As Greece’s finance minister says a deal could be made within a week, is Grexit off the cards?
Marina Prentoulis, senior lecturer at the University of East Anglia and a member of Syriza London, says Yes
The Greek government has always maintained that a solution for all debt ridden countries is possible without an exit from the Eurozone. The political will of all the partners can reverse the catastrophic direction of the union, and this is what Greece has affirmed time and again throughout the negotiations. What is needed is the recognition that the only viable solution to the financial problem of the Greek economy and the Eurozone as a whole is growth based on an agreement on low primary surpluses, restructuring of public debt and a change away from the catastrophic policies of further austerity and cuts in salaries and pensions. Although we are at a critical point of the negotiations, we hope that a mutually beneficial agreement is within reach. It will signal that a vision of a united Europe, founded on the principles of equality, social justice and solidarity, is still alive.
Sam Bowman, deputy director of the Adam Smith Institute, says No
Greece is in not one, but two holes. It owes €330bn (£237bn) in national debt, equivalent to 196 per cent of GDP, and its nominal GDP is also at a 13-year low. This means that unemployment cannot come down rapidly, as it has in the UK –where nominal GDP grew healthily after the crisis – so nominal wages will have to fall to a “new normal”. That takes an agonising amount of time, because firms prefer to sack some workers instead of cutting wages across the board. Greece’s future, then, looks to be one of persistent high unemployment. Before this is addressed the country cannot hope to overcome its economic malaise – it is simply not credible to expect supply-side deregulations to deliver the sort of growth Greece needs without a healthy level of nominal spending. That means no solution to the debt problem either. If Greece stays in the Eurozone, it will be on life support for the foreseeable future. It’s hard to rule out Grexit just yet.