Greece's Referendum The Price of Five Years of Cowardice

Much of Europe is outraged by Alexis Tsipras' decision to hold a referendum on reforms in Greece. But how did the euro zone allow an economically irrelevant country of 11 million to bring the common currency to the brink? Through cowardice.

Graffiti in Athens, Greece, depicts the euro with the word "No" in German. The country closed its banks and issued capital controls on Monday.

Graffiti in Athens, Greece, depicts the euro with the word "No" in German. The country closed its banks and issued capital controls on Monday.

You had it coming, Europe. And how!

The decision over the weekend by the Greek government to hold a referendum on Sunday on the reform measures being demanded by its creditors threatens -- within just a few days -- to destroy the illusions of five years of policies aimed at saving the euro. The easy way out is to cast blame on Greek Prime Minister Alexis Tsipras and his government.

After months of negotiations and just before the expiration of the deadline in question, the Greek government has now decided that it is unable to take responsibility for a clear "yes" or "no" to the results of negotiations on its own. Why didn't the Greeks says weeks ago that they wanted to put the negotiations up for a vote? That would have been the democratic way to go about it. In the very best case scenario, Tsipras' about-face on the referendum is a populist move (assuming the decision was taken with any political calculation). In the worst case scenario, it is a cowardly one (if the head of government got cold feet about making such a difficult decision).

But "constant cowardice" is also the answer to another question -- namely how the rest of the euro-zone members, Germany above all, could have allowed a situation to develop in which the erratic leaders of an economically insignificant country with a population of just 11 million people could bring the currency union to the verge of collapse?

Protracting the Problems

For the past five years, politicians within the euro zone, under German Chancellor Angela Merkel's unofficial leadership, have shirked painful decisions that might have helped to solve the debt crisis in Greece. The consequence has been that the problems have been protracted rather than solved.

This trend began with the first Greek bailout program in 2010. In order to prevent a Greek default, the euro-zone states provided their first credit guarantees to Athens at the time. To do so, they used tricks to circumvent clauses in European law that prohibited precisely this kind of shared liability within the currency union. Even then, the more courageous act would have been to force Greece's private creditors to absorb their losses. Under that scenario, even if banks had fallen into financial difficulties, one could have still used tax money to either partly nationalize these banks or to refinance them with fresh capital. During the financial crisis, Great Britain showed precisely how that could be done.

The cowardice continued with the 2012 debt haircut for Greece. At the time, euro-zone officials lacked the courage to force Greece's private creditors to accept the total loss of their capital. They only had to accept losses of half. And it was already clear back then that Greece's debt load would remain unsustainable despite the 50 percent cuts. But the politicians ignored the uncomfortable figures and instead prescribed unrealistic savings and reform targets for Athens. They also entertained the comfortable illusion that a handful of troika officials could somehow rid Greece of its inefficiencies.

With these harsh policies, the creditor states contributed significantly to the fact that the Greeks voted at the beginning of 2015 for a new left-wing government. The way in which this new government was treated was demonstrative of the third case of cowardice. European politicians have refused to even negotiate a debt hair cut that Athens has continued to insist upon. The reason is clear: They are afraid of their own voters, to whom they would have to admit that the billions that have flowed into Greece have now vanished.

In all likelihood, that is exactly what has happened. Most voters will have suspected as much for some time now.

Christian Rickens is the head of SPIEGEL ONLINE's business and economics desk.


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fospanton 06/29/2015
1. the price of five years of cowardice
Top notch commentary.
lagrena 06/29/2015
2. The Price of Five Years of Cowardice
Yes it is cowardly but his only option as he campaigned on a program that does not meet with the EU. However it seems like a room full of technocrats cannot recognize that another bailout will only lead to another bail out as the programs required do not generate income and growth. One example is the increased taxes on businesses. Todays news in Greece is about the plans to leave Greece. This country needs massive privations and a reasonable tax base that will generate business and income. Greece is WRONG but the TROIKA program will never lead to Greece being financailly strong
pjw2 06/29/2015
3. For Every Loser there is a winner
Yes, indeed Greece in the toilet but who pulled the chain? How much money was taken out before the final flush? Who has the money that was loaned? Follow the money, don't be dazzled by the illusion.
700islands 06/29/2015
Mr. Rickens should remember this is not the first time Greece has tried to hold a referendum on the teams of the bail out. The last PASOCK PM tried to hold one. He was pounced on by Brussels and forced from office. The next Greek PM was an unelected man and former Commission gandree. There was shock in much of the English speaking world at this. After all the EU had been formed in part to secure democracy in Europe, not for a currency. And instead we had democracy being sacrificed at the alter of a badly designed currency. Now we are back where we started. Once again Greece has the nerve to "shock" "Europeans" by asking voters to approve or disapprove. The idea that democracy itself could be so "shocking" is frightening. How else does one hope to secure a mandate to do something very hard? The Euro is very badly designed and until it is refashioned along sound lines with a lender of last resort, capital transfers and tax raising powers the rest of the talk is the birds. The real cowardice here is that Brussels is attacking democracy and no-one is speaking up for it while failing to take the steps necessary to save the Euro. Greece will do better out of the Euro. It will be hard, but then things are hard now, but by being able to adjust the value of their currency they will be able to make themselves competitive again. That is the other thing the UK did which Euro nations cannot.
dkwhitaker 06/29/2015
5. Great & Cowardice
Hi Not everyone in Europe is outraged. The English are not! Most of the money spent in Greece was on German imported goods. You the Germans bear most of the responsibility for the debt because you happily took the money without a moment's hesitation. Shame on both Germany and Greece.
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