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On the Record

Mass Protests in Greece Against Merkel

Daniel V. Speckhard


Editor’s Note: On October 9, 2012, Daniel Speckhard was interviewed by Dan Matheson of Canada’s CTV News, on German Chancellor Angela Merkel’s visit to Greece and the ensuing protests against European Union policies in Athens. Watch the video on

ctvnews.ca

.

Dan Matheson: Mr. Speckhard – Mr. Ambassador, can we ask you what your sense of how grim the situation right now is in Greece? It’s been relatively quiet in recent weeks. Does that mean there’s been improvement or is it just as grim as it’s been all along?

Daniel Speckhard: Well, it’s very grim. They revised downward the estimate as a 7 percent decline in the economy in 2011, and they’re looking at a 5 percent decline here in 2012. Job unemployment is at 25 percent overall and about 50 percent for people under 25. So it’s a very difficult situation right there now. It’s been relatively quiet, though, because there’s been a new government. The government has made some impressive moves in the first few months of its tenure to show that it’s on top of the situation and try to move forward on some of the reforms and try to repair some of the damage in relations with the other Europeans. I think that’s given them a little bit of breathing space.

Matheson: We’ve heard from the Prime Minister of Greece they need more money by November.

Speckhard: Yes, well that’s what they’re working on right now. There’s a group in town, it’s the EU IMF and East European Central Bank are negotiating this next release of 31 billion euro for the next tranche of assistance. If they don’t get that by November, they would be out of money. Partly why Chancellor Merkel is in town today is to discuss with the prime minister the final efforts to put in place a program and get support within the EU to move forward on that progress. But that’s just the next tranche of this particular bailout program that they’ve been on all along.

Matheson: We hear two philosophies on how this works. From the top looking down it sounds fine to impose austerity measures for three or four years to get the economy back on track. From the bottom looking up you hear the people cannot live with 26 percent unemployment. You can’t live with your entire family having nobody working, and your prospects are really grim indeed. So how do you balance what the people need with what the economy needs? How do they do this?

Speckhard: This is very difficult because I think the answer to that is in the form of structural adjustments. It’s not just cutting budgets, but you actually have to be changing the economy so that you’re offering opportunities for new economic activity to take place. That’s very, very difficult in a situation like this because the banks are in such terrible shape, they’re no longer willing to lend to businesses or to new entrepreneurs. There are not a lot of jobs in the private sector to take over for the cuts in the public sector. So in the short term you get into a really downward spiral that you mentioned. The IMF just recently said what their projections are is that Greece is not going to make the targets for reducing their debt to GDP ratio to 120 percent by 2020, they are well off that track. They’re saying this country is going to need new financing or new debt restructuring, something that the European leaders don’t want to hear right now at a very political time.

Matheson: Meanwhile, we have the chancellor in Athens today for the first time in three years I take it. Is it this a helpful thing to do?

Author

Speckhard: Well I think this is important for this very fragile government in Greece to show that it has some support from the German government, which in their mind is calling the shots on additional support for Greece. It’s particularly important because three or four or five months ago there was a lot of talk about perhaps letting Greece exit the eurozone. This is a sign that Germany at least for now is saying it wants Greece to stay in. Two thirds of Greeks says they want to stay as part of the Euro. They are tired of the austerity measures, but they do feel strongly about being part of the eurozone. So this gives the new government a boost in the arms to say that hey we do have some friends in very high places. The challenge is what’s going to come next. I think in the next month or two you will see a release of this additional assistance for this next tranche, but over the next four or five months they’re going to have to negotiate new additional aid packages or new debt restructuring. That’s going to be very, very difficult given that there’s going to be elections in Germany next year and that there’s a lot of concern over how they manage Spain and Portugal as well as Italy.

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