Another final countdown for Greece

AFTER months of wrangling, recriminations and negotiations Greece has being given its final deadline by Eurozone ministers to pay up or get out.
Following Sunday's referendum, which saw millions of Greeks flock to the polls to vote Oxi, or No, to austerity measures demanded by the Eurozone countries it was clear that the long awaited end was nigh. Tuesday's meeting of Eurozone ministers merely confirmed what the markets had already suspected.
Final deadlines for the Greek government have become something akin to a Rolling Stones farewell tour, we have seen them before and stopped believing the flyers. This time, however, it seems almost certain that the Greeks will have to make some drastic decisions or genuinely risk Grexit.
Following the failure in Tuesday of either side of this ongoing saga to reach a conclusion European Union President, and Prime Minister of Poland, Donald Tusk warned that unless Greek officials presented a genuine and workable proposal to stay in the euro by Friday morning it would face bancruptcy.
The deadline comes ahead of am emergency meeting of all EU leaders On Sunday to discuss the possibility of Greece's exit  from the Eurozone. While this exit may not necessarily mean leaving the EU Sunday's meeting shows how seriously its possible exit from the Eurozone is being seen by member states both in and out of the single currency and its potential for Europe as a whole.
A bankrupt country within the EU would pose a risk for the bloc as a whole,  not just the Eurozone. Greek history shows a country where financial insecurity rapidly turns to domestic insecurity. Riots against austerity measures precipitated the rise of Syriza, yet by the standards of Greece's own reasonably recent history these were mild issues compared to Military Juntas and dictatorships. For European Ministers on Sunday the question of a destabilising financial crisis on one of its members and what it will mean for the security of the bloc as a whole will be a real issue.
German Chancellor Angela Merkel has already made it clear that Greek debt will not be forgiven. As the holder of by far the largest single portion of Greek debt, both as a contributor to European bailouts and domestic loans, Germany may hold the balance of Greece's future. France, which holds the second largest portion, wants a solution, however President Hollande is unlikely to push against the formidable Mrs Merkel too hard on this issue if he feels that the stakes become too much.
A possibility may be for a restructuring of Greek debt alowing for a longer period of repayments at lower levels. The International Monetary Fund has pushed for this form of a solution, having already had its debts defaulted on however this seems to be more focused on the IMF desperately wanting any chance of recouping its losses than supporting Greece.
For now the sword of Damacles hangs perilously over Greece. The thread which holds it is the new Greek Finance Minister Euclid Tsakalotos. Already seen as more willing to negotiate than his predecessor and a safer hand on the economy Mr Tsakalotos' first week will be a trying one.

Time for the final Grexit

Grexit, Grisis, Great news for eurozone; whatever your want to call it the time for a decision on Greece's future is rapidly approaching.
At time of writing there are still some hopes that a deal can be struck, however, even these are slim. The concessions proposed by the Greek government may buy them some time with their creditors but it will only be  a stop gap measure and likely to anger their own electorate.
Having campaigned on a platform of standing up to the European Union, preserving pension rights and combating austerity Greek Prime Minister Alex Tsipras and his ruling Syriza party will find it uncomfortable to explain why they are now making such a dramatic U-turn. On Tuesday it looked questionable whether he would be able to get the support in parliament to follow through on any agreement which included a concession on pensions making the plans even more unrealistic.
While the  proposal to combat Greece's mounting  debt has been greeted with cautious approval by some, including EU President Jean-Claude Juncker, others, including head of the International Monetary Fund Christine Lagarde and European Central Bank President Mario Draghi, are not even this optimistic of a solution.
Greece is hedging its bets on the idea that other eurozone countries will see Grexit as too much of a risk and therefore so long as they put on a good show of trying to compromise they will they will get what they want. Even if a bailout is agreed upon this time though it will only be a temporary measure. Unless Greece dramatically cuts its spending, raises the retirement age and curbs its more excessive tendencies then this will be just one round of a never ending fiscal game between the eurozone nations.
The issue for Germany et al though is  that having shown that they will bend over backwards to keep Greece in the zone they will have lost a key bargaining chip and created an inevitability for any future negotiations.
At this stage it could prove to be a greater risk to actually keep Greece in the eurozone. What critics of this opinion are quick to point out is that the zone was created with the specific concept that once joined it could not be left. To allow for Grexit would therefore create a dilemma for the bloc as member nations face an uncertain future, with any member potentially leaving and avoiding its responsibilities should the going get tough, examples of Spain and Portugal are thrown around considerably with this argument.
Such future exits would undoubtedly be painful and costly for the zone in the short term. If the eurozone is to survive in any format however this will be its only chance. By reducing the number of nations the remaining members will be able to create a more secure sustainable regime likely to increase productivity.
It would also not necessarily mean to collapse of the financial systems of leaving countries and the subsequent decent into anarchy and autocracy which has been predicted. The outflow from a prosperous regenerated eurozone is likely to bleed into these countries through trade and treaties, which with their new found ability to manage their own capital and current accounts more effectively is likely to help boost economies over the long term.
On a practical level the argument that should countries be allowed to leave the eurozone it would create some form of mass exodus must surely if true, which is unlikely, prove a decisive reason why it should be allowed. An economic regime which everyone wants to leave by definition has been proven to have failed and should be discarded in favour of a more effective one.
Without a real threat of exit there is no genuine means by which eurozone members can force others to acquiescence. Any negotiations will therefore prove pointless with a predetermined policy of paying an inevitability. An exit will without any question be painful, the rebuilding costly and many would sufferin the short term  Failing to allow it though would be catastrophic in the long run with the long term effects precipating a global financial crash to make the last decade seem a minor inconvenience.

It's a crisis but not like you think

THE victory of the Syriza party in Greece has led to media reports making it sound as though we are on track for a Mad Max distopia.

In the short term the support for the anti-austerity platform it campaigned on has already seen fluctuations in the money markets. This is only to be expected though. The thought that the eurozone may be forced to write off €240bn is not a pleasant one, least of all for Germany which has the most to lose.

Statements by newly elected representatives of the party that the debt is unrealistic and should be wiped fail to explain why the country a) needed the loan in the first place and b) why it was issued if it could not be repaid. 

The easy answers are that accumulated mismanagement of fiscal policies led to Greece's collapse and that the debt can be repaid but only through lengthy and painful austerity measures. 

Euclid Tsakalotos', Syriza's economic spokesman, declaration that "nobody believes that the Greek debt is sustainable,"  failed to add the addendum which will have gone through the minds of European Central Bank policy makers. It is only unsustainable if Greece does not radically change its attitude to spending.

A comparison can be drawn by an individual maxing out credit cards, overdrafts and getting into arrears in the mortgage. While they may not be able to pay off the full amount in one go they can look at restructuring the debt, cutting back expenses and paying it off gradually. If they decide not to do this and take out more debt to buy a new television and computers for the kids then the debt is going to be unsustainable.

The key difference, other than the obvious size of the debt, is that it is harder to repossess the Parthenon than somebody's car.

Mr Tsakalotos seems to have forgotten that the €240bn was a loan, not a handout. While he may be correct in thinking that economists would agree that the debt is unsustainable it is only this way because Greek authorities have allowed it to become so.

His belief that the rest of the Eurozone will cave in the face of economic uncertainty, rather than risk a possible, albeit unlikely, exit from the bloc, is a very large gamble to take. Germany has already signalled that it is likely to call Greece's bluff. 

This could be disastrous in the short term as the euro suffers but it would not necessarily mean the end of the eurozone though. In a very simplistic explanation as the euro devalues it will make it cheaper for countries, such as America and the UK, to buy products from the member countries. This in turn increases the amount of foreign capital entering the country and thus begins the long road back to stability and prosperity. The fundamental issue is whether the bloc has sufficient resources to prop itself up in the meantime.

This may well be a risk worth taking though as one of the alternatives is that Syriza gets exactly what it wants. This in turn would provide a boost to other anti-austerity and anti-EU parties, a risky business for the long term survival of the European Union as a whole not just the euro.