Monday, July 23, 2012

Is Germany about Ready to Kick Greece Out of the Eurozone?

Brad Plumer at WaPo thinks so. He writes:
Greece’s problems look severe. To date, the country has received pledges of €240 billion ($291 billion) in rescue aid from the European Community, the European Central Bank and the International Monetary Fund. In return for that assistance, however, Greece was supposed to whittle its debts down to 120 percent of GDP by 2020.
It’s not clear what the rationale behind this exact target was. At the time it was proposed, many economists called it arbitrary and unrealistic. Greece is already trapped in one of the worst depressions in modern history. The government is under intense public pressure to ease up on the  €12 billion in planned tax hikes and spending cuts in 2012. What are the odds it will meet this goal?
Yet IMF and European officials declared the 120 percent target sacrosanct. And it could prove fatal for Greece. Over the weekend, Der Spiegel quoted a few anonymous E.U. officials who agreed that there was no way Greece would make its debt goals. In that case, the Greek government will likely need another €10 billion or €50 billion of aid just to stay afloat. But according to Der Spiegel, neither Germany nor the IMF appear willing to extend more aid. Here’s one quote:
The Süddeutsche Zeitung cited an unnamed German government source as saying it was “inconceivable that Chancellor Angela Merkel would again ask German parliament for approval for a third Greece bailout package.”
And here’s a quote from Germany’s economic minister (who’s also vice-chancellor under Angela Merkel):
Meanwhile, German Economy Minister Philipp Rösler said on Sunday he was “more than skeptical” that Greece’s reform efforts will succeed. “If Greece no longer meets its requirements there can be no further payments,” he said in an interview with German public broadcaster ARD. “For me, a Greek exit has long since lost its horrors.”
The IMF and euro zone will make a decision on further aid in August, but does this sound like a country that wants to make things work? Some German newspapers are rejoicing at the latest hard line. Here’s the Bild: “At last! This signal was overdue. Greece is neither able nor willing to solve its problems.”
If Greece is kicked out of the EZ, it could be the best thing that could happen to it. It could default on its debt. Start out fresh with a new sound currency and eliminate the various government spending programs that caused the financial crisis in the first place.

Instead, what Greek leaders would likely do is default on the debt BUT create a new currency that they can print, more and more of, to support government spending programs that caused the financial crisis in the first place---until hyper-inflation hits the country.


  1. Haven't we seen this before? Supposedly reliable sources say the Germans have had it with Greece and there will be no more accomadation. Then there is yet another emergency E.U. summit and Germany bends over and takes it again. All the German politicians want is what every politician wants - to keep kicking the can down the road to get past the next election cycle.

  2. But what about the extreme nationalists who will come to power by blaming Greece's troubles on foreigners?

    Those nationalists won't be able to come to power without promising favors and handouts for the usual suspects, esp. given powerful leftwing elements in Greece. So maybe Greece gets a dictator. Eventually the dictator, possibly a leftist, is pushed to settle some old scores with the Turks. The Turks, in turn, petition America for protection while hinting that Turkey need not be so friendly to the American military. And oh, by the way, America, the commies are much too influential in Greek politicss again.

    Probably some influential people in America or the UK are wily enough to see all of this coming, and so they get the American and British governments to lean on the Germans to eat another bailout. Perhaps French socialists will pile on. Bleeding hearts in Germany will be thrilled, but German nationalists cry foul at the galling crime the Germans are made to endure for the benefit of the incorrigibly childish Greeks.

    1. Paul T. are you seriously basing your analysis on a ridiculous premise that Greek will in any shape or form attack Turkey? That is akin to building an analysis around the fact Cuba will invade the United States.

      Yes if kicked out of the Euro Greece might go far right wing, yes it might also end up the other way around and they get a leftist dictator. But the fantasy that it will get aggressive with a neighbor that is vastly superior to it is rather ridiculous.

      If the Turkish President ever called the American President and asked for him due to a Greek military aggression, I think the American President might pass out from laughing assuming it was an april fools joke.