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Greece Nears Bailout Package, but Default Threat Still Lingers as Germany Demands More Oversight

Posted on the 17 February 2012 by Periscope @periscopepost

Greece nears bailout package, but default threat still lingers as Germany demands more oversight

Sign in Syntagma Square, Athens, on February 12. Photo credit:

Greek officials claim that they have met the demands of the “troika” (the European Commission, the International Monetary Fund, and the European Central Bank), including shaving an additional €325 million off the budget. But whether the expected €130 billion rescue package will be forthcoming remains to be seen – especially as Germany brands Greece a “bottomless pit” and demands more oversight of its finances.

Greece has until March 20 to come up with €14.5 billion to pay off a big bond payment that is coming due; between now and then, it has to convince eurozone finance ministers and the IMF, who are lending Greece the money, that it’s serious about enacting the raft of austerity measures it passed last week. Skepticism is high – Germany’s finance minister, Wolfgang Schaeuble, is demanding greater oversight of Greece’s finances and has even suggested that Greece postpone its April elections to keep the current technocrat government in power for a year and to keep Greece on target with its austerity measures. Still others worry that even if Greece is able to avoid default in the short-term, it’s long-term prospects are dismal: The Greek economy is expected to shrink an additional 7 percent this year, and even the IMF says that even with the bailout, Greece’s debt-to-GDP ratio will be 135 percent in 2020 (other figures put that at 120 percent).

But some are suggesting that a Greek default might not be the financial Armageddon previously thought – so how is this Greek tragedy to end?

As Greek pols are forced to go cap in hand to the troika, Greek pride suffers another humiliation: “Armed robbers broke into a museum at the birthplace of the ancient Olympics on Friday and made off with a haul of treasures.” It’s the second major art heist to hit Greece this year.

Is the euro strong enough to withstand Greek default? Ambrose Evans-Pritchard, writing at The Telegraph, says that Berlin, Helsinki, and other AAA-rated economies are betting that it is – and that’s how they justify trying to push Greece out. Right now, the regime of extreme austerity measures has “tipped the economy into a violent downward spiral”, aided by the Troika’s unreasonable expectations of rapid privatization. Greece is becoming a political victim. Meanwhile, Greek finance minister Evangelos Venizelos struck back at those who he believes want to see Greece exit the euro, claiming that they’re “playing with fire”.

Delaying tactics. Patience with Greece is running out. Helisinki and The Hague “are equally fed up with handing out money and have fewer hang-ups than Germany about playing the part of good Europeans”, and good news out of Italy, Spain, and now, Portugal, may make a Greek default less of a worry, The Economist declared on Monday. “Greece has delayed a messy default, but it will happen eventually.”

Europe is on the long, dark road to recovery. But no one really wants Greece to exit the euro, despite tough talk from Germany and others, The Economist, in a leader appearing in their print edition this week, claimed. And there’s actually some good news emerging from the euro’s story of chronic desperation: Ireland is competitive again, Spain is in the mood for change, Italy is passing pension and labor reforms, and Portugal has recently claimed that it doesn’t need anymore bailout money or time to meet its debts. “Two moods are competing in Europe: the feeling of injustice that set Athens ablaze last weekend, and the gathering sense of progress as governments act to make economies more competitive. The euro’s fate will be determined by which prevails.” Europe now needs political leadership and the courage to make real reform.

“We must do absolutely everything so that there is not a default by Greece, that would be dramatic for Greeks themselves and dramatic for Europeans,” French Prime Minister Francois Fillon said on RTL radio Friday.

What Europe loses if Greece goes. Nikos Chrysoloras, writing for Greek paper Kathimerini in a piece that appeared on The Guardian, argued, “Europe stands to lose as much as Greece itself from an exit of the latter from the eurozone.” If Greece falls, then so too does Cyprus, and “Europe will lose two outposts in the eastern Mediterranean, which have lost none of their significance on the international power chessboard”; moreover, “Greece is also Europe’s first barrier to the tidal waves of illegal immigration originating in Asia. It has lifted the burden for everyone, with very little assistance.” Saving Greece will also prevent its “Balkanisation”, the only logical outcome of “extreme poverty and the inability to import medicines, fuel, and food after a disorderly default.” And, reminded Chrysoloras, Greeks have “fought to defend western ideals and interests in every corner of the world – from the trenches of Europe, to the hills of Korea and the deserts of the Gulf. When Germans fell into the darkness of Nazism, when the empires of old (Belgium, Netherlands, France) surrendered within days, only Greeks and Brits were left standing.”

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