Sometime in the next twenty four hours, Greece’s future in the Eurozone could be determined. An emergency summit is set to get underway on Monday in Brussels. The single item on the agenda is reaching a deal in the Greek debt crisis. If no revisions are made or agreements reached that appeal to both sides, Greece will default on a 1.6 billion Euro IMF loan at the end of June. Failure to repay the loan might result in Greece withdrawing from the Euro and possibly from the European Union entirely. As of this evening (2023 Hours on the east coast of the US) representatives from all sides are burning the midnight oil in the hopes of reaching a tentative agreement of some sort by tomorrow morning.
The nature of the current situation is spherical. The IMF and European Central Bank (ECB)refuse to release the last 7.2 billion Euro installment of bailout funds to Greece until the nation agrees to introduce economic reforms that the IMF and ECB deem essential. Greece needs the new funds to be able to pay back the earlier bailout. The Greek population is already up in arms over the austerity measures that have already been imposed by Greece’s creditors. Wages and pensions have been slashed dramatically, and the unemployment rate in Greece has reached upwards of 25 percent.
This weekend, Greeks took to the streets to voice their opposition to the austerity measures. In recent days, Greek citizens have also been withdrawing billions of euros. The national banking system is under heavy pressure. Greek Prime Minister Alexis Tsipras came to power on a wave of anti-austerity sentiment. Right now he finds himself walking a tightrope as he tries to reach a compromise with Greece’s creditors and lenders without inflaming the passions of the Greek people further. The survival of his government and his nation as a whole are at stake.
For tomorrow, there are three distinct possibilities:
#1 No deal is reached. Greece defaults on the IMF repayments. The ECB puts a stop to all emergency monetary assistance, resulting in a run on Greek banks, economic chaos in Greece and the possibility of a Greek exit from the euro and EU entirely.
#2 Greece agrees to a last minute agreement with the creditors and remains in the EU.
#3 No deal is reached, but both sides reach a temporary solution in the hopes of resolving the issue permanently at a later time. Greece remains in the EU for now.
The second scenario is the most favorable outcome for all parties. The fact of the matter is that Greece and the EU have been down this road before. The inability of the EU and Greek government to construct a permanent solution to the Greek debt crisis, coupled with the anti-austerity feelings of Greek voters continue to keep the notion of an eventual Greek exit from the EU alive. After tomorrow, hopefully we will have a clearer idea of how this is going to play out.
Happy Father’s Day!
*Note- This weekend’s Defending Poland piece will be posted on Friday. Apologies for missing the self imposed deadline….again :)*