Will Greece Unravel the European Experiment?

The 19-member Eurozone may not have what it takes to survive...

In 2009, the Lisbon Treaty was supposed to create a new Weltmacht, a strong European Union with a president and foreign minister. Finally, the Europeans had the answer for Henry Kissinger, who sarcastically asked for Europe’s phone number. But it’s obvious that whoever answers the phone today doesn’t represent Greece.

The Greek elections, in which the radical left-wing Syriza won a near majority, shattered the Brussels consensus. The new coalition government insists that austerity must end and foreign debts must be renegotiated. Prime Minister Alexis Tsipras said that he wants Greece to stay in the Eurozone as well as the EU. But a breakdown of the European bailout program might make a Greek exit from the Euro (“Grexit”) the only feasible option. And the popular revolt against outsiders dictating economic policy creates a huge new roadblock to attempts to expand Brussels’ power over EU members.

Europe remains the world’s most important economic unit. Home to most of the significant colonial powers, the continent enjoys globe-spanning historical and cultural ties. Only after the mid-twentieth century was Europe displaced from military preeminence. In 1992, German chancellor Helmut Kohl predicted the “creation of what the founding fathers of modern Europe dreamed of after the war, the United States of Europe.”

However, the EU failed to live up to the grand hopes of the Eurocrats, the academic, bureaucratic, business, media and political elites who dominate continental politics and policy. Europe remains a geographic conglomeration, not a political unit.

Most dramatically, Dutch and French voters rejected the proposed constitution to expand Brussels’ authority and reduce national independence a decade ago. The Eurocrats then repackaged the convoluted constitution as an incomprehensible treaty, which could be approved by national parliaments. Only in Ireland was a popular vote required. The Irish voted no, but the EU insisted that Dublin hold another referendum, which achieved the desired result.

More power shifted to Brussels. However, multiplying bureaucracy stifled action, and the Eurocrats chose two utterly forgettable figures as president and foreign minister. Loyalty to the EU failed to extend beyond the organization’s sprawling headquarters-buildings in Brussels. Europe’s chattering classes wanted “more Europe,” but had no way to get it.

Then the Euro crisis exploded. The Eurozone created a common currency and monetary policy, managed by the European Central Bank. Only nineteen of twenty-eight EU members today belong, but in theory, all are supposed to eventually join. The common currency offered great convenience, but even the Euro’s architects recognized the inherent instability of creating a monetary union without a common budget. Relatively efficient northern European countries joined with congenitally improvident Mediterranean states. The latter no longer could maintain competitiveness through currency devaluation.

Greece lied about meeting the Euro’s standards, but the Eurozone’s other members didn’t care. Once in, Athens borrowed at essentially German interest rates and spent wildly. Not on anything that could credibly be called an “investment,” however. Instead, the Greeks preferred to keep their system of relaxed, but corrupt, inefficiency. Debilitating work rules, privileged economic cartels, bloated public payrolls, profiteering political influences and enervating cultural practices ensured that the country would never grow like its northern neighbors. Soon the loan bills came due and Athens couldn’t pay, which triggered a cascade of crises and bailouts.

Although nominally concerned about Greece—and other aid recipients, such as Cyprus, Ireland, Portugal and Spain—many Eurocrats had a larger purpose in mind. Said German chancellor Angela Merkel: “We must overcome the architectural flaws that worked their way into the economic and monetary union during its formation.” Euroelites used the crisis to bludgeon the European public to accept further continental consolidation.

Chancellor Merkel and former French president Nicolas Sarkozy disagreed over the details, but both pushed for Brussels to oversee budgets of individual governments. Said Merkel: “We have a common currency, but no common political and economic union. And this is exactly what we must change. To achieve this—therein lies the opportunity of the crisis.”

The opportunity of the crisis.

Which helps explain European leaders’ insistence that no country, no matter how badly indebted, should leave the Eurozone. Whatever the problem, said then-European Council president Herman Van Rompuy, “we’ll do more.” And “doing more” always meant lending more, which is why Greece currently carries a debt-to-GDP ratio of 175 percent, greater than any nation other than far-wealthier Japan.