Ivan Vejvoda: Insecurity in Greece Poses Risk to the Balkans

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Even as a compromise was found to halt an imminent Grexit (temporary or otherwise) this week, Greece’s situation, and even its euro membership, remains tenuous. In this context it is hard to remember that back in the 1990s, Greece was a crucial anchor of stability on the southern and southeastern flank of Europe and NATO. When Yugoslavia imploded and disintegrated, Greece was a rare example in the region of a successful EU and NATO member. It demonstrated a possible future of democratic stability and economic prosperity to the countries that would emerge from the break-up of Yugoslavia. But now it is Greece, longstanding member of NATO since 1952 and of the EU since 1981, which is the unlikely originator of potential political and economic instability in southeastern Europe.

The Euroatlantic integration dynamic has been unfolding since peace returned to the region, though often with fits and starts. The soft power of the EU remains a potent force; all the countries of the Western Balkans wish to join NATO (except Serbia) and the peace project that is the EU, no matter the state of the Union.

All the Balkan countries are still vulnerable, and a crisis in Greece would endanger their progress. Their economies are fragile, with low growth and high unemployment rates. They are relatively new democracies, and reconciliation in the region is tenuous, exemplified by the recent terrorist attack in Kumanovo, Macedonia, and the attack on Serbian Prime Minister Vucic at the 20th Anniversary of Srebrenica. Turmoil in Greece could also be exploited by local and foreign actors who aim to destabilize rather than consolidate democracy and security.

Twenty years ago, Greece seemed to be an example for the neighbors, with a stable consolidated democracy based on good governance and rule of law and a prosperous economy. Today, it reveals itself in a wholly different light. The responsibility for Greece’s plight is shared, but it is clear that Greece itself has not reformed itself sufficiently over the past three decades. Deep structural reforms are needed to confront an entrenched system of clientelism and nepotism under political party and oligarchic influence. Thus Greece must today engage in deep-seated reforms akin to those of its neighbors, perhaps again providing an example, though this time in parallel.

Despite its weaknesses, Greece’s GDP is bigger than the combined GDPs of all of the countries that were once part of Yugoslavia, and it plays an important economic role in the Balkans. It was an important investor in the region up until 2010. Its banks developed an impressive network; its telecom, mobile operators, and oil company bought important assets throughout the Balkans. If the situation in Greece deteriorates further, financial contagion is very likely, even though there has been a ring-fencing of the subsidiaries of Greek banks. Greek companies invested in the region could also begin to pull out of their investments.

In geopolitical terms, Greece commands a key position at the center of the Mediterranean, hosting a strategically important NATO base on Crete. Greece has very responsibly worked toward establishing closer, more stable ties with its NATO ally, Turkey, over more than decade, thus providing security. In contrast, Greece has been significantly less responsible when it comes to Macedonia, which Athens has blocked from achieving NATO and EU membership. As a major transit country for current and future (southern corridor) energy pipelines, Greece is a pivotal player in the EU’s struggle for energy security. It is also a frontline country on the receiving end of the current influx of migrants. As a country neighboring the Middle East and not far from Ukraine, and until recently a factor of stability for the Balkan Peninsula, it is not surprising that Greece has received the attention of Russia, which is seeking, for example, a more robust energy partnership with it. If Greece were to leave the eurozone, it would become even more exposed to external pressures and influence.

The potential consequence of a deterioration of the situation in Greece for the Balkans, in political, economic, and geo-strategic terms, should therefore be taken very seriously. The credibility of the EU and whole European project is at stake. It may not be by chance that at the height of the Greek crisis last week, German Chancellor Angela Merkel travelled to the region, visiting Tirana, Belgrade, and Sarajevo. She brought a strong message of reassurance to Greece’s regional neighbors to the continuing commitment to EU enlargement to this region, which will be all the more important if the crisis in Greece is not solved soon.

Ivan Vejvoda is senior vice president for programs at The German Marshall Fund of the United States in Washington, DC. This article was first published on The German Marshall Fund of the United States (GMF)