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Greece crisis a problem for the whole of Europe

students at UEL

German policy is the biggest obstacle to finding a solution to the current turmoil in Greece, according to Professor Vassilis Fouskas, Head of the Centre for the Study of States, Markets and People at the University of East London.

Professor Fouskas said that if Europe did not depart from its German-led monetarist policy, then the countries on the periphery would have only one option -- which was to default and exit the monetary union. 

Professor Fouskas, who is the co-author of Greece, Financialisation and the EU – The Political Economy of Debt and Destruction, was commenting on the last minute negotiations to save Greece from exiting the Euro.  The biggest problem that Greece faces at the moment is liquidity.  Simply put, Greece is short of money.

“Money is the most expensive commodity in Greece nowadays,” said Professor Fouskas.  “Bartering has become widespread and depositors are emptying Greek banks daily. This is a huge problem and an obstacle to any solution. But the biggest obstacle is German policy, because it is anti-inflationary and export-led and requires a great deal of austerity in the peripheral European states that simply cannot afford it.”

He added that the crisis was a European one because it was a balance of payments crisis, and not a fiscal crisis.  “Greece is not responsible for the crisis, or, if you prefer, it's not mainly responsible. This said, the solution can only be European.”

Professor Fouskas said that one possible solution would be to transform the EU and its monetary system into a political, federal union.  Under such a system,the European Central Bank would act as the Central Bank of a federal European state, performing the same function as America’s Federal Reserve Bank.

“Another solution is a velvet divorce - recognition of the reality that Germany, Portugal, Spain, Italy and Greece cannot have the same currency,” said Professor Fouskas. “This is the so-called multi-tier scenario in which countries of the core create their own monetary union with the other countries connected loosely with them.”

He added that unless Germany’s policy is defeated, the future of Europe will look bleak.

“Germany has to understand that its policy leads to Europe's disintegration and not integration,” added Professor Fouskas.

Notes to Editors

The University of East London (UEL) is a global learning community with students from over 120 countries world-wide. Our vision is to achieve recognition, both nationally and internationally, as a successful and inclusive regional university proud of its diversity, committed to new modes of learning which focus on students and enhance their employability, and renowned for our contribution to social, cultural and economic development, especially through our research and scholarship. We have a strong track-record in widening participation and working with industry.