‘TINA’ Revisited: Why Alternative Narratives of the Eurozone Crisis Matter

Abstract

During the dramatic negotiations over Greece’s third bailout package on 11–13 July 2015, Europe’s more than five-year-long euro-debt crisis took a significant turn, arguably changing the paradigm of the European Monetary Union (EMU). Spilling from the periphery over to the very core of the Eurozone, the Greek debt crisis triggered a larger conflict about whether the intractable problems of one of its member states could—in fact, needed to—be solved within the existing paradigm of the currency union or whether they made its break-off imperative. In fact, the German Finance Ministry claimed there were two alternatives: Either the Greek authorities guaranteed upfront ‘debt sustainability’ through a ‘credible implementation perspective’ of reforms aimed at financial market access after the new European Stability Mechanism (ESM) financial assistance programme was completed. Or, ‘a time-out from the Eurozone’ for Greece was the ‘only way forward (that) could allow for sufficient debt restructuring since this would not be in line with the membership in a monetary union’ (German Finance Ministry 2015). The Peterson Institute for International Economics was quick to warn against the risks of bringing a ‘Grexit’ up in Eurogroup dealings: ‘Doing so proved to be an extraordinarily effective negotiating technique.…At the same time, the spectre of a Greek exit undermined the sense of irreversibility in the euro area’ (Kirkegaard 2015). Former German Foreign Minister and Vice-Chancellor Joschkas Fischer advised not ‘to dismiss the fierce criticism of Germany and its leading players that erupted after the diktat on Greece’ (Fischer 2015). The spectre of the ‘ugly German’ foreshadowed what British historian Timothy Garton Ash has foretold for the European Union (EU) of the twenty-first century: ‘Europe is being torn apart—but the torture will be slow’ (Ash 2015). Finally, resistance on the part of France, Italy, Luxembourg and Greece itself—and the latter’s willingness to compromise—removed a ‘Grexit’ from the negotiation table. And despite the overwhelming majority of Greeks voting against the bailout conditions in the Greek referendum on 5 July, the Greek government committed to the Euro Summit’s conditions in exchange for a three-year financial assistance package. These obligations include Germany’s ‘upfront’ hard conditions, establishing a ‘privatization fund’, structural reforms and fiscal austerity under Troika control and acceptance ‘that nominal haircuts on the debt cannot be undertaken’. Yet, the creditors also pledge to boost growth and job creation and to ensure that Greece’s ‘gross financing needs remain at a sustainable level’ (Euro Summit Statement 12 July 2015). Nevertheless, over that haunting weekend in Brussels, EMU experienced a veritable, even if incomplete, paradigm change: Paradoxically, for the sake of fiscal stability it turned from an irreversible institution into a contingent, politically determined, more dynamic regime.