve in the short-run is a failed Greek state.
Heather A. Conley is senior vice president for Europe, Eurasia, and the Arctic, and director of the Europe Program, at the Center for Strategic and International Studies (CSIS) in Washington, D.C
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
© 2015 by the Center for Strategic and International Studies. All rights reserved.