The European Union has always been flawed by compromise and heavily reliant on good will. The Greek referendum has simply brought these things into focus. At the heart of the issue is that the EU is an economic federation of sovereign states (countries) with no power to bring rogue states into line. It is not the first federation to begin life in this fashion, however like the other federations, it must change if it is to have a permanent future.
The reason for the compromised structure is that Europeans’ are closely aligned to their countries and resist any notion that a central ‘bureaucratic’ body can override the will of their sovereign state. However they also recognise that being part of a wider collective has significant economic benefits. So the EU has been structured in line with these opposing forces. The current ruling party in Greece has made an emotional appeal to the former, to justify reneging on its obligations to the other members of the union.
When reviewing the various government responses to the global financial crisis, I referred to the European Union as a share house. In this context Greece has been living beyond its means even before it joined the share house. To gain entry to the share house Greece indicated that it was in better financial shape that it was. When the Global Financial Crisis uncovered the true nature of Greece’s economic position, Greece reached out to its fellow housemates for money. They obliged on the condition that Greece mend its ways – quickly. As it has transpired what they asked for was beyond Greece. Indeed to ask for austerity when Greece was trying to recover from the GFC was like asking an ill patient to go on a strict diet and intense exercise campaign. It was never going to work, and was likely to make matters worse: Which it did.
Now Greece wants to quit the austerity program, and the EU wants to save face and get its money back. Both sides can get what they need if pride can be put aside – which is why it is so disappointing that it has turned into such a melodrama: pride and ego tend to grow on the public stage. In a similar game of brinkmanship in the early days of another federation – the United States of America – a collection of member states tried to leave the Union. The result was civil war. Rebellion is never a painless solution.Having watched the promise of an Arab Spring turn into a wild fire of destruction, perhaps the players in this drama will choose to cooperate rather than set their own stage on fire.
The European Union needs to learn from its mistakes. First it needs to admit to all Europeans that they now live in a Federation. It must explain that if it is to realise its potential and deliver them the best quality of life, then a better balance needs to be struck between Federal (EU) and State (Countries) powers. Part of this is a realignment of the relationship between the central treasury and the various governments. In doing so they can look at other Federations throughout the world and adopt what works, and avoid what does not.
Even strong Federations are not without their problems. For example a strong USA still has some member states that are financial basket-cases, the most famous of which is California. Not coincidentally a state with a population with a similar attitude to paying taxes, receiving government benefits and authority in general as the Greeks.