Monday, September 12, 2011

And The Trojan Horse You Rode In On...

Or, all your Drachma are belong to us.

(via Marginal Revolution)

It certainly sounds like Germany, et. al are ready to show Greece the Euro Door. European finance ministers are apparently war-gaming the debacle. Der Spiegel International has a long article, in English, talking about the what they are thinking. Bottom line: Greece is hopelessly corrupt, inefficient, and can't reform itself.

The tougher talk is much more than show. The rest of Europe is losing patience with Athens. And after 18 months of crisis in the country, there is still no improvement in sight. Key economic figures are worsening, and there are growing doubts over whether the Greek government truly understands how serious the situation is.

In European capitals and at the European Commission, some are beginning to wonder whether the efforts of the last year-and-a-half were in vain. The partner countries have already provided Greece with €110 billion ($152 billion), and a second bailout has already been agreed upon. But Europeans are now beginning to realize that they have spent a lot of money for nothing.

The disappointment runs particularly deep in Berlin, where the government's crisis-management policy has clearly been going around in circles. In the beginning, the chancellor said that the Greeks ought to help themselves out of their own crisis. Then came the first and subsequently the second aid package. The new approach, the government said, was to rescue Greece so that the other debtor nations would be spared.

Now the Germans have come full circle, and the prevailing emotion is fear of a never-ending debacle in Athens. "Enough is enough," says one senior government official, adding that Berlin has lost patience with the Greeks. With a mixture of resignation and fatalism, Merkel and Schäuble are facing up to the inevitable and thinking the previously unthinkable: Greece is going bankrupt, and not even its withdrawal from the monetary union can be ruled out anymore.

Contagion

So can the damage be prevented from spreading and enveloping all of Europe? Der Spiegel is optimistic, citing encouraging signs in Ireland and Portugal.

Perhaps, if Greece exits, the thinking seems to be, the resulting carnage will at least serve the salutary effect of serving as a negative examples for others.