It may be the peak of vacation season in Europe, but the continent’s fiscal crisis has not taken a break. Last week, Wolfgang Schäuble, the powerful German finance minister, took time out from his holiday to have a sit-down with his American counterpart, Tim Geithner, in the North Sea island of Sylt. The last-minute meeting was organized at Geithner’s request. Less than a hundred days from the U.S. presidential election, it highlighted—as if more evidence were necessary—the Obama administration’s concern about how developments in the Eurozone could affect the vote come November 6.
What a difference ten years makes. In 2001, Greece adopted the euro as its national currency. Its borrowing costs, which plummeted in expectation of this momentous event, were almost as low as Germany’s. Its growth rate for the year climbed to 4.1 percent and inflation hovered around 4 percent—a sharp decline from the double digits of the ’80s and ’90s. It was a country on the way up. On the other hand, Turkey, its neighbor and geopolitical arch-rival, was mired in a major financial crisis. Its currency was collapsing, its banking system was broken and unemployment was skyrocketing.
The European Summit today and tomorrow in Brussels is the latest in a series of make-or-break moments for the European project. On many occasions since May 2010, when Greece was first cut off from market access, European leaders have been called upon to make a bold leap forward in the policy integration of the Eurozone—the only way to convince investors of the iron irrevocability of the common currency. Under constant pressure from the ongoing crisis, they have often seemed to be making the big decisions to reform the flawed architecture of the monetary union, only for initial perceptions to give way to a much more underwhelming reality. Markets have grown increasingly savvy and cynical in interpreting summit communiqués. They know that behind grand words and large headline numbers, the political will to come together has yet to be demonstrated. Is this summit meeting—in the week when Cyprus became the fourth Eurozone member to ask for an official rescue and Spain confirmed that it would need 100 billion euros to shore up its banks—going to change all that?
It was a night of high drama, after a tense pre-election period that often descended into violence. By the end of it, Greek voters had narrowly given the pro-bailout forces one last stab at salvaging the adjustment program with Greece’s creditors and avoiding a disastrous exit from the euro. This has bought the country some time. It must now make the best possible use of it.
“Not a step back: End the troika and the memorandum.” Thus read one of the placards hung up on a lamp post close to Omonoia Square in downtown Athens, where Syriza—the surging left-wing party led by Alexis Tsipras—held its major pre-election rally last night.