Has Ger­many im­posed an im­pos­si­ble deal on Greece?

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.