The EU's Greece summit: he who rules the euros, rules the EU

When a compromise is inappropriate, it must have come out of a summit of the European Union (EU). The recent Brussels meeting on March 25-26 is a shining example of this.

When a compromise is inappropriate, it must have come out of a summit of the European Union (EU). The recent Brussels meeting on March 25-26 is a shining example of this.

Greece, which was on the brink of a default, will be rescued, but now it (and the rest of the EU) will have to pay Germany more heed. Europe will have to switch to a new financial and auditing system and, most likely, make some amendments to the Lisbon Treaty, the EU's quasi-constitution.

These summits are like icebergs. They conceal much more underwater than you can tell from the tip. The recent summit may be a prelude to very serious changes in the structures and way of life in the Euro zone and, later on, in the entire EU. After this summit, it will be much easier to expel violators of financial discipline, like Greece, from the common EU currency system.

The concrete outcomes of the summit are as follows: 16 EU countries have agreed to grant Greece a loan on a shared basis. The EU countries will provide two thirds of the loan, and the rest will come from the International Monetary Fund (IMF). The final communique does not specify any figures, but 20-30 billion Euros was the sum heard most often in the lobby. In 2010, Greece will have to pay 53 billion Euros (of its total 300 billion euro debt). In April and May alone it will have to make interest payments totaling 23 billion euros.

By and large, it was not Greece's fate that was decided at the recent summit; it was the nature of the EU.

The new EU president, Herman van Rompuy, was instructed to set up a working group to prepare recommendations on improving financial and statistical discipline and on minimizing budgetary and economic risks. The summit decided to enhance the role of the European Commission in "economic governance." This term appeared for a simple reason - the Brits were the first to sense what the summit was all about and immediately demanded amendments to the text. The initial term "economic government" was changed to "economic governance" after Britain raised objections. Brits are always very sensitive about German-French decisions.

But all this was merely the tip of the iceberg. The changes that Greece's lack of discipline forced the EU to make - toughening control over financial and budgetary discipline, coordinating economic policy and strictly monitoring financial statistics and reports - will now extend to the rest of the EU. German Chancellor Angela Merkel hinted in her speeches before the summit that the EU will have to make some changes and probably amend the Lisbon Treaty. All EU countries were mortified by the prospect, which is quite understandable considering the anguish involved in ratifying the treaty to begin with. It entered into force just a few months ago.

For the time being, Merkel so skillfully agreed with French President Nicholas Sarkozy that Greece will have to be rescued by the EU, that he had no choice but to accept her terms, making it clear that he who rules the euros, rules the EU.

The contribution of each EU country to Greece's rescue will be proportional to its share in the capital of the European Central Bank (ECB). Germany has the biggest share in ECB, followed by France. Germans were emphatically against helping the Greek spendthrifts. Therefore, Merkel insisted that any decision on a loan must be based on a consensus reached by all EU members as well as the recommendations of the ECB, the European Commission and the Euro Group. In this way, Berlin has secured de facto veto powers.

In exchange for this flexibility (and at Merkel's insistence), van Rompuy's group must consider ways to expel future violators from the Euro zone so as to nip a potential precedent in the bud.

To sum up, the EU is changing the rules of conduct for all of its members, and Germany is clearly calling the shots.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.


MOSCOW. (RIA Novosti political correspondent Andrei Fedyashin)

To participate in the discussion
log in or register
Заголовок открываемого материала