Why the Greek crisis will continue for the next few years.


Even if it gets a deal up with its creditors, if you think Greece’s problems are going to go away, think again.

At this stage Greece has rejected the EU peace deal with Finance Minister Yanis Varoufakis describing it as “borderline insulting” but the negotiations are continuing.

But as The Economist explains, even if a deal is struck the funds will quickly be swallowed up, not least by those ECB redemptions. Private financing is still not an option which means Greece will be looking at a third bail-out. “Back-of-the-envelope calculations put the sum needed at between €30 billion and €50 billion. Trust between the two sides has evaporated since Syriza’s election, meaning the creditors are likely to demand more onerous terms than they might have done.”

“Any plausible deal at this stage is unlikely to do enough and it’s unlikely to be the end of the matter,” Simon Tilford, deputy director of the Centre for European Reform in London told Bloomberg. “This could just play out again and again.”

Which means this trench warfare will continue for the next two years. Even if Greece muddles through until August, it faces a financing shortfall of at least 25 billion euros through the end of 2016. That’s likely to worsen as the economy slides deeper into recession and tax revenue shrivels.

So who is to blame for this? For sure, Greece has accumulated too much debt. But the euro zone has been guilty of imposing far too much austerity on a battered economy. It’s loaded Greece up with unpayable debt and it has ignored the increasing desperation of ordinary Greeks. Europe’s politicians should not have been surprised that voters looked for a radical alternative in the Syriza party. But then Syriza has not handled this well at all. It has antagonised potential allies and destroyed the trust it needs to secure a better deal for Greece.

All up, what we are seeing now is a tragedy unfolding of epic proportions.


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