At the World Bank spring meeting in Washington federal finance minister Schäuble let it be known – almost in passing – that the Greek government had until the end of June to confirm what reforms it would make. Up till now, people had talked of the end of April as the deadline, previously of mid-March. So, why this latest deferment? Because we mean Greece so well? Perhaps we might also take the following into account:
If Greece was declared definitively insolvent at the end of April, then the EU and Germany – that “leads” on this issue – would have at least three problems:
1. There’s no agreed insolvency procedure for states. What do we do if lawlessness and social unrest erupt in Greece?
2. We’ve no well-ordered procedure for an exit from the euro; on principle, for political reasons, this was never foreseen. How would the Eurogroup handle an insolvent Greece? Can it be forced to quit? And what happens to the euro afterwards? Will the Eurozone be reduced practically to a currency union that one can join or leave? Which country would be next on the speculators’ radar? Would that come about without impacting on the EU single market?
3. There’s no orderly mechanism for an exit from the EU – that was also never envisaged for political reasons primarily. What would the EU do about an insolvent, perhaps normless Greece?