The Strategic Problems of Grexit

Friday, July 1, 2016

With Britain posed to exit the European Union, other European countries might reconsider their own status. None has a more fraught relationship with the EU than Greece, primarily because of its experience with the Euro. And what if Greece leaves the Eurozone?

A Greece outside of the Eurozone would be economically crippled and politically unstable. A return to the drachma no doubt appeals to national pride, but sober analysis shows that it could in no way balance the disadvantages of losing access to European markets and capital. True, a weaker currency would attract tourists to Greece, but the same result could be achieved by internal devaluation—that is, by lowering prices—without the disruption and dislocation of leaving the Euro. The current emigration of Greek young people might turn into a flood, with economic opportunity in Greece becoming even less than its current low level. Besides, the Euro is overwhelmingly popular in Greece, and any government that pulled out of it would face huge domestic political opposition and likely instability. Still, it is worth considering the strategic consequences of a Greek pullout from the Eurozone.

Greece has historic ties to Russia. The two states share Orthodox Christianity, unlike most members of the EU. They share a common historical enmity to Turkey. Russia aided Greece in its War of Independence (1821-1829). The Soviet Union sheltered Greek leftists who fled after defeat in the Greek Civil War (1946-1949). Most important, Russia is a rising power in the eastern Mediterranean and the Middle East.

If Greece left the Euro its loyalties to the West would weaken, including its loyalty to NATO. Given today’s changing strategic balance in the region—Russia up, America down—Greece might well consider Russia a better security partner than NATO in any case, but were Greece to leave the Eurozone the attraction could prove well nigh irresistible.

As a Russian ally, whether de jure or de facto, Greece could provide port facilities and even a military base. The result could add to the pressure on Turkey. Russian partnership with Iran and support for beleaguered Syrian President Assad—now, armed support—puts pressure on Russia’s historic rival, Turkey. A Russo-Greek alliance would all but close the circle around Anatolia.

At a minimum, Turkey might be forced into a de facto alliance with Russia and at least a tacit withdrawal from NATO. Even more radical outcomes are imaginable, however, including Russian support for the PKK, the armed Kurdish nationalist movement, with at least the threat of changing Turkey’s borders.

In short, a Greek withdrawal from the Eurozone would likely yield political instability in Greece, a Greco-Russian partnership or alliance, and increased pressure on Turkey, all with deleterious results for the United States and its European allies.