The game of brinkmanship that the latest Greek government has played with the Eurozone is at its end. It is a painful moment and a critical juncture for Europe. The question is not if, after all the misery, Greece might be better off without the euro (it would not) or if the Eurozone would suffer from financial contagion if it became clear that the common currency is breakable (it would). Instead, it would be better to ask how European countries can move away from petty, small disputes and think about embracing the broad idea of Europe writ large. That would help in the search for a sustainable solution to this agonizing, destabilizing, and never-ending Greek crisis.
While notable institutional progress toward the creation of a banking union and a mutual financial “safety net” has been achieved, it has come in fits and starts and is not sufficient to ensure an organic approach to the solution of European issues. In a world economy increasingly polarized between the U.S. and China, it is myopic for Europe not to seek even closer integration. It is time, therefore, for Europe to revisit the ideals of peace, democracy, unity, and prosperity that defined the origin of the European project and its attempts to unify Europe politically and economically.
Greece is clearly bankrupt - much through its own fault - and is not in a position to repay its debts in the current terms. Prime Minister Tsipras and the Syriza government have acted irresponsibly by bringing a rushed, confusing, and unfair referendum to voters, by breaking the trust with the European institutions instead of seeking a compromise, and by making Greece the first developed country to default on a loan by the International Monetary Fund (IMF).
That said, Greece needs help and cannot be abandoned. That help must be found within the European Union, within the euro, and ideally without IMF involvement. Since most of the Greek debt is owned by the official – rather than the private – sector, a way out should be easier to arrange even at the cost of bending the rules somewhat once again.
But as long as European leaders look at the next local election and their own domestic political interest rather than the big picture, no answer will be found. Securing a thriving future for Europe will remain an unaccomplished mission if the political vision and the courage to move to a closer fiscal union cannot be found. When all is said and done, however, Europe needs more Europe.
Dante Roscini, a native of Italy, is a Professor of Management Practice and the L.E. Simmons Faculty Fellow. He came to HBS after holding leadership positions in the European capital markets groups of Goldman Sachs, Morgan Stanley, and Merrill Lynch and has broad experience in the areas of corporate finance, mergers and acquisitions, and private equity.
George Serafeim on Greece