Greek Crisis Deepens Europe's Fault Lines

By Stratfor

July 13, 2015

Finally, the Greek crisis is challenging the Finnish government as well. Since March, Finland has been ruled by a coalition that includes the Euroskeptic Finns Party, which opposes a third bailout for Athens. Finland has traditionally followed a hard line when it comes to eurozone bailouts, but the government's composition has reduced Helsinki's room to maneuver. Like Germany, the Finnish parliament will have to ratify a third bailout for Greece.

A Systemic Crisis

The European Union is not merely facing a Greek crisis. It is facing a systemic crisis. The events in Greece have shown the extent to which a currency union without a fiscal union leads to conflict in Europe. The Greek government has presented the conflict as an attempt to weaken Greece's democracy, which is an incomplete explanation. The eurozone is a club of 19 democracies with their own national interests, priorities and constraints. Each actor has to pursue its own goals, all the while fettered by its domestic politics.

The Greek government promised to end austerity, remain in the eurozone and achieve debt relief, which ultimately proved impossible. The German government needs to protect its exports markets - and therefore the currency union - while making sure taxpayer money is not squandered. The French and Italian governments want to lead Mediterranean Europe while protecting their political ties with Germany. Bailout countries, such as Spain, Portugal and Ireland, are terrified that leniency with Greece would strengthen anti-austerity political forces at home. And small northern and Baltic nations, where the economic downturn was particularly severe during the early stages of the financial crisis, reject the idea of having to compromise their national wealth to help a country on the other side of the Continent.

Things would probably be easier if Europe were a federation, but history and geography make it impossible. What began as a technical debate about the fiscal situation of a peripheral country has escalated into a conflict that is stripping the structural weaknesses of the European Union. The European Union still has a week to find a solution to this conflict. Greece's debt with the European Central Bank, after all, is due July 20. The decisions made in the coming hours, though, will shape not only the future of Greece, but also the fate of the European Union.

A Stratfor Intelligence Report.

The Greek Crisis Deepens Europe's Fault Lines was originally published by Stratfor and is reprinted with permission.