How Greece now threatens the future of the European Union

greece

Talks to save Greece have broken up without a resolution. Deep divisions in the Eurozone have raised questions about the future of the European Union  Europe is now bitterly divided over how or whether to rescue this Mediterranean nation from imminent financial collapse.

Finance ministers from the 19 nations of the euro zone failed to agree on a fresh lifeline for Greece, exposing the fault lines that have developed over extending the deeply troubled nation its third bailout in five years.

As the Financial Times notes,  France has supported the radical Greek government’s latest bid to secure a deal but Euro-hawks led by Germany has formed a chorus of sceptics, raising doubts about Greek premier Alexis Tsipras’s ability to deliver the tough measures he has promised in his new plan. The German finance ministry raised the possibility of a five-year timeout from the eurozone for Greece, according to a finance ministry position paper that leaked on Saturday.

Negotiations were complicated by Finland, after the populist Finns party threatened to resign from the two-month old coalition government if a Greek bailout went ahead.

As a result, the BBC now reports that the full summit of all EU members has been cancelled while “difficult” eurozone talks on bailout deal for Greece continue.

Trust is the sticking point for Europe’s hardliners.

“We’re going to have extraordinarily difficult negotiations,” German Finance Minister Wolfgang Schaeuble said upon his arrival. “Hope built over years on Greece until the end of last year was destroyed at an unimaginable level up until the last days and hours.”

“Can the Greek government be trusted to act do what they are promising, to actually implement in the coming months and years?” Dutch Finance Minister Jeroen Dijsselbloem said. “I think those are the key issues.

What do these divisions tell us about the European Union’s future?

As Andrew Clark reminds us in the Australian Financial Review, the future of the European Union looks difficult even if they get rid of Greece.

Longer-term, the crisis is about the European Union, a loosely confederal group of 28 states, being unable to manage its 19-member eurozone and its single currency, amid roiling markets, mounting debt, growing unemployment, a lack of leadership, and an inward–looking obsession bordering on neurosis.

It all worked very well for many years but it all came unstuck with the advent of the global financial crisis in September, 2008 which saw Eurozone members like Spain, Portugal, Italy and Greece running up massive budget deficits, growth collapsing, and unemployment queues lengthening. Spain and Greece suffered 50 per cent youth unemployment.

Put simply, the European Union has not been designed to handle these sorts of crises and we are now seeing the result.

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