Whither Greece?

By Nelson Graves

N-D is backed by a network of experienced journalists who have lived on all continents and covered the world’s biggest stories of the past four decades.

Among them is Alan Wheatley. Alan has covered many of the biggest international economic issues since the early 1980s, reporting from more than 40 countries and living in London, Frankfurt, Paris, New York, Washington, Tokyo, Singapore and Beijing.

I asked Alan for his thoughts about Greece and its European partners. I specfically asked whether Greece, whose new government has said it would reject its austerity program, would have to leave the euro zone.

Here are Alan’s thoughts, put succinctly — in the News-Decoder way:

“Ever closer European integration has been the lodestar of Germany’s post-war foreign policy. Greece’s exit from the euro could still cause the EU project to unravel, which is why Berlin remains unwilling to risk kicking Athens out.

“Most Greeks want to stay in the euro, not least because the country’s banks would collapse without ECB support and the ensuing recession (accompanied by a leap in inflation) would be much worse than the austerity suffered to date.

Alan Wheatley

“However, current arrangements are unsustainable. The economy has shrunk by a quarter, and one in four Greeks is unemployed. The government’s debts, at 175% of GDP, are too large to be repaid.

“So expect momentum to build for a debt write-off in return for measurable progress towards ending the political clientelism and corruption that lie at the heart of Greece’s economic problems. Germany and other north European nations will insist that their taxpayers want their money back, while Greece will fume that foreigners are still dictating its policies.

“Compromise is far from assured, especially as extremist political groups are gaining ground across Europe. But with Russia’s behavior posing a stern challenge to European unity, the last thing the EU needs is to ‘lose’ Greece. And that means keeping Greece in the euro.”

Connecting the dots, News-Decoder style.