Greece, perhaps at German urging, might decide to leave the eurozone – the group of nations that use the euro as their currency – as early as Friday afternoon.
At least, that’s the current thinking.
Greek officials have submitted a proposal to extend the repayment terms on their most recent European bailout, and Germany appeared to be leaning toward rejecting it. So Greek officials countered that it was a “take it or leave it” proposition.
The European consensus is that if Germany sticks to its guns, Greece will be forced to exit the eurozone, a “Grexit,” as some pundits put it. The departure would likely be destabilizing to the European Union and its currency – but devastating to Greece.
To understand why Europe, which a decade ago seemed to be on the verge of becoming a dominant global economic force, finds itself stumbling now, it’s important to view the impasse from the perspective of the two main players, Greece and Germany.
Greece is the borrower, the troubled country needing a hand to get out of a deep, deep hole. Germany is the strongest European economy, and as such, a primary lender in what’s now seven years of loans and bailouts to Greece.
The view of Athens from Berlin is an unpleasant one: Germans increasingly see the Greeks as leeches, selfish and corrupt. Their country is teetering along the brink of disaster because they refuse to address some rather obvious problems. Bringing Greece into the eurozone was a huge mistake. Greeks don’t pay their taxes. They retire too early and work too little. They’re content to sit in the sun and enjoy a coffee that’s almost certainly financed by hardworking Germans.
The view of Berlin from Athens is no better: Greeks increasingly see Germans as neofascists, intent on economic conquest. In the Greek view, the Germans hoard euro riches without emotion as their cruel financial plans bring ruin and heartbreak to smaller nations. At Greek political rallies, posters showing photos of German Chancellor Angela Merkel altered to depict her in Nazi garb are commonplace. Greek Prime Minister Alexis Tsipras recently told his Parliament that their country had “a moral obligation” to seek Nazi war reparations from Germany.
The two views indicate there’s not much room for negotiation.
Exactly what will happen will be hashed out during an emergency meeting Friday in Brussels of the finance ministers of the 19 nations in the eurozone. Despite the heated rhetoric, it’s possible the ministers will agree to extend the $275 billion Greek bailout by another six months.
The request late Wednesday from Greece for an extension followed a European Central Bank decision to pump an additional 3.3 billion euros, about $3.75 billion, into Greek banks, cash needed to keep the Greek economy alive. One central bank official told the Reuters news agency that financial stability is more important than to “teach Greece some kind of lesson.”
But Iain Begg, a European expert at the London School of Economics and Political Science, said it wasn’t clear that many Europeans didn’t want that lesson taught. At best, Begg said, the Greek proposal is “borrowing time.” Fixing the Greek economy will take much longer than six months and a lot more money.
“Even if you got rid of all the Greek debt, that doesn’t solve the problem of the Greek economy,” he said.
As an example, he noted that Greece is the only European country that doesn’t produce a single household product that Europeans rely on.
“That’s a sign,” he said. “Greek exports are too low. Instead, you’ve got an economy in which improvements in standard of living are based on borrowing. That only works when things are going well.”
But they aren’t, and they haven’t been since 2008, at least.
Former French President Valéry Giscard d’Estaing was quoted in French news stories Thursday saying that Greece and the euro had been a bad match from the beginning.
“The entry of Greece into the euro in 2001 was a clear mistake,” he said. “I was against it at the time.” What’s needed now, he continued, “is what I would call a ‘friendly exit.’ ”
It’s not an uncommon theme, especially in Germany.
Rolf-Dieter Krause, a commentator for German public television, voiced a common German theme during an evening broadcast editorial this week. His point: Greeks want the rest of Europe to support their easy lifestyle. He noted that Greek salaries and pensions aren’t the lowest in Europe, and said the Greek response is a maddening, “Perhaps you can live on that; we can’t.”
“This is the arrogant talking of those who consider it their God-given right to live at the cost of others,” he during Tuesday evening’s news broadcast. “Why should Aldi checkers and elementary school teachers in Germany, people who draw small and medium incomes, have their taxes used to expand Greeks’ overblown civil service? This is what Athens wants.”
It doesn’t take long when watching a German newscast or reading a German newspaper these days to find similar sentiments. German television station ARD noted this week that if Greece gets its way and all debt is forgiven, the cost to Germany will be 60 billion euros – $68 billion – or about $850 for each of Germany’s 80 million residents.
Greeks have objected, meanwhile, to the outside-imposed “austerity” that’s come with the loans from European institutions and banks. They had to trim the government workforce and reduce pensions, moves that the new government, which came to power after elections Jan. 25, said it would immediately reverse. Where the money would come from to pay for the reversal wasn’t clear.
Even so, on Thursday, after the government had asked for an extension of the bailout, Antarsya, a left-leaning political party, reacted by noting, “It’s time to break with the European Union!”
“What happened yesterday proved once again that the EU is the most reactionary, anti-democratic and authoritarian institution in Europe after Nazism,” the party said in a statement. “Blackmail in the EU is not the exception but the rule.”
Arnout Mijs, an expert on the European economy at the Dutch Clingendael Institute research center, said the impasse could be blamed, at least in part, on the new Greek government’s misunderstanding of European politics.
“They remained in domestic election mode when they were supposed to shift to diplomatic mode,” he said.
Mijs said that while referring to Germans as Nazis might attract Greek voters, it didn’t make many friends in Germany. And although Greek voters might applaud at hearing that Italy is in the same boat as Greece regarding debt and its economy, Italian officials have no interest in such overstatements.
“They had natural allies in Europe, but they managed to insult them all,” Mijs said of the Greeks in an email. “What they’re left with now is a Europe looking at them and saying (to quote Margaret Thatcher in a different context): ‘We want our money back.’ ”