One of the ironies of the Greek predicament is that thanks to the previous Greek government the state deficit there reached low levels, beneath the EU ceiling and considerably better than some of the countries judging the Greek response. Unfortunately for Greece the election of a higher spending government coincides with the need to repay debts and to recognise that a low deficit was reached only after the most massive build up of debt which is now difficult to afford.
In the Eurozone France, Portugal and Spain are unable to get their state deficits down to the 3% maximum permitted, though they are more hawkish over what to do about Greece. Germany has eliminated her deficit, just as many wish she would spend and borrow more to reduce her surplus and provide some stimulus to other parts of the zone.
The so called negotiations are bizarre. Greece says she does not want any more debt and wishes to make her own decisions about social and economic policy. The troika, renamed the “institutions”, remind Greece that she is borrowing more and needs permission to do that under the Euro scheme. The price of more borrowing, to repay old debts and pay local bills, must be that Greece accepts the reform agenda of the Eurozone. Greece responds that she will not follow Euro austerity policies, labour market reforms and the rest which Syriza sees as damaging to the Greek chances of growing again.
The European Central Bank wishes to stop Greek commercial banks buying Greek government bonds and demanding financing from the ECB to help them do so and to pay for the deposits that are being withdrawn. The institutions want the ECB to go on financing Greece – or allowing Greece to finance herself by selling more Treasury bills – whilst they see if they can broker an agreement.
The troika briefs that they can live with Greece leaving the Euro if she will not accept the old medicine of the zone and the loan agreements. Few believe them. The Greek government briefs that they do not need new loans and are planning to do only what they want to do, which is mainly to spend more. Few believe them.
The truth is the two sides are locked in an acrimonious marriage where neither seem to believe in divorce. Both think they need each other, whilst disliking each other and telling the outside world they are just fine leading their own lives and having separate bedrooms.
How much longer can this go on? How much more damage will this scheme do? All the time the two sides bicker, half of all Greek young people remain out of work. None of it is a great advert for people to take a holiday in Athens this summer.