ATHENS – With the arrival of inspectors from international lenders in Greece this week to check on the progress of delayed reforms, speculation is growing that the country is inevitably heading toward an exit from the Eurozone of the 17 countries that use the euro as a currency.
New Prime Minister Antonis Samaras’ coalition government is under intense pressure from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that is putting up bailouts to impose more austerity measures and make another $15 billion in cuts.
The report will determine whether Greece will receive fresh loans of 31.5 billion euros ($38.3 billion) by September due under its debt rescue program. Greece does not have enough money to meet a 3.5 billion euro ($4.23 billion) loan payment and is seeking another loan to pay that loan, but lenders are reluctant as the country’s debt, already a staggering $460 billion, is building as austerity measures have worsened a deep recession, created 22.5 percent unemployment, shrunk the economy by 6.7 percent and is closing 1,000 businesses a week as tax revenues have fallen, despite big tax hikes.
The Troika loaned Greece $152 billion in a first series of rescue loans on condition that the government make big pay cuts, tax hikes and slashed pensions, but is withholding a second for $173 billion until more reforms are made, and has warned it could stop the payments unless Greece meets its demands. Already, the IMF said it is likely to stop making loans as soon as September, fueling anxiety that Greece’s exit from the Eurozone and return to the drachma will not be far behind.
Already a leading German lawmaker, Alexander Dobrindt, whose party is aligned with that of Chancellor Angela Merkel, has called for Greeks to be paid in drachmas, while Vice-Chancellor and Economy Minister Philipp Roesler said he doubts Greece can stay in the Eurozone, adding that the “horror” of a potential exit has worn off and no longer frightens EU leaders.
“Unfortunately it is likely that Greece will not be able to fulfill (the Troika’s) requirements. And I say quite clearly, if Greece fails to comply with the requirements that there should be no more payments to Greece,” he said. He added that an end to further international support might prompt the Greeks to conclude “that it is perhaps smarter to leave the Eurozone.”
Samaras is hoping to renegotiate the terms, but German officials say that will not happen. Germany is the biggest contributor to the Greek bailouts. German Foreign Minister Guido Westerwelle told the newspaper Abendblatt that his Free Democratic Party, the junior partner in Merkel’s coalition government, will not agree to any attempts by Greece to overhaul its bailout terms. “That won’t work — that’s a Rubicon we can’t cross,” Westerwelle told the newspaper. “It’s in Greece’s own hands to ensure it stays” in the Euro, he said. Last month, Westerwelle said negotiators might consider giving Greece more time.
The idea of a Eurozone exit was not unanimous, even in Germany. Speaking to Dow Jones Newswires, Norbert Barthle, the most senior conservative member of German parliament’s influential budget committee, said that Greek insolvency “does not mean Greece’s exit from the Eurozone. I see no tendency for Greece to exit the euro,” he added.
Troika inspectors are due on July 24, and are expected to press Greece to make more cuts and reforms. So far, Samaras’ uneasy coalition government led by his New Democracy Conservatives and his partners, the PASOK Socialists and Democratic Left, have been able to agree on only little more than $9 billion, frustrating the lenders.
“If Greece doesn’t fulfill those conditions, then there can be no more payments,” Roesler told broadcaster ARD, adding that he is “very skeptical” Greece can be rescued. Samaras said Greece needs more time to meet fiscal targets and lower its debt to 120 percent of Gross Domestic Product (GDP) by 2020, a goal he said cannot be met. Missing the targets means Greece would need between 10-50 billion euros ($12-$60.5 billion) in another bailout, which the IMF and several unidentified Eurozone countries are not prepared to accept, Der Spiegel said.
(Sources: Kathimerini, Bloomberg, Reuters, AFP)