Has Germany imposed an impossible deal on Greece?
The Greek debt crisis may appear to have come to resolution on paper, but the reality is that nothing is further from the truth. The terms and conditions imposed upon Greece by Europe are near impossible to satisfy and a deeper, broader crisis is bound to ensue unless dramatic debt forgiveness is enacted.
Greece has been presented with an impossible deal: a EUR 86 bln bailout in exchange for austerity measures that are threatening to tear the country apart from the inside. Such is Greece’s determination to remain part of the common currency area that anti-austerity politicians have agreed to the unthinkable. In fact, Prime Minister Alexis Tsipras has had to radically reshuffle his cabinet to maintain a modicum of support amidst a swelling tidal wave of dissent.
In recent weeks, the Greeks have been placed under tremendous political pressure to bend to a deal that is impossible to satisfy. The former Finance Minister Yanis Varoufakis went as far as to say that all economic reforms being imposed upon Greece have already failed. For many European nations, the idea of a Grexit is a nonstarter. That the Greek Prime Minister was forced to reshuffle his cabinet to replace opponents with proponents of the reforms is an indictment of just how difficult the terms of the bailout deal really are.
Greece is being forced to agree to a near impossible deal which it cannot possibly hope to satisfy given the massive debt-to-GDP ratio, capital flight, historic unemployment levels and complete loss of consumer confidence in the Greek economy. And even with all the concessions made by Greece, it is still not a done deal since European parliaments must vote in favour of the bailout and attendant repayments. Greek banks have been closed for weeks, and customers have only been able to withdraw EUR 60 per day as rigid constraints have been placed on the Greek banking system.
There have been positive developments with the bailout, since a EUR 7 bln European Union-wide emergency fund has been approved as a bridging loan for the country. With debt repayments due to the International Monetary Fund and the European Central Bank, the bridging loan will come in handy. But there is also something else taking root in Europe, and it doesn’t necessarily bode well for Germany. For decades, Germany has either been the beneficiary or the financier in Europe. But what has transpired with the Greek deal has got tongues wagging. The harsh terms and conditions of the bailout deal have caused a loss of credibility for Germany.
Many observers and participants to the talks considered the German position to be too harsh for a country that is finding it increasingly difficult to breathe under such punitive financial constraints. What is clear is that German interests are taking precedence over European unity. However, the Bundestag agreed to another bailout, and Chancellor Angela Merkel reluctantly consented to yet another bailout. There is talk that the European Union of today is not what the European Union of old was intended to be. For many analysts, the antagonist in this drama is Germany which is increasingly eager to sever ties with poorly performing European Union countries which it considers to be a burden on national interests. Time will tell whether the Greeks will be able to make good on their repayments, austerity measures and European Union standing. For now the can has been kicked down the road and the Greeks have had to digest a very bitter pill.