Americans were blithely celebrating President’s Day, members of the
Eurogroup were meeting in Brussels as part of a last-ditch attempt
to keep Greece’s economy from collapsing.
Wall Street Journal:
Negotiations over how to keep Greece afloat broke down abruptly
Monday, demonstrating a wide gulf between Athens and its European
creditors and triggering a new, heightened state of uncertainty
about the country’s future inside the currency bloc.
This week has long been circled on the calendar as the deadline
by which Greek representatives need to agree to abide by the
conditions of the Eurozone’s previous bailout packages, or else
lose the financing on which the country’s banks have come to rely.
No agreement will likely mean a sovereign default by Greece. If the
country can’t pay its debts, it will be forced to “Grexit,” or
leave the Euro and revert to a currency of its own.
You might be wondering: Why, if the Greeks need financing from
European creditors, did the talks fall apart? Greece’s newly
elected Prime Minister, Alexis Tsipras, and his far-left
Syriza Party just came to power in January. They say that the
“strict austerity” the bailouts imposed has driven the
Mediterranean nation into a recession–turned–humanitarian crisis
and are doggedly refusing to implement them going forward.
Per a recap from
The EU and the International Monetary Fund bailed Greece out in
2010, and then again in 2012 to the tune of some 240 billion euros,
plus a debt write-down worth more than 100 billion euros ($113
In return for the bailouts, the then centre-right Greek
government agreed to a series of stinging austerity measures, and
the much-resented oversight by the EU, IMF and European Central
Tsipras won elections last month on promises to ditch the
programme, which he said had wrecked the economy and sent the
jobless rate soaring.
European leaders, led by German Chancellor Angela Merkel,
are insisting that Greece implement the austerity measures (laying
off a large number of public sector employees and dramatically
reducing government spending, for example) as promised. But Tsipras
is claiming he has an electoral mandate to re-negotiate those
conditions. He campaigned (and won handily) on promises to roll
back his predecessors’ policy pledges, which are wildly unpopular
among the Greek people.
Tsipras seems to be betting that Germany and the others will
capitulate out of fear of the damage a Greek exit would probably
cause to the Euro—a sort of international Too Big to Fail situation
threatening to plunge the global economy back into crisis.
Eurozone leaders insist a deal needs to be reached this week to
avert disaster. At this point, it’s anyone’s guess whether that
will happen, and if so, which side is more likely to give in.