Greece

Greece Asks For 'Breathing Space' After Failing to Make Reforms Necessary For Bailout

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As many expected Greek Prime Minister Antonis Samaras has asked for 'breathing space' to implement austerity measures. The Greek government has to find 11.5 billion euros worth of savings over the next two years in order to be eligible for the 31.5 billion euro bailout installment. Without the bailout Greece will run out of money within weeks and will almost certainly have to leave the euro. Samaras has insisted that the request for an extension does not entail a request for more cash:

Let me be very explicit: we demand no additional money. We stand by our commitments and by fulfilling all our requirements. We have to crank up growth because that decreases the financial gaps.

German Chancellor Angela Merkel has said that a decision will not be reached this week, but that should not reassure Samaras. Merkel's colleague, Michael Fuchs, has pointed out that it looks unlikely that the Greek government has kept its promise to privatize some state assets. If the troika audit unveils these sorts of failings Fuchs concedes that it would be difficult to proceed:

If the troika tells us they did what they have to do then of course we will [continue with] the programmes. If not it is very difficult.

Fuchs has also said that a Greek exit from the eurozone would be tolerable:

If Greece is going to leave [the euro]…I don't believe it is going to have a great impact anymore.

How the Germans and French address the Greek requests will be crucial. Although Merkel and French President Hollande have not always agreed on how to tackle the euro-crisis it is expected that they will present some kind of united front this week.

Samaras must be careful to not push too hard for an extension. Patience is running out, and commitment to the single currency bloc is fading among some European politicians.

Ironically on the same day that Samaras asked for 'breathing space' it was reported that Christine Lagarde had labeled Iceland's recovery as 'impressive'.  The politicians in Europe would do well to learn more about Iceland's recovery. Iceland allowed its banking system to collapse, and did not pass on the burdens of economic stagnation and depression on to taxpayers.  This is in stark contrast to the eurozone, where banks are being bailed out and austerity is rejected. 

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