After Greece, What Keeps European Officials up at Night?

European union background

While Greece’s economy continues to weigh on European officials, Marc Chandler discusses other vital concerns for Europe.

Critics of the Greek government repeatedly claim that their radicalism prevents a resolution to the crisis. Yet the EC has indicated that the difference between the creditors’ proposal and Syriza’s plans amounts to 2 bln euro a year in government revenue. This does not seem so radical.

Consider Ukraine’s threat of a unilateral moratorium on its debt servicing unless its creditors accept a 40% haircut. The Ukrainian position enjoys support from the IMF, though Greece does not.

Consider Italy’s Prime Minister Renzi. He is threatening to “hurt the EU” if some greater burden sharing on the refugee crisis is not agreed upon soon. He was quoted in the press saying: “If Europe chooses solidarity, good. If it doesn’t, we have Plan B ready. But it would first and foremost hurt Europe.”

Reports indicate that Switzerland, Austria and French border police have turned back refugees trying to leave Italy. Italian riot police have been deployed to disperse a few hundred people refused by France. Switzerland, Austria and France argue that Italy is not providing proper documentation for the refugees.

Europe’s most indebted countries, Greece and Italy, due to geography, are the front line of the EU for those fleeing northern Africa and the Middle East. There is talk of some burden sharing, whereby other countries are given quotas of migrants to accept, but even here the numbers being discussed are less than half of the roughly 100k migrants that have entered Italy and Greece this year. Eastern and central European countries (Czech Republic, Slovakia, Hungary, the Baltics and Poland) reject any mandatory redistribution.

While aid to Greece has been suspended for a year due to a failure to reach an agreement with the official creditors, the refugee facilities in Greece are atrocious. Indeed, they are so dismal that Greece has the only exemption to the EU rule- that asylum seekers should be returned to the first EU country that they entered.

This rule compliments the Schengen Treaty, which provides for free movement within the EU. The toppling of the Gadhafi government in Libya in 2011 was an international effort, yet Italy (and Greece) argue that it is unfair they have to bear the burden of the consequences. Anti-immigration is a powerful campaign issue by the populist right in Europe, like the Northern League in Italy and the National Front in France. It is an issue at this week’s election in Denmark. It is also the issue that Cameron has chosen to press for EU reforms ahead of the referendum he promises for UK voters by the end of 2017.

The Home Affairs EU ministers meet tomorrow, but the bickering will continue. The same can be said the finance ministers that meet later this week. The issues that are threatening to pull Europe apart seem increasingly incapable of being resolved on the ministerial level. The heads of state summit, June 25-26, is the next best hope for both Greece and the refugee issue.