The sentence that could change Europe forever

Schäuble’s “timeout” surprise broke sharply with decades of EU political consensus.

Last weekend’s marathon summit on Greece might have gone down as the moment Europe came together to resolve its greatest crisis. Instead, it will likely be remembered for a single word, borrowed from American sports: Timeout.

“In case no agreement could be reached, Greece should be offered swift negotiations on a timeout from the euro area,” read the final line of the draft deal with Athens.

In other words, Greece could be shown the door.

Never mind that the sentence didn’t make it into the final agreement. The fact that the exclusion of a eurozone member was seriously considered and formally proposed — by Germany, no less — represents a departure from decades of European policy that will resonate far beyond Greece.

“This heavily prescriptive and in the end humiliating approach changes the nature of the implied social contract between the member states in a very negative way,” said Jeremy Smith, co-director of London-based PRIME Economics. “Although formal solidarity is being shown, the spirit is universally absent.”

For years, the specter of “Grexit” had driven Europe to undertake whatever was necessary to keep Greece afloat. Now, some countries appeared to be embracing the concept, dressing it up as a “temporary” option. The plan called for Greece to leave the euro for at least five years, during which it could restructure its debt outside the currency area and prepare for its eventual return.

It didn’t help matters that German Finance Minister Wolfgang Schäuble, Athens’ most vocal critic, was the mastermind behind the plan. He pushed for the option to be included, proposing it to his colleagues at the Eurogroup meeting that drafted the proposed agreement.

Early Monday, Europe agreed to give Greece a new lease on life in the eurozone, opening the door to a third bailout, though insisting on harsh conditions that Athens will have difficulty meeting.

A fresh rescue, worth as much as €86 billion, would end months of uncertainty over Greece’s immediate future in the euro. Yet the blueprint would place Athens under strict observation and force deep spending cuts, requirements that encroach further on its sovereignty and threaten to upend Greece’s already turbulent political landscape.

In some respects, Schäuble was simply acknowledging reality: If there was no deal, it follows that Greece would have no choice but to leave the euro.

But politically, it was explosive. The idea violated the very essence of Europe’s self-image as a union of solidarity and common purpose.

Word of the plan was first reported by the Frankfurter Allgemeine, a conservative paper that has been deeply skeptical of Europe’s bailout strategy, on Saturday evening just as Germany was presenting the idea to the Eurogroup in Brussels. Some Eurogroup members initially insisted it wasn’t under discussion at the summit.

“There isn’t a temporary Grexit: either there is Grexit or no Grexit,” a clearly agitated François Hollande said on his way into the summit.

He wasn’t alone.

“I consider proposals like a temporary exit from the eurozone to be degrading and wrong,” Austrian Chancellor Werner Faymann said. “That would mean that any country could be told to leave for half a year or a year.”

Rabble of states

In fact, the language remained in the draft until early Monday morning. At a meeting between European Council President Donald Tusk, Angela Merkel, and Alexis Tsipras, the German leader agreed to take it out.

Some participants believe the Germans tried to insert the timeout clause as a negotiating tool to put Greece under more pressure.

If so, it backfired. Leading Social Democrats in Germany were furious, accusing Schäuble of going rogue. But then it turned out their own leader, German Vice Chancellor Sigmar Gabriel, knew about it. The Greens, meanwhile, accused Schäuble of trying to blow up Europe and threatened to call in Germany’s constitutional court.

Once the final deal was done, Merkel tried to downplay the episode, stressing that such a step would have only been possible with Greece’s acquiescence.

But Schäuble was unrepentant. On Tuesday, he insisted that many members of the German government still think Grexit is the best option for Greece, sowing doubts about the viability of the deal on the table.

In Athens and Brussels, reaction to the accord was just as skeptical. Many see the agreement, even without the “timeout” clause, as evidence that Europe has ceased to properly function.

“I have a strong view that this statement is the worst moment ever in the EU,” said Smith, who believes that the eurozone leaders veered outside their legal mandate in trying to impose such conditions on Greece. “You can’t just have a rabble of individual states negotiating in the middle of the night on issues this serious.”

The interminable talks that preceded the weekend agreement laid bare Europe’s deep divisions on matters both political and economic, fueling doubts about the cohesiveness of the 28-member union and its ability to withstand political and economic shocks.

EU institutions from the European Commission to the European Central Bank clashed with governments over policy and tone, hewing to stereotypes of Brussels as a dysfunctional, administrative Babylon, where narrow national interest trumps solidarity.

What worries leaders in some European capitals is that Berlin’s Grexit initiative could turn Europe into a German-dominated penal colony, where anyone who doesn’t play by the rules faces sanctions or even financial ruin.

German officials insist this isn’t the case.

They believe they are reinforcing the EU’s underpinnings, not loosening them. In Berlin’s view, the lesson from the crisis is that Europe needs to become stricter in disciplining wayward governments, especially those in the eurozone. But their rule-based approach is clashing with the EU’s decades-old culture of flexibility and compromise, and many see it as a threat to national sovereignty.

Still, Germany’s growing political and economic dominance in Europe, which comes with increasing dependence on Berlin, means its neighbors may have little choice but to follow its lead, or get the “timeout” treatment.

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