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February 16, 2012

An appeal to the people of Greece: the current crisis shows why Europe needs full political and economic union - and Greece has a unique opportunity in leading the way to achieve this, or so argues Brendan Simms

Posted by Brendan Simms

Brendan Simms - Professor in the History of International Relations at the University of Cambridge - argues that the Greek crisis shows why now is the time for the European Union to become a single federal state. The views expressed here are those of Brendan Simms, not those of the Social Affairs Unit, its Director or its Trustees.

The relative ease with which the Italian and Spanish government rolled over even their long-term bonds last month suggests that the medicine administered by the ECB just before Christmas is having some effect, if only temporary. A complete Euro Armageddon a cascading contagion across the periphery followed by a central collapse of the French banking system - has now been averted, at least for the moment.

Greece, however, continues to struggle. Either the government consents to a perpetual debt serfdom, and international budgetary superintendence as demanded by the EU's system of "economic governance", or it leaves the Euro and returns to the drachma. The former may well not save the common currency, given the state of the rest of the PIIGS (Portugal, Ireland, Italy, and Spain), while an uncontrolled departure could still trigger the dreaded contagion and render all the ECB's seasonal morphine redundant.

Either way, Greece will be crushed. If she holds course, the creditor demands will stifle investment and growth for a generation; the collapse in services will continue. If she returns to the drachma, inflation will rocket, investor confidence will plummet, and Greeks will be thrown back on the tender mercies of a native clientelist elite far more corrupt and opaque than that of Brussels (and no less despised for being local).

There will also be a price paid by the European project. Picking off countries one by one may seem good tactics, but if it succeeds the continent will miss a unique opportunity to address the sovereign debt crisis in a democratic, comprehensive and constructive manner. With this in mind, the supporters of a mighty Union should address the following appeal.

Nobody doubts the courage of the Greek people. In 1941, your forefathers chose to defy impossible odds by resisting Hitler, and paid a terrible price for doing so. It is your right to reject the undemocratic dictates of Brussels, to repudiate your debts and to leave the Euro. We also know that you know that you were partly responsible for your own troubles, through profligacy and manipulation of statistics; and that you are perfectly well aware that the price for escaping external tutelage will be the return to an old political system which does not properly reflect who you are, or at least what you want to become.

And while we deplore the recent manifestations of anti-German xenophobia in Athens, we acknowledge that the very structure of the currency union which required low interest rates to fund German unification created an uncontrollable credit boom on the periphery for which we must all take responsibility.

We also believe, however, that your creditors have rights, particularly the Northern Europeans who are going to have to "bail" you and their own banks - out and that they are entitled to be reassured that any solution will not simply result in new unsustainable debts being run up.

There is another way to help not only Greece, and the other distressed debtors, but all Europeans, even beyond the Eurozone: full federal union, with the federalisation of existing state debts and the establishment of balanced budget requirements over time for those acceding states who are in deep deficit. This requires sacrifices from the Greek people: they will lose their sovereignty, they will have to shed some treasured foreign political postures, and they will have to submit to rigorous scrutiny of certain aspects of their national life.

There is little here, however, that the Greek government has not already agreed to. Unlike the existing arrangement, the Greek people will have a say. At the moment each Eurozone budget goes first to the relevant committee of the Bundestag, and each bailout is subject to the vagaries of German domestic politics, as indeed it has to be, because the Germans have a democratic right to oversee the disbursement of their hard-earned taxes.

The Greeks are in a unique position to begin the process of full federal union, and they have the most incentive to do so. They should demand not only a referendum in their own country on any overall solution but one in every state of the Eurozone. Only a settlement agreed and owned by all the electorates involved will stick.
Greece is the cradle of democracy. This is a historical fact which has been abused to the point of rhetorical meaninglessness. Now let invest it with real significance. Let Greece by the birthplace of a new European polity: united, democratic and formidable.

Dr Brendan Simms is Professor in the History of International Relations at the Centre of International Studies at the University of Cambridge and co-President of the Henry Jackson Society.

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