By Ilya Kharlamov
Greece is facing a dilemma: a default or losing its financial independence. Athens has rejected Germany’s proposal to appoint a Commissioner to control Greece’s budget and spending but now Germany’s Finance Minister Wolfgang Schaeuble is threatening to cut the bailout for the debt-stricken country.
On January 30, the EU leaders gathered in Brussels to discuss mechanisms to maintain financial stability and reduce a vast budget deficit in the eurozone. Greece is among economic troublemakers which scare investors away and halt the growth of the eurozone.
The EU leaders have almost accepted an agreement to write-off Greece’s debt which exceed 350 bln euros. The country is hardly able to pay it back on its own so the write-off will be part of the second bailout package. In return, the EU demands that Athens should cut social and budgetary spending and put its finance under European control. Athens will have to concede, says financial expert Andrey Gritsenko:
“Greece will agree to the EU demands and loose its tax and spending independence to avoid a default. The EU leaders are now discussing this in Brussels considering a document which aims at limiting spending of all EU countries and introducing a tougher control over these limits. If it applies to all EU countries, Greece will say “yes”. However, the EU will be rescuing Greece even against its will not to shatter the Union both politically and economically.”
Greece doesn’t want to relinquish its financial independence saying that only the national government must control taxes and spending. But the country’s GDP and output are going down.
Even if Greeks are unhappy with interference into their financial affairs, they are on the verge of a default, says ATON investment analyst Elena Kozhukhova:
“Market players view Greece’s default probability as rather high despite the EU and IMF bailout. Thus, the country will have to cede. There is no easy way out of the current situation.”