Don’t Look Now, But There’s Another Greek Debt Crisis Brewing

There’s been a familiar script since the Greek debt crisis erupted seven years ago. Athens balks at austerity measures, but eventually caves to European demands to stay solvent. Europeans tire of Greece’s political leaders, but tolerate them to keep Europe whole.

Now, the storyline is about to change. European finance ministers are set to blow through a deadline Monday to release a $7.4 billion in bailout funds. Greece needs the money to pay a bill in July, but the International Monetary Fund won’t pony up the cash unless Europe forgives some of Athen’s debt. Germany refuses to do so.

The group of EU finance ministers known as the “Eurogroup” meet Monday in Brussels to address the situation. They have already conceded nothing will be decided on the funds at the gathering.

The impasse comes as a wave of nationalist sentiment in Europe is threatening the belief that Greece should remain a part of Europe. Nationalists Marine le Pen in France and Geert Wilders in the Netherlands are climbing in the polls. The Dutch vote in March, while the French vote in April.

Meanwhile, German Chancellor Angela Merkel is facing a far-right challenge from the anti-EU Alternative for Germany in the fall. Berlin has footed more of the bill of any European country for Greece’s rescue and voters there are getting fatigued. Athens is in a “danger zone,” Ian Lesser, the-Brussels based executive director of the German Marshall Fund’s Transatlantic Center, said.

Wolfgang Schäuble, Germany’s finance minister and a close ally of Merkel, has said Greece must abandon the euro in order to get debt relief. He has also made clear he will not seek parliamentary approval to release more tranches of the $91 billion Greek rescue fund without the IMF on board. Yet the IMF won’t sign off on a deal unless Greece’s creditors give it a break on what it must repay. The IMF insists that Greece meet GDP projections two percent lower than Europe before it begins to pay back money it has borrowed.

The Greek government concurs with the IMF’s forecast that it cannot reach a budget surplus of 3.5 percent, a European demand. Alexis Tsipras, the Greek prime minister who led his country through the 2015 crisis, has warned Germany to “stop playing with fire” and grant him relief.

“There has been a consistent unwillingness to address the issue head on in a way that would give the Greeks sufficient relief that it would put the issue aside for a few years,” said Lesser.

Jan Kallmorgen, co-chairman of the Atlantic Initiative in Berlin, said he believes Germany will ultimately concede because the stakes of additional European fracture are too high.

Negotiations “are tough, longer than expected, emotions run high,” he told FP. “At the end there will be a solution because Tsipras’s main interest is to stay in power, and Europe cannot allow for any other exit scenario debate” after Brexit.

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