Can Putin Survive?
The Lessons of the Soviet Collapse
In the late 1990s, the Western world became concerned with a phenomenon known as Y2K (Year 2000), or the Millennium Bug—that is, a mass collapse of all computer systems in the seconds after the clock struck 12:00 on New Year’s Eve 2000. Most early computer programmers had entered dates only according to their last digits, rendering 1976, for example, as “76.” They did so mainly to save memory space, which was very expensive in those days, and also because they assumed that their programs would have a limited shelf life. Now it was feared that some computers would not recognize the new date in 2000 and assume instead that they were back in 1900. Some worst-case scenarios envisaged hospital machines breaking down, banking chaos, and even airplanes falling out of the sky.
A "No" supporter flashes a victory sign before a Greek flag atop the parliament in Athens, Greece July 5, 2015.
Yannis Behrakis / Reuters
All this calls to mind the long Greek agony over the euro. When the crisis first blew in 2010, there were widespread fears that if Greece defaulted on its public debts, contagion would bring down banks across the eurozone and destroy the market for government bonds in the next-in-line states, such as Italy, Spain, Portugal, and perhaps even Ireland. The fears seemed somewhat justified: nobody quite knew how markets would react, and the complex interconnections between Greek debt and bank solvency elsewhere were not clear to even seasoned experts. It was precisely this sense of uncertainty on which Greek governments traded from the start of the crisis and upon which Syriza’s “game theorists” based their ultraconfrontational stance starting in January this year.
To be on the safe side, though, European officials and banks have spent the last five years conducting the financial equivalent of what the Y2K teams did, quarantining Greece so that any fallout could be safely contained and a G2K avoidedFor this reason, the European Union provided emergency bailouts for Greece, writing down a substantial proportion of the debt in return for commitments to reform state and economy. To be on the safe side, though, European officials and banks have spent the last five years conducting the financial equivalent of what the Y2K teams did, quarantining Greece so that any fallout could be safely contained and a G2K avoided. Recently, German Chancellor Angela Merkel claimed that this had been achieved and that Europe was now “much stronger” than when the Greek crisis had first exploded in 2010.
The announcement greatly increased the willingness of Brussels and the other European capitals to confront what they perceived as repeated Greek backsliding on the implementation of agreed reforms. The showdown between EU and Syriza last weekend was the result, and yesterday’s “no” vote in the referendum on the bailout terms seems to suggest that the country is about to exit the euro. So we will now see whether fears of G2K will be realized or whether the mechanisms put in place by the rest of the EU since 2010 have worked—although, as with Y2K, we will never be sure if the threat was all imaginary in the first place.
German Chancellor Angela Merkel arrives at the Chancellery in Berlin, Germany, July 6, 2015. France and Germany called for an emergency summit of euro zone leaders to discuss Greece's stunning referendum vote on Sunday to reject bailout terms, as calls mounted in Berlin to cut Athens loose from Europe's common currency.
Fabrizio Bensch / Reuters
It may be that the financial contagion in Europe can be contained, but the strategic and political contagion will be immense.That moment cannot be long delayed, however. Today, European governments will have to decide on how to respond to the events of the past week. They will not even consider the only answer to the Greek problem—and most of the other problems afflicting the eurozone—which is a full fiscal and political union along U.S. lines, involving the merging of all state debt across the common currency area and the end of Greek and all other national sovereignties. (The Greeks themselves have not even made such a suggestion, which shows that even five years into the crisis they have as little idea of the necessary relationship between monetary and political union as their Brussels counterparts.) Instead, European governments may try to fudge the issue yet again or, more likely, force the issue by cutting off funds to Greece. Working out exactly what will then happen then is futile, because so many different factors are in play. In Greece, it seems certain that the Greek banks will collapse and that state and country will run out of money, return to the drachma, and default on its debts. Widespread misery will result, and it will take decades to recover to pre-crisis levels and rejoin the euro, if Greece ever does.
It may be that the financial contagion in Europe can be contained, but the strategic and political contagion will be immense. Unless it also leaves the EU, Greece may become an open door, as some Syriza ministers have already threatened, through which migrants pour in. The country will drift even more into the Russian orbit, with potentially fatal consequences to the EU’s common foreign policy, especially its sanctions over Ukraine. Above all, the irreversibility of monetary union will be called into question, with huge implications for all kinds of political and economic bets placed over the past three decades. No amount of modeling can quantify the likely damage to the union, but it will be colossal and perhaps fatal to deeper integration.
Either way, the Greeks are faced with an impossible choice: either to agree to an austerity program that is crushing the life out of its young people and its weakest or to return to the failed national politics that got the country into this mess. The world will soon know the answer on G2K, but whatever it is, as we contemplate the ruin of one of Europe’s nations, we should remember that Europe is neither a system nor a game, but a common destiny, and we should wish a plague on all those in Brussels and Athens who have brought us to this pass.