Greek crisis 'threatens dream of European Union'

Europe's failure to solve the Greek debt crisis risks lasting damage to the post-war dream of "ever closer union" at a time when it faces new threats on its borders, analysts said.

The chaos in Greece comes with European leaders already at each others' throats over a wave of Mediterranean migrants, while the Ukraine conflict has plunged relations with Russia to their worst since the Cold War.

Leaders have warned that the Greek situation is an existential moment for the European project, with German Chancellor Angela Merkel saying on Monday that "if the euro fails, Europe fails".

But experts say that even if Brussels can keep Athens in the euro, the crisis will sow seeds of distrust deep in the soil of the 60-year-old project to build a unified Europe after two world wars.

"It will leave scars," Janis Emmanouilidis of the European Policy Centre think-tank in Brussels told AFP.  "There is a lot of distrust."

- 'Nightmare' for Greece -

The launch of the European single currency a decade and a half ago was trumpeted as a unifying moment for the continent of 500 million people, but recent days have seen that dream of unity descend into what Emmanouilidis called a "nightmare".

Banks are closed in Greece, Greek and European leaders have accused each other of lying and at the weekend there was the unprecedented sight of eurozone finance ministers refusing to extend Greece's bailout and then freezing Greek colleague Yanis Varoufakis out of a meeting.

Both French President Francois Hollande and European Commission chief Jean-Claude Juncker warned on Monday that if Greeks vote "No" and reject a bailout proposal in a referendum on Sunday, Athens will have to leave the euro.

"I think this is definitely a big blow for the eurozone project, even if they manage to keep Greece," said Pieter Cleppe of the Open Europe think-tank.

He said there had not been "permanent damage" to the EU yet as core principles such as the single market were not affected, but added that "there is a danger that this could be undermined".
"Even if disaster is avoided, the Greek episode will have very profound consequences for the EU, in terms of reforms needed," added Nicolas Veron of the Breugel think-tank in Brussels.

"The Greek crisis has revealed that our system of government in the European Union... does not work, is extraordinarily inefficient, incapable of taking a decision within a useful timeframe."
- Geopolitical challenges -

A frantic week of EU meetings in Brussels last week produced no Greek deal, with leaders instead spending six hours at one summit arguing about how to redistribute the hundreds of thousands of migrants fleeing Syria and North Africa.

A senior European official said it was "close to open conflict" on the migrant issue.

That showed Europe at its most dysfunctional at a time when it should be coming together to deal with unprecedented challenges in an unstable world, said Emmanouilidis.
"If you show that you are not even able to deal with your internal problems... that sends the wrong signal in a geopolitical context," he said.

"It's different from 2012 when Greek exit from the euro was last being talked about. When that was happening, the geopolitical situation was not as unstable as it is now with respect to the Middle East, North Africa, the Balkans, Russia, migratory pressure, you name it."

The chaotic situation could also boost eurosceptics such as Nigel Farage of Britain's UK Independence Party and Marine Le Pen of France's National Front, he said.

"Farage and Le Pen, I am sure, have a smile on their faces as they watch this," he added.

On the other hand, the Greek crisis may actually help the EU deal with the threat of losing another member, namely Britain, Jean Dominique Giuliani of the Robert Schuman Foundation told AFP.

Prime Minister David Cameron is demanding reforms to the EU before holding a referendum on whether to leave the bloc by 2017, but made only a brief, low key speech at a summit last week dominated by migration and Greece.

"Cameron seems to be being a bit more prudent. He doesn't want to add to a big problem of internal politics by making demands from his European partners," Giuliani said.