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Angela Merkel Will Be Responsible For A Greek Exit From The Eurozone
If Greece leaves the eurozone in the coming days, it will be the result of decisions made by German Chancellor Angela Merkel, more than any other institution or leader.
Although Greece has been negotiating with a so-called “troika” of institutional creditors — the International Monetary Fund, the European Central Bank and the European Commission, which represents the eurozone nations — Germany is widely believed to be the creditor whose views are most decisive. The country is the single largest creditor in the series of bailout payments that the troika has provided to Greece since 2010. As such, Germany under Merkel’s leadership has been the lead architect of the loans-for-austerity policy Europe has used to manage the Greek debt crisis.
Germany is also the euro monetary union’s largest economy and, arguably, its most powerful voice on the international stage.
It was no surprise, then, that all eyes have been on Merkel in recent days.
On Monday, Merkel signaled her greatest willingness thus far to accept a Grexit, or a Greek exit from the Eurozone, arguing that it was important to keep Greece in the monetary union, but not at the expense of eurozone standards of fiscal prudence.
“Perhaps we could give them up in the short term, maybe we could say ‘let's just give in for once,'” she said, according to Agence France-Presse, referring to a proposed deal that would accommodate more of Greece's demands.
“But I say: in the medium and long term, this would damage us,” Merkel continued. “It would damage us in that we (Europe) would cease to be relevant in the world, that our unity disappears.”
“If Greece asks for further negotiations, we will not ignore this,” she added.
Greece faces a June 30 deadline for a 1.6 billion-euro debt repayment to the IMF that it needs bailout money to pay. The IMF has said that it will consider any late payment tantamount to default.
On Saturday, after negotiations between Greece and its creditors came to a standstill, Greek Prime Minister Alexis Tsipras announced that his government was calling for a July 5 referendum vote on the latest proposal by its creditors.
In response, the ECB halted its emergency lending to Greek banks, prompting the Greek government to limit bank withdrawals to prevent banks from running out of cash — a procedure known as imposing “capital controls.”
If the ECB declines to restore its lending to Greek banks, Greece could be forced to leave the eurozone, an outcome known as a “Grexit.”
By leaving the door open to further negotiations, Merkel on Monday exhibited her occasional role as the “good cop” in negotiations with Greece, compared with the harder line taken by many ministers in her government. Indeed, she must contend with the criticism of members of her grand-coalition government — in both her own center-right Christian Democratic Union party and the center-left Social Democratic Party — who believe Germany has already been too generous with Greece.
Yet as the long-serving and popular leader of Europe’s largest economy and Greece’s largest creditor, Merkel bears ultimate responsibility for the unyielding negotiating strategy that creditors have employed with Greece thus far, as well as for the austerity policies that led Greece to elect a left-populist government and to attempt to renegotiate the terms of its bailout this past January.
Under Germany’s leadership, the eurozone nations have insisted that Greece make rapid fiscal adjustments in order to pay off its mammoth debts in a timely fashion. Greece claims — and many economists agree — that it will never be able to repay the debt it currently owes the troika of creditors, and that continuing to try to do so is preventing the country from recovering economically. But leaders of the eurozone nations have argued that writing down the debt would mean treating Greece differently than other eurozone nations like Portugal and Ireland that paid off their debts after implementing similar austerity policies.
As such, analysts believe that if Greece leaves the eurozone, history will treat Merkel as the European leader who is most to blame.
Peter Doyle, an economist and former senior manager at the IMF, says that Merkel could have called for a eurozone-wide write-down of debt that would have circumvented the issue of differential treatment for Greece.
“I very much hope that in this whole thing, that Merkel will, for the sake of Europe and reason,” call for greater compromise with Greece, Doyle said in an interview earlier this month.
Other European leaders, including European Commission President Jean-Claude Juncker, indicated after the referendum was announced that the vote would be a decisive vote on Greece’s status in the eurozone.
The prospect of a Greek departure could have long-term implications for the future of the eurozone as a political entity, despite the fact that European leaders have taken steps in recent years to limit the financial fallout of a Grexit.
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Economics professor Nicos Devetoglou argues in HuffPost Greece that it's unwise for the European Union to continue to impose harsh austerity demands on the Greek people.
With its fresh and harsher measures, always reigning intransigently supreme in the foreground, the EU still insists upon more widespread cuts in public expenditure, pensions and wages. Bound, if adopted, to starve the Greek economy into deeper recession due to an already collapsing aggregate demand in the system — exacerbated by a set of yet steeper rates envisaged both in direct and indirect taxation.
Read the full story here.
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Critics of Greek Prime Minister Alexis Tsipras have accused him of showing little willingness to compromise in the talks. “Whenever the ideological, radical people lead the debate it leads to nothing,” European Parliament President Martin Schulz told HuffPost Spain last week, in an apparent reference to Tsipras and his government.
The pointed rhetoric has gone both ways, with Tsipras on Saturday rallying against “authoritarianism and harsh austerity” while calling for a July 5 referendum to decide whether Greece should accept another bailout.
Read more about the controversial prime minister here.
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Nick Robins-Early reports:
Greece failed to meet its deadline to pay 1.6 billion euros it owed to the International Monetary Fund on Tuesday, a development that heightened fears of a Greek exit from the eurozone.
The IMF confirmed Greece missed the deadline in a statement on Tuesday night. It is the first time a developed country misses a payment to the IMF.
Tuesday also marked the end of Greece's years-long bailout program.
Read the full story here.
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Since the breakdown in negotiations between Greece and its international creditors over the country's debts, it has become very difficult to follow the crisis. At almost every moment, a new European leader puts in his two cents.
The Royal Bank of Scotland (RBS) published a memo on June 29 that sums up the different scenarios Greece faces once its residents vote on the proposed bailout plan in a referendum on July 5. The outcome of the vote, the possible resumption of negotiations, the European Central Bank’s (ECB) reactions, a possible exit from the eurozone… It’s all in there.
“If we start with the possibility of a 60/40 vote in favor of ‘yes’ going by recent polls, and assuming that there will not be a return to the Greek exit scenario in the case of a ‘yes’ victory, then we estimate the probability of a Greek exit at 40 percent maximum, against 10 to 20 percent in our previous estimations,” RBS explains in their memo.
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U.S. Treasury Secretary Jack Lew spoke with Greek Prime Minister Alexis Tsipras and other European officials on Monday, urging them to continue negotiating a bailout deal ahead of Greece's July 5 referendum on agreeing to any such deal. But a former senior International Monetary Fund official told The Huffington Post on Tuesday that the United States should have intervened a week ago when the latest talks between Greece and its creditors began to fall apart.
Read the full story here.
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In a blog for HuffPost Greece, Syriza's Manolis Glezos defended the Greek government's decision to call a referendum on the bailout proposal as a triumph of democracy.
In need of democratic expression, the government announced a referendum for July 5th. At a critical time, the government did the obvious: It requested that the Greek people judge the government, give direction to the government, and reward or criticize the government.
…
The Greek people spoke many times during the five years of the memorandum. They bled, they inhaled chemicals, they were faced with violence and mockery from the political personnel that for four decades now has used power in many ways, but never according to the principle “the measure of all money is people.”
Read the full blog here.
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Joseph Stiglitz argues in the WorldPost that the situation in Greece has some important similarities with Argentina's 2001 default — and some differences as well.
In both countries, recessions turned into depressions as a consequence of austerity policies — making the debt even more unsustainable. In both cases, the policies were demanded as a condition for assistance. Both countries had rigid currency arrangements that gave them no possibility for running expansionary monetary policies during the recession. In both countries, the IMF got it wrong, providing alarmingly flawed forecasts of the consequences of the imposed policies. Unemployment and poverty soared, and GDP plummeted. Indeed, there is even a striking similarity in the magnitude of the fall in GDP and the increase in the unemployment rate.
Read Stiglitz argument here.
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From HuffPost France:
Greek Prime Minister Alexis Tsipras’ announcement on Saturday that he plans a referendum on the European Union’s proposed bailout plan has been strongly applauded by the leadership of France's National Front party. While financial markets plunge into disarray as rumblings of a Greek exit from the eurozone grow louder, the party of Marine Le Pen rejoices over this “beautiful democracy lesson” addressed “to the Eurocentric class.”
It's not much of a surprise to see France's extreme-right party supporting the coalition of the Athenian radical left. Despite their ideological differences, the National Front welcomed the victory of Syriza in the Greek elections in January, lauding it as as a “slap in the face” to the euro and the austerity politics of the European Union.
Read the full story here.
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Daniel Marans reports:
But nowhere do expressions of solidarity with Syriza resonate as much as in Spain, where Podemos is seen as a credible threat to the ruling conservative government. While Spain’s austerity policies have won it plaudits from eurozone leaders, they have proven less popular at home. Podemos has taken advantage of dissatisfaction with the country’s high unemployment rate to win mayoral races in Barcelona and Madrid, Spain’s two largest cities. The two wins could portend a victory in general elections later this year.
Read more here.
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Nick Robins-Early writes:
In 2010 and 2012, Greece accepted bailout deals from European creditors totaling hundreds of billions of euros in order to prevent the collapse of the Greek banking system. The funds kept Greece from a potential default that would force it out of the eurozone, but most of the enormous sum of money involved in the bailouts ultimately didn't end up funding public services or directly going to the Greek people.
Instead, as The New York Times reported in 2012, much of the bailout funds went back to the same creditors who gave Greece both the bailouts. This resulted in a situation where the so-called troika of the IMF, European Central Bank and European Commission were effectively lending Greece money so it could pay off the debt it already owed them. As a senior adviser to Germany's Deutsche Bank told the Times then, the troika “is paying themselves.”
Read the full story here.
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The Guardian asked 100 Greeks about their views of the troika, the chaos and whether they want their country to stay in the eurozone. Check it out here.
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Nobel laureate Joseph Stiglitz writes in The WorldPost:
It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe's leaders have not even learned.
Read Stiglitz' full argument here.
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HuffPost France reports:
Greek Prime Minister Alexis Tsipras’ announcement on Saturday that he plans a referendum on the European Union’s proposed bailout plan has been strongly applauded by the leadership of France's National Front party. While financial markets plunge into disarray as rumblings of a Greek exit from the eurozone grow louder, the party of Marine Le Pen rejoices over this “beautiful democracy lesson” addressed “to the Eurocentric class.”
It's not much of a surprise to see France's extreme-right party supporting the coalition of the Athenian radical left. Despite their ideological differences, the National Front welcomed the victory of Syriza in the Greek elections in January, lauding it as as a “slap in the face” to the euro and the austerity politics of the European Union.
Read the full story here.
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A Greek default carries some near-term risks for the U.S., but such a move may actually help Greece broker a deal that with time would lift its depressed economy.
“If they vote yes, it just postpones the day of reckoning,” Mark Weisbrot, co-director of the nonprofit Center for Economic and Policy Research, told HuffPost. “The debt is unsustainable and the austerity is making the debt burden worse by pushing the Greek economy back into recession.”
Read the full story here.
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“Game over. The euro as we know it is coming to an end,” writes Mauro Gillen in HuffPost Spain.
We knew already that the design for the euro was institutionally incomplete. The monetary union launched in 1999 lacked a banking, fiscal, and political union to back it up. But at the very least, we were all expecting the management of the euro crisis to be a bit more competent. It is a pity to realize that European politicians and technocrats have misunderstood the nature of the crisis and taken the wrong measures to overcome it. And thus we come to this bizarre situation in which a member country has established capital controls. It is unprecedented and tragic. The Greek fiasco reveals that the monetary union exists only in the imagination of European citizens, politicians and technocrats. Investors have a very different view.
Read the full blog here.
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An honest leader, who is unwilling to sell the country out in exchange for continuing power, appears — that's how Alex Andreou sees Greek Prime Minister Alexis Tsipras.
Andreou writes in the WorldPost:
It is true that the referendum leaves Greek people with the choice of types of extreme misery. Will it be an externally imposed misery or a self-determined type? But it is utterly unfair to suggest that this is a position to which Syriza has brought us. It is a position to which 40 years of corruption and incompetent government and five years of economically illiterate IMF hegemony have brought us. Faced with the choice of an ever-expanding abyss of austerity, of death by a thousand paper cuts, Tsipras has opted to act as a catalyst and bring things to a quick and decisive end.
Read the full argument here.
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Take a look at some of the most impressive images of the dayA protester bears on her wrist the ”NO” slogan in reference to the forthcoming referendum on bailout conditions set by the country's creditors, during a demonstration in front of the Greek parliament in Athens on June 29, 2015. (ARIS MESSINIS/AFP/Getty Images)An elderly woman, who usually get her pensions at the end of the month, waits outside a closed bank in Athens, Monday, June 29, 2015. (AP Photo/Petros Giannakouris)
A man is silhouetted as he stands behind a representation of the the Greece national flag, as he takes part in a protest held by supporters of the NO vote in the upcoming referendum, in Athens on Monday, June 29, 2015. (AP Photo/Daniel Ochoa de Olza)
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Reuters reports:
WASHINGTON, June 29 (Reuters) – The United States would not want to see Greece exit the euro zone, the State Department said on Monday as the debt-ridden country struggled to reach a deal with its lenders.
State Department spokesman Mark Toner said U.S. Secretary of State John Kerry discussed the Greek debt situation with his German counterpart on the sidelines of Iran nuclear talks in Vienna.
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Pavlos Tsimas, Editor-At-Large for HuffPost Greece, writes: “It is true that in a referendum, the people speak. But they don't say much. Just a “yes” or a “no.” That's why the important part of a referendum isn't the answer. It's the question.”
Read Tsimas' full blog here.
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If Greece leaves the eurozone in the coming days, it will be the result of decisions made by German Chancellor Angela Merkel, more than any other institution or leader.
Daniel Marans reports:
Although Greece has been negotiating with a so-called “troika” of institutional creditors — the International Monetary Fund, the European Central Bank and the European Commission, which represents the eurozone nations — Germany is widely believed to be the creditor whose views are most decisive. The country is the single largest creditor in the series of bailout payments that the troika has provided to Greece since 2010. As such, Germany under Merkel’s leadership has been the lead architect of the loans-for-austerity policy Europe has used to manage the Greek debt crisis.
Germany is also the euro monetary union’s largest economy and, arguably, its most powerful voice on the international stage.
It was no surprise, then, that all eyes have been on Merkel in recent days.
Read the full story here.
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Pierpaolo Barbieri and Dimitris Valatsas argue in the WorldPost that the Greek government and its leader Prime Minister Alexis Tsipras are ultimately responsible for the crisis the country currently faces.
“With people hoarding fuel and raiding supermarkets, Tsipras and team now insist this is all Europe's fault for not offering a better deal. But it is Syriza that has demonstrated nothing but incompetence over the last five months of negotiations,” they write.
Read the full blog here.
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Greece is going to need a lot more than 120 euros to escape its current debt crisis.
But that’s all that three donors had given by Monday morning, a day after a British man named Thom Feeney set up a crowdfunding campaign on the site Indiegogo.
The goal: 1,600,000,000 euros (about .8 billion) — and only eight days left before the unofficial funding campaign closes.
“Why don’t we the people just sort it instead?” Feeney wrote on the site, complaining that the European ministers involved in Greek debt negotiations are “dithering” and “flexing their muscles.” “The European Union is home to 503 million people, if we all just chip in a few Euro then we can get Greece sorted and hopefully get them back on track soon. Easy.”
It’s probably not that simple. Read the full story here.
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Paul Krugman is urging Greeks to vote “no” in a referendum that could determine their country’s future in the European Union.
In a New York Times blog post published Sunday evening, the Nobel Prize-winning economist argued that the July 5 referendum would simply preserve the same dysfunctional austerity regime that has left Greece languishing for five years.
In that case, Krugman said, it would perhaps be better for Greece to leave the euro, reissue the drachma as a currency and simply try to weather the economic tumult that would result.
“Maybe, just maybe, the willingness to leave will inspire a rethink, although probably not,” Krugman wrote. “But even so, devaluation couldn’t create that much more chaos than already exists, and would pave the way for eventual recovery, just as it has in many other times and places.”
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Reuters reports:
For months, the notoriously cautious Merkel has been wrestling with the question of whether to risk a “Grexit” and accept the financial, economic and geopolitical backlash it would surely unleash.
Unlike her finance minister, Wolfgang Schaeuble, who sent abundant signals in recent months that he could accept a euro zone that does not include Greece, Merkel has been determined to avoid such an outcome, according to her closest advisers.
If Greece ends up leaving the euro zone anyway, many in Germany and elsewhere will blame the left-wing government of Greek Prime Minister Alexis Tsipras that came to power in January. It has infuriated its partners with what they have perceived to be an erratic, confrontational stance in the debt talks.
But it will be Merkel, more than any other European leader, who will have to sort through the rubble of a “Grexit” and answer the question of why disaster was not averted.
Read the full story here.
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Professor Ifigenia Kamtsidou argues in HuffPost Greece that the European Union addressed the Greek crisis by implementing measures and decision that overstep the primary federal law and take fundamental liberties and rights away from the Greek people.
“The mirror of Europe is broken and the Greek people are called to look at their reflection in one of the pieces,” she writes. “The participation in the referendum is complicated but maybe it will let us know which fragment can become the basis for the new reflection of the country.”
Read the full story here.
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The specter of a Greek exit from the euro, sometimes called the “Grexit,” has loomed over this year's bailout talks, just as it did in previous years of debt negotiations. There are multiple scenarios that could occur in case of a default. Many economists and financial writers predict that the effects on Europe would be bad, but not nearly as harmful as what would happen within Greece itself.
Read more about the different possible scenarios here.
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Dimitrios Giokas writes in HuffPost Greece that if Greeks would drop the euro in favor of the country's old currency, the drachma, the effects may be hard and painful.
“It's clear that we should not base our hopes on futile and dangerous solutions, such as returning to the drachma,” Giokas argues. “Let us draw up a long-term plan for the next day, that will turn Greece into a modern, well-governed European country with a strong economy and liberated from the chronic pathologies that pester it.”
Read the full analysis here.
