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Tough Luck, Greece

So this is my third follow up post on the situation in Greece: you can read my previous blog posts here and there. Earlier today, German chancellor Angela Markel coldly rejected pleading by Alexis Tsipras, the Greek prime minister, and ‘schooled’ him to accelerate his economic overhaul effort in return for cash.

Yesterday, European leaders gathered in Brussels to discuss energy and foreign affairs. In particular, the primary topic of their interest seems to be what they view as the repeated failures by the Greek government to deliver on commitments made in return for bailout funds. As I wrote in my first blog post on this topic, Tsipras had promised EC, ECB, and IMF to submit a list of overhaul measures. Merkel asserts insists Greece to honor the February agreement and stressed the need for it to move as fast as possible.

The rest of the Europe (at least the creditor countries) are basically calling saying tough luck on to Greece. President Hollande of France echoes Merkel’s stubborn stance, asserting “the necessity of Greece to deliver the reforms that are expected of it”. Finland cannot agree more with Merkel as well; its prime minister Alexander Stubb said that Greece had “no chance, absolutely” of getting any further money from Europe unless it first delivered on its February promises.

On the other hand, there are countries like Belgium that hold a grudge about Germany’s bossy attitude. “I am angry”, said Charles Michel, the prime minister of Belgium. “We did not give a mandate to either France or Germany to negotiate.” He believes that all EU members, not just a few powerful countries, should actively participate in mediation with Greece.

At any rate, Professor Smitka was precise in stating that “Germany is trying to bully a brand new government into an agreement”. Right now, Greece is facing a sort of ‘ultimatum’; the country needs to present concrete measures “in the next days”, whatever that may be. We will see how this mayhem goes down in those next few days.



  1. Good overview. Now, are the German demands even feasible (much less politically feasible)? If the multiplier is large (surely greater than one) for a country in deep recession, can Greece possibly trim deficits enough to meet German demands? Or will the economy shrink so much that even “stern” measures won’t deliver results.

    In the meantime, if Germany is itself engaged in austerity, how is Greece supposed to be able to export? They depend on German tourism for a non-trivial share of their income. If Merkel slows her own economy with a predictable drop in tourism, well, is there anything Greece can do?

  2. maguirem15 maguirem15

    “Tax evasion remains endemic in Greece, which has been under its EU/IMF bailout program since 2010, and successive governments have failed to break the grip of special interest groups on the economy.”
    In OECD Urges Greece to Tackle Bribery of Foreign Officials, an article recently published by the New York Times notes that not only does Greece need to meet the measures set by EC, ECB, and IMF, but they also need to find and fight the bribery that is taking place within its borders. The OECD is urging Greece to be more proactive on finding foreign bribery cases, and most of the cases are not found by the Greek authorities.

    • Note that you can insert links in comments using the <a href=”URL”>title</a> tag.

      Now there’s an aphorism “never waste a good crisis” on the ability to use hard times to sneak in policy changes that might not otherwise be feasible. That however does not mean the laundry list of complaints (you mention “special interest groups” and “corruption”) are in any way of macroeconomic significance. Rather, are not Greece’s problems due first to Germany funding a real estate boom, and then refusing to stimulate its economy, and thereby preventing Greece from increasing exports to the rest of the EU (given the weight of the German economy)? So Germany benefitted from the real estate boom and related exports and jobs inside Germany, but is asking Greece to bear all of the costs of adjustment. Merkel then has the nerve to complain about Greece!!

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