For once in its life, the latest Euro zone agreement with Greece was not a grubby late-night, last-minute compromise. Actually, it was so tough that it has now precipitated not one but two Greek plebiscites regarding its implementation (one referendum and – with last Thursday’s news from Athens – one general election). There was some cursory sympathy for Greece along the way from France and Italy, but that was about all. For much of the last night of the most critical negotiation in early July, even Greece’s temporary exit from the Euro zone was dangling from the square brackets of the draft communiqué.
Some people seem to want to pin the blame for Greece’s lack of Euro zone friends on the debating style of its combative former Finance Minister, Yanis Varoufakis. I want to propose two other reasons for Greece’s recent solitary confinement, and Germany’s new-found popularity: QE and Russia.
First, QE. Or Quantitative Easing, to give it its long name. Because it was just three days before the Greek people elected their first Syriza government in late January that European Central Bank (ECB) President Mario Draghi announced his new monetary policy programme, after years of prior rancour and disagreement. This time last year, if you can remember, it wasn’t so much about fiscal austerity that governments and policy-makers were butting heads over, but monetary austerity. And it wasn’t the Greek government that appeared to be in the minority of one in that debate, but the German government. Sometime in January this year, Germany finally capitulated, President Draghi got to make his announcement, and the QE die was cast. I remember wondering then whether there would be a price to pay for Germany’s acquiescence. There was: it was Greece. I might be mistaken, but I think you’ll find on very close inspection that the German government timed its agreement on Eurozone QE precisely so that it could then be tough on whatever new Greek government was elected in late-January, and have new-found friends (who owed it!) to support its uncompromising stance.
Then there’s Russia, and the rising geo-political tension on Europe’s eastern flank. Wouldn’t you know it, but all five of the Euro members who back on to Russia and/or Ukraine were steadfast supporters of the tough German position on Greece.
I thought my European geography was pretty good until I read a recent piece in Prospect magazine about the Baltic States, when I realised I didn’t know much about it at all. Take the Russian oblast of Kaliningrad, for example: it’s the one bit of Russia – sandwiched as it is between Poland and Lithuania – that is completely cut off from the rest of country. But, to Russia, it’s one of only two year-round, ice-free ports for the Russian navy to berth in. And the other one? Why, it’s Sevastopol, in the current hotspot that is Crimea.
By the way, that same article that alerted me to the potential difficulties in Kaliningrad and the Baltic States also gave away their key foreign policy objective of recent decades. “We join everything”, said Estonia’s President Toomas Hendrik Ilves. Or as Estonia’s Finance Minister said in the run-up to the adoption of the Euro in 2011: “We believe a small country should have a strategy of being integrated into the major zones and organisations that are active here. It’s a trademark – a political trademark”. For anyone who thinks that the Baltic states are in the Euro out of a rationale economic calculus, think again: they’re in it out of a sense of national survival. And remember: under the current rules, it’s “No Euro, no Europe”.
As the biggest country and richest country in the European Union, it’s no surprise that countries want to be on good terms with Germany. Ironically, it was the countries to the west of it – most notably France – that wanted to contain a reunited Germany by tying it into the Euro in the early 1990s, just as the Cold War was ending. But now, with the end of the end of the Cold War on the menu, it’s Germany’s eastern neighbours who are looking to it for support. It’s not that they’re afraid of Germany. Quite the opposite, in fact: they’re desperate for its support.
But like any good regional hegemon, German comfort for Russia’s Euro zone neighbours comes with a price. And, as with QE, the most recent price was Greece. That’s right, Yanis Varoufakis: it wasn’t all your fault.
Indeed, and as they might be forgiven for saying in Berlin given the geo-political predicament of at least some of their Euro zone partners and new-found friends: “With friends like these, who cares about our enemies”.