Who’s to Blame for Greece? by Theodore Pelagidis & Michael Mitsopoulos

Author:Theodore Pelagidis & Michael Mitsopoulos
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

6.2 Euro Area Exit

Essentially, the European partners, having responded to a short notice request by the Greek government, and having offered to the Greek government a support package that stretched to the limit the spirit of the Maastricht treaty with regard to the no bailout clause—that is the first pillar of the Maastricht Treaty—were rewarded with a reluctance from successive Greek governments to face the problems at hand with adequate determination. Thus, at some point, it was inevitable that some European officials would put, in various ways, on the table the question of terminating, directly or indirectly, the membership of a misbehaving member, in this case Greece. Thus questioning the second pillar of the Treaty; that is the rule that once in, a country does not leave.

Such a stance may have a rationale, as an effort to force Greek governments with a quite unfavorable track record to finally deal more decisively with the problems at hand. And they may also reflect reasonable doubts and disappointment from European politicians, who one has to recall, are elected and accountable towards the taxpayers of their country. Also, unlike the clear awareness in the 1990–1993 administration that with Europe also going through a crisis, as was the case then, Greece had to take care of its own problems in a determined way, such an awareness seemed to be completely absent from the Greek politicians after 2010. This definitely undermined the European efforts to help Greece within the limitations of the democratic mandates of the national and European governments.

Yet, in spite of all these undeniable facts, there is a fundamental flaw in the adopted approach. First of all, it is not difficult to argue how, under these conditions, and with the ability of the Greek government to achieve set fiscal targets increasingly put as a precondition for maintaining euro area membership, and with a legal deficit regarding possible links between an euro exit and an exit from full EU membership, given that only the latter is explicitly provisioned for in Article 51 of Treaty of the European Union (TEU) and given that an euro are exit is bound to lead to the violation of key articles of the TEU , the country is set on a course governed by a self-fulfilling prophecy of euro area exit. One only has to go to the board of any international company, and propose a project that involves investing in Greece, and observe the reaction of the other board members. Or observe the flow of deposits outside Greek banks before the series of elections in early 2012 and after November 2014 to appreciate the contribution of this uncertainty towards deepening the depression of the Greek economy. The impact of uncertainty is now increasingly documented, as in Bachmann et al. (2013), The Economist (2012a, 2013), and European Commission (2013), to affect the real economy that creates jobs and pays taxes. As a result of this uncertainty , the private sector is already effectively operating outside the euro area . From

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