NR Digital

Four Kinds of Dreadful

by John O’Sullivan
On the possible outcomes of the Greek debt crisis

One day before the G8 summit, there was a “leak” from the office of German chancellor Angela Merkel that revealed some of the thinking behind how Germany wants to resolve the long-running euro crisis. The leak was that Chancellor Merkel would ask the Greek prime minister to hold a referendum on Greece’s membership in the euro zone at the same time as the June 17 Greek election. But because it was immediately and embarrassingly denied, it also revealed that the German government was increasingly desperate as it juggled solutions to the euro/Greek crisis. You could follow the thought processes that led to the leak and later to its retraction.

Before the leak:

Chancellor, what we want is for the Greeks to stay within the euro and also to meet their obligations to repay debt and reform their economy. The Greeks hope to avoid meeting their obligations, natürlich, but polls show that 80 percent of them, more than ever, would choose to remain in the euro. So let us tell them to hold a referendum on the euro. If it passes, any new government, however Greek, will not be able to use the threat of exiting from the euro in order to blackmail us into giving it more money. We will have tied their hands. And we will have kept the euro zone virgo intacta. A master stroke, nein? 

After the leak:

Unfortunately, Chancellor, there are some unforeseen difficulties with our brilliant plan to hold a Greek referendum on the euro. First, you may recall that we actually dismissed the last-but-two Greek prime ministers for suggesting exactly the same referendum. Second, our colleagues in Brussels remind us that we dislike referendums in general because they have a way of not giving the required answer. And, third, a referendum would tie our hands only slightly less than those of the Greeks. It is, of course, unthinkable that Greece should leave the euro. At the present moment. But the costs of keeping them in might ultimately become so high that a “Grexit” — that is what the frivolous Anglo-Saxons call the Greeks’ returning to the drachma — might well become thinkable.