Greece says no

From the point of view of TTIP, the current situation in Greece does not bode well. The Eurozone and the wider-EU area has become far more unstable, with the possibility of both a Grexit and a Brexit on the horizon. The recent referendum in Greece also sets a dangerous precedent; if TTIP were put to the public then it would almost certainly be rejected. If an agreement on TTIP is to be made, it is not expected to be finalized before 2016. Between now and then, the Eurozone and indeed the EU, could be radically different.  Both politically and economically, forces are growing across the EU which threaten to tear it apart. Almost without exception, every Eurozone member now has a far-from-center radical party which has grown enormously popular in recent years. The consequences of this, for both the future of the EU, and the future of TTIP, look dire indeed.

The situation in Greece and the rise of SYRIZA is part of a growing anti-capitalist and anti-free market movement across Europe. With elections due in several European countries next year, the rise of radical parties, such as Podemos in Spain or the Front National (FN) in France could put TTIP’ in serious jeopardy.  Economics needs strong stable political institutions to succeed, and such institutions are rapidly fading. Take Greece for example; after the No vote yesterday, former Prime minister and head of the opposition, George Samaras, resigned from his post. The political landscape in Greece is now dominated by the Far-left in SYRIZA, many of whom are communist and anti-market, and the Far-right, such as the Neo-fascist Golden Dawn. Economic turmoil creates political turmoil; as much as people wax lyrical about Greece’s proud history of democracy, it was ruled by a military Junta for almost 10 years in the 70s. how long will Tspiras and co remain popular should Greece exit the Euro and enter recession? Violent protests have been occurring for several years now. As preposterous as it may seem now, a violent coup, or the possibility of a civil war, cannot be ruled out

From an economics perspective, in the absence of a debt forgiveness or third bailout, Greece will be forced to leave the Eurozone. This will cause a sharp recession in Greece- inflation is expected to rise by 35% while the newly installed Greek drachma would almost immediately drop in value by 50% against the Euro (Source: IMF). However, it would also cause a contraction in the European economy, as the financial markets would almost certainly test the stability of other member states. The value of the euro would fall against the dollar, thus making the EU more competitive abroad. However, any benefits would be almost immediately offset as markets looked to test the willingness of the ECB to prop up its other shaky members, with Spain more than likely being the primary target. The euro would almost certainly lose is ability to challenge the dollar for the title of the World’s reserve currency, the consequences of which would be severe.

A Greek exit from the Euro essentially creates two possible situations, both of which are uncertain. The first is that European leaders double down on their efforts to pass TTIP, in an effort to increase economic growth and offset the recession a Grexit would cause. The alternative, more likely scenario is a financial market attack on Greece and the Eurozone area leads to a huge anti-corporate sentiment across the EU. This anti-corporate sentiment is manifested via opposition to TTIP, with the trade deal ultimately collapsing before an agreement can be made.

This blogger is of the opinion that TTIP should be opposed, not on the grounds of anti-capitalism, but because it is an affront to free trade itself. Regional trade agreements hinder rather than help the WTO in its globalization efforts. harm free trade rather than promote it. For one, they increase the influence of power imbalances in international trade relations, allowing large economies to impose their will on smaller economies. This would not occur if trade liberalisation were implemented globally, and tend to increase resentment to free trade in developing nations. The numerous amounts of these regional agreements has led to some incredibly complex rules and regulations, further increasing the costs of trade. However, their biggest drawback is that they allow countries to exempt sensitive political sectors from liberalisation, and this is particularly true of the TTIP. The main reason why the Doha talks are still ongoing, is because of the EU and the US’s refusal to end their protectionist policies for their agricultural sectors. The TTIP allows them to avoid angering Belgian farmers or Iowan corn growers, while reaping the benefits of free trade in other sectors. They will therefore have no incentive to conclude the Doha round, and while this may benefit them in the short run, it is simply not sustainable, and will severely damage the WTO and its trade liberalisation efforts.