Long drawn out Greek tragedy?
All eyes are on Brussels this week as we await the outcome of negotiations over Greece’s future in the EU.
All eyes are on Brussels this week as we await the outcome of negotiations over Greece’s future in the EU. Policymakers are trying to keep the mood music upbeat, with the Greek Government presenting a ‘workable’ plan to pay back 1 billion euros by the end of this month. One of the big issues is the national politics of key EU nations involved. The Greek Government is between a rock and hard place on how it actually raises the money, with levies or tax rises the most logical solution. But the politically-charged atmosphere makes this a dangerous option, especially given the Syriza administration won the last election on an anti-austerity message. Meanwhile, the German government, the key architect of keeping the EU together, is facing its own internal demands not to be too lenient towards Greece or some Cabinet members even calling for Greece to be forced out.
The Greek Government is also looking to halt a run on the banks. There is speculation it will stop or limit bank withdrawals this week. This is the biggest signal yet that that monetary union has failed in Greece, and something which may undermine any good news from the negotiations. Some economists feel this is the first step of Greece’s economy being quarantined and its eventual exit from the Eurozone. Meanwhile, the weekend papers reveal Whitehall is already making preparations for the ‘Grexit’. What has been quite telling in the reaction of the markets. Or in this case the lack of reaction. Although their is no denying a Grexit would have an negative impact upon growth in EU nations. What many economists now believe is that it wouldn't kill growth like it could have done in 2012 and the euro-economy is better place for Greece leaving the EU. One of the biggest factors being that European Central Bank and the International Monetary Fund bought up vast amount of Goverment bonds, transferring risk from private to public sector. However, all this fails to point the potential cost or need of humantarian aid is Greece's economy does fail.
The seriousness of this issue is stealing the limelight from Cameron’s plans to present his demands for renegotiation later this week at the EU Summit. The Sunday Times insisted that the PM has limited his demands to four areas: curbs on migrant benefits; an exemption from the principle of "ever-closer union"; more powers for national parliaments; and protections for countries outside the euro. With the Eurozone facing its biggest crisis, the timing of Cameron’s announcement may seem a little churlish to the people he is trying to win over.