Greece is again on the path to a euro exit, as it needs more money to keep up with its bailout program—money that Germany and the International Monetary Fund (imf) refuse to give.
After a stormy set of elections, Greece has fallen behind in implementing the reforms it committed to in exchange for its €130 billion bailout package. Greece is asking for more time, but the imf has said that the delay will cost it €10 to €50 billion more.
The imf has signaled that it won’t give Greece any extra money, according to an article published by Spiegel Online on July 23. Germany’s top politicians have rejected pleas for extra money with unusual forcefulness. The Süddeutsche Zeitung quoted an anonymous German government official saying that it is “inconceivable that Chancellor Angela Merkel would again ask German Parliament for approval for a third Greece bailout package.”
“What’s emerging is that Greece will probably not be able to fulfill its conditions. If Greece doesn’t fulfill those conditions, then there can be no more payments,” said German Vice Chancellor and leader of the Free Democratic Party (fdp) Philipp Rösler in a television interview. “I think for many experts, for the fdp, for me, that an exit by Greece from the eurozone lost its horror a long time ago.”
German foreign minister and Rösler’s predecessor as vice chancellor, Guido Westerwelle, also rejected any relaxation of Greece’s bailout conditions. “That won’t work, that’s a Rubicon we can’t cross,” he said.
Greek Prime Minister Antonis Samaras blamed the two elections for Greece’s delay in reforming, saying the country was going through a “Great Depression.”
The government was meant to identify €11.5 billion of spending cuts in June, but it’s still short €3.5 billion. Meanwhile, the government sale of assets that was meant to raise €3 billion this year seems set to raise only €300 million. And the government’s revenue is €1.5 billion below its projected level.
Auditors from the imf, European Commission and European Central Bank will soon present a report as to how far behind Greece is and whether it can receive the €31.5 billion it’s scheduled to receive in September as part of its bailout.
If they decide Greece is too far off course and refuse the money, Greece won’t be able to pay its bills.
Meanwhile, Spanish Finance Minister Luis de Guindos will meet with his German counterpart, Wolfgang Schäuble, for crisis talks July 24 as Spain seems set to require a second bailout.
Spain’s interest rate on 10-year government bonds hit 7.59 percent—the highest level since Spain joined the euro. Seven percent interest is considered to be the danger zone, where a nation will soon need a bailout. Two Spanish regions have already requested financial help from the Spanish government. Another four could soon request help.
Once again, Europe is on the brink of a crisis. Once again, it may find some temporary solution to patch things together for a few more months. But these crisis points are coming every few weeks now.
Europe can’t keep going like this. It hasn’t solved its crisis yet. Very soon Europe will be plunged into a financial crisis that will revolutionize the Continent.
For more information on what this change will be, see our article “Europe: Extreme Crises Demand Extreme Solutions.” ▪