Why “Grexit” isn’t an Option

Greece is often looked at as the sick man of Europe – and the source of its disease is economic. It has been argued that the recession in Greece is steeper than that faced by the United States during the Great Depression.

Greece is currently the only European Union (EU) country that is still operating under an EU bailout plan. The latest bailout agreement, signed by Greek Prime Minister Alexis Tsipras in the summer of 2015, will be in effect for at least three years and subjects Greece to the direct supervision of the “Troika” (the EU, the International Monetary Fund, and the European Central Bank) for another eight years, at least. Even while discounting the European Central Bank’s support for Greek banks, Greece has received the most financial stimulus out of any European country, amounting to approximately 326 billion euros over three bailouts since 2010.

However, in order to receive financial assistance, Greece implemented a series of unpopular measures, including extensive welfare cuts, tax rate increases, and extensive reforms to the labor market. Despite some accusing the Troika of inflicting unnecessary damage to Greece via excessive austerity, the country is in need of major structural reforms, and Troika’s requests for Greece to improve its fiscal governance, taxation, market competitiveness – while simultaneously revising its budget and addressing its trade deficits – are hardly outlandish.

Unsurprisingly, these unpopular measures and the general economic turmoil in the country have resulted in considerable political repercussions. Greece’s dominant party, PASOK, fell from power and its representation in parliament plummeted to a mere five percent. SYRIZA, a once-marginal far-left party, has taken PASOK’s place. An unprecedented coalition between SYRIZA and far-right populist party ANEL emerged, effectively breaking the traditional left-right division in Greek politics. Greece has had seven prime ministers since 2009; the high turnover rate in the government’s leadership is unmistakable evidence of Greece’s political instability.

The current coalition government initially adopted an anti-EU and anti-Western stance and searched for new, non-Western partners like Russia. However, no actor other than the EU is willing to provide financial support for the indebted country. As a result, the Greek electorate remains predominantly in favor of staying in the Eurozone. Tsipras made a spectacular U-turn in his attitude toward the EU and signed a new agreement with the Troika in July 2015. The coalition government is currently sitting on a thin parliamentary majority, which is unlikely to continue given the harsh austerity measures it will have to implement in the future as part of the new bailout Greece has agreed to.

Since late 2015, Greece has also received an unprecedented wave of Syrian refugees, which has put pressure on the entire Schengen area. Contrary to his earlier assurances that no borders would be closed off, Prime Minister Tsipras acquiesced with the EU’s decision to block the flow of migrants from Greece to the rest of Europe by closing a number of borders in the Western Balkans.

The security concerns resulting from the influx of migrants, combined with the economic woes that have rendered the country dependent upon the Troika’s support and the public’s rising discontent with its government’s general incapacity, has left Greece on the brink of an economic and political meltdown. German Chancellor Angela Merkel, however, continues to argue that Greece should not be vilified for its failure to handle the migrant crisis, but rather receive support from the international community. The EU announced it will allocate further financial support to Greece, and NATO agreed to patrol the Greece-Turkey sea border.

Despite the strained relationship between Greece and the EU resulting from the persistent economic turmoil and refugee crisis, there is still hope. Both the populace and Greek government still support remaining in both the Eurozone and the Schengen Area. The majority of the Greek population perceives the possibility of “Grexit” as a highly undesirable outcome that would ultimately inflict unfathomable damage to Greece in the long term.

Greece’s EU membership is pivotal to its future prosperity for many reasons. Being an EU member gives the country access to many economic benefits. Greece has received billions of euros from the EU as part of the organization’s Common Agricultural Policy, Cohesion Policy, and Social Policy. EU membership promotes modernization and reform, as the bloc requires its members to conform to its collective standards.

EU membership also provides Greece with security and facilitates diplomatic relationships, especially now that the EU has accepted members from former Communist states, like Bulgaria and Romania. Leaving the EU would not simply be an economic catastrophe, but also a political and geo-strategic setback for Greece. Unsurprisingly, President Barack Obama is keen on ensuring that any Greek-EU tensions that may endanger Greece’s position within the Eurozone be resolved – even going so far as openly criticizing Europe’s insistence on austerity. In other words, there is strong support for Greece to remain in the Euro (and the EU) both at national and international level.

On Sunday, May 22, 2016, SYRIZA and ANEL parliamentarians voted in favor of a new 7.500 pages-long austerity law, which included numerous tax hikes, privatizations, pension cuts, and other unpopular austerity measures. The new austerity package includes an automatic fiscal stabilizer, whereby every year, if there is any deviation from the annual fiscal targets that are already agreed, there is to be automatic cuts in salaries, pensions, and other spending without a vote in the Greek parliament. Moreover, the new package includes a new Privatization Fund, which will be in operation for 99 years, and will manage (and sell at its wish) all Greek public property. These measures appear outrageous to anyone who has taken the election pledges of Tsipras and his coalition government seriously.

It remains unclear whether Greece can or wants to comply with the long list of reforms that the EU demands of the country’s economy, governance, and society in terms of actual/full implementation. Wary of aggravating public discontent with the required austerity measures, the SYRIZA-ANEL government has delayed completing its part of the bailout deal with the EU. Given the waning support for Greece’s current coalition government, a new government may rise in the future, leading to further political instability in the country.

Greece has undergone a very painful period of economic crisis, and all signs indicate that any forthcoming hardships will considerably threaten Greece’s economic, political, and social stability. As has been the case with Greece since its founding, the future of the nation depends on whether or not it can remain part of the European core. Despite Greece’s seemingly tenuous relationship with the EU, both politicians and citizens seem to agree that the country should stay in the EU. However, Greece needs to deliver on its promises of implementing a series of difficult and unpopular reforms. How the country manages the implementation process will determine the future trajectory of its relationship with the EU.