BRUSSELS – The fear of contagion has spread over Europe. Many see Greece as the potential first domino to fall in a scenario that runs as follows: the Greek austerity measures do not suffice, the debt crisis deepens, and the risk of a sovereign default spreads to other European economies.
As the Greek domino falls, countries like Portugal, Spain, or Italy start tumbling, and a small economy’s crisis turns into a major European calamity.
This view suggests that other countries might be forced to rush and help their European “brothers in arms” – whether or not Berlin or other capitals want to.
Eventually, the sovereign debt crisis might hit the real economy, with Europe ending up in a vicious circle of even higher deficits, lower growth rates, exploding unemployment, and decreasing competitiveness.
Obviously, this is the scenario that everyone – with the possible exception of some speculators – wants to avoid. And, after the recent EU summit agreed on an “ultima ratio” rescue plan for eurozone countries facing the danger of default, chances are high that it will not materialize.
But the prevailing domino theory is incomplete. The crisis could have social and the political spillover effects that go well beyond the economic realm.
For the sake of illustration, let us stick to the Greek case. The economic situation in Greece is deteriorating quickly. Some analysts have even predicted a “slow death” of the Greek economy. Citizens themselves sense that the situation will most likely get (much) worse before it improves.
Most Greeks are aware that the country needs to be radically transformed. But reforms will be painful, and it might take years before the country shows first signs of recovery.
In the meantime, Greek society will suffer from budgetary austerity, cuts in social expenditure, and an overall economic downturn. Despite this bleak picture, Prime Minister George Papandreou’s Socialist government still enjoys support. At this stage, most Greeks do not believe that any other political party could manage the crisis more effectively.
But at the same time frustration is mounting in Greece. In the absence of hope, the country seems to be falling into a collective depression. Will this eventually lead to collective social unrest?
The country has already witnessed outbreaks of violence in its recent history. Although Greece is still far from a radical outburst, one cannot exclude the possibility of fierce reactions on the streets of Athens or other major cities.
It can be argued that such a contingency is something that Greece – or any other country in a similar situation – should cope with on its own. But this line of thinking is short-sighted. A major outbreak of social unrest in Greece or elsewhere could affect the wider EU public in various and unforeseeable ways.
Some “friends of Greece” will decide to show active, though peaceful, solidarity with their European compatriots. Others might follow the Greek example and go into the streets, not out of solidarity but out of frustration with conditions in their home country.
In the worst case, images of violent protests in one EU country might incite others to violence. Some will hold the EU and the measures “imposed by Brussels” responsible for the outbreaks of social unrest. In such a situation, the crisis will have triggered a social rather than an economic domino effect, which is no less worrisome.
The crisis and the reactions to it already have led to misunderstandings and bad feelings throughout the EU, doing more harm than expected. Old stereotypes and inappropriate historical memories have reappeared.
The confrontation between Greece and Germany has been particularly nasty. Mutual accusations reached a level unworthy of the common history and the close personal, cultural and economic ties between both countries.
Indeed, it can be argued that the political dominos are already falling. The crisis, and reactions to it, widened old cracks and opened new ones. Distrust between EU countries seems widespread. All sides blame others for a lack of solidarity – openly or behind closed doors.
Those who suffer most from the crisis claim that the recent rescue plan should have come much earlier, and that economic imbalances in the EU have contributed to the debt crisis in some member states.
Others cannot understand why they should “bail out” countries whose irresponsible misconduct put not only themselves, but also the common currency, under strain.
Decision-makers and commentators need to take into account not only the economic but also the social and political consequences of certain policy responses or the transnational costs of not taking swift and decisive decisions.
If Europeans disregard Kant’s categorical imperative – i.e., don’t do to others what you don’t want others to do to you – they should not be astonished if the European Union comes to a standstill or even implodes.
It is up to European citizens and elites to avoid the worst. Otherwise, future historians will ask why Europeans at the beginning of the twenty-first century chose division and international marginalization rather than unity and global relevance.
Janis A. Emmanouilidis is Senior Policy Analyst at the European Policy Centre in Brussels.
Copyright: Project Syndicate, 2010.