Why the situation in Greece may continue to become increasingly ridiculous
Greece remains mired in its continuing, parallel, fiscal and monetary crises. Many significant variables remain to be dealt with, however, as of late there are “resolutions” in the works. The fact still remains that, at least in terms of external, international perception, this entire situation perpetuates itself in an infinitely close manner approaching sluggish non-activity.
Greece is set to default on its 1.6 billion Euro IMF loan payment by the end of June. It is evident, in some ways, that without more funding Greece will stay in its perpetual state of petty squabbles and infighting.
Dutch Minister of Finance, Jeroen Dijsselbloem made comments recently in the Hague with respect to the Greek debt to GDP ratio and its future sustainability. Theoretically, his statements indicate a desire to reduce this ratio to a targeted 124% of GDP by the year 2020 and below 110% by 2022.
“A manageable debt crisis, as the one that we are currently addressing with the help of our partners, would snowball into an uncontrollable crisis, with great risks for the banking system and financial stability.”
Additionally, over extension in the greater European debt market continues to be a problem. The European Central Bank, inevitably, has serious concerns about the solvency of Greek debt as well as its position within the greater European economic system.
Dutch politician, Andreas Scheuer, recently disparaged lawmakers in Athens for perceived absurdity with respect to efficient economic perspectives independent of political ideology, stating that “They are behaving like clowns sitting in the back of the class room, although they have received explicit warnings from all sides that they might fail to pass to the next grade.”
German Chancellor, Angela Merkel, remains steadfast on this issue. Her position, which appears to be universally committed to solving this absurd situation, unfortunately, becomes increasingly compromised as time goes on, as many of her fellow German conservatives have a burning desire to close off the sputtering loan-bailout spigot.
Greek Prime Minister, Alexis Tsipras, also elucidated his stance on resolving these issues, in favor of both sides, through communication, “In the event we have an honorable agreement, my colleagues and I will undertake the cost of seeing it through, […] In the opposite case, it will be us again that will say the big ‘no’ to a continued catastrophic policy for Greece.”
Certainly one can understand that there are many independent yet interconnected variables at work with respect to this continuing problem. In the long run, it appears as if political conflict may serve to both benefit and harm an eventual resolution.
Malcom Barr, a London-based JP Morgan Chase economist stated on topic of this specific problem, “Greek authorities may depict capital controls or the closure of the Greek banks as unjustly imposed upon them […] We doubt that the ECB will do anything without there being clear political backing.”
It seems apparent that, over time, the Greek government’s capability to manage its own financial situation will continue to wane. The necessity for a stream of funds which does not add piles of extraneous debt to this situation is paramount. The only problem, however, in my opinion lies in the negotiation of such a deal.
With the current, apparent trend, nothing may ever happen and the Greek economy may continue to become increasingly stale and rotten. A sustainable solution may require a slight change in dialectic. This effort toward change must contain a fundamental desire to increase internal Greek autonomy, as permanent slavery to the IMF and ECB solves little.