Merryn's Blog

Want democracy? Leave the eurozone

Greece's election result is academic, says Merryn Somerset Webb. The country is ruled by EU finance ministers and the ECB. The only way to get its freedom back is to leave the eurozone.


I went on Radio 4's Broadcasting House on Sunday morning with Ann Pettifor to talk about the Greek election. The idea was to talk about whether it really mattered who won (you can listen to it here, from about 11 minutes in). The answer, from both of us, was "no, not really."

If a person is deeply in debt and not producing the income to cover the interest plus a bit, he is beholden to his creditors one way or another to his mortgage lender, or perhaps to his bankruptcy trustees. If a company is deeply in debt and having the same trouble it management is at the mercy of its banks and its bond holders (see my post on Glencore here). The same goes for countries.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

As long as Greece is determined to stay in the eurozone and run its affairs in euros, it is subject to the bailout plan agreed with its creditors. So whoever won the election, (however left wing or right wing, however pro-austerity or anti-austerity) would have had no choice but to have a go at delivering on the reforms and spending cuts that make up his bailout deal.

You can only spend money as you wish if you have money. And Greece, with its €86bn bailout underway, quite clearly does not something the Greek people with their firm endorsement of Tsipras clearly understand. That doesn't mean that Greece has no options.

Advertisement - Article continues below

In the introduction to the 2012 edition of his book The Rotten Heart of Europe, Bernard Connolly pointed out that it was inevitable that the structure of the eurozone would cause financial crisis. Those suffering most would then be offered the chance to "sign away their sovereignty in return for some supposed economic palliative". They would have to choose between more Europe or no Europe.

"If a country declares that a new national currency is henceforth its legal tender and if that country's central bank withdraws from the Eurosystem, that country will be in infringement of the treaty. So what? The Commission issues hundreds of infringement proceedings every year and some of them years later find their way to the so called ECJ. Why should a country suffering the purgatory of monetary union (the official German view of monetary union as it affects others) accept it as an eternal hell for fear of ECJ censure any more than it worries about infringement procedures because it has not complied with NSU rules on, say, the size of print on packets of breakfast cereal?"

But Greece isn't exactly a financial paradise at the moment. It also isn't much of a democracy (it is ruled by the EU's finance ministers and the ECB). However it is still a sovereign nation. If it wants its freedom back, it can leave the eurozone (if not the EU). Then its next election would at least be worth voting in unlike the last one.




How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Government bonds

Keep an eye on Sweden's interest rates

Could Sweden be poised to return to negative interest rates?
31 Jan 2020

Boris Johnson’s big Brexit plan

The prime minister needs to get Brexit done, and get the economy growing – particularly for first-time Tory voters. Can he manage all that while negot…
30 Jan 2020
EU Economy

Investors needn’t fear the rise of Europe’s green parties

Green parties across Europe are finding the centre-right to be natural allies. That will be great for business, says Matthew Lynn.
12 Jan 2020

Most Popular

Silver and other precious metals

You should all own some silver. Just don’t expect it to make you rich

Silver is cool, beautiful and immensely useful. But for investors it's the most frustrating of metals. Dominic Frisby explains why you should own some…
12 Feb 2020

Money Minute Wednesday 12 February: grim times for European industry

Today's Money Minute previews industrial production in the eurozone, plus the latest from America's central bank.
12 Feb 2020
Investment strategy

The secret to avoiding being panicked out of your portfolio

With the coronavirus continuing to occupy headlines, investors still aren’t sure how to react. But the one thing you mustn’t do is panic. Tim Price ex…
11 Feb 2020

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020