Drama and Chaos

picture: Karl-Ludwig G. Poggemann

As finance ministers sat together at the Ecofin meeting last week, the future of the Eurozone was at stake, with Greek political deadlock casting a shadow of darkness over its own euro existence.

Greek President Karolos Papoulias was going to ask politicians last Tuesday to stand aside and let a technocratic government be formed to avoid bankruptcy of the heavily indebted Balkan country even though radical leftists from Syriza party have already rejected the proposal out of hand.

No wonder Syriza feels so strongly about rejecting anything that could form a technocratic government, when opinion polls show that they could possibly win next elections in June.

The opportunity for the niche party to become a major player by making its way to the hall of fame on the back of the Greek debt disaster is luring. Especially with the notion that the Greek voters already said “No” to the austerity imposed by International Monetary Fund and European Union funding the Greek bailouts in round one in 2010 and round two emergency bailout in March of this year.

Officials in Brussels are still voicing support as Eurogroup Chairman and Prime Minister of Luxembourg Jean Claude Juncker and German Chancellor Angela Merkel both consider Greece’s leeway from the Eurozone to be “nonsense” and “propaganda”.

picture: Karl-Ludwig G. Poggemann

“The government would have to stand by the program,” Juncker said after chairing a meeting of Eurozone finance ministers in Brussels late Monday. “If there are dramatic changes in circumstances, we wouldn’t close ourselves off to a debate over extending the deadlines”, he added.

Adding to the pressure on Greece, the government in Athens must decide today on a €436 million repayment to the bondholders who accepted the Greek debt restructuring plan back in March. If they fail to do so, Greece will default. This time it won’t be a technical default that Fitch ratings declared after the Greek debt restructuring, but a real one.

Put the emphasis on it and use capital letters to say DEFAULT.

The situation in Greece is a real stalemate, a true impasse. Markets may not have much passion for such an uncertainty and soon start to really believe that the Greek default and subsequent Eurozone expulsion, as a result of breaking previous restructuring promises, will cause great harm to the credibility of the European Monetary Union.

Dutch Finance Minister Jan Kees de Jager previously said his government has already studied the option of a Greek departure from the Eurozone although official European policy still is to keep the country within the bloc.

Yet, leaving the Eurozone currently is not a legal option, leaving the European Union has to come along with that.

Unless the German economic engine stops running, the big wheels of patience of political partners and the principle of solidarity of the international community with Greece will still be the norm. Luckily for Europe and especially for Greece, the German powerhouse works very well for the time being, with the gross domestic product (GDP) first-quarter estimate exceeding expectations multifold, growing 0.5% from the previous period, or 1.2% on a year. French GDP in comparison remains flat, and Italian GDP is seen falling by 0.8%.

If the political impasse in Greece continues with political parties involved not willing to find agreement, or finance ministers of the Eurozone lose patience for whatever reason, guess what will follow? Drama and Chaos – two words that Greece gave the world centuries ago.