Grexit? Greece again on the brink as debt crisis threatens break with EU


The Guardian — Bailout negotiations between Athens and its creditors have stalled. The possibility of Grexit, or euro exit, has re-emerged and bond yields have soared. And the shrill rhetoric last seen at the height of the crisis in 2015 has returned.

Analysts are sounding the alarm – an alarm that the embattled prime minister.

As always, time is of the essence.  Athens was told this week that further rescue funds would not be forthcoming until it concluded a compliance review of terms attached to the €86bn  aid package. In July Greece faces debt repayments of €7.4bn, raising the spectre of default because state coffers by then will have run dry.

The impasse has turned into a standoff as creditors demand additional austerity once the current bailout expires, effectively cageing greece into a fourth supervision programme.  Without further reduction of pensions – already cut 12 times since the crisis began – and the tax-free threshold of personal incomes, the International Monetary Fund (IMF) argues, the debt-stricken country will never be able to achieve its agreed fiscal goal of a primary surplus of 3.5% of GDP for ten years after 2018. But it is very doubtful if the levels of surpluses demanded can be achieved at all, even with additional austerity.

In a fiery parliamentary debate late on Wednesday, Tsipras dug in, insisting his two-party coalition – in power with a wafer-thin majority of two – would not cave in to demands that his government has repeatedly called absurd.

Completion of the review is essential to Greece, exiled from international capital markets, for being included in what is left of  the European Central Bank’s 9 March bond-buying programme is  key to the country regaining market access. If the deadline is missed few believe Athens will be able to keep itself afloat without a fourth bailout once the latest loans end.

But what happens next is dependent not only on what happens in Athens. To a great degree events in Europe and Washington will also play a role.

Ahead of Germany’s general election in September, Berlin’s finance minister Wolfgang Schäuble has also raised the stakes with growing criticism of Greece – a tactic that has proved popular with voters who might otherwise support Germany’s far-right AfD party. Earlier this week Bild, the mass-selling newspaper, stoked passions further by suggesting the German government was warming to the idea of Greece leaving the euro – a notion Schäuble has openly supported in the past.

Complicating matters further is the direction the IMF will take now that President Trump is in power. In his former role as a billionaire businessman, Trump tweeted that the Greeks were “wasting time” in the eurozone.

Last week, the IMF delivered its gloomiest assessment yet of Greece’s debt burden, arguing that it was not only unsustainable but eventually likely to become “explosive”. The IMF’s board will formally discuss the issue on 6 February but has already hinted that without a commitment of debt relief from the EU it will be unable to contribute further loans. Germany, the biggest contributor to the nearly €300bn of emergency funds assigned to Greece, insists further aid depends exclusively on IMF participation.

Syriza, like every governing party before it, has been hollowed out by the eviscerating effects of having to apply policies that it came to power vowing to oppose.

The once unassailable popularity of Tsipras has been pummelled by the implementation of some of the harshest measures to date and few believe he has the political capital to enforce another round of austerity.

“It is not a can but a bomb being kicked down the road,” said one western diplomat. “In a world where liberal values are under threat we could be looking at a very dangerous scenario where the cradle of democracy also collapses.”

Bereft of growth and battered by cuts and tax increases, Greeks have become poorer and ever more cognizant of their own insolvency in a state where sovereignty exists in little more than name. One in three now live below the poverty line and unemployment hovers around 23%. The latest impasse has not only seen emigration levels rise and non-repayment of household and business loans soar but also nostalgia for the drachma grow.

According to one of the pollsters, what was once a minority view is changing fast, with the majority of Greeks in a recent survey saying it was wrong to have joined the euro.

“The only reason people want to stay in the euro is because they fear the consequences if we were to leave, but if things don’t get better that will change too” the pollster said.