Greek Crisis Still Simmering


The Greek crisis is still far from being solved with Athens struggling to implement the reforms it promised in order to receive the latest round of bailouts from the European Union. So far, Greece has only followed through on 14 out of the 48 reforms needed to receive the €86 billion (us$95 billion) promised in the third bailout agreement made in August. Süddeutsche Zeitung reported on Tuesday that European creditors are planning to delay the October payment of $3.3 billion, with the planned $27.6 billion bailout payment to recapitalize Greece’s banks also in jeopardy.

“There is growing concern in Berlin and among other creditors that reforms are already beginning to slide in Athens,” head of Eurasia Group’s European practice, Mujtaba Rahman, said on Tuesday. “This was expected next year, but the fact it is happening now is an indication of just how challenging the situation remains with Greece.”

The International Monetary Fund (imf), however, is warning that Greece’s EU creditors must also do more. Their officials, who are currently in Greece reviewing progress on the promised reforms, have said the imf would not participate in the bailout unless Greece delivers in implementing the promised reform. But top imf officials have also warned that the eurozone must reduce Greece’s debt burden—effectively forgiving some Greek debt.

“For us to go forward, we want more than a general assurance that the matter will be handled, with enough specific details on how it will be handled to assure the fund that Greece’s debt service will be on a sustainable path,” the imf’s first deputy managing director, David Lipton, said in an interview in Washington, D.C.

He wants more than “a general assurance” for good reason. The conditions of Greece’s 2012 program stated that Greece would need “debt relief and long-term transfers from its European partners.” Greece’s creditors did nothing to follow through on this commitment.

German leaders want the imf involved, while at the same time are dead set against forgiving Greece’s debt. There’s some wiggle room, but they’ll have to do a lot of wiggling to meet both of these conditions.

Greece is back to almost the exact same situation it found itself in at the start of 2015. The economic crisis is still far from being fixed. If anything, the issue has become even more complicated. There’s now more bad faith and mistrust between the eurozone, Greece, Germany and the imf.

Germany’s victory over Greece in the showdown over the summer only brought a temporary reprieve. There are long-term, fundamental causes for the crisis in Greece, and these Band-Aid bailouts solve none of them.

The only way for the eurozone to fix these problems is to create a new political union—to transform the single currency area into a superstate. For more background on why this is the case, and what this superstate will look like, read our article “Why the Euro Is Heading for an Earthshaking Crisis.”