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  • Faculty of Economics
  • Where is the EU heading? - Will the day come when Greece and the UK leave the EU?
  • Professor Tatsuhiro Nakagawa
  • Faculty of Economics
  • Where is the EU heading? - Will the day come when Greece and the UK leave the EU?
  • Professor Tatsuhiro Nakagawa

What was Tsipras's first year in power like?

The Greek sovereign debt crisis has attracted worldwide attention as to whether it will default or not. In August 2015, Greece promised to continue its austerity measures, reform its pension system and labor market, and privatize state-run enterprises, which were proposed in order to receive financial assistance. This resulted in financial assistance of up to 86 billion euros over three years from the European Union (hereafter referred to as EU), and default and Greece's withdrawal from the Eurozone (GREXIT) have been averted for the time being.

 

Greece has received financial assistance twice in the past from international creditors such as the EU due to its financial situation, but in return strict conditions were imposed, placing a heavy burden on the people. As the economy slumped and the standard of living of the people deteriorated, provoking strong opposition, the radical left party Syriza (Coalition of the Radical Left), which pledged to fight against austerity, won the support of the estimated 2.5 million people living in poverty in the national elections held in January 2015, and came to power for the first time in the history of Greek constitutional government.

Prime Minister Alexis Tsipras, who is also the leader of the Syriza party, entered new financial aid negotiations with strong public support, but in the end he ended up accepting the implementation of economic structural reforms demanded by the international creditors, including reforms to the tax system, pension system, and labor market, privatization of state-owned enterprises, and fiscal reconstruction.

 

It has been one year since the radical left-wing government was born. As if to celebrate the first anniversary of the government, domestic and foreign investors sold shares of Greek companies and banks, causing the Athens Stock Exchange to weaken after the New Year, and on February 8, 2016, it plummeted *1, hitting a new low for the first time in 25 years since at least 1991. The reason for this is the poor management and concerns about bankruptcy of the country's major banks, as well as the lack of progress in reforms to the tax system and pension system, which are conditions for the third financial aid *2 agreed upon by the radical left-wing government and international creditors - the EU, the IMF (International Monetary Fund), and the ECB (European Central Bank), and pessimism is growing that the review of the progress, which will begin within the month, will be difficult. According to European media sources, Prime Minister Tsipras will abandon the current financial aid and will soon enter into new debt negotiations with the international creditors.

 

*1 A trading situation in which prices of stocks, bonds, etc. fall suddenly.
*2 Greece's financial situation has worsened in the past, and it received financial assistance from international creditors in 2010 and 2012 on the condition that it implement austerity measures and reforms to its pension system and labor market.

 

If the media sources are correct, what was the past year like for the radical left government, which won the national election last year on the pretext of solving and resolving Greece's debt problems, reforming the economy and improving people's lives, and seized political power for the first time in history, even if it was in a coalition with a right-wing party? If the reforms of the tax system, pension system, and labor market are "too big for social impact to handle," have they implemented reforms in other areas that the radical left promised in its election manifesto? If so, why is Greece still unable to escape from the turmoil? The radical left politicians' argument is nothing more than a self-preservation argument that they do not want to incur the displeasure of the general public and slip away from their seat of power. Together with "populism from the left" - left-wing populism - which shows signs of turning its face to the poor people, it may not take long for them to sink into the "river of forgetfulness (Lethe)" that flows through the "underworld (Hades)" that the Greek people's ancestors spoke of long ago.

 

The problem is GREXIT (Greece's exit from the Eurozone). Either the Greeks themselves will make that choice, or their EU partners will give them the final push. Prime Minister Tsipras' political style is one in which he promotes toughness as a working-class fighter rather than placing emphasis on dialogue and negotiation, but it is questionable whether such a style will continue to be accepted by EU representatives in the future.

Britain: Another Brexit?

While the current situation in Greece is being reported, media sources are criticizing British Prime Minister David Cameron, who is a party to another withdrawal - BREXIT (Britain's withdrawal from the EU), as a worse politician than Tsipras. Cameron is waving a gun at Germany, France and others and saying, "If you want us to stay in the EU, change the EU rules as we say, or we'll shoot you." To put it bluntly, it's blackmail.

 

Greece and the UK - these two countries are located at the northern and southern ends of Europe, and have very different cultures and customs, but they are currently facing a common problem. That is the problem of accepting the so-called refugees who have poured into Europe from the Middle East and North Africa. Greece is one of the gateways through which so-called refugees enter Europe, but one of the destinations, along with wealthy Germany, is the British Isles (UK), due to the ease of communication in the language (English). The Athens government pretends to be tearful, saying that "Greek people are suffering because of the harsh debt repayment conditions of Germany and other countries," but in fact, there is a constant reputation that the treatment of refugees in Greece is "inhumane." This is why Greece is called the "bottleneck" of the refugee problem. In this respect, Greece is no different from former communist countries such as Hungary and Poland, which are anti-Western Europe (anti-EU), nationalistic, and Catholic supremacist (excluding non-believers such as Muslims).

 

On the other hand, the UK has kept its distance from Europe and has not wanted to get caught in the crossfire of the current refugee crisis. However, it must be said that it is just like Greece in that it is reneging on treaties and rules that successive governments have made. If the Cameron administration were to choose this path, it would be in danger of being seen as being in the same category as Hungary, which praises Hitler, and Poland and the Czech Republic, which are not ashamed to imitate the autocratic rule of the head of state of their former colonial power (Russia) (the Putinization of politics).

 

In former communist countries such as Hungary and Poland, right-wing populist governments leaning towards extreme nationalism have been born one after another. This is thought to be a reaction to the rise of radical left-wing parties in countries such as Spain and Portugal, emboldened by the victory of the left-wing populist party led by Tsipras. If the rise of far-right and fascist forces were limited to former communist countries in the process of developing democracy, there may not be much need to worry about it. However, when it extends to the core countries of Western Europe such as France, Germany, and the Netherlands, the story changes. In France in particular, the far-right party (National Front) has rapidly grown with the support of the people who are disillusioned and rebellious against the incumbent President François Hollande, who is known for his indecisiveness. It may not be an exaggeration to say that the situation is very similar to the eve of the birth of the left-wing Syriza government, when many Greek citizens turned their backs on the existing political elite.

Where does the Greek mentality come from?

For the past year or so, the EU has been at the mercy of Greece, but this is not only in terms of debt relief and financial assistance, but also because the country has directly and indirectly influenced the EU's systems and institutions, and even the refugee problem. In order to understand these problems, it is appropriate to start by answering questions such as why a tiny, fragile country like Greece has built up a mountain of debt that is beyond its means, and why the obvious rule that debts must be repaid does not apply in this country. This also means looking back on Greece's modern history.

 

Before that, I would like to ask you all something. Have you ever seen the name of a country called Greece in modern history, let alone ancient history? Most people would answer "OXI" (meaning "no" in Greek). The aim of this column is to provide materials for understanding the state of modern Europe by looking back on the modern history of Greece, which is largely ignored in most junior and senior high school textbooks.

In a referendum held on July 5, 2015, more than half of the Greek people supported the "anti-austerity policy" of the left-wing party led by Alexis Tsipras. It is difficult for us Japanese to understand the national character of Greece, which chooses "anti-austerity" even though the country is in a situation where it cannot make ends meet without financial assistance from other countries. What is the mentality of the Greek people that underlies this?

 

Greece was ruled by foreign powers such as the Roman Empire, the Eastern Roman Empire, and the Ottoman Empire for a long time until it escaped from the Turks and gained independence in the first half of the 19th century. During that long period of rule by foreigners and ethnic groups, the Greeks developed a mentality that "opposing one's country is good." To them, rebelling against one's country and stealing its wealth and assets is just taking back what is theirs, so they are "righteous thieves." This led successive governments to consider it their "duty" to steal national assets and distribute them generously to their supporters. This is why political scientists call Greece a "kleptocracy" *3.

 

*3 South Korea, the Philippines, and Indonesia under the rule of Chung-hee Park, Ferdinand Marcos, and Suharto are also classified as "kleptocratic states" in political science.

 

In 1829, the Greek state was finally founded under a monarchy, and a republic was established at the beginning of the 20th century. However, the monarchy was soon restored, and then replaced by a dictatorship, and the state system remained unstable for some time. Moreover, during World War II, Greece was ruled by Nazi Germany, and after the war, a civil war broke out between the forces allied with the Allied forces of the UK, the US, and France and the forces allied with the former Soviet Union (Russia), and in the late 1960s, Greece was again led by a military dictatorship. Years passed without a reliable state system being established. In this situation, politicians continued to have the same "thief state" mentality as before, gathering support from people who had a common interest with them, and once they came to power, they repeatedly distributed money to their supporters. Ironically, the Greeks were the ones who coined the word "dimokratia," which is the origin of the word "democracy," but their own country was not able to establish democracy easily. The consequences of this have come to the surface and are still felt today. Since financial support for Greece is being paid for by taxes from EU countries, it is only natural that some countries would like to see Greece leave the eurozone. However, I believe that the Greek problem has also given us an opportunity to seriously consider how we should shape the eurozone and the EU in the future.

Predicting the Future of the EU

Jacques Delors, who became the French Minister of Economy and Finance and became the President of the European Commission, leading European integration, said in an interview with the French newspaper Le Monde in January 2000 that the EU's "top priority geopolitically should be the Ukraine issue. Poland, the Czech Republic, Hungary, and others should be secondary." Regarding economic issues, he said, "Since the Eurozone was launched in 1999, we should aim for the ultimate goal of political integration. Some member states are trying to reduce the EU to the formation of a free trade area. We cannot move forward by simply pursuing short-term economic interests." It will be impossible to achieve peace, stability, and prosperity in Europe without deepening European integration.

 

Speaking of Delors, he was a man who made no attempt to hide his distrust for Greece, saying that "it was a mistake to allow Greece to join the EC [the predecessor of the EU]." The main reason was that Greece did not meet the requirements for membership, but more than that, he was skeptical of Greek democracy.

 

However, Delors' true worth lies not only in his devout Catholicism and high moral character, but also in his keen insight and long-term perspective, qualities required of a politician. When we recall Russia's annexation of the Crimean Peninsula and its invasion of Ukraine in January 2015, we can only take our hats off to his keen insight and foresight. Considering that former communist countries such as Hungary and Poland, which were introduced earlier, have become "troublemakers" with refugee issues and other problems, the expansion of the EU to the east may have been even more "premature" than that of Greece.

 

Meanwhile, the part about "pursuing only short-term economic interests" clearly refers to the UK, Sweden, etc. When the UK abandoned EFTA (European Free Trade Association), which it had led in establishing in 1960, and joined what was then the EC (European Community) in 1974, it declared that it would "devote itself to the development of the common market, but would not cooperate with political integration," making no attempt to hide the fact that its aim was "pursuing only economic interests."

 

Nevertheless, the UK under Margaret Thatcher contributed to European integration, albeit reluctantly. Although she was opposed to the "one currency (creation of the Eurozone)" proposed by Delors and others, she saw "one market (market integration)" as being in the UK's national interest. And her successor, Prime Minister John Major, did not overturn the table at the treaty negotiations in Maastricht, the ancient city in the Netherlands, which included the creation of the Eurozone. It is no exaggeration to say that the rise of Euroskepticism and anti-EU policies even more severe than those of Thatcher were formed under the government of Tony Blair, a left-wing Labour Party member who had worked hard to get the UK into the EC since the Wilson administration in the 1960s.

 

Since the beginning of the year, it is said that BREXIT has become more realistic than GREXIT. Of course, unlike Greece, the UK is one of the major European countries, so withdrawal from the EU is expected to have many unfavorable effects on both the EU and the UK. That being said, it is natural that there is criticism of Cameron's style of forcing a review of the rules to benefit his own country with a gun in hand.

 

Even in countries like Germany and the Netherlands, which accept the UK's position to some extent, they are not willing to pay any price to keep the UK in the EU. If other countries demand lenient rules for the UK, they will have no choice but to comply. This is the same logic as not being lenient towards the Greek government, which demands a write-off of its debts.

 

In February of this year, some proposals to revise EU common rules, such as reducing refugee welfare, were approved in order to make it easier for the UK to gain public support in the referendum. British Prime Minister Cameron told the media that he would make a sincere effort to remain in the EU in the referendum. Encouraged by this, Greece is also seeking new financial support, and both parties are plotting to get what they want by sulking. Those who would be happy to leave the eurozone and EU include the fascist party Golden Dawn and KKE (Greek Communist Party) in Greece, and UKIP (UK Independence Party) in the UK, as well as about half of the members of the Labour Party and the Conservative Party. However, what is noteworthy about the UK is that there are several anti-EU ministers in the Cameron cabinet, and many influential people, including London Mayor Boris Johnson, who is expected to be the next leader of the Conservative Party, openly support BREXIT.

 

So where is the EU heading? The EU's ultimate goal is to realize the idea of integration not only in the economic sphere but also in the political sphere, but since 1974 when the UK, Denmark and Ireland joined the EC, there have been coexistences of EU member states that aim to realize that idea and those that do not. Therefore, it has been thought that it is essential for member states that are willing to move towards the realization of such an idea through political integration to further deepen integration, while those that are not willing to at least abide by the current rules, and create a system that accepts their intentions if they wish to join political integration at a later date.

 

However, the agreement reached in February between the UK and 27 member states including Germany and France went beyond such thinking and became a political settlement -- a "consensual divorce," to borrow the media's term -- to clearly separate member states that aim for greater integration in various fields of politics, economy, and society from those that do not. The former group includes more than a dozen eurozone countries including Germany and France, while the latter group includes the UK, the former communist countries, as well as Sweden and Denmark.

 

What is more important is that even if core EU countries such as Germany and France have compromised, there is absolutely no guarantee that the Cameron administration will win the referendum scheduled for June 23. There is no need to wait for sensational articles in the British tabloid newspapers (yellow journalism that sells scandals and exposés) to see that support for leaving the EU has been growing rapidly recently, and victory seems likely.

 

Regardless of whether the UK remains in the EU or not, countries that aim for deeper EU integration, such as Germany and France, will be able to move forward without worrying about interference from countries that do not want this. In fact, high-ranking officials from Germany and France have said that they will soon announce proposals aimed at deepening integration. Of course, this is not a plan that targets all EU member states as in the past. It is only targeted at countries that support the realization of the idea of EU integration, and if they no longer want integration, that is also fine.

 

If that is the case, then if Athens' leader, Tsipras, does not adhere to the conditions of the financial aid he promised last year and does not accept the more "generous" conditions they expect, the core countries of the eurozone will have no choice but to say "please." I think it's about time that Greek politicians realize that there is no such thing as a loach under a willow tree. The situation is clearly different from last year.

 

To summarize: The European regional community, which started with six countries in 1958, has expanded again and again with an increasing number of member states, and has now grown to include 28 countries. In the process, the ties between countries have become closer, and to a certain extent, systems and the laws and rules behind them are shared, but at some point, it has ceased to be a community in which everyone is looking in the same direction and trying to move in the same direction.

 

Anti-EU people see the unanimous decision by the EU to grant the UK a special status in February 2016 as the beginning of the end of the EU. On the other hand, it could be said that this was an expression of the political will of countries that have committed to continue working together to correct the limitations of the Community, which relies solely on the number of member states in pursuit of economies of scale, and to achieve the ultimate goal of political integration. If this is the case, it seems more appropriate to see it as the EU re-establishing its position for deeper integration.

 

(Published in 2016)

Related articles

  • "100 Days of the New Greek Government: The Endgame of Eurozone Debt Settlement" by Tatsuhiro Nakagawa (Japan Securities and Economic Research Institute, Securities and Economic Research, Vol. 90: 2015)
  • European Union Headquarters (Brussels) Site
  • "Current Status and Prospects of the European Banking Union: Towards Reform of the Banking Sector" (Japan Securities and Economic Research Institute, Securities Review, Vol. 55, No. 7: 2015)
  • Official web magazine of the Delegation of the European Union to Japan

Study this topic at Aoyama Gakuin University

Faculty of Economics

  • Faculty of Economics
  • Professor Tatsuhiro Nakagawa
  • Affiliation: Aoyama Gakuin University College of Economics Department of Public and Regional Economics
    Subjects: Seminars for Freshmen, Problems in Modern Society (Independent Courses), Global Economy A, Introduction to Public and Regional Economics, Studies on Public and Regional Policies, Studies on Public and Regional Policies (International), Seminars for Freshmen, Economic and Financial Review (EU Economy), Seminar (Advanced)  I, Seminar (Preliminary) , Economics in the European Union (Seminar)/Economics in the European Union (Graduate School), EU Economy
    Areas of expertise and related fields: European finance and economy
Link to researcher information
  • Faculty of Economics
  • Professor Tatsuhiro Nakagawa
  • Affiliation: Aoyama Gakuin University College of Economics Department of Public and Regional Economics
    Subjects: Seminars for Freshmen, Problems in Modern Society (Independent Courses), Global Economy A, Introduction to Public and Regional Economics, Studies on Public and Regional Policies, Studies on Public and Regional Policies (International), Seminars for Freshmen, Economic and Financial Review (EU Economy), Seminar (Advanced)  I, Seminar (Preliminary) , Economics in the European Union (Seminar)/Economics in the European Union (Graduate School), EU Economy
    Areas of expertise and related fields: European finance and economy
  • Link to researcher information

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