Grexit, Too High a Bill and Too Big a Deal


Since the question started to become more serious (2012), two different theories have been developed on the topic. The first one, known as the domino theory, states that a possible Greek withdrawal would lead markets to wonder which country could leave the Eurozone next. The fate of the other countries would then be questioned, similarly to what happened during the sovereign debt crisis in Europe in 2010-2012. The consequence could be an implosion of the Eurozone.

“a Greek withdrawal would lead markets to wonder”

Instead, according to the other vision, the theory of ballast, the Eurozone would actually be strengthened by Grexit. The monetary union would finally manage to erase a constant problem. Additionally, a decision to let Greece leave the Eurozone, or push it to do so, would increase the credibility of its rules.

In 2012, the former one seemed sufficiently realistic to push the creditor countries to put the option of a Greek exclusion aside. The German Chancellor, Angela Merkel, decided to officially visit Athens where she expressed her «hope and desire» that Greece would keep up being a Member.

Nowadays though, the situation is quite different. The rating agency Fitch has recently declared (6th March) that, although Grexit is still a concrete risk, Eurozone is now immune to risks contagion.

The Domino effect, Spotlight Europe
“Unlikely to happen”. (Flickr:Bro. Jeffrey Pioquinto, SJ/licensed under CC BY 2.0)

«The Eurozone has developed mechanisms to alleviate the risk of contagion and concerns about the solvency of other Member States are less evident than what they were like in 2012. A domino effect from Grexit is therefore unlikely to happen», remarked Fitch.

Indeed, adds the agency, the market stress has considerably decreased. The financial support programmes no longer support Ireland and Portugal, the Eurozone financial system has been strengthened by the decision to move towards a banking union.


Grexit, Too High a Bill and Too Big a Deal

A Greek temple bathed in sunlight, Spotlight Europe
The Greek heritage. (Flickr: petros asimomytis/licensed under CC BY-NC-ND 2.0)

The European reality has always been crossed by threats of division and secessionisms due to its cultural and political diversity which constitutes both its weak point but also the basis for building its strength.

One of these aspects, which had remained a latent possibility in the last years, is now becoming more concrete; It has been nicknamed as Grexit, the hypothetical Greek withdrawal from the Eurozone.

“European reality has always been crossed by threats of division”

In February, the new Tsipras government reached an agreement with the Eurozone creditor countries, including a package of immediate reforms and an extension of four months of the financial assistance program. Even though Europe could feel relieved at the moment the compromise calls for tough negotiations on a new financial assistance program, to be introduced by the end of June.

In any negotiation the fundamental element that influences the behaviour of the players and then the final result, as Jean Pisani-Ferri, French economist, public policy expert and French government Commissioner General for Policy Planning recently observed, is the cost that the impossibility to find a further agreement would bring to the protagonists themselves.

To understand more deeply the phenomenon, it is important to focus on two key points: The actual legal provisions it could base its ruts in and the economic consequences of its realization.

Concerning the first aspect, under the Treaty on the European Union, the fundamental document of institutional regulation of the EU, it is written that «Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements» (Art. 50), but no provision appears to establish either the opposite process, an exclusion carried out by all the components against one Member State, or the revocability of the Euro – membership.

Andre Sapir, Bruegel, Spotlight Europe
Andre Sapir, Bruegel (Detail, Flickr: Department for Business, Innovation and Skills/licensed under CC BY-ND 2.0)

André Sapir, think tank Bruegel’s Senior Fellow, Professor of Economics at the Université Libre de Bruxelles (ULB) and former economic adviser to the president of the European Commission confirmed this. In an interview that recently appeared in several European daily newspapers, the Italian Il Sole 24 Ore, he affirmed that Grexit is just an exercise of «Phanta-politics». He also underlined that the other Member States would not accept to lose a Mediterranean politically and economically strategic point, such as Greece.

But what would be the bill generated by a possible Greek withdrawal from the Eurozone, in economic terms?



Grexit, Too High a Bill and Too Big a Deal


Despite these reassurances, as Jean Pisani-Ferri wrote, it cannot be stated yet that a Greek withdrawal would not bring any damage and this is mainly due to two reasons.

First of all, it would contradict the tacit assumption that participation in the Eurozone is irrevocable. This would create a precedent in European history and, if the climate began to be a bit tense again, there would be no certainty that another Member State would not follow this path.

“formalize the rules of quitting, so far unwritten and undefined”

Secondly, a possible withdrawal of Athens would force the European policymakers to formalize the rules of quitting, so far unwritten and undefined. This would naturally turn the risk of breach not only more acceptable, but also more concrete.

This does not mean, Pisani-Ferri added, that the other Member States should play any possible card or pay any possible price to keep Greece as a Member of the Union. But, on the other hand, the idea of a peaceful and effectless withdrawal of the country from the Eurozone is an illusion.

The Euro symbol in Frankfurt, Spotlight Euro
“In its complexity resides its strength”. (Flickr: MPD01605/licensed under CC BY-SA 2.0)

From the perspective of young generations it does not appear as hopeful future scenery, to know that the Greek tool would in any case pass on our shoulders too, once stepped in and established as agents in the labour markets. Despite this, it is crucial for a young European to learn how to think in a wider perspective; the European project is not a cup of tea to be set into reality, but in its complexity resides its strength too. Losing any part of this project would mean to damage it somehow. A human body still works without a hand but less effectively.

It is important that each young EU citizen understands this key aspect and accepts some small personal sacrifices in order for the whole machine to work better. There is a negative effectless way neither in losing a hand nor in losing the component of a Union.

This article has also been published by the European Sting.


About the author:
Camilla Crovella, Spotlight Europe
Camilla – Author at Spotlight Europe

Camilla (21) is a member of the Eustory Alumni Network and writes articles for online magazines. She studies Law at the University of Turin.

Young World-Wide-Minded Europeans towards the EU Political Union (2/2)

People standing before the EU banner crossing hands, Spotlight Europe
If all European nations worked closer together, the enforcement of human rights and immigration issues could be simplified. (Flickr: European Parliament/licensed under CC BY-NC-ND 2.0)

Every European citizen should be aware of the fact that since 1950, when the European Convention for Human Rights and Fundamental Freedoms was signed, countries are obliged to respond to any possible violation of human rights to a sovereign Court; this guarantees not only a major respect for every single person but also a stronger persistence of peace and democracy. Therefore Europeans should sensitize national governments to these Court’s functions to be enlarged and made more powerful, being it not only a guarantee for European citizens but also for foreigners who happen to be on the EU territory in order to escape from a dangerous situation for their own freedom or safety.

I am strongly faithful that this further step towards a complete unification can be reached and would mean the best possible guarantee of freedom. Indeed many doors have already been opened in the last 60 years by the EU. Lightening example of this appeared in the 1980s when Greece, Spain and Portugal had to embrace democracy as a fundamental condition for their membership; furthermore, we cannot forget about the situation of permanent peace between France and Germany (comparing to the 3 wars they fought in the last centuries) or still, about many chances of integration with Eastern countries begun after the collapse of the Berlin Wall.

Italian coast, Spotlight Europe
Italy is particularly affected by illegal immigration. (Flickr: Paolo Margari/licensed under CC BY-NC-ND 2.0)

What particularly concerns me among the recent issues Europe has to deal with, is that of immigration. Italy, among all European Mediterranean countries, is increasingly and considerably touched by the phenomenon and evidently the measures taken to face it are neither efficient nor sufficient. Though, this is not just a problem linked to Southern nations. This is not only because we all need to develop the idea that all the topics concerning one European country actually concern all of them as parts of a single union. It also brings many more immediate and practical consequences: countries such as Italy are often seen by immigrants just as “Transit Countries”, the first of a long series of steps towards a family reunification up North. My personal interest on the point developed in 2009 when a group of Eritrean and Somalian immigrants arduously arrived next to Italian costs, were collectively sent back to Libya by the Italian authorities. All of this happened without any kind of acknowledgment about their personal backgrounds and any care for the risky and tiring trip they had just faced. The question naturally raised by such an event relates to how it is possible that nowadays a declared democratic country commits such an action, with total disregard to human dignity. Moreover several conventions signed by all European countries state that it is necessary to guarantee immigrants a refugee status whenever they run through the risk of ill-treatment in the country of origin (as in the case previously mentioned).

“It is necessary to make the citizens feel involved.”

My personal requirement to the new European leadership would develop on two levels. First of all, from the European prospective, it is necessary to make the citizens, especially the new generations, feel more involved and personally touched by the problem. The second point would be to better organize and structure more in depth the procedures to welcome, host and help the incoming immigrants.

Indeed the European natives, especially in my country, do not conceive immigrants as a special chance to enlarge the national cultural horizons and as a resource but simply as the “others”, the “different ones” etc. All these feelings belong to a phenomena which should no longer appear in a 21st century democratic society such as racism, xenophobia and so on. A concrete episode which made me develop this belief is happening in my country. In the last 20 years, Lampedusa Island (situated in the extreme South of Italy) has been the symbol of hope and freedom for many refugees escaping from North African coasts.

Sadly, in such an historically fascinating place the first and most cruel kind of Italian stereotype against African immigrants originated.

Girl with a European flag paint on her cheek, Spotlight Europe
“Strengthen a unique European identity, especially among the young generation.” (Flickr: European Parliament/licensed under CC BY-NC-ND 2.0)

To conclude, my personal requirement to the new EU leadership would be to work in order to develop and strengthen a unique European identity, especially among the young generation. The crucial point to focus on would be the respect for human rights; young generations especially should be made more aware of the fact that giving more power to over-national institutions, towards a Political Union, would be the only way to guarantee equal rights and opportunities to every person residing on EU territory. Additionally, young people should especially be taught how to develop a world-wide open way of thinking. For this reason, a common feeling of fear of the other such as the one nowadays present towards immigrants, is no longer acceptable.

About the author:
Camilla Crovella, Spotlight Europe
Camilla – Author at Spotlight Europe

Camilla (21) is a member of the Eustory Alumni Network and writes articles for online magazines. She studies Law at the University of Turin.

Young World-Wide-Minded Europeans towards the EU Political Union (1/2)

Scene of a plenary session in the European Parliament, Strasbourg, Spotlight Europe
The author is expecting from the European leadership to work closer together politically. Only this way can human rights be efficiently secured and defended. (Flickr: European Parliament/licensed under CC BY-NC-ND 2.0)

The elaboration of a one and only idea concerning what to ask of the new European leadership is neither simple nor univocal. So stated, it is important to underline that this aspect is not a negative point at all: Europe is a complex reality and this should be the heart of a new process of evolution towards a political unification.

Indeed, a crucial aspect concerning the Old Continent is nowadays its ability and strength to fit and keep the balance with the more and more worldwide operating economic powers. For this reason it is important for all the institutions to cooperate in order to push Europe in the middle of the 21st century globalised world, not only in economic terms. From this point of view, there is a key theme which is too often undervalued and forgotten in our realities: Human Fundamental Rights, in general, and, more in depth, immigration.

“The best way to guard Human Rights would be to reach the Political Union.”

I cannot avoid thinking that, for what concerns our own continent, the best way to guard Human Rights would be to reach the Political Union. In building this conviction, I was strongly inspired by the work of a group of people and in particular by one of these, Ursula Hirschmann. As a young Jewish and socialist she was forced to leave Germany when Hitler gained the power and Ursula decided to follow her husband, a political prisoner of Fascism to Ventotene Island in Italy. There she met Altiero Spinelli and Eugenio Colorni and together they wrote what is considered today as the theoretic basis of EU, the Ventotene Manifesto.*

They faced the biggest tragedy and violation of human rights that the world had ever run through, World War II. Consequently they affirmed that only a Federative Union could be the solution against racism and any other kind of cruelties that had happened. They stated that the birth of a single huge European Nation would have been the only way to guarantee to every man “[…] An area of free choices as wide as possible in order to allow the highest development of their personalities”. In addition to this I always like to recall an Ursula Hirschmann’s sentence: “I have nothing but my chains to loose in a united Europe. That’s the reason why I am a Federalist”.

Man walking past European flags in the European Parliament, Brussels, Spotlight Europe
Europe´s compexity should be at the heart of a political unification. (Flickr: European Parliament/licensed under CC BY-NC-ND 2.0)

Like this small group of freedom and democracy defenders dreamt, so do I. I am convinced that reaching the Political Union would be the best way to guarantee equal respect for human rights and equal possibilities to succeed to every EU citizen.

Sadly, the idea of Union they portrayed seems nowadays a bit more difficult to achieve. Indeed, the current crisis which is compromising the economic situation of many countries has dramatically damaged the relationships between the European nations. We find ourselves in front of an evident separation between economically weak countries (such as Greece, Italy, Spain, Portugal etc.) and stronger countries, being together for what looks just like a matter of money.

“The European nations should concede their power to continental institutions.”

What I would ask the new EU leadership to do would be to cooperate not only to support the common currency and finance to defeat the crisis but also to work in order to reach a political unification. The latter is the only one which could observe a real equality of respect for fundamental rights among every EU citizen and third-nationals staying on the European territory. In order to reach the Political Union (which would mean only one parliament, one government and one juridical system), all the European nations should necessarily concede their power to the continental institutions. Consequently both the monetary and the fiscal unions are nothing but small steps on the way to the political union, already drawn at the time on Ventotene.

A particular institution, not belonging to the frame of the European Union but to the one of the Council of Europe that should acquire a stronger influence, is the European Court of Human Rights, so that a wider and wider space to guarantee human rights across national borders could be reached.

*Spotlight Europe background information: The complete text of the Manifesto can be read and downloaded here.

About the author:
Camilla Crovella, Spotlight Europe
Camilla – Author at Spotlight Europe

Camilla (21) is a member of the Eustory Alumni Network and writes articles for online magazines. She studies Law at the University of Turin.