ROME — As stock exchanges tumble worldwide, pundits try to apportion blame. Some weigh the momentous impact of the Greek referendum that rebuffed a debt settlement offered by the European Union. Others ponder the problem of the Chinese Stock Exchange which lost about a third of its value in a matter of a few weeks. The fact that China’s Shanghai-Shenzhen Index lost the equivalent of ten times Greece’s debt, by some lights, shows that China’s current stock turmoil is far more ominous than Europe’s malaise.
I beg to differ. Behind the roller coaster ups and downs of the Chinese stock market lies a solid national economy and state, rich in foreign currency reserves and armed with many institutional instruments for intervention.
Behind the Greek tragedy, on the other hand, lies a motley collection of states which are a European Union barely in name. Days after the Greek referendum, it’s still unclear if a compromise between Athens and Brussels can still be struck and under what conditions. And though the total volume of Greece’s losses appears much smaller than China, a Greek exit from the Euro zone could trigger the end of the euro as a currency as we now know it. Its demise could also spark the reshaping of the global financial order, where the euro currently plays a key role.
Nothing of this scale is happening at the moment inside China — though the present crisis points to the need for a deep restructuring of the Chinese financial system which is still too dominated by state-owned companies and unsavory insider trading practices.
In Europe the crisis is more complex and goes beyond simple economic accounting. The common people who voted “no” in Greece to the EU offer most likely didn’t understand the deal. They didn’t grasp the concept of Europe as the grander idea behind the euro. Yet no European politician, so far, seems willing to speak on behalf of that European ideal. And in the absence of trust between countries and their peoples, the process of finding a solution to the Greek crisis reverts to a vicious cycle. That is: Brussels tries to puts mounting pressure on Athens and Athens reacts in kind, inviting a revolt of other “delinquent” nations in Southern Europe who already see themselves as suffering under the “German yoke.” This results in more mistrust and bad bargains. This is what is happening in Europe.
There is less maneuvering room for an agreement in Europe right now, especially with respect to Greece. The most ruthless opponents of the EU do not want the euro or want only selfish special conditions.
One note of optimism can perhaps be found in the bizarre story of two ports — both of Greek origin. One is under the rule of Rome and the other under that of Athens.
The ports are Taranto and Piraeus. The two are distinguished by different conclusions in negotiations with their investor, logistics giant Hutchinson Whampoa (Hong Kong). After failed attempts over a decade to transform Taranto into the logistics hub for the Mediterranean and Southern Europe, Hutchinson decided to move from Italy (in theory on the road to recovery) to Greece (in theory on the road to bankruptcy).
None of this celebrates Greek luck in the face of Italian misfortune or vice versa. But it does show the different attitudes the two countries have toward the future.
Greece clearly recognized that it must engage with Asia, the economic dynamo of the world today. It also recognized that such engagement would come at minimal cost, especially when compared with what would be extracted on the European side.
Italy, on the other hand, for reasons still incomprehensible to many, rejected engagement with Asia. Whether a sign of indifference or a short-term strategy, the result for Italy is likely to be very harmful in the long term.
The history of Piraeus perhaps is also a sign that Greek politicians, despite their ostentatious radicalism, may be more pragmatic and strategic than they appear. The Greeks — whether voting “yes” or “no”— wish to remain in Europe. This contrasts with an alleged move by Italy’s Berlusconi government in 2012 to sneak out of the euro zone and return to the lira without warning the rest of the EU.
Greece’s leaders desire a new European pact, beginning with the heavy restructuring of their debt. But this is not just a question for Greece. It is for all of Europe to decide. All parties must first decide in what direction they want the European economy to move. Will Greek premier Alexis Tsipras be in charge or Brussels? In the six years since the 2008 US financial crisis and the current troubles affecting the euro, Ireland has recovered, Spain seems on track, Italy gives positive signals. But despite these upbeat examples, Greece has glaringly destroyed 25% of its national wealth.
Other issues complicate the picture. Young people in Europe don’t understand the orders emanating from Brussels. There is a question of European trust. There is also a lack of democracy since technocrats make most decisions and impose them on elected politicians. There is also the growing populism of demagogues. This is because the financial issues at stake are incomprehensible to most voters, who want simple answers instead.
However, most of this sorry state of affairs, where half of Europe blames the Greek government, is really due to a dearth of European ideals and political unity. Brussels only asks states for numerical financial/economic results and doesn’t care about how those targets are achieved in each country. This is Europe’s biggest weakness: You can’t be unified just because accountants tell you to be.
It takes a project, a common ideology, which for Europeans is absent. Couples don’t stay together to better balance their bank accounts or save on rent. They stay together first and foremost, because they love each other. Accounts must also balance, but you don’t put the cart before the horse. Where is the love in Europe?
In the absence of such ideals, Greece has tried a strategy of brinkmanship, blackmailing Europe and the world on the issue of its financial accounts. It’s unjust and it’s expensive. But in the worst extremity, the EU can still afford to pay off the Greek debts or expel Greece from the euro.
Italy does not have the luxury of such brinkmanship. Its economy is too big to fail and too big to be kicked out of the euro. If Italy tried to do half of what Greece is doing, it would put everyone at risk.
This means Italy has less room to maneuver than Greece. But it’s still likely to be damaged by whatever happens with Athens. A Greek exit from the euro or a major restructuring of its debt puts Italy on the firing line of international speculation. In addition, the campaign of demagogic Tsipras, although it was in vain, incites easy populism in the vein of political party leaders Beppe Grillo and Matteo Salvini, who dream of playing similar roles in Italian politics.
Europe also lacks a common language, since every country speaks its own language, while in Asia all the political elite and intellectuals speak English. The old community of coal and steel, the forefather of the EU after World War II, was created to ensure a Europe free of the threat of a fascist past and the present communist threat. What should Europe really be today? It was not about money in the past it cannot be about money today.
Yet the shadow of money extorted with violence and threats is what present European negotiations over Greek debt seem to be about. Regardless of any agreement that may be reached, Greece has tarnished Europe. The present predicament also shows why the EU must rise above its current battle over accounts in order to survive.
Today, how does a European leader try to define European ideals and the region’s geopolitical boundaries? Where are the limits? In Ukraine or beyond? In Turkey, Morocco, or farther away? In theory the Chinese project to recreate a new Silk Road and relaunch the Mediterranean ports could help shape a new European identity. The project would serve as a terminus of a great economic exchange and social and political system that would give meaning to all the different parts of Eurasia along the Silk Road.
These are ideas that Brussels should consider when talking to Athens. But it may be that Athens is setting the terms of its union with Europe and that larger issues such as greater engagement with China will fall by the wayside. Tsipras’s electoral victory shows Greek voters are scared, unemployed, and impoverished. It is a victory of weakness, not of strength, and this weakness could bring down everything.
Angela Merkel, the virtual heir of archduchess Maria Therese of Austria, must find a voice to speak to the hearts of her people, the European people, and not to their wallets. Meantime, in very practical terms, she and President Francois Holland of France, must quickly find a way out of this mess. History will judge them all.
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