Greece could be forced out of the eurozone unless international lenders throw it a second 130-billion-euro lifeline. But while Greek leaders see disaster ahead if they crash out of the monetary union, there very well might be no other option.
Caught between the EU, IMF and private bondholders, Greece has to push through tough austerity measures and clinch a second-bailout before a major bond redemption on March 20.
With EU, IMF and ECB inspectors due in Athens later this month to hammer out a new rescue package which was agreed upon in principal this past October, Greece also has to come to an agreement with the private holders of its sovereign bonds to avoid default.
On Tuesday, government spokesman Pantelis Kapsis told Greek television "the bail-out agreement needs to be signed. Otherwise, we will be out of the markets, out of the euro.”
But while Greece has been accused of blackmailing Brussels with the threat of insolvency, Johan Van Overtveldt, editor-in-chief of Belgium's Trends and Knack magazines, told RT Athens really has no other choice.
“It’s a kind of blackmail – give us more money or we exit and you, the remaining countries in the eurozone, risk some kind of chaotic situation. But the other fact is that they really are at the end of the road – there is no other option left for them. They are in a deadlock, they cannot rewind the Greek economy and so they are facing a big, black hole.”
In fact, while the warning issued by Kapsis was widely interpreted as a call to bolster domestic support for the highly unpopular measures, Overtveldt argues the government is really trying to avoid the fallout of further economic decline which will ultimately force Greece to exit the monetary union. And further unrest is a real possibility.
“The Greek economy is going down like a stone. We are now at a point where everybody in Greece realizes … unrest and even anarchy in the country is becoming so much of a threat that some drastic things need to be done,” he says.
As a result, Overtveldt says the Greek government “is looking for an alibi to offer [an excuse] to their public by which they can say, ‘well, it’s not our fault, it’s the international community that is pushing us towards the exit of the eurozone.’”
However, while Bank of Greece governor George Provopoulos told a local newspaper last week a return to the Greek drachma “would mean real hell” for the country, Overtveldt says it is the only way Greece can really get back on track.
“I think even he [Greek Prime Minister Lucas Papademos] now has to concede that Greece’s problems can’t be solved by going down the road of structural reforms that need to be done anyway. They take time to take effect and Greece doesn’t have that time left,” he said.
“The problems are so severe, the recession is so deep, that you need a kind of shock treatment. Of course, exiting the eurozone would be that kind of shock because amongst other things, that would mean immediately a greatly devalued currency – the new drachma – which would bring back international competitiveness to Greek companies.”