Defining endgame approaches - Greek debt crisis

AS our economic recovery continues apace, as we fret over changing our Constitution to allow same-sex marriage and allowing last summer’s minor hurlers challenge for the presidency the crisis around Greek debt and the country’s position in Europe approaches something like an endgame — an endgame that casts an ever-darkening shadow right across Europe.

Reflecting how very close we are to that make-or-break crossroads the euro fell across the board on Tuesday, as details emerged on a European Central Bank proposal to increase the insurance it would demand in return for emergency funding to Greek banks.

Whichever way you look at it things seem more than grim for the people of Greece, a battered population that has endured life-changing cuts to incomes and services over the last few years. And, terribly hard as it may seem, there may be worse ahead.

This morning, two days ahead of a eurogroup meeting in Riga, the people of Greece face the starkest prospects, either defaulting on its debts and a chaotic and crushingly expensive exit from the euro which would pose huge political and financial risks for the rest of Europe. Some investors are certain that Greece will default sparking a much feared Grexit. Fathom, an economic consultancy, has an index measuring market opinion on the probability of that outcome. It has stood at close to 100% for several weeks.

Alternately, the Greeks can accept the consequences of repaying its international creditors even if it means something like unrelenting hardship for at least the medium term. It would also mean imposing real and independently verified reforms on a culture hardly defined by civic obligation. Adding to the idea that the day or reckoning is at hand public sector entities have been ordered to transfer idle cash reserves to the central bank to help alleviate a cash squeeze.

The reasons for this pessimism are dishearteningly familiar. Last February the Greek government promised Brussels that it would introduce game-changing economic reforms but nothing has happened as yet. Once supportive EU finance ministers still await long-promised proposals from Athens privatisations and labour market reform.

Just as seriously but on a different plane neither the eurogroup ministers or fellow lenders the ECB and the IMF have a credible understanding of what is going on in the country any more. Their missions were thrown out of the country long ago so we all have to take Greece’s word for it on the state of their finances. Hardly an ideal situation.

There is too the complication that the determined, idealistic but inexperienced Syriza lack the political nous to work their way through what must be a nightmare situation. That situation must be exacerbated by a growing sense of frustration among European governments with the lack of progress — or real commitment — from the Greek government. The real tragedy is that no matter what happens the people of Greece face a difficult and unenviable situation. It is not too late, however, for some sort of sanity to prevail.

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