Follow Us:
Saturday, January 29, 2022

In Fact: The un-economics of Grexit and a political project called Euro

The first real possibility of a Grexit emerged in 2012. Since then, it has cost hundreds of billions to keep it in the Eurozone.

Written by Bhawesh Mishra |
Updated: June 30, 2015 12:00:07 am
Greece, Greece banks, Greece banks closure, Greece protests, Greece economy, Greece ATM limits, Greece limits withdrawals, Greece ATM withdrawals, Greece banks shut, European central bank, Greece loans, economy Greece, europe news, economy news, world news, indian express news Greece got caught in the first wave of Eurozone in 2001 after it rigged actual numbers on its economy.

It would be wonderful to explain, in words as clear as the waters of the Mediterranean, what the big mess in Greece is. But much like the bailout deal that’s going to a popular vote this Sunday, the Greek story is a muddied sea. There is some tainted economics, clumsy politics and a party-pooper called Vladimir Putin in this unfunny mix. And then there is history, damned history — the chemical that spikes every cappuccino, from the Bosphorus to the Irish Sea, and leaves Europe both anxious and calm.

The no-nonsense German would insist that the numbers are very simple. Greece is 2 per cent of the Eurozone’s economy, and shrinking. It has just over 2 per cent of the European Union’s population — just over 1.1 crore, or about half of Delhi NCR’s. But it is buried under debt higher than the Ghazipur landfill, with birds of carrion circling above. Greece owes its EU siblings and others more than € 320 billion — or Rs 23,000 billion — more zeros than Greeks are willing to count. This is 175 per cent of its GDP, which has shrunk by a quarter in the past five years. India, with its giant size and frugality, owes only about 65 paisa to outsiders for every rupee of its annual income. The money EU has already spent trying to keep Greece in the Eurozone is € 282 billion — about 50 times Delhi’s yearly budget.


When a German frau buys a sausage snack from a stall in Munich, the Euro she is spending is what remains after she has paid her income tax, social security, mortgage or rent, and every other cent she may owe. It angers the factory worker then, that the average Greek would eat lamb chops smothered in extra virgin olive oil on a bed of spinach sprinkled with snow-white feta cheese, often on borrowed money. She is still livid the Greeks hosted the Olympics, also on debt. It’s stupid and immoral, the Germans think, to have a beach party on other people’s money. Angela Merkel agrees, but there are political and historical scratches on the crystal of her thinking.

First, the politics. Greece got caught in the first wave of Eurozone in 2001 after it rigged actual numbers on its economy. The big mamma and papa of EU, Germany and France, looked away for a decade. Greece was supposed to build a German machine of an economy on a politics as untidy as that of Asia or Latin America. This, until the debt collectors came calling in the wake of the financial crisis of 2008.

The first real possibility of a Grexit emerged in 2012. Since then, it has cost hundreds of billions to keep it in the Eurozone. But the problem is that Greece in is now more toxic than Greece out. The reviled troika of the European Central Bank, European Commission and IMF pretty much said so on Saturday after the leftwing Greek government walked out of last-ditch talks.

It is a European truism that the left can’t rule without lots of borrowed cash. So when Greeks elected the indignant Syriza last year with the impossible promise of paying back debt without raising VAT or cutting welfare, it was a decision made by a confused and distressed people. Syriza talked economic bunkum and won — and many thought they had a plan B if they couldn’t pay up. It is now clear that there was no plan A, either. So it’s over to the same disoriented electorate to decide on a rescue deal so complicated that even EU technocrats can’t fully explain it. If Syriza’s bluff has been called, so has the Eurozone’s.

While the German engineer still wants Greece to pay up or leave, history tells Ms Merkel that Greece must stay. Between its unification around 1870 and 1945, Germany fought many small and two World Wars. The wars killed about 8 crore people, the same as Germany’s population today, and left the continent economically in ruins. After 1950, Germany has tried to achieve through peace and industry what it could not via military power and Nazi evil. The stoic elite also knows that the German export engine, second largest after China’s, runs on a cheap Euro made possible by southern European laggards. If Germany had to go back to the Deutsche Mark, it would perhaps be 2 to a dollar, rather than 1.1 Euro. While some in Germany and Greece are okay with a mountain of inflated Drachma, history shows that in Europe, no good has ever come out of hyper inflation, only suffering.

And then there is the bouncer skulking behind the pillar in this party of 50 crore haunted Europeans. No one in Europe understands and needs Russia more than Germany. It’s a must for the success of Berlin’s EU project that Russia is kept out of sores such as Greece. That’s exactly the wound Greek PM Alexis Tsipras was poking in Moscow recently. It is also at once essential to keep Putin smirking so that he does not run over Ukraine and, history forbid, Poland, sniffing down on Berlin. The EU also can’t yet do without Putin’s sole exports — oil and gas.

So the economics of a Grexit is mired in Europe’s unity politics, which is the lotus raised from the marsh of its history. One fact stands out amid divided opinions on this crisis: The fates of the EU and the Eurozone — 19 of the 28 members — are one. Greece’s economic exit is a political bomb planted right under Brussels.

Suggested Reading
* Greece’s Odious Debt, by Jason Manolopoulos, Anthem Press
* Postwar: A History of Europe Since 1945, by Tony Judt, Penguin

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Explained News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard
0 Comment(s) *
* The moderation of comments is automated and not cleared manually by