Never underestimate Europe’s capacity for compromise. Throughout the region’s wrenching debt crisis, leaders from the EU, euro zone, and related institutions have shown an extraordinary ability to fudge the big decisions.
Never underestimate Europe’s capacity for compromise. Throughout the region’s wrenching debt crisis, leaders from the EU, euro zone, and related institutions have shown an extraordinary ability to fudge the big decisions.
This muddle-through strategy is hardly inspiring stuff, but it’s (just) enough to get the job done. And at no time have eurocrats’ fudge-making skills been tested more severely than during Greece’s standoff over a new bailout deal. Consider the following:
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The contradictions, provocations, and twisted logic above are enough to make your head spin. And yet, time and again, Europe has defied the “this time it’s different” crowd. On the edge of the abyss, at the eleventh hour, a solution is devised to avert disaster (but give little cause to celebrate). The EU, euro zone, and related institutions did not emerge by chance, and for political, economic, and emotional reasons they won’t be dismantled so easily—or quickly, since nothing in Europe ever moves that fast.
Of course, one cannot just blithely rely on eurocrats to keep on keeping on indefinitely. After all, short-term fixes can generate bigger long-term problems that even the most clever compromises can’t solve. But the fact remains that “Grexit” (a Greek exit from the euro zone) remains far more costly—for all involved—than muddling through another round of bailouts and bickering.
Greek politicians are holding their noses and pledging to vote across party lines to keep a bailout deal alive. German chancellor Angela Merkel has ruled out a “classic haircut“ on Greek debt, but that leaves plenty of other varieties to choose from. The commission’s creativity in scrounging for a bridge loan is bureaucracy at its most desperate, and innovative.
There are valid reasons to believe that Greece is capable of rapid reforms and that Germany was the one that made the biggest compromise in backing another Greek bailout (paywall). Heck, some are even bravely spelling out a bullish case for Greek economic growth. For what it’s worth, betting markets recently slashed the probability of Grexit to less than 10%.
The frenzied fudge-making activity in recent days suggests that leaders could be cooking up the biggest batch the continent has ever seen.
