Greece's Economic Crisis Presents Major Challenge To The Euro

Transcript

ROBERT SIEGEL, HOST:

This crisis may be a test of Greece, a test of Greek realism, or a resolve or resignation, but it's also a test of the European Union under the euro. Kathleen McNamara of Georgetown University says that what makes the common European currency unique is what makes the Greek crisis especially difficult to solve.

Professor McNamara, welcome to the program.

KATHLEEN MCNAMARA: I'm glad to be here.

SIEGEL: And first, have you heard anything from what you just heard from Joanna that makes you any more optimistic or hopeful of a resolution of this crisis today?

MCNAMARA: Not at all. I think she's really captured the lack of obvious way out of this crisis.

SIEGEL: So what's so unusual about the euro?

MCNAMARA: What's so unusual about the euro is that, historically, single currencies have had a one to one relationship with the nation state. The euro really is a currency that does not have a government behind it to support it, and that's created a lot of both economic and political problems.

SIEGEL: It has a eurocracy, they would say, behind it. It has all of the member states behind it. But you're saying not a government that all of the people who use this currency acknowledge as their sovereign government.

MCNAMARA: I think you've really hit on it. The euro was created as an act of sort of bureaucracy, of technocracy, it was an elite deal. It was brought about without a lot of public discussion and debate. It worked great during the 2000s when we had an expanding economy, but once the financial crisis hit, the various problems with the euro really became visible to everyone, and it really sort of broke open the notion that it was an apolitical thing. It's clearly very political.

SIEGEL: Yeah. In search of precedent, you have dug up some prior European currency unions. I feel like this is a category in "Jeopardy," the genius version. The Scandinavian Monetary Union?

MCNAMARA: Yes. It turns out - I mentioned that successful single currencies really have been only in the context of broader political projects - the nation state in particular. But we do have examples of efforts to have a standard currency zone, in the 19th century in particular. So we had the Scandinavian Monetary Union and something called the Latin Monetary Union, which actually had France, Belgium, Greece in it. But those efforts failed, largely because they didn't have broader political structures in place.

SIEGEL: So what we're seeing is a single currency without a single country, which hugely complicates negotiating something so complicated as a member - Greece - running out of money and needing help. They have to make up decades-worth of national development on the fly to try to solve this.

MCNAMARA: Yes, that's exactly right. I mean, there's a couple different really important points. One is just in terms of sort of the democratic legitimacy of what's going on, whereas when the United States had our financial crisis, TARP was debated in the U.S. Congress, you know, and representatives from all the various parts of the United States came together to discuss the financial crisis. But in the case of the eurozone crisis, what we have are people like Christine Lagarde of the IMF, the unelected head of the European Commission, the Eurogroup president and so on, negotiating visibly with the Greek counterparts. But you really don't have that sort of supporting, democratic representation that would really help things.

SIEGEL: How do you think all of this ends up - the Greek euro crisis?

MCNAMARA: Well, I of course don't have a crystal ball, but my sense is that Greece is in real trouble, that in fact, the so-called Grexit, or Greek exit, from the euro is quite possible. I think some of this is related to just the deep structural problems of Greece, but some of it is related to the fact that Tsipras really did not handle the negotiations in a coolheaded way. Alternatively, on the part of the European Union though, this crisis may actually end up strengthening the core countries of the EU, and the institution-building that has been going on since the euro crisis began is likely to continue.

SIEGEL: Kathleen McNamara, thank you very much for talking with us.

MCNAMARA: You're very welcome.

SIEGEL: Professor McNamara is director of the Mortara Center for International Studies at Georgetown University and author of "The Politics Of Everyday Europe: Constructing Authority In The European Union." Transcript provided by NPR, Copyright NPR.