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Greece’s vote is Germany’s Pyrrhic victory

APTOPIX Germany Europe GreeceAPTOPIX Germany Europe Greece
German Chancellor Angela Merkel, right, points as she and the Prime Minister of Greece Alexis Tsipras leave after a press conference as part of a meeting at the chancellery in Berlin, Germany, Monday, March 23, 2015. (AP Photo/Michael Sohn)Photograph by Michael Sohn — AP

The world’s attention this week has been rightly focused on Greece, as it prepares for its fateful referendum, a vote that is effectively about its membership of the Eurozone, whatever Prime Minister Alexis Tsipras may say to the contrary.

But on Monday, it will be the turn of the other protagonist in this drama, Germany, to make its choice. As with Greece this weekend, there will be no good choices left–only bad ones and worse ones.

Either result can easily be spun as a victory for Germany and the German-inspired Eurozone approach to the debt crisis. If they Greeks vote no, then they can effectively be forced out of the Eurozone by the European Central Bank, making a horrible example of anyone in Spain, Italy or France who questions the path of austerity and structural reform. If the Greeks vote ‘yes’, then Germany can tell the world: “See? We told you were right,” and impose another round of spending cuts and tax increases.

Except that, either way, it’s a type of victory that we all know–thanks to ancient Greece. When King Pyrrhus of Epirus lost most of his friends and officers in beating the Romans at the battle of Asculum, he knew that the costs were higher than the benefits, saying (according to Plutarch): “Another victory over the Romans and we shall be ruined utterly.”

If the Greeks vote ‘no’ to continuing the bailout, then the pressure to force Greece out of the Eurozone will be irresistible, thanks to the poisonous climate that the government and media have managed to generate over the last five years. At which point, the latent losses on all those direct and indirect German exposures to Greece (€89 billion, according to the German economist Hans-Werner Sinn, who has thought of little else for the last five years) will be crystallized. Berlin will be left with the problem of recovering what it can from a bankrupt state in even more disarray than it is now. Europe will have proven that its promise of “ever closer union”, a union designed largely to suit Germany, is just words on paper. The next time a major crisis comes around, markets will either blow the union apart, forcing Germany into a massive exchange rate appreciation and recession, or forcing it to accept what it has resisted so hard for the last five years–a transfer union. Pyrrhus would be proud.

If, however, the Greeks vote ‘Yes’, the outlook is hardly better. The Eurozone will have to put together a new aid package, and it seems that after yesterday’s broadside from the International Monetary Fund, the result will have to be much the same: recognise that Greece’s debts are unpayable, write off a good part of what has been lent, and wait a generation for the rest to be repaid. Another wry smile from Pyrrhus. (The Fund was just as scathing of Greece’s failure to reform as of the Eurozone’s debt math, but that’s another matter).


The beer garden hardliners from Munich to Hamburg may be able to console themselves by next week that at least they got rid of that maddening gadfly Tsipras and his equally provocative Finance Minister, Yanis Varoufakis. And in the short term, they would be right: a ‘Yes’ vote, if it comes, seems likely to create a ‘national unity government’ that will do Germany’s bidding.

But that might turn out to be the most Pyrrhic victory of all. It’s not just that democracy in Europe isn’t well served by the ejection of a freshly-mandated government by foreigners (even if that was primarily the result of its own fecklessness, and even if there were 320 million foreigners as opposed to only 11 million Greeks).

It’s that the opinion polls suggest an extremely close vote. If Greece is so deeply split down the middle on the key question of the day (and it’s still a big ‘if’ because the polls have big margins of error and a lot can still happen in the next 48 hours), there can, almost by definition, be no ‘national unity’ over which to govern. There will be no collective pulling together and grinning-and-bearing-it. There will only the same factions tearing each other apart over a shrinking pie (as they did under the technocrat Lukas Papademos in 2011/2).

Implementation–the modernisation of the Greek economy and state–will be no more possible than under the governments of the last five years, and Greeks and Germans will be doomed to play out the same game of debt restructuring, for even higher stakes, within a couple of years. Whatever the Germans want to tell themselves on Monday, that is not the situation that Greeks will be voting ‘Yes’ for on Sunday, and not one that ultimately serves Germany either.




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NOTE: This is the best representation I’ve seen of what happens after Sunday vote. Unfortunately, it was published on Twitter without attribution. If anyone recognizes it as their work, please let me know so that I can credit you properly. Thanks, GTS