Alexis Tsipras, Angela Merkel, assets, Athens, austerity, bailout, banks, crisis, Croatia, Cyprus, David Cameron, debt, debt swap, default, Dutch, ECB, EU, euro, Europe, Eurostat, eurozone, France, Geramny, Germany, greece, Grexit, Iceland, IMF, Norway, Summit, Switerland, Syriza, Troika, Trojka, Turkey, UK
A Swedish soft rock band named Europe recorded what has since become a 1980s anthem “The Final Countdown”. Thirty years on it haunts us as global investors await the outcome of a showdown with debt-ridden Greece.
It has been a long and winding road, sorry Beatles, with a crisis which in the past five months received more media and social media attention than a televised talent show.
But finally we may be heading for closure. Or at least a fix before it all flares up again in two years. As we read in this morning’s newspapers Germany is at last bowing to pressure as a chorus of countries and key institutions demand debt relief for Greece. Significantly, the European Council has called on both sides to make major concessions, insisting creditor powers do their part.
This Sunday 28 EU leaders will meet to decide whether to “release” Greece from the Eurozone. The much referred to Grexit.
It’s a huge decision and a new provocation it’s never faced. Countries have swarmed to join the rich Europe club, the EU, since the 1950s but none have ever left. Let alone the smaller eurozone currency subset.
The EU has increasingly become a blank cheque book for needy weedy nations. The financial support of richer earlier entrants has become a magnet for “aspirational countries”.
But those still queuing like Croatia and Turkey might pause to consider whether they were blessed to be outside a club which has rules – as well as handouts. Norway and Switzerland have remained wealthy albeit burdened by the attention of safe haven seekers and speculators. And Iceland melted down its indebted banks and started anew since 2009 with positive economic growth to show already.
So if you want to join the EU and eurozone you need to abide by rules. They start with being honest about your finances and pace and direction of reforms. But they also require enforcement by the other members.
Greece decided to delude itself and its European paymasters ever since the 2004 Olympic Games it had hosted. Eurostat accused it of “cooking the books” and Reuters news agency ran the headline. Germany and France, already exceeding their own budget deficits before 2009, were suspiciously quiet about Greece at that time.
So if the donors themselves don’t police you can’t complain about beneficiary Greece!
Of course the hardline German Chancellor Angela Merkel who latterly swept to power sees things differently.
Her claim is that since May 2010 the Trojka of international creditor groups including the IMF, EU, and ECB have provided EUR243bn in bailout loans and much more in bank liquidity. Some of that was due payback in June.
So how about someone telling us where all that cash went? And why should we offer a dime more?
EUR243bn is a huge sum thrown at the Greece problem – without anything to show after over five years! The Greeks protest they can’t pay any of it back. And as I wrote recently the Dutch accept they will never see their money back.
Greek prime minister Alexis Tsipras and even his more ardent Syriza party zealots are not dead set to quit Europe. All they want are handouts on better terms. That’s why with his new finance minister beside him Tsipras is offering a new face and trying today before the Sunday summit deadline to get one last counter offer in to extend bailout credit.
But it’s Europe I blame, not the 1980s music act, for propping up a disaster.
This week I bumped into a colleague who used to be a bureau chief in Athens and still follows Greece closely. Even in his resigned voice it became clear he sees Europe pulling a last-ditch deal together to avert Grexit. How disappointing that actually is.
A rich man’s club is worthless unless you adhere to the rules. Europe will be stronger if it courageously decides this week to release Greece. And long-term it will be better for Greece too.
There should be a process to put Greece in a separate lane in Europe until it has genuinely reformed and re-qualified for re-entry to the Eurozone and EU. And it would serve as a lesson to any other weedy European nation seeking to emulate spendthrift Greece.
The solution is right there staring at Europe. Do the brave right thing.