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| In Eurozone, Growing Support for a Greek Exit | In Eurozone, Growing Support for a Greek Exit |
| (about 4 hours later) | |
| Of the countless writs and regulations that govern Europe’s currency club, one golden rule trumps them all: Membership is conditional. | Of the countless writs and regulations that govern Europe’s currency club, one golden rule trumps them all: Membership is conditional. |
| After joining the euro in 2001 and through the bailouts of the last five years, Greece has been told the same thing. To belong, it must satisfy the strict economic standards that underpin this community of 19 disparate nations. | After joining the euro in 2001 and through the bailouts of the last five years, Greece has been told the same thing. To belong, it must satisfy the strict economic standards that underpin this community of 19 disparate nations. |
| Now, as yet another Greek government resists the rule makers, the view is taking hold in Europe that its ambitious currency project would be better served if Greece just left. At its root, the euro project is an enterprise that succeeds only if its members follow the rules. | Now, as yet another Greek government resists the rule makers, the view is taking hold in Europe that its ambitious currency project would be better served if Greece just left. At its root, the euro project is an enterprise that succeeds only if its members follow the rules. |
| Such a dire outcome is not assured, of course. Greece and its creditors could strike a deal, unlocking fresh aid and avoiding a default. | Such a dire outcome is not assured, of course. Greece and its creditors could strike a deal, unlocking fresh aid and avoiding a default. |
| Greek government officials said debt talks with creditors would continue through the weekend. And there is a chance that the prime minister of Greece, Alexis Tsipras — who has said he is committed to staying in the euro — will replace the hard-liners in his cabinet with party leaders who will support him in cutting a deal with Europe. | |
| But there is little sign that either side is softening its position. | |
| Talks on Thursday between Greece and its creditors concluded without an agreement. The country’s polarizing finance minister, Yanis Varoufakis, led the discussions at a meeting of European finance ministers in Luxembourg, sticking to the government’s official position that there can be no agreement without debt relief from Europe. In less than two weeks, Greece must repay 1.6 billion euros, or $1.8 billion, to the International Monetary Fund, one of its creditors. | |
| Increasingly, economists and government officials in Europe have begun to accept that little more is to be gained in this struggle to get Greece to play by the rules. | |
| In Germany especially, the fear is that providing new loans to Greece without extracting more spending cuts represents a fateful step toward a so-called transfer union, with wealthier nations providing handouts to Greece and other weaker countries. “If a small country can blackmail the other members into a transfer union without conditions and controls, the euro cannot survive,” said Adam Lerrick, a sovereign debt expert at the American Enterprise Institute, a research organization based in Washington. | In Germany especially, the fear is that providing new loans to Greece without extracting more spending cuts represents a fateful step toward a so-called transfer union, with wealthier nations providing handouts to Greece and other weaker countries. “If a small country can blackmail the other members into a transfer union without conditions and controls, the euro cannot survive,” said Adam Lerrick, a sovereign debt expert at the American Enterprise Institute, a research organization based in Washington. |
| Thomas Mayer, a former economist at Deutsche Bank who now runs a research institute in Frankfurt, compares the current situation to an elite country club with a longstanding member who persistently flouts club standards. | Thomas Mayer, a former economist at Deutsche Bank who now runs a research institute in Frankfurt, compares the current situation to an elite country club with a longstanding member who persistently flouts club standards. |
| The club faces two choices. It could relax its principles at the risk of losing its select status. Or it could eject the troublesome member and risk causing a big stink in doing so. | The club faces two choices. It could relax its principles at the risk of losing its select status. Or it could eject the troublesome member and risk causing a big stink in doing so. |
| These days, many in Europe are inclining toward the second option, Mr. Mayer says, which may well be for the best. While there would be pain for Greece, the effect on Europe’s broader economy may be limited. | These days, many in Europe are inclining toward the second option, Mr. Mayer says, which may well be for the best. While there would be pain for Greece, the effect on Europe’s broader economy may be limited. |
| “You just can’t keep forcing this down people’s throats,” Mr. Mayer said. “Plus, if Greece left, it would show that there is life outside of the European monetary union.” | “You just can’t keep forcing this down people’s throats,” Mr. Mayer said. “Plus, if Greece left, it would show that there is life outside of the European monetary union.” |
| Mr. Mayer has been among the many offering Greece advice in recent months. | Mr. Mayer has been among the many offering Greece advice in recent months. |
| In April, he proposed to Mr. Varoufakis, the Greek finance minister, a plan by which the government might issue i.o.u.s as a currency supplement. The vouchers would serve as an additional monetary unit, albeit a devalued one, for government workers whose salaries and pensions were being cut. | |
| Now he says he thinks Greece needs a new currency altogether, a radical step but one that should not be seen as the end of the world. | Now he says he thinks Greece needs a new currency altogether, a radical step but one that should not be seen as the end of the world. |
| “The Czechs and Slovaks did it,” he said. “One should not make it bigger than it is.” | “The Czechs and Slovaks did it,” he said. “One should not make it bigger than it is.” |
| As Mr. Tsipras fights for his political life, his strategy of demanding from Europe more than it can give is now being blamed for pushing Greece to the very edge. That is, the government opposed both labor reforms and spending cuts. | As Mr. Tsipras fights for his political life, his strategy of demanding from Europe more than it can give is now being blamed for pushing Greece to the very edge. That is, the government opposed both labor reforms and spending cuts. |
| Those are two of the most sacrosanct rules in the eurozone playbook, argues Harry Theoharis, a member of the Greek Parliament for the reformist To Potami party. | Those are two of the most sacrosanct rules in the eurozone playbook, argues Harry Theoharis, a member of the Greek Parliament for the reformist To Potami party. |
| “There is no way the creditors would have agreed to that,” said Mr. Theoharis, who as a top tax official in the previous Greek government worked closely with the country’s lenders. “Now the base line is default — this is madness.” | “There is no way the creditors would have agreed to that,” said Mr. Theoharis, who as a top tax official in the previous Greek government worked closely with the country’s lenders. “Now the base line is default — this is madness.” |
| Both sides are girding for a euro exit. | Both sides are girding for a euro exit. |
| The Greek central bank warned on Wednesday that the country’s economy would be devastated. And bankers say that in the last week, Greeks have pulled more than €1.5 billion from their deposit accounts. Within the European Stability Mechanism, Europe’s newly formed rescue vehicle, preparations are being made to bolster other weak countries in the event of a contagion panic. | The Greek central bank warned on Wednesday that the country’s economy would be devastated. And bankers say that in the last week, Greeks have pulled more than €1.5 billion from their deposit accounts. Within the European Stability Mechanism, Europe’s newly formed rescue vehicle, preparations are being made to bolster other weak countries in the event of a contagion panic. |
| While polls in Greece still show overwhelming support of the euro, a majority of Greeks are fed up with the harsh austerity measures that have been a condition for the €240 billion in loans that have been disbursed to the country. | While polls in Greece still show overwhelming support of the euro, a majority of Greeks are fed up with the harsh austerity measures that have been a condition for the €240 billion in loans that have been disbursed to the country. |
| After all, Europe’s criticisms notwithstanding, Greece has cut government spending by €28 billion since 2010 — about 15 percent of its total economy. | After all, Europe’s criticisms notwithstanding, Greece has cut government spending by €28 billion since 2010 — about 15 percent of its total economy. |
| And within Mr. Tsipras’s ruling Syriza party, a more radical left-leaning flank has begun to make the same argument that is being aired now in Europe: Greece cannot and should not be forced to live within the eurozone’s economic strait jacket. | And within Mr. Tsipras’s ruling Syriza party, a more radical left-leaning flank has begun to make the same argument that is being aired now in Europe: Greece cannot and should not be forced to live within the eurozone’s economic strait jacket. |
| “Default and exit is the only option,” said Costas Lapavitsas, a London-trained economist who recently returned to Athens and won a seat in Parliament under the Syriza banner. “The other choice is to adopt the policies of our lenders and that is the option of a slow death.” | “Default and exit is the only option,” said Costas Lapavitsas, a London-trained economist who recently returned to Athens and won a seat in Parliament under the Syriza banner. “The other choice is to adopt the policies of our lenders and that is the option of a slow death.” |
| For years now, Mr. Lapavitsas has been arguing that Greece would fare better if it had its own independent currency and could make spending and borrowing decisions separate from the restrictions laid down by Europe. | For years now, Mr. Lapavitsas has been arguing that Greece would fare better if it had its own independent currency and could make spending and borrowing decisions separate from the restrictions laid down by Europe. |
| Until recently, his voice has been a lonely one. He now says that inside and outside the government, more people are listening. | Until recently, his voice has been a lonely one. He now says that inside and outside the government, more people are listening. |
| One recent poll shows that 58 percent of Syriza party members support a return to the drachma. | One recent poll shows that 58 percent of Syriza party members support a return to the drachma. |
| It’s not just Syriza either. Theodore Katsanevas, an economist, has formed a political party that advocates a return to Greece’s former currency. | It’s not just Syriza either. Theodore Katsanevas, an economist, has formed a political party that advocates a return to Greece’s former currency. |
| Mr. Katsanevas, a former member of Parliament for the one-time governing Pasok party, and the more radical Mr. Lapavitsas are political opposites. But they are united in their belief that Greece can no longer follow the harsh strictures that are the condition of euro membership. | Mr. Katsanevas, a former member of Parliament for the one-time governing Pasok party, and the more radical Mr. Lapavitsas are political opposites. But they are united in their belief that Greece can no longer follow the harsh strictures that are the condition of euro membership. |
| “We can’t survive under a hard euro,” Mr. Katsanevas said. “There is no hope that we pay our debts, or return to growth — there is just no hope at all.” | “We can’t survive under a hard euro,” Mr. Katsanevas said. “There is no hope that we pay our debts, or return to growth — there is just no hope at all.” |