Mercifully, the long simmering crisis in Greece — which first started in early 2010 as Athens revealed the full extent of its indebtedness — is finally nearing what appears to be a conclusion.
Negotiations in Brussels have broken down in acrimony, or brinksmanship, over the last 48 hours. Threats are being passed around now, with German Chancellor Angela Merkel warning that a deal needs to be done by the time markets open on Monday. Officials at the European Central Bank said they are revaluating their support of beleaguered Greek banks. And Greek Prime Minister Alex Tsipras boomed that his country rejected harsh demands from its creditors, including pension cuts, because it has "new priorities."
As time ticks away, the outcome is all in the hands of Eurozone finance ministers and their staff as they prepare for another meeting on Saturday morning. The hard deadline is Tuesday, when a $1.8 billion debt payment is due from Greece to the International Monetary Fund. IMF officials said they would not extend the deadline.
Someone has to give or else the situation will quickly spiral out of control, leading to bank runs, capital controls and, potentially, the restoration of the drachma if Greece exits the euro.
Greece wants debt relief, higher taxes (if it must impose some austerity measures) and the protection of its tourism industry and pensioners. The IMF wants Greece to rely less on taxes and on debt relief from the European establishment. Other European parties want no debt relief and further cuts to pensions and government workers, among other demands.
Even if these three groups can hammer out a deal, an agreement would still need to pass the national parliaments. This is troublesome. Leftist hardliners in Athens are clamoring for a debt default and exit from the Eurozone while a majority of German citizens, according to new poll data, want to kick Greece out of the Euro.
Possible outcomes in Greece include snap elections, a referendum on exiting the Euro and the resignation of Tsipras — something he is now threatening to do according to the Greek press. This after the German press reported the country's creditors had offered a five-month $17.3 billion extension of the current bailout plan, not unlike the four-month extension agreed to in February. Tsipras reportedly rejected this out of hand as being insufficient to cover his government's cash needs.
If no compromise is found on Saturday, markets could be rattled badly on Monday and Tuesday, potentially precipitating a crisis if deposits are pulled from Greek banks, again forcing the European Central Bank to increase its support — something officials will be loath to do if they feel Athens is headed for the exit. Bundesbank chief Jens Weidmann has already voiced concerns these funds, totaling roughly $100 billion, are tantamount to state financing, which is illegal under the ECB's charter.
As things stand now, the atmospherics seem to be darkening. Eurozone officials are eyeing a "Plan B," while the leftists in Athens are accusing creditors of wanting to "annihilate" their country. We will know more Saturday morning.
Top Reads from The Fiscal Times:
- Why Vladimir Putin Wants Texas to Secede from the U.S.
- The Next Star Wars: Are We Ready for Satellite Attacks?
- How ISIS Is Spreading Terror Far Beyond Iraq and Syria