Greek tragedy strikes again. European and Greek leaders are at each other’s throats about Greece being on the dole. Again. And that’s got investors all in a tizzy about holding onto Greek debt. Again. So where does this leave the ominous eurozone crisis, which appears to have no end?
Here’s the gist of the problem. The “troika” in charge of Greece’s fate (the European Union, the International Monetary Fund, and the European Central Bank) doesn’t think the austerity measures Greece has in place are enough to keep the country paying its creditors. The Greek government, meanwhile, is pleading for more slack, since, by its estimations, its squeezed population is about to go mad. What follows from there is a lose-lose scenario, not only for Europe and Greece, but for the hobbled global economy. The Wall Street Journal:
“It’s killing us,” says one Greek cabinet minister.
Athens can’t force through another round cuts to pay pensions and social services: “An angry population will take matters into its own hands, the government will collapse and we may end up with political crisis in a near-bankrupt euro-zone country which nobody will know how to control.”
The situation can only get worse, since nobody’s interests align. The Greeks want more time to meet their budget targets without having to make more cuts that would cause more public angst. The Germans, whose opinions arguably matter the most since they have the financial ammo, are already in a huff with German Chancellor Angela Merkel about expanding the eurozone’s bailout fund. More pushback from Greece about meeting its current austerity measures only fuels the fire. The ECB, meanwhile, is struggling to salvage its cherished reputation after vacuuming up billions of dollars in dodgy European sovereign debt, so more slack from its camp is also a tall order. And dinky Finland is making a fuss by demanding collateral for any more cash it forks over to Greece. Of course, normally Finland would be a sideshow in European matters big or small. But the fact that all 17 members of the eurozone have to agree to the terms of Greece’s next bailout (they already agreed to it in principle) before the funds are released makes the country a pretty effective spoiler. If the latest kerfuffle – the negotiations for which are set to resume in 10 days – leads to Greece not receiving its next tranche of bailout money, get ready to revisit the threat of financial meltdown. (As in, remember the market freak-out from a few weeks back?)
Of course, the one interest member countries share is preventing a messy breakup of the eurozone, which would wreck havoc on all their economies. But if pursuing that interest requires 17 leaders to risk political suicide in their home countries, you can bet your euros that economic havoc is sounding more appealing every day.