Monday, February 20, 2012

Price of the next bailout for Greece may be democracy itself; EZ ministers meet to approve new agreement

To day is President's Day in the U.S., meaning that the work week will begin with very little news coming out of the America. But in Europe, all eyes are on a meeting in Brussels between Eurozone ministers today.

The meeting is set to approve the latest bailout package for Greece – a 130€ billion package that may include a requirement that Greece make the ultimate sacrifice, a cancelation of their upcoming April election.

“The Greek people send to Europe the message that they have made, and will make, the necessary sacrifices for our country to regain its position of equality within the European family,” Greece's Finance Minister Evangelos Venizelos said, according to the New York Times.

But rumors have been rampant all weekend that some in Europe want Greek elections to be cancelled, fearing that the April election would become a referendum on the bailout agreement.

In fact, two seemingly contradictory rumors have been circulating: one states that the finance ministers really wouldn't mind Greece leaving the Euro, the other that elections might force Greece to leave the Euro. But really the issue at hand is not so much about if Greece leaves, but how.

A Greece that exits the Eurozone through progressively more severe austerity would be slow, and could be controlled in a way that would protect the interests of the finance community and other EZ nations. A more abrupt exit would mean that EZ interests would no longer be a consideration.

The head of the Euro group, Luxembourg's Prime Minister Jean-Claude Juncker, has been saying all the right things lately, claiming that no one wants Greece out of the Eurozone. This is necessary if Greece is to continue to play along. Without this kind of assurance, the Greeks on the street won't see any reason to agree to further austerity measures.

So what happens if the EZ ministers approve the latest bailout package? If the agreement comes with no new surprises then things may settle down for the next few weeks, assuming Greece is given time to implement the new austerity measures. If not, then one can count on further unrest on the streets of Athens. With unemployment already over 20 percent, the further layoffs demanded in the new agreement will only make matters worse. Does anyone really think the austerity measures will be carried out prior to the national election?

But if the price of the new agreement is a cancelation of the April election then many will see this simply as a coup, and all bets are off.