As EU leaders say Grexit would be catastrophic, can we expect a deal sooner rather than later?
Christian Schulz is senior economist at Berenberg, says Yes
Syriza’s devastating reform reversals and reckless negotiating have weakened Greece so much that it will soon have to accept Troika demands. Empty public coffers, record deposit outflows, dwindling taxpayer morale, the Tsipras recession and the predictable failure to get Russian or Chinese funding have left Athens completely dependent on its European partners. Polls show public opinion is turning against Syriza. But Greece has severely antagonised European leaders, parliamentarians and voters since January. Even a Greek u-turn cannot guarantee positive votes in Germany for an inevitable third bailout this summer. Still, the EU needs to help Greece. It has a long history of dealing with temporarily awkward members, bringing them back to the fold eventually. This patience is central to the European project. Reminding voters and parliamentarians of that should secure the necessary majorities. Europe’s goodwill and Greece’s desperation should bring some sort of deal soon.
Jennifer McKeown is senior European economist at Capital Economics, says No
There are tentative signs that Greece and its creditors might reach a compromise to allow the disbursement of much-needed financial aid. Greece has apparently reconsidered its vow to abandon privatisations and mooted new taxes on the wealthy to meet its fiscal goals. But the government is adamant that it won’t implement the pension cuts that have been demanded of it and EU leaders still seem unprepared to make any concessions that might allow the two parties to meet in the middle. Accordingly, Greece might be unable to meet its near-term obligations and a messy default, perhaps even leading to its expulsion from the Eurozone, remains a real threat. Note that, even if it secures a bailout payment next week, this will be no more than a stop-gap. It needs a major debt write-off to return to growth and this seems unachievable within the currency union. Indeed, Greece may yet choose to exit to reap the dual benefits of lower debt and a weaker currency.