Keeping Greece in the Euro May Have Nothing to Do With Finances

by Maria Petrakis

June 12, 2015 — 2:01 AM EEST

 Bloomberg

A bronze statue of Harry S. Truman stands unguarded along a busy Athens road, a reminder of Greece’s post-World War II position as a strategic bulwark for the U.S. and Europe.

If euro-area policy makers overcome their frustration over Greek financial brinkmanship and cough up more aid, it will be in no small part because of that role.

“Greece’s geopolitical potential has been used as a promise, but mostly as a threat,” said Eirini Karamouzi, lecturer in contemporary history at Sheffield University and author of a book on Greece’s relationship with Europe during the Cold War. “There’s always been the threat of a catastrophic spillover effect if Greece was left to its own devices or, worse, turn into a failed state in Europe’s backyard.”

Greece’s trump card historically has been its location at NATO’s southeastern flank. As Islamic State gains to the south and east, Russia encroaches to the north and migrants flood to Europe, the question is whether Greece is worth more than the billions it needs to get out of its financial hole.

While Prime Minister Alexis Tsipras’s government and its creditors squabble over percentage-point differences in budget requirements, leaders are talking security and politics.

‘Tough Decisions’

At the Group of Seven summit in Germany this week, U.S. President Barack Obama urged greater efforts to resolve the crisis. “If both sides are showing a sufficient flexibility, then I think we can get this problem resolved,” he said. “But it will require some tough decisions for all involved, and we will continue to consult with all the parties involved to try to encourage that kind of outcome.”

German Chancellor Angela Merkel, French President Francois Hollande and Tsipras then huddled for two hours on the sidelines of a meeting on Latin America on June 10 to bash out a deal before the end of the month.

With the country’s banking system on the brink, Tsipras has to deliver economic reforms and budget fixes before getting as much as 7.2 billion euros ($8.2 billion) from the country’s existing bailout funds.

Russian Overture

Before then, though, Tsipras is scheduled to also head to St. Petersburg to attend an economic forum on June 18.

It would be the second time since he came to power in January that he’d meet Vladimir Putin in Russia. That relationship raised eyebrows in Berlin and Washington as the U.S. and European Union pursued sanctions against the country over the conflict in Ukraine. Tsipras has agreed to cooperate with Russia on a gas deal that the U.S. has criticized.

Merkel noted the strategic stakes after her first meeting with Tsipras in March.

“We have common geopolitical challenges that need to be tackled,'' she said then. Europe is a ‘‘huge peace effort that has to be carried forward by each political generation.’’

The need to keep Greece firmly in the bosom of the West has always underpinned decisions about its European role. Greece became the 10th member of what’s now the EU in 1981 -- joining before Spain and Austria. For 26 years, until Bulgaria joined in 2007, it shared no land border with another EU member. It adopted the euro in 2001, only then to reveal less than a decade later its finances weren’t in order.

Truman’s Warning

Merkel’s words were an echo of what Truman told Congress in 1947. That’s when he got approval for military and economic aid to prevent Greece from falling under the influence of the Soviet Union during its 1946-49 civil war.

‘‘Should we fail to aid Greece and Turkey in this fateful hour, the effect will be far-reaching to the west as well as to the east,” Truman said. “We must take immediate and resolute action.” The reference to Turkey doesn’t appear in the quotation on the Athens statue.

The Greeks joined NATO in 1952, three years before the Federal Republic of Germany and the same time as Turkey, uniting two traditional enemies under one umbrella. The aid Greece received under the Truman Doctrine and then the Marshall Plan bankrolled years of growth.

Conflict of Needs

Greek leftists chafed at the U.S. influence. The military regime, or junta, in 1967 to 1974 was seen as sponsored by the U.S. Truman’s statue, erected in 1963 by grateful Greek Americans, was defaced, attacked and toppled regularly over the years to protest U.S. policies in Greece and the region.

As Tsipras prepared to meet Merkel in Brussels on Wednesday evening, his foreign minister, Nikos Kotzias, told a gathering at Oxford University that now is the time to decide whether the pursuit of security, prosperity and freedom will prevail over the focus on numbers and profit margins.

“Nowadays the role of geopolitics is more important than before,” Kotzias said. “Our world is in the midst of a conflict between its current needs and the future demands.”

The EU “needs to learn to see beyond the end of its nose, as we say in Greece,” he said. “To manage our future not as a momentary action, nor as a shareholders’ meeting that thinks with an horizon of quarterly earnings.”