As Another Financial Crisis Looms, Is It Time for Greece to Leave the EU?

Photo by PASOK / CC BY-SA 2.0

Once again, farmers, who have been a symbol of previous protests in Greece have been blockading roads and border controls amid growing signs that they are pivoting towards yet another economic crisis. It was more than seven years ago that the Greek financial crisis first erupted and in keeping with all global debt crises, the solutions have been more austerity, tax increases and yet more bailouts to compound the very problems they claim they are trying to resolve.

Greece has somewhat been overshadowed by events in the UK, with regards to Brexit and in the US with the election of Donald Trump, but the grave situation it now find itself in has never gone away, except from making the usual headlines. Bailout negotiations between Athens and its creditors have predictably stalled again as they always do. In many senses it makes grand theatre as the financial world has previously pretended that the outcome could be a Greek default and ultimately a Grexit.

However, the western geopolitical landscape has changed out of all recognition, particularly in the aftermath of the Brexit vote and bond yields have soared in Greece recently, perhaps suggesting this time that a Grexit is now a distinct possibility. As nervous investors dumped bonds, the yields on two-year Greek government bonds has risen from 6% to 10% in less than two weeks.

The predictable alarm bells are ringing once again as prime minister, Alexis Tsipras was due for talks with Angela Merkel and other European leaders in Malta. There is fear amongst political commentators that things maybe very different this time around and that the governing party, Syriza may also be looking at the option of exiting the EU altogether.

Athens was told this week that further rescue funds would not be forthcoming until it concluded a compliance review of terms attached to their €86bn aid package. In July, Greece faces debt repayments of €7.4bn, raising the spectre of a default as state funds will have run dry by that point in time.

As ever, creditors are demanding yet more austerity once the current bailout expires, including further reductions in pensions, which have been cut 12 times already since the crisis began. They have also demanded that Greece cuts its tax-free threshold for personal income as the IMF farcically suggests it needs to do so to reach an unattainable goal of a primary surplus of 3.5% of GDP from 2018.

Tsipras is insisting that his government would not cave into these IMF demands but time will tell whether this is merely rhetoric to try to placate a parliament over which he has a slender majority. The delays are fuelling the fear of a Grexit like never before amid concerns of US policy under the Trump administration towards Greece and gathering momentum inside Germany that perhaps it is time to let Greece go.

As if to compound the very problem even the IMF are now suggesting that the Greek debt burden is unsustainable and likely to become explosive. It is of course incredulous that it has taken them this long to recognise the blindingly obvious.

When set against the backdrop of endless austerity and tax increases, one in three people now living below the poverty line and official unemployment figures of 23% and the non-repayment of household and business loans souring, the majority of Greeks are now saying they should have never joined the Euro.

From this author’s perspective when a nation has nothing left to lose, then they have nothing left to fear. Greece has essentially arrived at that juncture now and time will tell if this debt crisis will be the straw that breaks the camels back and finally the realisation that they need to let go of this insanity and leave the European Union.

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