The Greek financial crisis is like a never-ending action movie. With great character development, interesting plot twists and action at every turn, the world has become captivated with the "Greece vs. the eurozone" narrative. Unfortunately, however, this is far from fiction. The most interesting part of the story to me is not that the Greeks are being blamed for their "horrible mismanagement" of their economy or the "Greek millionaire pensioner" tale the German press is so fond of telling. What's most interesting is that the Greeks are not the exception, they are the rule. Greece has turned into the whipping boy for the eurozone, itself embroiled in financial crises throughout the zone.
Greeks voted yesterday in a national referendum to reject the latest proposal by the eurozone, a proposal which had been rescinded by the time the referendum had actually been held. At the announcement of the referendum, polls showed the vast majority of Greeks did not want a "Grexit" (Greek exit from the eurozone) and wanted to continue to use the euro. Greek Prime Minister Alexis Tsipras embraced these polls and turned the question on its head. A "No" vote means staying in the eurozone but with better terms, he argued. "It'll give me more bargaining power," he pleaded. He reframed the question and in doing so ensured a victory for the "no" side. The "Yes" camp, led by media elites and industry groups, argued there would be an immediate energy crisis and that a financial apocalypse would begin should the Greeks reject the eurozone proposal. They overplayed their hand and the public did not like it.
So the Greek electorate - or the 61 percent that showed up at the polls - rejected austerity but accepted continuing to stay in the eurozone, according to Tsipras' arguments. This is great news: The Greeks return to the bargaining table and sit across from their fellow eurozone members, all of whom, without question, abide by the criteria set out together at the turn of century, right? Wrong.
The five criteria laid out by the European Union for admission into the common currency are known as the Maastricht criteria. According to the Maastricht, as the treaty of the same name is known, EU member states must abide by "stringent" economic guidelines to get into the eurozone and are technically supposed to continue to follow for continued membership in the eurozone. The five criteria include: An inflation cap, a budget deficit/gross domestic product (GDP) ratio, a debt/GDP ratio, an interest rate cap, and finally a euro-peg scheme in which the national currency must stay in a tight band trading against the euro for two years.
The bad news is Greece is in violation of some of these criteria. The good news (for Greece) is that so is almost everyone else. Even the most perfect of eurozone countries, Germany, the champion of financial discipline, does not currently meet the Maastricht criteria.
Of the 19 countries that make up the eurozone, only Estonia, Finland, Latvia, Lithuania, Slovakia, and Luxembourg meet the "convergence criteria" in terms of the debt/GDP ratio. Turkey, for example, also meets these criteria; however, with exception to the aforementioned six eurozone nations, all others are in violation of the Maastricht, including Germany, France, Spain and Italy, as they are above the 60 percent target set out in the treaty. With no exit clause, however, the removal of eurozone countries is currently technically impossible without new amendments being added.
If we look at other criteria, such as inflation, ironically Greece and Cyprus have the best record with a -2.10 and -2.40 inflation percentage. A deflationary period is no surprise for Greece or Cyprus, nor would it be a positive development for any economy. Nevertheless, criteria are criteria. They are joined by Slovenia to constitute the countries with the three lowest inflation percentages. The Maastricht dictates the average of the three lowest inflation percentages in the zone become the benchmark and no country should have inflation 150 basis points above the average, in this case -1.74 percent. So technically any eurozone country whose inflation percentage is above -0.24 is in violation of the Maastricht. Again, Germany is in violation of the Maastricht in this instance and it is joined by 15 other eurozone countries. Turkey's inflation, when denominated in euros, currently also meets the Maastricht criteria.
In regards to the budget deficit/GDP ratio, Turkey again meets the criteria of under 3 percent, whereas, here again, nearly half of the eurozone is in violation of the Maastricht. Finally, the fourth and last criteria - the currency volatility criterion is moot for eurozone countries - is that of long-term interest rates. This year, Cyprus, Portugal, Slovenia, Malta, Lithuania, Latvia, Italy, Spain, and Ireland were all in violation of this criteria with their long-term interest rates exceeding the lowest eurozone interest rate by over the mandated two percentage points. Turkey, in euro denominated terms, again bests many eurozone countries during the year in adhering to the Maastricht.
As for the final criteria, staying within a 15 percent trading band against the euro for two years, Turkey will have met this criterion by August 2015.
So why is it that the global press is framing the Greek financial crisis as uniquely Greek when the crisis is a broader European one? How can German politicians continue to act so pretentiously when they are in violation of the same criteria they accuse the Greeks of violating? The answer is Greece is the scapegoat for a broader European crisis. Congratulations to Tsipras and his former finance minister, Yanis Varoufakis, for standing their ground and not giving in to European demands so easily. Here's to a solution to the Greek crisis that is fair to the Greek people, holding all eurozone members equally responsible for their violations.
