WashU Expert: Greece at the crossroads

Greece continues its economic free fall, appearing unable to make its debt payments to the International Monetary Fund (IMF) on time. With no prospect of any additional bailout funding, the country’s financial situation, and its standing as it pertains to the euro, remains unclear.


Costas Azariadis, PhD, an economist at Washington University in St. Louis, is currently in Greece. A native of Athens, Azariadis emailed his observations and insights into the turmoil and what might be next.

“In Athens Monday, restaurants were full of patrons, many of whom had spent part of their day lining up in front of ATMs and gas stations. Supermarket shelves were bare for the first time in 40 years,” writes Azariadis, the Edward Mallinckrodt Distinguished University Professor in Arts & Sciences.

“As the city veered from normalcy to panic and back, people were preparing for a July 5 referendum for or against the euro.

“Leading the camps bargaining over Greece’s future are longtime German Chancellor Angela Merkel, who heads a centrist coalition, and Alexis Tsipras, the new Greek prime minister and chief of SYRIZA, a grouping of union activists, unorthodox communists and anarchists.

“Facing dissent inside their coalitions, Merkel and Tsipras backed away last Friday from an agreement they had almost finalized early last week. That deal pledged Greece’s lenders (European Union, IMF and European Central Bank) to roll over Greek debt if Greece agreed to continue liberalizing markets and go through another round of belt-tightening.

“Tsipras found the deal a hard sell to his party without serious debt relief from the lenders. German polls, however, showed debt relief was deeply unpopular, and the preliminary agreement collapsed.

“The upshot is that, barring a last minute miracle, Greece is likely to become technically insolvent midnight Tuesday by missing a 1.6 billion euro payment to the IMF. This will lead the country and the euro into uncharted waters.

“The best-case scenario is a resounding pro-euro vote on July 5 brokers an agreement like the one Merkel and Tsipras were close to inking last week. At the other extreme stands much uncertainty for Greece and the weaker members of Europe’s periphery.”