Reports on negotiations going on with the new Greek government typically put them in one corner looking for concessions and Germany in the other, saying no. Of course Germany has a key position, as the euro zone’s biggest nation and its chief paymaster. Nothing will be agreed unless Berlin gives the nod. But part of the complication in what we are watching from the outside is that there are now 19 euro zone countries and for a range of reasons most of the others are also slow to offer concessions to Athens.
Some have obvious political concerns. The Spanish, Portuguese and Irish governments all face opposition parties calling – in different ways – for a harder line on debt with Europe and thus political threats from any major concessions to Greece. Some of the poorer countries – including the Baltic states, Slovakia and Slovenia – wonder why should they make concessions to Greece, whose national income is higher than their own. Meanwhile in many of the richer countries, extreme right wing opposition parties would object to anything that costs their exchequer money.
Remember that most of Greece’s debt is owed to other member states via one of the EU rescue funds, rather than to private-sector borrowers. This is why there is such resistance to forgiving debt, which would require amounts written off on national balance sheets across Europe, rather than restructuring, which would mean interest would be received much later. There is an element of avoiding reality here, but there it is.
Time is also now an issue. There are severe doubts about whether even an interim arrangement to agree financing for a few months for Greece and its banks can be concluded at Monday’s meeting of euro-zone finance ministers. And this is before any of the really serious talking about a longer term fix gets under way. In the meantime the ECB is making it clear Greece must be in a programme if its banks are to be funded, deposits are moving out of its banking system and Greek tax revenue is plummeting, as many choose not to pay.
The rough rules of international diplomacy suggest the heat will be kept on Greece’s government, which, so far, appears to have no allies around the table.
