Don’t mention the G-word. Turning up the heat in Europe

Don’t mention the G-word. Turning up the heat in Europe

Greece still has many hurdles to jump through before it can see its 86bn euro bailout being enacted. First, a vote in the Greek parliament is needed by Wednesday, which seems likely with opposition support. Parliaments in several eurozone states also have to approve the new bailout. In the longer term, Greece’s economy will likely enter a serious recession – a contraction of 3%, a rise in unemployment above 26%, and that’s before the ECB announces any further emergency liquidity (ELA) to prop up Greece’s virtually bust banking system, with capital controls to be kept in place for some time yet, and banks of course, still closed. And on Alexis Tsipras’ desk, a bill of 3.5bn euros to be paid to the ECB by next Monday.

With the vote on Greece’s bailout producing a decisive ‘no’ vote last Sunday, it was as much a referendum on prime minister Alexis Tsipras and his Syriza government, who now face supporting a more draconian bailout than was previously offered. The shift to populist parties across Europe is a trend that is set to continue, given the success of UKIP as a significant player in UK politics, the rapid rise of Podemos and latterly Ciutadans in Spain, as well as other parties across the continent challenging the consensus and traditional party politics. Together with this is a growing probing of democracy in Brussels, as many politicians will use the Greek deal as a means of making bold statements on the brutal nature of negotiations EU-style. Among them, the politics – and fairness – of austerity – endlessly debated between economists, its effects witnessed on every level in pharmacies and homes in Greece.

Talks around the table about Greece’s bailout flared up European divisions on the country’s exit from the single currency it has just avoided. Similar rifts on the migrant crisis have divided north and south Europe – the lion share of the 137,000 people in the first six months of the year arriving at the shores of Italy and Greece, the majority fleeing from Syria’s bloody civil war, according to a recent UNHCR report.

A look at headlines in recent days points to the continued scale of this problem. “Hungary begins work on border fence to keep out migrants”. 80,000 migrants have already reached Hungary this year, 80% of them from Syria, Iraq and Afghanistan. In fact, Hungary received more refugees per capita than any other EU country apart from Sweden. The threat of migrants is causing other European states to erect walls and fences, a physical and symbolic image of this problem.

The solidarity needed to implement Brussels’ plan to distribute migrants more fairly throughout Europe and ease the pressure on its most vulnerable states was in short evidence, after the plan was rejected at the end of June by European leaders, confirming again the toxic nature of immigration.

Long ignored in the European news cycle has been Ukraine. Its economy is forecast to shrink by nine percent this year, so precarious the situation remains in the country. Russia’s frozen conflict in the east has affected production, as a trade war continues. Gas supplies from Russia to Ukraine, as of the beginning of July, have been halted.

Ukrainian president Petro Poroshenko spoke yesterday of Russia’s plan to make Ukraine a “state of bondage”, wishing to exert political influence through the conflict in the east. He said: “Ukraine won’t allow that.”

He also warned of a new spike in military activity in Donbass: “We’ve got information that there is a record large number of the armed forces of the Russian federation along with the border of Ukraine.”

The Greek deal this morning has also staved off the threat of Russian economic assistance for the crippled southern European economy. Russian president Vladimir Putin was keen to ally with Tsipras, the latter describing Russia as one of “Greece’s most important partners” just last month. In addition, NATO movements in the Baltics to counter Russian aggression look unlikely to end any time soon.

A cocktail of economics and politics have already made for an incredibly turbulent year for Europe and its institutions. Disagreements are likely to create further divisions, proving the difficulty in mastering the art of diplomacy in such a divergent continent.

France’s olive branch to Greece

France’s olive branch to Greece

Greek negotiations are looking more precarious – and harder to predict – than ever. This weekend saw a hard-ball approach from Germany’s finance minister Wolfgang Schäuble, who proposed allowing a temporary exit for Greece from the euro, and an even clearer line from Finland, who rejected the latest proposals, that trust has completely broken down – its finance minister erring more on the side of a Grexit than keeping the country in the single currency. One official said some of the proposals appeared designed to “humiliate” the Greek prime minister Alexis Tsipras and his Syriza government.

Germany stands together with Baltic states, Slovenia, Slovakia and the Netherlands in being uncompromising and more willing than ever before to see the 19-member currency break down. Meanwhile, hope still rests with Southern Europe states such as Spain, Portugal and Italy, who have shown themselves to be far more ready to fight for a deal, owing in part to their own economic troubles. A Greek exit would do them no favours, as the ripples of a broken Europe would flood the entire continent no less.

By far the most loyal supporter of Greece throughout the negotiations has been France. Newspaper reports at the beginning of the week outed the fact that advisers from the French Treasury had been in Athens, helping the Greeks to draft out the proposals that prime minister Alexis Tsipras handed to the European Council on Thursday evening. One adviser said: “It’s the Greeks who are holding the pen, but they are using us as a sparring-partner”. Sceptics have used this as a means of exaggerating France’s role, retorting that the Greeks would be incapable of working alone on the list of reforms. Greece needs expertise, and for France, it shows that they are at the very centre of the European game.

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On Sunday, Hollande dismissed German proposals of a temporary Greek exit, which had grabbed many of the headlines. He asserted: “There is no temporary Grexit, there is a Grexit or there is not a Grexit”.

For each French citizen, Greek debt totals 600-700 euros. Although the eurozone has tried since the beginning of this crisis to build a firewall around Greece, a Grexit would nonetheless spell a loss of 55.7bn euros to the French, far more than either Italy or Spain, according to 2012 figures.

France’s president, François Hollande, has long been working hard for a German compromise in achieving a deal, acknowledging the suffering of the Greek people and the need for “indispensible” reforms. On Wednesday, he said Greece’s latest proposals for its next 59bn euro bailout were both “serious” and “credible”. Hollande equally talked of the need of a united Europe, whose break-up Angela Merkel could realistically never allow herself to preside over.

The Greek crisis has marked the fracturing of the symbolic, long-standing Franco-German micro-managing of the European Union’s recent troubles – Angela Merkel seems more than ever to run the show alone – her calm, measured approach resonating far more than any other leader.

In no uncertain terms, France’s economy minister, Emmanuel Macron, warned in Spain’s El País newspaper on Thursday: “if we don’t act fast, the euro zone will cease to exist in ten years”. In what is increasingly seen as a disagreement around negotiation tables, Macron argued that a Grexit would not only be an economic failure, but political. He said: “Not doing everything possible so that Greece stays in the eurozone is accepting a deterioration of Europe”. Macron’s grand gestures were accompanied by a warning for the 19-member currency as a whole: “the status quo and ambiguity are driving us to the disbanding of the eurozone.”

Echoing the language of Hollande, he said a compromise had to be found, with ambitious reforms for Greece, but not so much so that they destroy the country’s economy, given its already painful course of austerity. Investment was needed for growth, but Macron maintained a critical line against Syriza and Tsipras, who is no hero of the Greek people, he said.

François Hollande has always been seen to be more presidential on an international stage, from France’s military intervention into former colony Mali’s war against Islamists, to the British co-ordinated attack on Libya. In reality, he is continuing to struggle with his own domestic politics – a weaker-than-expected economic recovery, with unemployment refusing to budge. Economic growth for this year is predicted at 1.2%, admittedly far more than the 0.4% average growth of the past three years.

A strong Europe can not only afford Hollande a more statesman-like appearance on the continental stage, more crucially it pays to counter the anti-EU rhetoric of Marine Le Pen’s Front National party, whose reaction to Greece’s ‘no’ vote was to laud Greek PM Alexis Tsipras as a respected leader and a man of the people. She was clearly drawing on the rhetoric of increasingly potent populist politics sweeping across Europe. To draw parallels, Le Pen conjured up the figures of Mitterand, even de Gaulle, to colour her complimentary remarks. At the same time, she attacked Hollande for being the “cabinet director of Jean-Claude Juncker”.

Le Pen talked of the victory of the ‘no’ camp as a means of standing up to the “oligarchy” of the EU, the “diktats” of the single currency and an “inhumane” austerity. In short, she said: “this No is excellent news”, spelling the end of France throwing money into Greece’s black hole of debt. She even coined the term “eurosterity” (or eurostérité), calling for the dissolution of the single currency, which she likened to a vanity project which was saving face only by imposing tough austerity.

Running short of allies, Alexis Tsipras cut a lonely figure around the negotiation table on Sunday. As leaders enter a new week of talks, nobody really knows whether Greece is blindly tip-toeing to the exit door, or if the solidarity shown by the likes of France will ultimately lead to a last-minute deal. After leaders ignored the seemingly apocalyptic Sunday deadline, the can-kicking that has characterised negotiations looks set to continue, for how ever long it can.