The Straits Times says

An existential moment for Europe

There's no loss of face in Greek Prime Minister Alexis Tsipras' about-turn in damping his nation's debt crisis. He made the right choice between an immediate chaotic exit from the European Union and staying within its fold - for now.

So far, Mr Tsipras has acted virtuously in promising to do his best to fulfil the requirements of creditors, which include the International Monetary Fund and the European Central Bank. In a show of good faith, he has fired several ministers who voted against the reforms. Thus assuaged, the European Council has approved the bridging loan that will help Athens pay debt instalments that fell due to the IMF and the ECB yesterday. With the default staved off, Greek banks have reopened after three weeks. To secure the larger €86 billion (S$127 billion) bailout sought, Mr Tsipras must now pass major reforms and work with a Cabinet that, like himself, is deeply sceptical about the reforms.

It's not just the prescription but the entire euro project that is being questioned elsewhere, too. As a former Swedish finance minister noted: "It's very difficult to argue today to our population that it's a well-functioning system." Trust and responsibility are among the key pillars of the system. But these have been shaken by, among other factors, the revelation by Mr George Papandreou five years ago that the Cabinet led by his predecessor had cooked the books to claim a healthier fiscal situation than was the case. Critics have cause to ask whether Greece should have been allowed into the EU in the first place.

In calling recently for the creation of a euro zone government, French President Francois Hollande referred to former European Commission president Jacques Delors' concept of a single currency based on "solidarity" as well as "responsibility". His view has drawn immediate criticism but he got the attributes of a common currency right. The clear lesson of the Greek saga is that a national economy is not unlike a business enterprise in that governments, like firms, cannot endlessly spend more than they earn in revenue. When private creditors declined to continue lending, the EU, ECB and IMF kept on feeding Greece until the new Syriza government negated the rescue and reform programme, just as it had begun to show some results.

Erratic and populist behaviour, as exhibited by Mr Tsipras and his team, contributed to the investor and capital flight that brought Athens to its knees. But euro self-examination shouldn't stop there. "Our biggest threat is not too much Europe, but too little," according to Mr Hollande. That is debatable, but is a central question that Europeans need to settle, given the contradictory tugs across the continent. For the rest of the world, a Europe at odds with itself threatens the peace it has enjoyed for decades and the solidarity upon which sustainable economic recovery is based.

A version of this article appeared in the print edition of The Straits Times on July 21, 2015, with the headline 'An existential moment for Europe'. Print Edition | Subscribe