Financial Times: Three unedifying lessons of the Greek deal

13 July 2015

EU leaders overruling domestic policies, France's rediscovery of its status as coequal leader of the European project, and the ECB forcing a shutdown of the Greek banking system are the three lessons we can draw from the latest deal between Greece and its creditors.

The details are still trickling out about the political agreement struck by the all-night eurozone summit, and there are a lot more decisions to be made in the coming days. But we can already draw three lessons. None is particularly edifying.

First, the decisions Europe’s busiest politicians find it appropriate to make are outright bizarre. The draft document that the eurogroup of finance ministers prepared for leaders on Sunday contains, among other things, a specific requirement to improve competition among . . . bakeries.

[...] we should gasp at the hubris of a class of European politicians who think both that their time is well spent doing this kind of micromanagement and that their preferred micro-policies are so conducive to growth they can overrule the domestic political process.


Second, the one constructive party in the past few weeks has been France. After five years of playing second fiddle to Germany — and to Berlin’s tune at that — Paris rediscovered its status as coequal leader of the European project. For all its sternness, Germany does not want to go it alone. The health of the euro would have been stronger today had France retrieved its confidence sooner.


Finally, Greece capitulated because the European Central Bank forced it to do so. In flagrant defiance of its treaty obligation to support the general economic policy of the eurozone — which includes since June 2012 a requirement to separate the health of the banking system from the solvency of sovereigns — the ECB forced a shutdown of the Greek banking system and made clear it would only let it function again once a deal on sovereign finances had been struck.

This has established beyond any doubt that the independence of the eurozone’s central bank from politicians is nothing of the sort. Far from being independent, the ECB does governments’ bidding. But its dependence is selective — and that is something that should worry the citizens of eurozone nations beyond Greece.

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