Down and Out in Athens and Brussels
In the next several days, decisions taken by Europe on the Greek crisis – particularly whether to reverse the shutdown of the country's banking sector and embrace deep debt relief – will determine Greece's economic fate. Wittingly or not, these decisions will determine the EU’s fate as well.
NEW YORK – The Greek catastrophe commands the world’s attention for two reasons. First, we are deeply distressed to watch an economy collapse before our eyes, with bread lines and bank queues not seen since the Great Depression. Second, we are appalled by the failure of countless leaders and institutions – national politicians, the European Commission, the International Monetary Fund, and the European Central Bank – to avert a slow-motion train wreck that has played out over many years.
If this mismanagement continues, not only Greece but also European unity will be fatally undermined. To save both Greece and Europe, the new bailout package must include two big things not yet agreed.
First, Greece’s banks must be reopened without delay. The ECB’s decision last week to withhold credit to the country’s banking system, and thereby to shutter the banks, was both inept and catastrophic. That decision, forced by the ECB’s highly politicized Executive Board, will be studied – and scorned – by historians for years to come. By closing the Greek banks, the ECB effectively shut down the entire economy (no economy above subsistence level, after all, can survive without a payments system). The ECB must reverse its decision immediately, because otherwise the banks themselves would very soon become unsalvageable.