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Victoria Mindova

Four major scenarios for emerging from the European financial crisis were outlined  by Maria João Rodrigues from the Université Libre de Bruxelles. She was invited to take part in a special discussion in Athens that aimed to answer the question "Scenarios for the Eurozone 2020: Crash or way out of the crisis?"

The first option, according to Rodrigues is that Brussels and the European Union countries should continue to apply a series of fiscal measures and some partial reforms as before. This model is certainly considered unsustainable for the development of the euro zone and is not expected to bring positive results. However, it remains possible, if stronger political will for change is not demonstrated.

According to the second scenario, one or more euro zone countries would not be able to withstand the burden of fiscal measures and they would wish alone to leave the monetary union. This model proves to be particularly dangerous because the euro zone will lose its positions to the financial markets and even the most powerful countries in it will face the threat of expensive lending.

The third possible option, which Rodrigues presented, is for the countries with the highest credit rating (AAA) to form a union inside the union. This option does not imply the collapse of the euro zone, but it will create a two-speed Europe. The powerful countries in the union would resort to closer political, banking and social integration, for which there has already been a strong base. The weaker countries from the European periphery would continue to use the euro as a currency, but they would not be able to get into the close circle of integration and benefits until they attained certain results. The idea of ​​European integration itself would be put to the test in the third scenario, although it seems quite possible at this stage.

The last option, which theoreticians consider, is a change of the political will in the countries of Europe and giving impetus to overall integration in both the euro zone and the European Union. This means full integration of budget, banking and economic policies in order to create a centralized strategy for emerging from the crisis. In this option, the euro zone would create a massive economic and political bloc that would convince financial markets and European sceptics that the union would withstand and enter a new phase of its existence.

"Each of the scenarios presented has advantages and disadvantages for each of the member countries of the euro zone," Rodrigues stressed without giving preference to any of the options previously mentioned. She added a little later in the discussion, "The deeper integration of Europe in general cannot be made unless the Germans are convinced that they will gain more from the process than they will lose."

The deputy foreign minister Dimitris Kourkoulas, at whose invitation Professor Rodrigues visited Athens, said the European debt crisis was a failure of the countries - Greece, Portugal and others, but it was also a failure of the integration. He is firm that if there is no serious turn in the policy pursued both at national and European level Europe will not stand the test. "Greece was the catalyst that has turned the global crisis into a European one," he said firmly and severely criticized the lack of political will in the local government to make the necessary changes.

"Greek politicians still perceive the introduction of reforms as something imposed by the lenders rather than a necessary change towards recovery," Kourkoulas said. He believes that Germany has contributed to the deepening of the problem by insisting on a programme that seems actually impractical in its current version. The combination of wrong measures and lack of initiative in the right direction by the Greek side create conditions for a complete collapse.

Meanwhile, JP Morgan provides for a 15% probability of the Greek government not adopting the fiscal adjustment measures this month. Shaking the government's stability and the serious response of political forces to the changes in labour legislation are the basis for the doubts about whether Greece will be able to introduce the measures required for the payment of the aid tranche of 31.5 billion euro. International financial experts estimate that if Fotis Kouvelis’ Democratic Left boycotted the vote, PASOK and New Democracy could lose up to 10 deputies in order to pass the package of measures.

As far as the extension of the aid programme to Greece is concerned, JP Morgan estimates that the country will need an additional 25 billion euro to be able to stay afloat. It is still very early to talk about a second haircut of the debt financial experts say and estimate that European countries are not ready to discuss the participation of the official sector (OSI) in the restructuring of the unsustainable debt.

Commerzbank’s chief economist, Joerg Kraemer, has told Deutsche Welle that he does not preclude the granting of the third and final aid package to Greece. He has confirmed the already established opinion that Europe is not ready to accept a new debt haircut, which will affect central banks in Europe. However, international lenders do not want to risk a possible exit of Greece from the euro zone. "Actually, the European Union and the International Monetary Fund should not approve the payment of funds to Greece, because the country has not implemented the terms set. However, international lenders do not want to risk Greece’s default," Kraemer said, cited by Ethnos.

He explains Berlin’s milder position to Athens with the upcoming elections in Germany. According to him, without another aid package to Greece, the government will have to explain to the German people why the money previously poured into the Mediterranean country has been lost. "This is what Berlin tries to avoid and therefore, it prefers the decision for a third support package."