Britain and America Have Exaggerated the Greek Crisis

The Greek vote relating to its recent debt crisis has been exaggerated by some media outlets into a crisis of the euro, as if the currency could no longer work and the European integration plan is about to fall apart.

British and American media have long talked of the decline of Europe. Ever since the 2010 European debt crisis, talk of the disintegrating euro has been rampant and all of the negative talk has given financial investors a chance to commit arbitrage, as a weaker euro would benefit the U.K. and America.

Because of the myriad languages in Europe, the British and American media have an advantage and more might, affecting the Chinese media’s reporting and making it more difficult for the Chinese to understand Europe. In the last few years English language outlets have been growing in Europe, so the Chinese media should select information according to “Internet Plus” in order to present a more balanced picture of Europe.*

The British and American media obviously want to pull China into the fray, so they exaggerated the Greek crisis’ impact on China. A well-known American investment bank’s early July report claimed that the Greek crisis will lead to a 2.2 percent drop in Chinese exports to Europe. Yet for years, Chinese exports to Greece were less than 1 percent of the total exports to Europe! The exaggeration is meant to imply that China should rescue Greece. To answer this problem we should really ask, why didn’t America and Russia rescue Greece? Why are they expecting China to do the rescuing?

Admittedly, Europe is facing challenges from a globalized economy and problems of aging populations, while European integration is also facing its detractors. Safety in Europe is threatened by the Ukraine crisis and North African immigrants, and some areas have even been hit by terrorist attacks. This, however, does not mean that Europe is beyond hope. We need to reflect on these “Europe is collapsing” theories.

After the euro debt crisis, the various European economies recovered gradually. Countries with heavy debts, such as Ireland, Spain and Portugal, have all started to revive their economies in 2014 and have stopped receiving help. In fact, Spain’s economy grew faster than Germany’s in 2014.　

Greece was the exception in the euro debt crisis. In spite of this, its economy grew in 2014 for the first time in six years, at a rate of 0.8 percent. Problems in Greece are not limited to debts; there are problems with its economic structure, national governing ability, social welfare reforms, etc.

The industry structures in Greece are not complex enough, so even if labor costs were greatly reduced, exports might not be able to increase very much. Even if Greece left the eurozone and depreciated its own currency, exports would not greatly improve. Greece does not have many export categories with an advantage. The largest, the petroleum-processing industry, is dependent on imports, so any effects from a depreciating currency would be canceled by increasing imports. Tourism has made great contributions to the Greek economy, but without changes in taxes and the taxation system, putting the burden on tourists is like killing the chicken for its eggs. In addition, the Greek welfare system also needs fundamental changes. While the Greek pension system is one of the most generous in organized economies because it is disconnected from the country’s productive power, it is not financially sustainable. The EU has estimated that in the existing system, Greek pension costs would increase by 12 percent in the total Greek GDP, while other EU countries have only raised them by 3 percent.

Reform of the eurozone has always been ongoing. In late June, the leaders from five major European organizations jointly released a report on the reform of the European Economic and Monetary Union, advocating a two-step process to further improve the future of a joint economy. The plan estimated that the transition would end by 2025, when a euro treasury would be built. This is also designed for a better response to crises similar to the Greek one.

The European integration project has always tried to make choices between small steps and great leaps toward European integration. Every crisis has given more motivation to the cause, and the Greek crisis is no exception.

*Editor’s Note: “Internet Plus” is an action plan introduced by the Chinese government to increase China’s competitiveness by integrating various IT technologies with modern manufacturing.