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

Europe: All change on Iraq

Europe's leaders drop their earlier assessment that the crisis in Iraq is principally a humanitarian issue.

Read full article

More on This Story

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    -1

    Comment number 118.

    113.
    quietoaktree
    #108 kane
    "--better than working for a living and paying taxes ?"
    Did you see how many Mau Mau were celebrating and dancing at the good news of the 3. It gives the phrase 'hangers on' a whole new meaning.


    I think Greece should leave the Euro and Germany wipe it's debt clean.

  • rate this
    0

    Comment number 117.

    @111 ONE bad misjudgement??? What about awarding it to Le Duc Tho, for instance?

  • rate this
    0

    Comment number 116.

    111.
    margaret howard
    "But one bad misjudgement doesn't invalidate the prestige of the prize."
    So if awarding President Obama the Nobel Peace Prize was the only mistake the committee have made, in your opinion, it thus follows that you think that the nominating of Hitler in 1939 by the same committee was not a mistake.

  • rate this
    -1

    Comment number 115.

    “That we henceforth be no more children, tossed to and fro, and carried about with every wind of doctrine, by the sleight of man, and cunning craftiness, whereby they lie in wait to deceive.” Not long and the truth will be revealed. For your information Google The World Monetary Order to Come.

  • rate this
    +1

    Comment number 114.

    mh: "How many are there in America to the murderd indigenous population? "

    You're of course of-topic but I'll answer with a question:

    What did the the English, Spaniards and Portugues did to much earlier immigrants inhabiting future Argentina, Barbados, Bolivia, Brazil, Canada, Chile, Colombia, Cuba, Haiti, Jamaica, Mexico, Peru, US, Venezuela?

    Can you answer just for once and explain?

  • rate this
    +1

    Comment number 113.

    #108 kane

    "If Germany just paid war reparations to Greece that it owed, Greece could pay it's national debt and have 100s of billions left over."

    --better than working for a living and paying taxes ?

    -- those problems still have to be solved --or the Greeks will look for another excuse.

  • rate this
    +1

    Comment number 112.

    Marg, there's not many memorials put up by the conquering Saxons for our native Celts around the UK.
    You're arguments are often so obscure, no way can the holocaust compare to any other crime in history.

  • rate this
    -2

    Comment number 111.

    cont

    "Noble Peace Prize lost its credibility when they gave it to Obama 2 weeks after he was elected like taking political sides"

    The Nobel cttee were as relieved as we all were to survive the Bush presidency without a nuclear holocaust and were premature. We indulged in the triumph of hope over experience.

    But one bad misjudgement doesn't invalidate the prestige of the prize.

  • rate this
    -1

    Comment number 110.

    Marg: There are thousands of memorials to the people murdered by the Nazis right across Europe

    Yet you forgot

    Pmk: genetical (DNA) analysis proves beyond any doubt that so called Native Americans were de facto 1st refugees from the future Soviet Union

    At what point do immigrants become natives?

  • rate this
    -1

    Comment number 109.

    99.austriacus
    @93
    "How soon they forget who defeated Soviet Union without firing a shot"

    Oh, we recall that You were there ( большое спасибо)

    But, would a secret agent talk about his successes, even years after?
    +++


    Of course he/she wouldn't.

    Now, about Austria pretenting for ever it didn't know about the Grand Game going on in its terrritory between 1949 & 89...:-)

  • rate this
    -3

    Comment number 108.

    107.
    Lorentz
    "would it be possible for Greece to get to this percentage from 182%, 140% or whatever"
    If Germany just paid war reparations to Greece that it owed, Greece could pay it's national debt and have 100s of billions left over.

    "The actual target is no more than 60% of GDP"
    All Germany owe Greece is about 15% of German GDP.

  • rate this
    +1

    Comment number 107.

    The actual target is no more than 60% of GDP - would it be possible for Greece to get to this percentage from 182%, 140% or whatever, without the Governments, ECB, and the IMF taking a write down?

  • rate this
    0

    Comment number 106.

    97 Lucy


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

    There are thousands of memorials to the people murdered by the Nazis right across Europe.

    How many are there in America to the murderd indigenous population? And how many memorials acknowledging the contributions made by Africans in the forging of a new nation?










    There are

  • rate this
    -1

    Comment number 105.

    #104 pmk

    "Moving to to US from NE Syberia taking advantage of the fact that ca 15 thousand years ago there were no US border patrols, nor Customs Offices in Alaska."

    --Russian control was not racist ---even then.

  • rate this
    -1

    Comment number 104.

    91.LucyJ

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


    Lucy, genetical (DNA) analysis proves beyond any doubt that so called Native Americans were de facto 1st refugees from the future Soviet Union.

    Moving to to US from NE Syberia taking advantage of the fact that ca 15 thousand years ago there were no US border patrols, nor Customs Offices in Alaska.

  • rate this
    +2

    Comment number 103.

    Most wish that Greece leave EU, but I don't think the EU officials, US, & China will allow that to happen. In addition to the EU's living up to the Nobel Peace prize, they all are afraid of the domino effect for the global economy, esp with the current slowing growth in China, unending economy crisis in EU, slow recovery & fiscal cliff in US. http://www.chasingruins.com/

  • Comment number 102.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +4

    Comment number 101.

    Comrade: Schengen is one of the reasons for the EU getting the Peace Prize

    What about European leaders who want to boost themselves up politically?

    To me, Noble Peace Prize kinda lost its credibility when they gave the award to Obama 2 weeks after he was elected like taking political sides

    Its almost like the Nobel Peace Prize is more about politics now than anything

  • Comment number 100.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    0

    Comment number 99.

    @93
    "How soon they forget who defeated Soviet Union without firing a shot"

    Oh, we recall that You were there ( большое спасибо)

    But, would a secret agent talk about his successes, even years after?

 

Page 12 of 17

 

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.