Chancellor Angela Merkel had been hoping that her trip to Athens earlier this week would help demonstrate Germany’s solidarity with Greece as it struggles to overcome its debt crisis. Just two days later, however, leading economic institutes in Germany have darkened the mood considerably. The institutes presented their autumn economic forecast on Thursday, and cast doubt on whether Greece would be able to remain part of the euro.
“We believe that Greece cannot be saved,” said Joachim Scheide from the Kiel Institute for the World Economy, one of several top economic institutes tasked by the German government with examining the state of the country’s economy twice a year.
Oliver Holtemöller, of the Halle Institute for Economic Research, was also pessimistic at the Thursday press conference called to present the evaluation. He said it is unlikely that Greece will ever be able to free itself from its debt burden — and called for a new debt haircut for the country.
The idea is not likely to go over well. Any new restructuring of Greek debt would necessarily involve the country’s international creditors rather than solely affecting private investors as last spring’s €100 billion haircut did….
And that’s where it ought to get very tricky. The reality is indeed that much of what has been loaned to Greece has gone for good, and, like it or not, Greece is going to need yet more help. But if international creditors (such as the IMF) from outside the euro zone are to participate, then will be the time to insist that they will not do so as long as Greece remains within the currency union that is killing it.
Meanwhile, Herman Van Rompuy, President of the EU’s European Council (and the “damp rag” of Nigel Farage’s memorable peroration) tweeted this this morning:
There is increasing confidence in future of eurozone, a growing sense that we will get there…
If Van Rompuy really believes those words he will not worry if the rest of the world insists on letting the euro zone finance its continuing folly all by itself. After all, it is, apparently, ‘getting there’…
Back in the real world, IBT reports:
Unemployment rose to a record 25.1 percent in July, the Greek statistical service ELSTAT said Thursday, a 0.3 percent increase from June and the 35th consecutive monthly increase. Greece’s jobless rate is now double the Eurozone average and has more than tripled since the crisis began to accelerate in 2008. More than 1.26m Greeks were actively seeking employment in July, up 43 percent from a year again, and youth unemployment was measured at crippling 54 percent.
A further blow followed the ELSTAT release with news that Greece’s biggest company – in terms of market value – was moving its headquarters Switzerland and de-listing is shares on the benchmark Athens Stock Exchange General Index…. Fage Dairy, one of the country’s biggest agricultural firms, said earlier this week that it was moving its headquarters to Luxembourg, a move Standard & Poor’s said addressed “risks linked to being a Greek incorporated company–including potential reduced access to capital markets, and legal uncertainties.”