Greece: Germany Determined To Punish 'Wastrels'

Yves Smith at Naked Capitalism, in a post about the increasing massive failure to solve the "EuroCrisis," points to Germany's apparent determination in the face of the continuing downward spiral of Greece, a spiral which Greek Prime Minister Antonis Samaras compares to the American Great Depression, to force Greek acquiescence to continued severe austerity measures not so much as a solution but as a punishment for imagined bad behavior. Here's Smith's assessment:

But as conditions in Greece become even more desperate ..., German threats are becoming more dire:

“If Greece doesn’t fulfill those conditions, then there can be no more payments,” German Vice Chancellor Philipp Roesler told broadcaster ARD yesterday, adding that he is “very skeptical” Greece can be rescued and that the prospect of its exit from the monetary union “has long ago lost its terror.”

The immediate trigger is inspectors from the Troika are due back in Greece this week to “assess” progress towards meeting targets. Since there is no way for a patient in an intensive care ward to stave himself back to health, it is not at all obvious how Greek leaders can convince their new economic lords and masters that they can do the impossible. The Wall Street Journal sets forth the critical dates over the coming months:

But without a green light from the troika, Athens risks being cut off from badly needed aid and could run out of cash as early as August. It has sought emergency funding from Europe to cover a looming bond redemption in late August.

Greece faces a much more important deadline in September, when international creditors are due to make their next aid payment, which they delayed in June as the elections played out. Extending the deadline could require even more aid to support Greece while it delays more cuts.

An unnamed EU source told Der Spiegel [Greece] won’t reach its goal of lowering government debt to 120% of GDP by 2020 (quelle surprise!). The article states that falling short means Greece would need €10 billion to €50 billion more in funding, which the IMF and certain Eurozone governments (read Germany) will nix.

Smith then examines the economic and political consequences of various courses of action from the perspective of a number of major players; please read those in the original. Smith's conclusion sounds about right to me:

It’s hard to foresee how this ends, but if the powers that be are balking at another €10 billion to €50 billion for Greece, they will not pony up the hundreds of billions that many analysts see as necessary for Spain. The Eurocrats are running out of runway, and there’s no sign of a Plan B. If we didn’t all have a stake in the outcome, this would make for great theater.