The European Union, Greek Debt, and the Global Refugee Crisis

The European Union, Greek Debt, and the Global Refugee Crisis

David R. Dixon and Julio C. Gonzalez

The United States’ relationship with Europe is complex but paramount for US security - as Europe serves as a geographical and cultural buffer for the US to our adversaries to the east (Russia) and to the south (Islamic fundamentalists).   After Wall Street's 2008 collapse, Greece became the epicenter of Europe’s debt disaster, and many experts fear a Greece default could cause other small EU economies to follow suit. This combined with the Russian currency crisis in early 2015, a slowing Chinese economy, sluggish US economy, and calamity with ISIS  - one only needs to think of Archduke Ferdinand’s assassination, and the Greek exit from the Eurozone quickly transmogrifies into thoughts about global financial Armageddon.  Notwithstanding these European calamites, African and Middle Eastern migrants are currently fleeing to the EU after being battered by interminable wars and harsh economic, political, and social conditions.  This paper offers a brief history of the European Union (EU), analyzes their recent debt crises, and suggests that the US and EU strengthen ties by partnering to solve the global refugee crises.

Europe, although a minor continent geographically, holds approximately 50 kingdoms, nations, and territories that coalesce to form the most powerful economy in the world - with a GDP per head of €25,000 for its 500 million consumers[1].   The United States’ relationship with Europe is complex but paramount for US security - as Europe serves as a geographical and cultural buffer for the US to our adversaries to the east (Russia) and to the south (Islamic fundamentalists).   This essay offers a brief history of the European Union (EU), analyzes their recent debt crises, and suggests that the US and EU strengthen ties by partnering to solve a humanitarian problem.

First, to fully understand the US / EU relationship, we must appreciate the intricate history of the EU.  Before 1950, the dream of uniting Europe was a romantic idea in the minds of philosophers and visionaries such as Victor Hugo, who proclaimed before the International Peace Conference in 1851 “A day will come when we shall see those two immense groups, the United States of America and the United States of Europe, stretching out their hands across the sea….joining together to reap the well-being of all.”[2]  The unfathomable carnage of World War I and II brought an opportunity for bold leaders to chart a new path for the decimated continent.  One such leader was French foreign minister Robert Schuman, who in 1950 championed the formation of a European Coal and Steel Community (ECSC).   This pragmatic and richly symbolic proposal helped transform the raw materials of war into economic bonds of reconciliation.  The ECSC became a reality in 1951 with the Treaty of Paris, signed between the six founding members (Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands).[3]

In the 1960’s, the founding Six abolished customs duties between each other and set up common trade and agricultural practices.  In 1973, Denmark, the UK, and Ireland joined the ECSC, and the nine countries set up common social and environmental policies. 1979 brought the first elections to a European Parliament.  The fall of the Berlin Wall in 1989, the reunification of Germany in 1990, and the dissolution of the Soviet Union in 1991 were tumultuous turning points that helped lead to the Maastricht Treaty of 1992.  This treaty created the European Union, which came fully into force on 1 November 1993.[4]

In 1995, Austria, Finland, and Sweden joined the EU. In the years following the collapse of the Soviet Union, many former Soviet Bloc states sought to distance themselves both culturally and economically from Russia, leading to the EU’s largest expansion in 2004 with the addition of 10 states. Now in 2015, 28 nations comprise the EU.  Through the Economic and Monetary Union (EMU), the 28 nations of the EU coordinate their economic policies to further their shared goals.   To date however, only 19 of the 28 member states have replaced their national currencies with the euro - which came into circulation on 1 January 2002.[5]  These 19 nations together form the Eurozone.

Predictably, bringing together all of these disparate governments under one political and economic umbrella created many bitter challenges.  Chief among these antagonisms is the Eurozone financial crisis that has embroiled the continent for over five years.  It began in 1999 with the adoption of (and many say because of the adoption of) the single euro currency.  Suddenly, the euro allowed less stable and poorer economies like Portugal, Ireland, Spain, and Greece (PIGS) to borrow as much money as they wanted “at the same low interest rates as financially stable nations such as Germany, even though the poorer countries’ inflation rates were much higher.” [6]  After Wall Street's 2008 collapse, Greece became the epicenter of Europe’s debt disaster when it admitted in October 2009 that it understated Greek deficit figures for several years.  The global lending markets subsequently shunned Athens, and by 2010 Greece tumbled towards bankruptcy and threatened to set off a new global financial meltdown.[7]

To stave off catastrophe, the European Central Bank, International Monetary Fund, and European Commission orchestrated two international bailouts for Greece, which would eventually total 240 billion euros - almost $264 billion at today’s exchange rates.[8]  However, this financial contagion continued to metastasize - by 2011 the IMF and EU had also bailed out Ireland and Portugal.[9]   This was not free money, of course.  The lenders (mainly Germany) imposed severe austerity measures that required Greece to conduct painful budget cuts, increase taxes, streamline the government, and become more business friendly.  Although the bailouts calmed short term market fears, unfortunately the “Greecesion” only intensified -  their economy contracted by 25% from 2010-2015 and unemployment now sits above 25%. [10]

Many economists, and many Greeks, blame the sluggish recovery on the draconian austerity measures imposed by Germany.  Greece's anti-austerity political party, Syriza, won big in the January 2015 elections, which strained negotiations between Greece and its creditors over future financing, because Syriza’s campaign platform “rejected the European Union and IMF-backed bailout program and promised to expand social spending.” [11]  Greek Prime Minister Alexis Tsipras even claims that the austerity policies created a humanitarian crisis. In a brazen maneuver of desperation, Tsipras recently sought war reparations to help pay their debts - claiming that Germany owes them €278.8 billion ($303 billion) for Nazi era-crimes -  a sum that eclipses Greece's gross domestic product in 2008 (before their debt crisis began).[12]

On April 25, 2015 some Eurozone financial leaders recognized for the first time that they are considering a “Plan B” if a deal on Greece’s future financing cannot be agreed upon.[13]  This Plan B could be a hasty Greek exit from the Eurozone.  Moreover, the continued financial struggles of the PIGS only exacerbates the political problems in the EU - as many “Euroskeptic” parties such as Syriza have recently arisen.  This includes the right-wing National Front in France and Spain’s left-wing Podemos (“We Can”).  This increased nationalism once again calls into question the sustainability of the monetary union.[14]

Greece is a relatively small economy, but if they leave the Eurozone, the fallout may severely impact the United States. The US/EU economic partnership is the world's largest, with the US exporting $277 billion and importing $418 billion.[15] The US dollar may appreciate with further Greek turmoil - which, coupled with increased European interest rates, would make U.S. exports to the EU more expensive and possibly inaccessible to some EU nations.  Naturally, decreased US exports would undermine US corporate earnings.  As experienced in 2013 with sequestration and the government shutdown - a struggling US economy may have unintended negative impacts to the US military.  But this is not even the worst case scenario. 

Many experts fear a Greece default could cause other small EU economies to follow suit. Considering these teetering European dominoes combined with the Russian currency crisis in early 2015, a slowing Chinese economy, sluggish US economy, and calamity with ISIS in the Middle East - one only needs to think of Archduke Ferdinand’s assassination - and the Greek exit quickly transmogrifies into ruminations about a “global financial Armageddon”.[16]  While the US plays no direct role in the current Eurozone debt discussions, clearly the US has a lot at stake.  President Obama, Secretary of State John Kerry, Treasury Secretary Jacob Lew, and Federal Reserve Chair Janet Yellen should continue to urge Greece and its creditors to reach a debt deal before time expires on these tenuous negotiations.

Next, Prime Minister Tsipras’ claim of a “humanitarian crisis” strikes an ironic chord, because arriving on his shores every day is the other emergency that causes rampant tensions between EU nations - the current refugee crisis.  The United Nations reports that “51.2 million people were forcibly displaced at the end of 2013, fully 6 million more than the 45.2 million reported in 2012.” [17]  Battered by unending wars and harsh economic, political, and social conditions - African and Middle Eastern migrants are fleeing to the EU and US. 

Across the world there were an estimated 866,000 asylum applications in 2014, and the preponderance were registered in Germany (173,100), followed by the United States (121,200), Turkey (87,800), Sweden (75,100), and Italy (63,700).[18]  In 2012, 51 percent of illegal migrants entered the EU via Greece.  This trend continues today although the numbers have abated somewhat after Greece instituted harsh border controls under Operation Aspida (Shield) which included barbed-wire fence construction along the Turkish/Greek border.[19]  Of course, a maelstrom of problems like diseases, human trafficking, and illegal contraband often accompany these mass migrations. 

What to do with this colossal human influx causes considerable angst in the EU.  Aydan Özoguz, Germany’s immigration commissioner, vented about the EU’s dysfunctional asylum system: “…some countries are doing very little. We are one of the richest countries and we want to help, but it’s not okay that Germany, Sweden and France are taking 50 percent of the refugees while other countries do nothing.” [20]  Italy recently scrapped one rather effective, albeit expensive plan when in November 2014 they announced the end of Mare Nostrum, a mission launched after 600 people died when two ships sank in 2013.  From 2013-2014, the Italian Navy and Coastguard saved an estimated 100,000 people, but it proved politically contentious because other EU nations did not help Italy shoulder this liability.[21]    

Italy recently replaced Mare Nostrum with the less aggressive Operation Triton which operates under the command of Frontex, the EU’s border control agency.  Many nations, such as Britain, eschew participation in Triton because of the unintended pull influence that tacitly encourages “more migrants to attempt the dangerous sea crossing and thereby leading to more tragic and unnecessary deaths." [22]

Rather than address the pull factor, Britain indicated they may address the push factor - one part of the solution to this crisis may eventually involve military action against the human trafficking rings in Libya that illicitly profit from smuggling refugees into Europe. Many of these rings generate revenue for ISIS.   In April 2015, British Foreign Secretary Philip Hammond issued a statement urging EU nations to deal with this “huge international challenge” at every stage, and he offered the expertise of the National Crime Agency and Britain’s security services to help identify the lawless smugglers.  He also said “We must target the traffickers who are responsible for so many people dying at sea and prevent their innocent victims from being tricked or forced into making these perilous journeys.” [23]

This heartbreaking humanitarian disaster could provide a bridge for US / EU cooperation.  The US bases substantial ground forces in Europe. US naval forces have a strong and continuous presence in the Mediterranean. Combating human trafficking rings in Libya would certainly be a complimentary effort to the current US strategy to degrade ISIS.  The US military could transport asylum seekers to EU countries that have not yet experienced a large influx, thereby helping to bring more equity across EU nations to the distribution of immigrants to the EU. The migrants may prove to be valuable sources of human intelligence for the fight against ISIS.  Follow on military action would likely involve Marine Expeditionary Units and Special Purpose Marine Air Ground Task Forces that are already pre-positioned in the Mediterranean region. In any case, even a moderate US military assistance to this refugee crisis could ease EU tensions so they can focus on their important debt negotiations.  Of course the only long term solution is to help alleviate the conflicts and deplorable economic conditions in the immigrant’s origin countries, in which the US could play a key role through economic aid, business training, and education.

In conclusion, the disastrous effects of conflict precipitated the EU polity.  The US / EU symbiotic partnership is paramount to the economic and national security of both entities.  In order to continue to realize Victor Hugo’s dream of two continents joined for the well-being of all - US foreign policy should provide a stabilizing voice in the debt conflict, and the US military should play a proactive role in the refugee crises that currently threatens the 28 member states.

End Notes