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A New Chance for Greece

ATHENS – On September 20, Greek voters will go to the polls – yet again – in a snap election called by Prime Minister Alexis Tsipras. The early poll was no surprise: almost a third of Tsipras’s colleagues in his leftist Syriza Party refused to endorse the bailout he had negotiated with the country’s creditors. In a parliamentary vote on the deal last month, Tsipras, in office since January, was forced to rely on support from the opposition.

So was the international community’s sigh of relief after the latest financial rescue – additional money from Greece’s creditors in exchange for structural reforms – premature? Will Greece, the twenty-first century’s “sick man of Europe,” persist in refusing to reform?

The underlying issue is whether Europe’s monetary union needs greater integration to manage crises such as Greece’s, or whether it can maintain the current approach, founded on national responsibility and sanctions for those who break the rules. Germany’s finance minister, Wolfgang Schäuble, has suggested that those sanctions should include expulsion from the eurozone – something that was never envisaged in the European Union’s 1992 Maastricht Treaty.

Nor, of course, was it ever envisaged that Greece would face its current economic trauma. Admittedly, the country’s economic performance after the oil shock of the early 1970s was poor, marked by slow growth, high inflation and unemployment, huge fiscal deficits, increasing debt, a declining currency, and inadequate infrastructure. Indeed, until the mid-1990s, the government’s lack of macroeconomic discipline and its tendency to succumb to populist demands and vested interests accounted for much of the country’s economic weakness. But entering Europe’s economic and monetary union was meant to induce the political system to pursue longer-term goals such as productivity growth and enhanced competitiveness.