Europe’s moment of truth has arrived


Clearly, though, some decisions have to wait on the result of Sunday’s referendum on whether Greece will accept its creditors’ terms.

I would vote “no,” for two reasons. First, as much as the prospect of a euro exit frightens everyone – me included – the troika is now effectively demanding that the policy regime of the past five years be continued indefinitely. Where is the hope in that? Maybe, just maybe, Greece’s willingness to leave the eurozone will inspire a rethink (although probably not). Regardless, devaluation couldn’t create that much more chaos than already exists, and it would pave the way for eventual recovery, just as it has in many other times and places. Greece is not that different.

Second, the political implications of a “yes” vote would be deeply troubling. The troika clearly did a “reverse Corleone” – they made Prime Minister Alexis Tsipras an offer he couldn’t accept, and presumably did so knowingly. So the ultimatum was, in effect, a move to replace the Greek government. And even if you don’t like Greece’s Syriza party, that has to be disturbing for anyone who believes in European ideals.

An Act of Monstrous Folly

Until now, every warning about an imminent breakup of the euro has proved to be wrong. Governments, no matter what they say during elections, give in to the demands of the troika; meanwhile, the European Central Bank steps in to calm the markets. This process has held the currency union together, but it has also perpetuated a deeply destructive austerity regime – don’t let a few quarters of modest growth in some debtor countries obscure the immense cost of five years of mass unemployment.

As a political matter, the big losers from this process have been the parties of the center-left, whose acquiescence amid harsh austerity measures – and, hence, their abandonment of whatever they supposedly stood for – does them far more damage than similar policies do to the center-right.

It seems to me that the troika expected, or at least hoped, that Greece would be a repeat of this story. Either Mr. Tsipras would do the usual thing – abandon much of his coalition and likely be forced into an alliance with the center-right – or his Syriza government would fall. And either might yet occur.

But, at least as of right now, Mr. Tsipras seems unwilling to fall on his sword. Instead, faced with the troika’s ultimatum, he has scheduled a referendum on whether to accept it. This is leading to much hand-wringing and declarations that Mr. Tsipras is being irresponsible. But he is, in fact, doing the right thing, for two reasons.

First, if it wins the referendum, the Greek government will be empowered by democratic legitimacy, which still, I think, matters in Europe. (And if it doesn’t, we need to know that, too.)

Second, until now Syriza has been in an awkward place politically, with voters both furious at ever-greater demands for austerity and unwilling to leave the euro.

It has always been hard to see how these desires could be reconciled; it’s even harder now. The referendum will, in effect, ask voters to choose their priority, and give Mr. Tsipras a mandate to do what he must if the troika pushes the government to the brink.

If you ask me, the creditor governments and institutions have committed an act of monstrous folly in pushing the negotiations to this point. But they have, and I can’t at all blame Mr. Tsipras for turning to the voters, instead of turning on them.


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