Averting the Greek tragedy

WHEN the euro’s notes and coins entered circulation at the start of 2002, political and economic leaders in member states declared the move to be entirely irreversible. Less than a decade later, however, and possible withdrawal is being openly discussed in legislatures, salons and media in Britain and on the Continent. It is a measure of how far and how fast the single currency has fallen.

The latest crisis to hit the euro was triggered by the first, failed attempt to rescue the stricken Greek economy. It has been compounded by the justifiable fear that the contagion could spread to Spain, Portugal, Italy or Ireland, who now have to pay the bill for their governments’ years of unchecked spending. What might seem a cause for celebration among Britons is in fact a cause of concern, because Europe remains this island’s largest trading partner.

This is why we cannot afford to look the other way during the eurozone crisis. Of course, we do not deserve to pay large sums to prop up a currency which has long been opposed by Britain but the cost of its collapse would be far greater than that of saving it.

Greece could yet abandon the euro, even if that prospect receded slightly yesterday as member states moved towards a debt restructuring and another bail-out. The rules, however, mean struggling nations have no option to devalue, which would help them become more competitive, or to default. A return to the drachma would trigger a run on Greek banks and a new financial crisis across the Western world.

So it is right for Britain play a part in preserving the euro, even though the consequences seem unpleasant. The rescue should, however, be lead by Germany and France. They have long been the cheerleaders for the currency and they need to take a stronger role in preventing a new Greek tragedy.

Athens has little influence in the matter because, despite the Greek government’s sweeping austerity measures, its fate has spun out of its control. Political leaders there should concentrate on trying to restore order to their society and must look to Nicola Sarkozy and Angela Merkel for a solution. They, in turn, must throw off the inertia and rivalry that has undermined their efforts so far.