The Greek conundrum

 
Lightning illuminates the ancient Parthenon temple on top of the Acropolis hill in Athens on 14 October 2012

They are closing in on agreement. That is the word from Athens.

After three months of talking between the Greek government and inspectors from the IMF [International Monetary Fund], the EU and the ECB [European Central Bank], they have narrowed the differences over the savings Greece must make in order to qualify for the next tranche of money.

The mood music from the politicians has been positive. The Greeks, we are told in Brussels, are this time serious about reform.

The German chancellor signals her support for Greece by flying to Athens.

German Finance Minister Wolfgang Schaeuble is more explicit. He does not think there will be a Greek default: "We do not see that there is any sense to speculate on Greece leaving the euro, that would be very damaging for Greece and the euro."

Most of the summer talk about Greece leaving the euro has evaporated.

But here is the problem. The Greek government and the troika are still arguing over the figures, although they are close.

The main problem is that once again, the depth of the Greek recession has been underestimated. Tax revenues are down and the shrinking economy undermines projections.

Even so, heads of government this week at a summit in Brussels may well end up discussing a new deal for Greece if the talks in Athens succeed.

Almost certainly Greece will be given two more years to meet its commitments. The IMF backs this and so do most of the eurozone finance ministers.

More time, as Mr Schaeuble pointed out, means more money. Perhaps 20bn euros (£16bn). Perhaps more. That will have to be found. Even so, that is the easier part.

Hard choices

The strategy was for Greece to bring its debt-to-GDP ratio down to 120% by 2020. That clearly will not happen.

The IMF predicts a ratio next year of 182%. By 2020, the IMF believes they might get the figure down to 140%. The European Commission is a touch more optimistic.

What all this means is that the current plan is not sustainable. It is not working.

The Greek economy, with a few exceptions, is in free fall. Sooner rather than later, a cold choice will have to be made.

Will there be a restructuring of debt (with this time national governments and the ECB taking losses), or will there be a third bailout, or will the politicians accept the medicine is not working?

The pervading sense of unreality was broken this week by Swedish Finance Minister Anders Borg who was quoted as saying: "It is most probable they [the Greeks] will leave."

That may or may not be true, but a Greek exit cannot be said to be off the table until the key question has been answered: How will the Greek debt mountain be reduced?

 
Gavin Hewitt, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    0

    Comment number 98.

    91 Lucy

    "It is exciting hearing the reports from America's Mars Rover Curiosity
    which is worth more than any amount of money :)Go USA!!!

    I hope it will prove more productive than this endeavour:

    "Can a stealth airship finally capture definitive video evidence of Bigfoot? U.S. team to take to the skies over California in attempt to track down the elusive creature"
    DMail Science

  • rate this
    +1

    Comment number 97.

    Marg: in 2000 years of recorded history we Europeans have never exterminated a whole people

    What about what German Nazis tried to do to Jewish folk?

    Some Europeans may not remember history of WWII but Americans like me sure do

    My German American Illinois farmer grandfather was a pilot against Nazis in WWII

    Today his memorbilia (+many others) is in D-Day Museum in New Orleans

  • rate this
    -1

    Comment number 96.

    93.
    powermeerkat
    "[How soon they forget who defeated Soviet Union without firing a shot]"
    They haven't forgotten, Europeans have an ingrained perverted pleasure for suffering. So don't expect them to thank you for saving them from 5 mile bread queues because they'll never forgive you first.

  • rate this
    -2

    Comment number 95.

    #88 austriacus

    Kane was the one who called the 3 tortured Kenya citizens ´GOLD DIGGERS´

    -- but Greece and Greeks not !

    -- he cannot be taken seriously.

  • rate this
    0

    Comment number 94.

    @87
    "Denmark and Sweden violating de facto Schengen Agreement"

    Schengen incorporates the ideal of freedom of international travel, and they believe that going back to a national perspective is better for their population. "Shutting those criminals out".

    Fear of the unknown is a mighty motivator.

    If they do not like Schengen, they should cancel their membership,
    that is easy, no questions asked.

  • rate this
    +1

    Comment number 93.

    QOT to PM :you should have stayed at home --for all the benefit even that appears to have brought.
    +++


    If I had, you wouldn't be able to post here freely, and in English today, but forced to do that in Russian, if KGB gen. Putin had allowed you, in the 1st place, comrade.



    [How soon they forget who defeated Soviet Union without firing a shot]

  • rate this
    +1

    Comment number 92.

    88.
    austriacus
    "Saw Your comments on the other blog"
    As I said, I saw it for what it was, a bit of a caper. Just because I didn't wax lyrical about the event it doesn't mean necessarily don't have it in the correct context. It was all about self promotion. If you say I can't take it for what it was, then I'd be surprised and ask you exactly what you took exception too.

  • rate this
    0

    Comment number 91.

    Pmk: For people having any freedom always vote with their feet

    Lets just hope they aren't like the aliens in the movie Aliens
    (Sigourney Weaver)
    or Predator (Arnold Swarzeneggar) for that matter!

    It is exciting hearing the reports from America's Mars Rover Curiosity
    which is worth more than any amount of money :)

    Go USA!!!

  • rate this
    -1

    Comment number 90.

    #86 TGO

    --others have it somewhere else --but they all have it.

  • rate this
    -1

    Comment number 89.

    71

    You could also have mentioned that in 2000 years of recorded history we Europeans have never exterminated a whole people which America managed in 200 years.

    Not to mention the millions of African slaves who toiled to make America rich and who still live in abject poverty in many parts of that country.

    As for illegal immigrants - by rights aren't most Americans illegal immigrants?

  • rate this
    -1

    Comment number 88.

    @83
    "Not quite sure how you arrive at that conclusion, suggest you're attending the oaktree school of reasoning"

    Saw Your comments on the other blog

  • rate this
    +1

    Comment number 87.

    78.ComradeOgilvy
    76.pmk

    "How many millions of llegals you have to take care of in Austria?"
    The Europeans understand the futility/stupidity of policing huge borders between friendly nations. They have effectively legalised rather than ostracised.
    Schengen is one of the reasons for the EU getting the Peace Prize.
    +++

    Denmark and Sweden violating de facto Schengen Agreement.

    WHY??!

  • rate this
    +2

    Comment number 86.

    I would support giving Greece more money, but I have this nasty bite mark on my hand...

  • rate this
    -1

    Comment number 85.

    pmk

    " with little or no experience when comparing societies you have never visited or attempted to understand.

    pmk Please, name uninhabitable areas in the United States ?

    -- you should have stayed at home --for all the benefit even that appears to have brought.

    pmk-- The only countries I've never visited: Bhutan (next year's project), Brunei, Central Africa, Mauretania, Mali, Niger, Zimbabwe.

  • rate this
    +1

    Comment number 84.

    @76
    "How many millions of llegals you have to take care of in Austria?"

    It is tens of thousands rather than millions. And it would be considerably less if the Greek-Turkish border was controlled more intensively.

    Last week a Turkish boy was found on his own in Vienna. His parents had abandoned him there. Tragic.
    We have 3 to 5 similar cases ( abandoned children ) per week.

  • rate this
    -3

    Comment number 83.

    77.
    austriacus
    2 Minutes ago
    " And You are one of those who cannot take Baumgartner's jump as what it was:"
    Not quite sure how you arrive at that conclusion, suggest you're attending the oaktree school of reasoning.
    I see it for what it is, a bit of a caper and not much else.

    "most people watching enjoyed it."
    I'm sure they did but they knew what they were tuning in for and got no surprises.

  • rate this
    -1

    Comment number 82.

    I hope those pesky aliens didn't bring it to America:

    The Armageddon virus: Why experts fear a disease that leaps from animals to humans could devastate mankind in the next five years

    http://www.dailymail.co.uk/sciencetech/article-2217774

  • rate this
    +1

    Comment number 81.

    75.kane
    71 austriacus

    "on the other hand we have never sprayed "agent orange".
    [a defoliant]
    ++++
    However mustard gas? Gas chambers?

    Forget Cyclon B, kane, and 6 million victims of Germanic civilization.
    How do you think sarin and soman got their names?

    Perhaps austriacus, not born yesterday, can remind you.

    [II Front moving too fast for A-bomb to be used against Germans.]

  • rate this
    0

    Comment number 80.

    Pmk: [How can we advise Europeans to take steps we (or at least Obama) are not willing to take?]

    Because we are not all Obama
    even if he is our current President

    Thing is any country who is in Eurozone owns this debt
    It doesn't matter if they use the Euro or not

    Everyone is trying to make this a Greece or Italy or Spain problem
    Its not

    Its a Eurozone problem

  • rate this
    -2

    Comment number 79.

 

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