The Grexit Summer of 2015 will be remembered as a key moment in the history of the European monetary union. We were very close, indeed, to see for the first time a member state leave the Eurozone. In the run up to the crucial July 12-13 Council meeting, there were three contrasting views on the matter. Those that thought that the Eurozone had become robust enough to withstand the exit of a member state, and if anything this exit would deepen the integration of the rest; those that thought that Grexit would be the best option for the Greek people. And then there were those (me included) that believed that if Greece were to leave, the monetary union would immediately become a fixed exchange rate regime that could easily be attacked by speculative forces. In other words, we would soon be in 1992 and the Pound crisis all over again.
Finally, Grexit did not happen. But the experience was intense, frustrating, and for many, traumatic. Thus, with six months of hindsight, I have asked seven of my colleagues who have worked on the euro for years (Erik Jones, Mark Blyth, Katherine McNamara, Hubert Zimmermann, Daniela Schwarzer, Amy Verdun and Federico Steinberg) to reflect on these events. There were no precise guidelines for this academic symposium. My aim was to have gender balance, include scholars based both outside and inside the Eurozone (although with emphasis on the latter), and the only question that we put forward was: What have we learned from the Grexit Summer? Their answers are fascinating, and I will not attempt here to summarize them. Read the texts below. They are all incredibly rich and thought-provoking, and I am grateful to all seven (all a source of inspiration in my work) for agreeing to participate.
These are my own reactions. The general view on the future of the euro is perhaps overly pessimistic (with the exception of Steinberg). Furthermore, as I speculated beforehand, it appears that those that are outside the Eurozone (Blyth and McNamara) are more skeptical than those sitting inside the storm (the other five, including Verdun, who has recently been based in the Netherlands). One wonders why. Does closeness limit the capacity to appreciate the whole picture, or does distance hinder to see the details? Jones, for instance, looks at agency. And this is a very important point. The personalities of Merkel, Tsipras, Draghi and Schäuble were key in the whole process. All four in their own way performed outstandingly. Schäuble pushed the chicken game between Greece and Germany to the very edge (recklessly considering Grexit as an option), Draghi too (although he was convinced Grexit should be avoided). Tsipras recognized at the end of a big fight that Grexit would be fatal. So did Merkel. I would agree with Jones that the German chancellor was key, and I also doubt whether anyone could have done it better.
Sharp as always, Blyth´s metaphor that the Greeks wanted to stay in their marriage while having an affair with Katy Perry (i.e. stay in the euro while getting debt relief) goes straight to the big dilemma that a lot of Eurozone member states face. Fittingly, this dilemma becomes a trilemma, in Zimmermann’s own simile about the euro marriage. The first option is “a shotgun marriage of partners” which would be some sort of authoritarian federalism. The second option is to respect the will of very divergent national democracies and therefore break up the marriage and the euro (this sounds a bit like Le Pen speech to me). The third option is a happy marriage based on democratic federalism. Alas, for Zimmermann, this can only happen with the more likeminded and converged core of the Eurozone. Yes, indeed, this last option means exits will happen.
Of course, one could think of a fourth more optimistic option. One that involves a European fiscal capacity, democratically legitimized, as suggested by Schwarzer and Steinberg, and with all the Eurozone member states involved. Is it possible? It is very difficult to say because the outcome will depend on the social struggles within the Eurozone, with France and not Germany as a key player, in my view. Talking about France, I think it is a mistake to look at the Eurozone only from a debtor southern vs. creditor northern countries perspective, as done by Blyth, McNamara and Zimmermann. It happens that there are a lot of creditor individuals in the south too, and not only in France. These creditors sitting in Porto, Milan or Sevilla were in favor of Schäuble´s hardline with Greece as much as their fellow creditors in Stuttgart or Antwerp. For me, the Grexit Summer showed that there is a pan-European creditor vs. debtor (rightwing vs. left wing, if you want) contest emerging. In this light, the austerity and reform-obliging policies of the Eurogroup, as summarized by Verdun, might just be the democratic reflection of the average European voter, who tends to be mostly conservative and a creditor.
This brings me to the question of whether we have gone back to a straightforward intergovernmental Eurozone, as suggested by McNamara. When the leaders meet so many times in such short amount of time, and have to take such important decisions jointly, the degree of socialization goes beyond the intergovernmental. Perhaps it is true that the Monet method has reached its limit, but the EU is not the UN. The level of integration is much higher. I agree entirely that, as scholars, we need to make further efforts to conceptually capture the space in between a non-intergovernmental and non-federal Eurozone. There is consensus that the current status quo is in the long term unsustainable. The ECB cannot continue to be the “Leader of Last Resort”, as Blyth puts it, and Schwarzer and even Steinberg lament. The provision of eurozone public goods needs to be done at the European level, by elected politicians.
Ultimately, as McNamara’s historically informed work shows, the future of the Euro will be decided by social struggles, and this will be between debtor and creditor countries and creditor and debtor individuals. Monetary unions are not constructed on rosy agreements, but rather on social tension, conflict and violence that ends in more unity – or disunity. The euro will follow the same path. For now, knowing that open conflict around redistribution of resources creates too much tension, the ECB has chosen to solve the conundrum technically and silently. With massive QE the ECB will have one day the option to cancel the sovereign debts in its balance sheet. This is why EMU is not like the gold standard.
In conclusion, for now Blyth can have both a happy marriage and a secret affair with Katy Perry. The big question is what will happen when his wife finds out.