With Africa attempting its own form of monetary union, lessons from the eurozone and Greek crisis could not be clearer. Inevitably the crisis in Europe will not leave Africa unscathed.
A few years ago, when the Greek banking crisis turned into a sovereign debt crisis leading to the first bailout by the “Troika” (ECB, IMF and European Commission), this column warned that given that Greece’s debts were unsustainable, the respite was only temporary.
The column also highlighted that in the past, sovereign debt crises were usually resolved through a significant loss of sovereignty as well as concrete assets. Back then this seemed an unlikely fate for Greece, given the existence of the European Union and its values and rhetoric about democracy, solidarity and so forth. However, the unfolding drama since the election of the left-wing Syriza party has demonstrated that anything is possible.
Certain momentous global events crystallise thinking and inevitably lead to profound shifts, not just in perceptions, but in policy and action. The 9/11 tragedy caused the global perception of the US to alter markedly. Despite its strong military response to the attack, the aura of invincibility that had previously cloaked the US was replaced by one of vulnerability and fragility. The significant decline that the US has witnessed since can be attributed to this change of perception. It has enabled major actors since then, whether the Taliban, the Iraqi insurgents or latterly Russia and China, to openly challenge the US’s unipolar status.
The events surrounding the Greek referendum are similarly going to have a profound impact in reshaping perceptions of European unity, democracy, solidarity (and in the end, power).
First, the euro is now clearly seen for what it is, the extended “deutschmark area”, enabling Germany to accumulate surpluses, at the expense of its weaker neighbours.
Second, the banks, whose irresponsible lending triggered the crisis in the first place, have again been protected. The consequences of their irresponsibility and the odious debts loaned to a corrupt Greek elite have been passed on to ordinary taxpayers in Greece and the eurozone through the bailouts.
Third, despite the awareness of most economists and financial institutions that Greece needs significant debt relief because its current debt is unpayable, the Troika have nevertheless insisted on more austerity measures, including a fire-sale of assets and effectively, control of the Greek Central Bank and treasury.
Fourth, such actions are producing a dangerous split between surplus Northern European countries and the indebted Southern European countries, with a deepening crisis that is reigniting many of the hostilities and rivalries that the European Union itself was supposed to eliminate. It has itself also produced bigger geo-political convulsions with what looks like a split between the US controlled IMF and the German-controlled ECB/European Commission as to how to resolve the crisis: significant debt relief (IMF), more austerity or Greek exit (ECB/European Commission).
Meanwhile Russia and China wait in the wings, in case despite all the measures taken so far, Greece eventually crashes out of the euro and perhaps the European Union.
Finally, Greece is important for Europe. It represents the beginning of European civilisation and notions of democracy, philosophy, art, literature, and science. In other words a particular idea of European “exceptionalism”. The manner in which the Greeks have been treated and humiliated over the last few years will have profound consequences. What is the value of European unity and solidarity, when the pioneer of Europe is attacked so remorselessly?
So what does Africa take away? If Greece can be treated this way, future African debtors will be treated even worse, as we saw in the 1990s. Secondly, feckless and corrupt elites can return a country to colonial status or debt slavery. Thirdly, Africa is attempting its own form of union and the lessons of the eurozone are important to bear in mind as we construct our common African space.