Sarkozy: “Without the euro there is no Europe…”

That was the exaggarated claim of French President Nicolas Sarkozy as Frau Bundeskanzerlin blinked over her demand that private bondholders be made to share the burden of a ‘Greek miracle’ second Greek bail-out.  Although where that leaves the Bundestag is another matter…

And now that the French and German leaders are in agreement it’s down to the Greek Prime Minister George Papandreou to forge a domestic political consensus.  Or not.

A new political contract is essential for Greece to survive the current crisis.

For this contract to emerge, there has to be a degree of self-realisation among Greeks as a whole that responsibility for the last 30 years lies not only with one party or another, or one political class or another.

Greece could absolve itself of responsibility for the crisis, and sever its European commitments, by defaulting on its debt and removing itself from the Eurozone. This is an unrealistic, though not an unlikely option, and immensely unpopular in European circles.

Alternatively, there could emerge a gradual realisation that this crisis can only be met and overcome through broad public consent and co-operation in the wake of some acceptance of responsibility for the causes of the crisis.

The conditions of the bail-out are strict, the austerity measures harsh, and faith in the political system is diminishing, but a better future can only be built on a broad social consensus and co-operation to see the programme through in the long-term.

Can the Greek political leaders see that far ahead and create the conditions for consensus? Current evidence suggests not.

BBC Europe editor, Gavin Hewitt, assesses the bail-out options for Greece, and President Sarkozy’s claim

President Sarkozy yesterday betrayed the tension when he said: “Without the euro there is no Europe and without Europe there is no possible peace and security.”

In raising the stakes to make this a crisis about peace in Europe he is trying to frighten European leaders.

The French president’s fear is almost certainly exaggerated. There is no threat to security.

The euro would survive the exit of Greece – the European Union existed before the euro and no doubt would survive a contraction the euro-zone.

Would there have to be a re-think about where the EU was heading? Certainly, but some would welcome that.

Indeed.  And on the bail-out options?

Almost certainly there will be a fudged deal backed by a Micawberesque hope that something will turn up. It might buy some time but the big questions will not have been answered.

Ultimately, will European tax-payers be prepared to absorb Greece’s debts as the price for saving the euro-zone?

Of course that, in itself, might not save the euro-zone in the longer term – “If fiscal union is not on the cards, the only other option is eurozone breakup”

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