Monday, March 28, 2011

Greece's search for the exit

Greece's Finance Minister, Giorgos Papakonstantinou, has started to look for the exit. Emerging from a cabinet meeting today, he declared that Greece's economy is on the road to recovery, that tax cuts will be introduced on fuel, and that privatisations should not be pursued rashly, lest the country lose control of the foundations of controlling its destiny.

This comes just days after the EU Heads of Government committed fresh new funds to the European Financial Stability Facility under the Euro Plus Pact. That pact provides funds, but increases the likelihood that countries who let the finances spin out of control will face financial penalties, and eventually be left on their own.

The ink on that agreement is hardly dry and the Greek government does not look impressed. It claims that economic growth rates between 30 and 40 per cent are removing the necessity to make hard choices.  How convenient.

Assuming Greece's financial statistics are as poor as they ever were, Europe now faces a choice. It can drive a sword through its freshly-minted Pact (and indeed, there might be good reasons for never having agreed to this pact). Or it can turn the sword on Athens. You can imagine which option Berlin would prefer.

This should be interesting. The Greek governmnent sees itself not as Persephone, but more like  Asterix and Obelix. Whose view will turn out to be right?

Popcorn, anyone?

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