Mark Mazower writes: At the heart of the European project is a deep ambivalence towards nationalism. Nineteenth-century theorists of nationalism saw no incompatibility between love of country and international solidarity. But that was before two world wars. Twentieth-century fathers of federalism, such as the Italian Altiero Spinelli, had a barely disguised loathing for the excesses of nationalism, which they associated with fascism and war.

We can have a little more confidence than that. Even the No vote in the Greek referendum was, so the polls suggest strongly and as the prime minister, Alexis Tsipras, has acknowledged, a vote for Europe and even for continued membership of the euro itself. And if, after five years of the worst depression since the 1930s, the Greek public still recognises the merits of participating in Europe, we can be sure public opinion in most other countries contains a solid core of pro-European sentiment. This is for historical reasons (memories of the world wars), geopolitical (fears of Russia and of fallout from the Middle East), and also because people can see that the real problems ahead lie well beyond the capacity of single states to tackle – global warming, endemic conflict in Africa and the Middle East that is generating hugely destabilising movements of people.

But we should not push things too far, which is precisely what the euro, at least as administered until now, has done. For one thing, it has too often been presented as just a question of signing up to rules, as if central bankers and not the elected representatives of member nations should make the fundamental decisions in any kind of democratic confederation. For another, it has lacked any redistributive or solidaristic dimension. [Continue reading…]

Yanis Varoufakis writes: Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.

In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the eurozone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.

Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.

To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well. [Continue reading…]

Jeffrey D. Sachs writes: The Greek catastrophe commands the world’s attention for two reasons. First, we are deeply distressed to watch an economy collapse before our eyes, with bread lines and bank queues not seen since the Great Depression. Second, we are appalled by the failure of countless leaders and institutions – national politicians, the European Commission, the International Monetary Fund, and the European Central Bank – to avert a slow-motion train wreck that has played out over many years.

If this mismanagement continues, not only Greece but also European unity will be fatally undermined. To save both Greece and Europe, the new bailout package must include two big things not yet agreed.

First, Greece’s banks must be reopened without delay. The ECB’s decision last week to withhold credit to the country’s banking system, and thereby to shutter the banks, was both inept and catastrophic. That decision, forced by the ECB’s highly politicized Executive Board, will be studied – and scorned – by historians for years to come. By closing the Greek banks, the ECB effectively shut down the entire economy (no economy above subsistence level, after all, can survive without a payments system). The ECB must reverse its decision immediately, because otherwise the banks themselves would very soon become unsalvageable.

Second, deep debt relief must be part of the deal. The refusal of the rest of Europe, and especially Germany, to acknowledge Greece’s massive debt overhang has been the big lie of this crisis. Everyone has known the truth – that Greece can never service its current debt obligations in full – but nobody involved in the negotiations would say it. Greek officials have repeatedly tried to discuss the need to restructure the debt by slashing interest rates, extending maturities, and perhaps cutting the face value of the debt as well. Yet every attempt by Greece even to raise the issue was brutally rebuffed by its counterparties. [Continue reading…]