Greece can’t leave the euro without leaving the EU

Greece - European Union. Elcano Blog
Photo via Debating Europe.
Greece - European Union. Elcano Blog
(Debating Europe)

When the European Commission says Greece’s membership of the euro is ‘irrevocable’ it is not expressing a political position but a legal reality. Such an eventuality is not foreseen in the treaties: it is legally impossible. The only way out of the Economic and Monetary Union (EMU) would be to leave the EU itself –a voluntary step that has finally been made possible by the Lisbon Treaty (art. 50), but which had not been contemplated before that–, a possibility only envisaged by the UK should that option win in the referendum promised by David Cameron. No other country has such an intention, let alone Greece.

Most of the Greeks want to leave neither the euro nor the EU, and Syriza is not advocating departure. The latest Eurobarometer (autumn 2014) gave the EU a 44% negative image. But although 98% consider the situation in the country ‘bad’, 63% support the euro while 36% disapprove of it. However, even for the creditors, and especially for Germany, it would be more costly if Greece were to exit the euro rather than stay, as noted by a Bruegel report.

The issue has been present since at least 2009, when the problems started, although they did not get really bad until 2010. A report published by the European Central Bank itself in December 2009 –which is worth re-reading– said that ‘A Member State’s exit from EMU, without a parallel withdrawal from the EU, would be legally inconceivable’. It added that although perhaps ‘feasible through indirect means, a Member State’s expulsion from the EU or EMU, would be legally next to impossible’. The main indirect means would be through the Vienna Convention on the Law of Treaties of 1969. But even then it would be difficult.

It is true that international, and European, law can be bent to one’s will, so nothing can be ruled out entirely. One possibility would be to exit without actually leaving, namely, a temporary suspension of membership of the Monetary Union. But without the cooperation of Greece itself it would be legally impossible not only to expel the country but to make it leave by its own will, even if it failed to fulfil its international obligations and default on the payment of part of its debt. And this would be financially more palatable to the rest because German banks, especially, but others also, are now much less exposed to Greek debt than in 2010, since most of these obligations have been transferred to the ECB itself and thus, ultimately, to the euro member states.

However, whatever happens in Greece after the 25 January elections will have consequences for the entire Monetary Union and its members and even across the EU. So it is understandable that outside Greece opinions are being expressed and pressure exerted in either one direction or the other. This is a Europe in which sovereignty is shared and which is intervening in the internal affairs of all of its member states. And there is undoubtedly some concern about what Syriza will do. The Greek elections, although only Greeks will vote in them, have effectively become European elections. One should not forget the chill that ran down the spines of Europe’s leaders when the then socialist Prime Minister George Papandreou, without consulting his counterparts, intimated in October 2011 that he would submit Greece’s conditions to a referendum, an idea he has resurrected for his current election campaign.

Syriza is not misguided in arguing that Greece will never be able to repay a debt which accounts for over 170% of its GDP. Only to pay the €6,000 million due to the ECB next summer would devour the primary surplus of 2014, which was achieved at great cost. Some restructuring of Greece’s debt will have to be faced sooner or later, as indicated by several leading economists. Creditors –and Berlin, Brussels and Frankfurt– have no wish for Greece to leave the euro and stop paying her debts, and neither do they want it to slow down its reforms, considering it is a country that practically lacked, and still lacks, an effective tax collection system (despite which it was allowed to join the Monetary Union). Restructuring will be necessary, although there is a great difference between doing so in an orderly manner or messily. In any case, if Syriza wins and manages to form a government –and these are two questions, as its opponent Samaras is a tough nut to crack– it remains to be seen whether it will find it possible to apply its ideas to Greece alone, or whether it will require a European framework, something that might be difficult, but not impossible, to achieve. Everybody, especially, the Germans, has been keen to talk to Syriza’s leader, Alexis Tsipras, to sound him out on the possibility of finding an arrangement. Just in case.