The financial travails of the Greek government go on, and will do so for some time even in the best of scenarios. So at least one thing is fixed: simple arithmetic quite clearly shows a noticeable imbalance in that country’s public financial resources and the amounts it customarily spends. Unfortunately, all other considerations surrounding that predicament and how best to address it seem to be stuck in a kaleidoscope-like flux.
Take for example the blogpost found on this site a couple weeks ago: there, resort to the IMF to assist Greece out of its bind was unthinkable, and the proposed solution – suggested by no lesser figure than the current German Finance Minister Wolfgang Schäuble – was instead to set up some sort of Monetary Fund within the institutions of the European Union. You can scratch that now; according to no less than Bundeskanzlerin Angela Merkel (who of course outranks Schäuble), IMF involvement would be perfectly OK and, if there is to be some sort of within-the-EU Monetary Fund, then it certainly won’t be able to appear in time to have anything to do with solving the Greek case. Oh, and another point I made was that the preferred technique so far of EU heads-of-government for dealing with the Greek situation was simply to issue declarations of support without actually doing anything to back them up, and that is also no longer completely true. Mind you, it’s not that the EU leaders now are trying to back them up; it’s that some, such as Bundeskanzlerin Merkel, don’t even want to talk about it any more, including shutting Greece’s problems off of the agenda for another EU summit meeting scheduled to be held next week.
But it gets even worse, as we see in an article in today’s issue of the Dutch business newspaper Het Financiële Dagblad. Merkel now is willing to countenance IMF involvement, but Nicolas Sarkozy still insists publicly that that is out of the question. Furthermore, the French President (together with Jose Manuel Barroso, Chairman of the European Commission) does want to talk about Greece at next week’s summit, at least to the extent of issuing another ringing declaration that the country will not be let down by its EU brother-states – thereby accomplishing a lowering of its borrowing costs, at least for a while.
Unfortunately, it seems that an IMF team has already been called in to take a look at the Greek situation, according to this HFD piece. Plus, the suspicion remains (although it is mentioned elsewhere, not here) that Sarkozy mainly wants to shut out the IMF in order to deny credit/glory to that organization’s head, Frenchman Dominique Strauss-Kahn, who might well run in 2012 to replace Sarkozy as French president. But this now-open disagreement on fundamental aspects of how to deal with the situation between the heads of the EU’s two leading states can only worsen investor confidence in Greece’s finances, and thereby the situation as a whole.