February 3, 2015 10:58AM

Will Greece Unravel the European Experiment?

The Greek elections, in which the radical left-wing Syriza won a near majority, shattered the Brussels consensus.  A breakdown of the European bail-out program might make a Greek exit from the Euro (“Grexit”) the only feasible option.  And the popular revolt against outsiders dictating economic policy may block new attempts to expand Brussels’ power over EU members.

Europe remains the world’s most important economic unit.  However, the EU failed to live up to the grand hopes of the Eurocrats, the academic, bureaucratic, business, media, and political elites who dominate continental politics and policy.  Voters rejected the proposed constitution to expand Brussels’ authority and reduce national independence a decade ago. 

The Eurocrats then repackaged the convoluted constitution as an incomprehensible treaty, for approval by national parliaments. More power shifted to Brussels. 

However, multiplying bureaucracy stifled action.  Loyalty to the EU failed to extend beyond the organization’s sprawling headquarters buildings in Brussels. 

Then the Euro crisis exploded.  The Eurozone created a common currency.  Only 19 of 28 EU members today belong, but in theory all are supposed to eventually join.  Even the Euro’s architects recognized the inherent instability of creating a monetary union without a common budget.

Once in, Athens borrowed at essentially German interest rates and spent wildly.  Soon the loan bills came due and Athens couldn’t pay, which triggered a cascade of crises and bail-outs.

Although nominally concerned about Greece and other aid recipients, many Eurocrats had a larger purpose in mind.  Said German Chancellor Angela Merkel:  “We must overcome the architectural flaws that worked their way into the economic and monetary union during its formation.”  Thus, Euroelites used the crisis to bludgeon the European public to accept further continental consolidation. 

European leaders insisted that no country, no matter how badly indebted, should leave the Eurozone.  The EU would lend more in return for economic austerity.  Although the Greek economy has started growing again, it shrank a quarter since 2008 and unemployment still tops 26 percent. 

That explains why Greeks voted for Syriza, which offered dreamy promises of more spending along with angry demands for debt relief.  The Eurocrats imagined that Tsipras would moderate like so many previous radicals had done.  But so far he and his party have given no indication of retreating. 

Doing so would disillusion Syriza’s supporters, who voted for non-violent revolution against a corrupt, failed establishment.  Tsipras also would risk his government—Syriza is a coalition of leftist parties. 

Crisis could come quickly.  The existing bailout program ends in a month.  Tax revenues are down, borrowing will become difficult, spending is set to spike.  Grexit might look attractive to Athens.

This horrifies the Eurocrats.  Worried Chancellor Angela Merkel:  “If the Euro fails it’s not just the currency that fails, but Europe and the idea of European unification.” 

Yet if European leaders blink in their game of financial chicken with the Tsipras government, their credibility will be destroyed.  If the Troika proves willing to deal, other states will demand similar concessions.  Caving in to debtors also would anger the wealthier countries footing the bill. 

Although the European Union is separate from the Eurozone, a break in the latter would impact the former.  And the EU already faces increasing challenges.  In part because of the lack of popular accountability, electoral opposition to Brussels is exploding.

Euroskeptic parties polled well in last year’s European Parliament elections.  These groups are playing an ever greater role in national contests as well.  As I point out in National Interest online:  “If Tsipras delivers on his promise that “Democracy will return to Greece,” popular opposition to the EU as well as Euro could swell elsewhere.”

Alexis Tsipras and Syriza have delivered an electoral earthquake.  Even if Syriza’s economic nostrums fail, its electoral victory may end up reinvigorating popular sovereignty and accountability throughout Europe.  That could make radical party’s victory worthwhile.