Skip to main content

On Greek economy, who will blink first?

By Heather A. Conley, Special to CNN
May 19, 2012 -- Updated 1628 GMT (0028 HKT)
An EU flag flies in front of the Acropolis in Athens. A rerun of the Greek elections is scheduled for June 17.
An EU flag flies in front of the Acropolis in Athens. A rerun of the Greek elections is scheduled for June 17.
STORY HIGHLIGHTS
  • Heather A. Conley says the EU is on the brink over Greece's economic crisis
  • If Greece doesn't stick to its bailout terms, it may not receive further EU aid, she says
  • A great test of democracy is taking place in democracy's birthplace, Conley says
  • Conley: Drama may conclude on June 17, when Greece's electoral re-run is scheduled

Editor's note: Heather A. Conley is director and senior fellow, Europe Program, at the Center for Strategic and International Studies.

(CNN) -- Until the rerun of the Greek elections scheduled for June 17, we will witness an unprecedented game of brinkmanship. The game will be played along the following lines.

European political leaders will state unequivocally to the Greek electorate that it is time for them to make a stark choice: Vote for parties that will continue with the agreed reforms (the dreaded austerity) and stay within the European family or vote for parties opposed to the austerity measures and leave the euro and perhaps the European Union.

Fear and confusion rule as Greece faces uncertain future

This clear and concise message was recently voiced by Austrian Finance Minister Maria Fekter. She declared that if Greece does not stick to the terms of its bailout program, it will not receive further aid from the EU or the International Monetary Fund.

"One cannot exit from the eurozone, one can only exit from the EU," she said. She also noted that Greece would have to reapply for EU membership, with no guarantee of readmission.

CNNMoney: Greek banks strain for cash

Heather A. Conley
Heather A. Conley

Greek politicians, particularly Syriza leader Alexis Tsipras, will probably respond to that message with a different one, which he will transmit back to Brussels, Paris, Berlin and Frankfurt (home of the European Central Bank): Europe cannot afford to let Greece fail and therefore, in the name of solidarity, Europe must continue to do whatever it takes to support Greece. But this time it should not require Greece to take such painful measures. Oh, and Europe will need to give Greece additional funds (in the name of "growth") no matter what combination of political parties enters parliament and forms a new government.

The trillion dollar question: Will Greece exit the euro?

Sounding like a blackmailer, Tsipras has said, "The eurozone is not in danger because of Greek resistance, but because of the bankrupt policies of the memorandum, of yesterday's political system"; "if the disease of austerity destroys Greece, it will spread to the rest of Europe"; and "the European leadership and especially Mrs. Merkel need to stop playing poker with the lives of people."

Rehn: Euro is better off with Greece
Mario Monti, "EU improved from Greece"
Outer Circle: Greece downgraded

Perhaps it is fitting that a great test of democracy is taking place in democracy's birthplace.

So, who blinks first? In the past three days, we have seen two actors blink immediately: German Chancellor Angela Merkel and Greek and Spanish bank depositors.

The consummate political tactician, Merkel understood that with French President Francois Hollande's electoral victory on Sunday, Italian Prime Minister Mario Monti's continued public pressure and her party's recent electoral loss to the social democrats in the largest German state, the political winds were shifting at home and abroad on growth.

This week, Merkel confessed that she was in fact in favor of identifying additional growth measures when she said she was in a "high level of agreement" with Hollande. She noted that for "stimulus to be pursued for growth in the euro zone, which we could pursue in the interest of Greece, we're open for this. Germany is open for this." Of course, details and date of delivery of said growth remain a mystery.

Follow @CNNOpinion on Twitter and Facebook/CNNOpinion

London a safe haven for eurozone money
Italians talk Greek eurozone crisis
The Greek left-wing and the eurozone

Greek and Spanish depositors were the second actor to blink when they removed approximately €700 million (about $890 million U.S.) from Greek banks and €1 billion (about $1.26 billion U.S.) from Spain's third-largest and recently nationalized bank, Bankia.

Their actions were indicative of the fear that the game of chicken is getting out of hand. This sentiment was strengthened by European Central Bank President Mario Draghi's decision to cut off certain Greek banks from receiving ECB funds and the IMF's announcement, earlier Friday, that it would freeze contacts with Greece until the June 17 election.

The ultimate answer to "who blinks first" lies in understanding how this crisis has played out over the past two years.

Diplomatic marathon: G8 focusing on Greece; NATO, on Afghanistan

The Greek bailout package has already been renegotiated twice, most recently in March of this year, to address deteriorating economic fundamentals and to force private bondholders to take losses. There have been no less than 17 European summits to "resolve" the crisis only to return to crisis shortly thereafter.

Three bailout packages (Greece, Ireland and Portugal); €1.3 trillion ($1.65 trillion U.S.) in cheap, three-year loans to European banks; and a change in government in 10 out of the 17 eurozone countries -- the art of the European muddle-through strategy has been perfected.

It is clear from Tuesday's meeting between Merkel and Hollande that Europe will continue to actively pursue this muddle-through strategy until it is no longer able to pursue it.

The treaties, the summitry and the political volatility that define Europe are completely ill-equipped to handle the crisis as it enters a new and potentially determinate end state. Most important, the collateral damage that comes with muddling through for the past two years is taking a significant social and economic toll: Spanish unemployment is at almost 25%; Greek youth unemployment is at 51.5% and a third of the French electorate in the first round of its presidential elections voted for either an extreme left or right party. Is Europe willing to be home to a lost generation in the name of European solidarity?

No one knows how this brinkmanship will come to an end, or even if it will come to an end at all. And certainly no one knows whether it will result in economic Armageddon or a small blip on a trader's computer screen. Actions or statements by either side are likely not to be conclusive.

It is more likely that a sudden, unanticipated shock created by either the markets or political actors before June 17 causes an unstoppable chain reaction. Should this be this outcome, in some way it may come as a relief as it is far easier to blame an event than to accept responsibility for Europe's actions over the past two years.

This game of chicken is not unique to Europe. Washington had its own bout of brinkmanship last summer regarding the increase in America's debt ceiling, and is likely to have it again in a few months. Europe has just upped the level of play.

What does it mean to be Greek right now? Share your story with us on iReport!

The opinions expressed in this commentary are solely those of Heather A. Conley.

ADVERTISEMENT
Part of complete coverage on
September 30, 2014 -- Updated 1326 GMT (2126 HKT)
The Occupy Central movement has already achieved much by bringing greater attention to Hong Kong's struggle for democracy, writes William Piekos.
September 27, 2014 -- Updated 2209 GMT (0609 HKT)
As Prime Minister Narendra Modi visits America, Madeleine Albright says a world roiled by conflict needs these two great democracies to commit to moving their partnership forward
September 29, 2014 -- Updated 1802 GMT (0202 HKT)
John Sutter: Lake Providence, Louisiana, is the parish seat of the "most unequal place in America." And until somewhat recently, the poor side of town was invisible on Google Street View.
September 29, 2014 -- Updated 1311 GMT (2111 HKT)
Julian Zelizer says in the run up to the 2016 election the party faces divisions on its approach to the U.S.'s place in the world
September 29, 2014 -- Updated 1419 GMT (2219 HKT)
Ruben Navarrette says Common Core supporters can't devise a new set of standards and then fail to effectively sell it.
September 30, 2014 -- Updated 1329 GMT (2129 HKT)
Earlier this month, Kenyans commemorated the heinous attack on the Westgate Mall in Nairobi.
September 29, 2014 -- Updated 2057 GMT (0457 HKT)
David Wheeler says Colorado students are right to protest curriculum changes that downplays civil disobedience.
September 27, 2014 -- Updated 0158 GMT (0958 HKT)
Sally Kohn says when people click on hacked celebrity photos or ISIS videos, they are encouraging the bad guys.
September 26, 2014 -- Updated 1155 GMT (1955 HKT)
Loren Bunche says she walked by a homeless man every day and felt bad about it -- until one day she paused to get to know him
September 30, 2014 -- Updated 1332 GMT (2132 HKT)
ISIS grabs headlines on social media, but hateful speech is no match for moderate voices, says Nadia Oweidat.
September 29, 2014 -- Updated 1233 GMT (2033 HKT)
A new report counts jihadists fighting globally. The verdict? The threat isn't that big, says Peter Bergen.
September 23, 2014 -- Updated 2137 GMT (0537 HKT)
Ebola could become the biggest humanitarian disaster in a generation, writes former British Prime Minister Tony Blair
September 26, 2014 -- Updated 1658 GMT (0058 HKT)
ISIS has shocked the world. But will releasing videos of executions backfire? Four experts give their take.
September 26, 2014 -- Updated 1439 GMT (2239 HKT)
Eric Holder kicked off his stormy tenure as attorney general with a challenge to the public that set tone for six turbulent years as top law-enforcement officer.
September 26, 2014 -- Updated 1309 GMT (2109 HKT)
LZ Granderson says Obama was elected as a war-ending change agent, not a leader who would leave behind for his successor new engagement in Iraq and Syria. Is he as disappointed as the rest of us?
September 24, 2014 -- Updated 0910 GMT (1710 HKT)
Gayle Lemmon says the question now is how to translate all the high-profile feminizing into real gains for women
September 25, 2014 -- Updated 1900 GMT (0300 HKT)
John Sutter says the right is often stereotyped on climate change. But with 97% of climate scientists say humans are causing global warming, we all have to get together on this.
September 25, 2014 -- Updated 1257 GMT (2057 HKT)
Andrew Liepman and Philip Mudd: When we declare that we will defeat ISIS, what do we exactly mean?
September 26, 2014 -- Updated 2040 GMT (0440 HKT)
Thailand sex trafficking
Human trafficking is a multibillion dollar global industry. To beat it, we need to change mindsets, Cindy McCain says.
September 26, 2014 -- Updated 2242 GMT (0642 HKT)
The leaders of the GOP conferences say a Republican-led Senate could help solve America's problems.
September 25, 2014 -- Updated 1401 GMT (2201 HKT)
Nicholas Syrett says Wesleyan University's decision to make fraternities admit women will help curb rape culture.
September 25, 2014 -- Updated 1302 GMT (2102 HKT)
Mike Downey says New Yorkers may be overdoing it, but baseball will really miss Derek Jeter
September 29, 2014 -- Updated 1232 GMT (2032 HKT)
Quick: Which U.S. president has authorized wars of various kinds in seven Muslim countries?
September 24, 2014 -- Updated 1817 GMT (0217 HKT)
Women's issues should be considered front and center when assessing a society's path, says Zainab Salbi
September 23, 2014 -- Updated 1805 GMT (0205 HKT)
A catastrophe not making headlines like Ebola and ISIS: the astounding rate of child poverty in the world's richest country.
ADVERTISEMENT