A Fist Full of Euros (The Utopian)

In The Utopian

Thomas Meaney,Harris Mylonas

Why did it take four months for Europe’s parent nations — Germany and France — to prop up the continent’s prodigal son, Greece? And what can the European Union do when it comes to coping with such behavior with its other children?

There is little doubt Greece needs to face up to the part it played in its current financial mess — in which its ballooning deficit threatened the stability of the nation and the euro. But it now appears that in the case of Germany, at least, the slow response was more than meets the eye. Chancellor Angela Merkel was not simply pandering to her fragile coalition and frustrated electorate. Instead, the Greek crisis turned into a three-part opportunity for Germany: The country has dramatically boosted its exports thanks to a weak euro, a German is now the front-runner to head the European Central Bank, and it can now more easily justify cracking the whip on the rest of the Eurozone.

As Europe’s biggest exporter, Germany has been hamstrung by a weak dollar and even weaker Chinese yuan. The devaluation of the euro relative to the dollar in the last three months by more than 10% has helped German exports recover from a devastating 19% drop in 2009. While Germany has traditionally been committed to a strong currency, Merkel has been content to let the export sector of the German economy benefit temporarily from the crisis. Call it the Greek stimulus. The old economic tanker is skillfully navigating its course.

Germany now also has a leg up in the race to replace Jean-Claude Trichet as the head of the European Central Bank. The candidacy of the longtime favorite, Italy’s Mario Draghi, has been severely compromised by his close ties with Goldman Sachs and its role in aiding the Greek government’s attempt to conceal the full extent of its debt. Now Axel Weber, the current Bundesbank president, leads in the running, putting the Germans in a much better position to have one of their own head Europe’s leading financial institution.

More important, Germany now stands on much firmer ground when it comes to haranguing debtor nations in the Eurozone to get their books in order. The austerity measures ratified by Athens in March are a necessary step on the road to Greek recovery and would have been impossible to implement without the impetus of the crisis. Now other financially shaky nations in the Eurozone — Ireland, Spain, Portugal and Italy — have incentives to take preemptive measures to avoid Greece’s predicament.

But Germany is not the sole beneficiary. There is also silver lining for the Eurozone as a whole in this crisis. EU nations such as Estonia, Latvia, Lithuania and Bulgaria, which have not made it into the inner sanctum of the Eurozone, will now face a much longer wait. That was not nearly as easy for Western Europe to justify before the crisis. Finally, the EU as a whole can extend the wait for controversial applicants for EU membership indefinitely. France and Germany can now point to the need for EU consolidation rather than cultural or religious differences.

So what’s the fallout? European leaders reached a consensus last month following a drawn-out Franco-German compromise. All sides portray the agreement as a victory. Greek Prime Minister George Papandreou will test the waters by borrowing 5 billion euros from the bond markets by the end of March. French President Nicolas Sarkozy has bargained for more EU bilateral loans and a restricted the role for the IMF, which is run by one of his political rivals, Dominique Strauss-Kahn. Meanwhile, Merkel has solidified her role as a European kingmaker and has called for treaty revisions that could include the creation of a European Monetary Fund and rules that would expel problem states from the Eurozone.

One thing remains clear. The parents of the Eurozone solved Greece’s problem without resorting to the direct — and embarrassing — involvement of the International Monetary Fund. In recent years, new EU member states such as Hungary and Latvia turned to the IMF when they needed assistance. But Greece is too close to home. Germany and France share the same currency with Greece and cannot risk jeopardizing the credibility of the euro in the long run. Trichet’s announcement that the European Central Bank policy-makers will extend emergency collateral rules beyond 2010 eases liquidity pressure on the Greek economy and makes it unlikely that Greece will need to ask for help from the Eurozone and IMF. Yet by paying lip service to the possibility of IMF involvement in the future, Merkel has calmed the fears of her electorate.

Despite the dragging of the German Chancellor’s heels, the solution to the debt crisis has been a European one. There will be more disagreements in the months to come, but the storm has, for now, subsided. What hasn’t shattered the Eurozone just might make it stronger.

Thomas Meaney is doctoral student in modern history at Columbia University and an editor of The Utopian. Harris Mylonas is an assistant professor of political science and international affairs at George Washington University.

 

Greece’s crisis, Germany’s gain (Los Angeles Times)

 

In the Los Angeles Times

 

By Thomas Meaney and Harris Mylonas

Why did it take four months for Europe’s parent nations — Germany and France — to prop up the continent’s prodigal son, Greece? And what can the European Union do when it comes to coping with such behavior with its other children?

There is little doubt Greece needs to face up to the part it played in its current financial mess — in which its ballooning deficit threatened the stability of the nation and the euro. But it now appears that in the case of Germany, at least, the slow response was more than meets the eye. Chancellor Angela Merkel was not simply pandering to her fragile coalition and frustrated electorate. Instead, the Greek crisis turned into a three-part opportunity for Germany: The country has dramatically boosted its exports thanks to a weak euro, a German is now the front-runner to head the European Central Bank, and it can now justify cracking the whip on the rest of the Eurozone — the group of nations that use the euro.

As Europe’s biggest exporter, Germany has been hamstrung by a weak dollar and even weaker Chinese yuan. The devaluation of the euro relative to the dollar in the last three months by more than 10% has helped German exports recover from a devastating 19% drop in 2009. While Germany has traditionally been committed to a strong currency, Merkel has been content to let the export sector of the German economy benefit temporarily from the crisis. Call it the Greek stimulus. The old economic tanker is skillfully navigating its course.

Germany now also has a leg up in the race to replace Jean-Claude Trichet as the head of the European Central Bank. The candidacy of the longtime favorite, Italy’s Mario Draghi, has been severely compromised by his close ties with Goldman Sachs and its role in helping the Greek government’s attempt to conceal the full extent of its debt. Now Axel Weber, the current Bundesbank president, leads in the running, putting the Germans in a much better position to have one of their own head Europe’s leading financial institution.

More important, Germany now stands on much firmer ground when it comes to haranguing debtor nations in the Eurozone to get their books in order. The austerity measures ratified by Athens this month are a necessary step on the road to Greek recovery — and would have been impossible to implement without the impetus of the crisis. Now other financially shaky nations in the Eurozone — Ireland, Spain, Portugal and Italy — have incentives to take preemptive measures to avoid Greece’s predicament. Less export-dependent Eurozone nations will benefit from a stronger euro and the increased consumer purchasing power of foreign goods that comes with it.

Lastly, EU nations such as Estonia, Latvia, Lithuania and Denmark, which have not made it into the inner sanctum of the Eurozone, will now face a much longer wait. That was not nearly as easy for Western Europe to justify before the crisis. Meanwhile, for more controversial applicants such as Turkey, the wait can be extended indefinitely. France and Germany can now make their case much more persuasively on economic rather than cultural grounds.

So what is to be done? There is a growing consensus among European leaders that their financial crises require a European solution. Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and Merkel have all spoken of creating a European Monetary Fund as the preferred solution, and the EU executive commission has already taken up the proposal.

One thing remains clear. The parents of the Eurozone want to solve Greece’s problem without resorting to the direct — and embarrassing — involvement of the International Monetary Fund. In recent years, new EU member states such as Hungary and Latvia turned to the IMF when they needed assistance. But Greece is too close to home. Germany and Greece share the same currency and cannot risk its credibility in the long run.

What hasn’t yet shattered the EU just might make it stronger.

Thomas Meaney is a doctoral candidate in modern history at Columbia University. Harris Mylonas is an assistant professor of political science and international affairs at George Washington University.

 

The Name Game (Foreign Policy)

In Foreign Policy

BY THOMAS MEANEY, HARRIS MYLONAS

The future of EU expansion? It all depends on what the meaning of the word”Macedonia” is.

The European Union is a club with a long line out the door. Just ask Croatia,Montenegro, Serbia, Albania, or Turkey. But for one Balkan country, the biggestproblem is showing the right ID at the velvet rope. Seven former communist countrieswere able to enter both NATO and the EU by the end of the Bush years. But last yearthe Greek government blocked the Former Yugoslav Republic of Macedonia fromjoining NATO, citing bad neighborly relations, and is determined to torpedo its EU bidas well. The reason? It’s all in a name.

FYROM, perhaps due to the unwieldiness of its acronym, has tried to enter as just”Macedonia,” the name of the ancient empire of Alexander the Great. But Greece alsohas a northern province called “Macedonia” and worries that Skopje has expansionistambitions.

The United States supports the eastward expansion of NATO in an effort to shrink theRussian sphere of influence and — the name issue notwithstanding — FYROM wouldseem to be a perfect candidate for membership. The Obama administration can helpthe United Nations solve the dispute by abandoning the Bush administration policy ofstubbornly backing the “Macedonians” and talk its fledgling friend into a compromisethat will push it over the Balkan hump.

But doing so won’t be easy. The Former Yugoslav Republic of Macedoniaunderstandably doesn’t like to be known by its cumbersome post-Titoist tag. “Don’tYou FYROM Me!” is a favorite bumper sticker on the streets of Skopje. In the 1990s,foreign observers doubted the viability of this landlocked country with an explosivecultural makeup and powerful neighbors. Slav Macedonians, Ethnic Albanians, Turks,Roma, Serbians, and Bulgarians are all packed together in a state the size of Vermont.It’s not surprising that such a fragile country would want to cling its oldest and mostrespectable heritage.

The largest minority in FYROM are Albanians, who desperately want to becomemembers of the EU and NATO. Besides the obvious economic benefits, membershipwould ultimately allow these Albanians closer ties with their coethnics in the westernBalkans. They are growing impatient with the recent surge in “Alexandermania”backed by the Slav majority that promotes an exclusively “Macedonian” identity for thecountry. Last month, the government unveiled plans to erect an $8 million, 72-footstatue of Alexander the Great atop his horse, Bucephalus, in the capital square. Nevermind that the historical Alexander’s actual capital was located inside modern Greece.

More troubling are the maps in “Macedonian” textbooks that show their ancestral homeland stretching far into present-day Greece (as well as Bulgaria and Albania) and describe Thessaloniki, the capital of the northern province of Greece, as occupied territory. These are irredentist claims that justifiably worry the Greeks.

Imagine how Californians would feel if Baja California wanted to be called simply”California”? Or how Swedes would react if Norway changed its name to”Scandinavia”? The U.N.’s designated mediator has floated various possible names for FYROM, and Greece has recently indicated it would accept “The Republic of NorthernMacedonia.” But such a solution implies there is a “Southern Macedonia” in Greece inhabited by the same people, as in North and South Korea. But this is not the caselinguistically or ethnically. A more sensible solution would be “Vardarska Makedonija,”named for the river that flows through the region, which respects the dignity and identity of Greece’s northern neighbor but also distinguishes it from the northernGreek province.

It’s no accident that the EU and NATO both require prospective members to have nooutstanding border disputes, but the government in Skopje has exacerbated tensionswith Greece. It has renamed its airport, streets, and squares after Hellenistic heroesand interferes with the internal affairs of Greece by claiming there is a “Macedonian”ethnic minority living there under duress. This week FYROM even brought a case atthe International Court of Justice in Hague against Greece for blocking its NATO bid.

Where does FYROM get its chutzpah? From the United States and its allies. In 2004the Bush administration hastily recognized the country as “the Republic of Macedonia”in return for its support of the Iraq war. It did not expect Greece actually to block analliance with a meddlesome neighbor. Barack Obama’s administration now has theopportunity to encourage FYROM to find a compromise agreeable to both parties.

The move will find support among realistic Republicans and Democrats who want tounclog the NATO bottleneck and undermine the increasing cooperation betweenGreece and Russia. By giving lip service to sovereignty — Georgia — and at other timessupporting ethnic separatism — Kosovo — the Bush administration gave the impressionthat the United States will change its stance on these concepts whenever they suit itsnarrow strategic interests. By helping Greece and FYROM reach a mutually acceptableagreement, the Obama administration can reverse this impression, and moreimportantly ensure the future peace of Europe.