Tuesday, May 12, 2015

Greece Inches Closer to an Accident

by Mohamed A. El-Erian


May 12, 2015

An immediate crisis has been averted once again in the Greek drama. At least that is how most media outlets will interpret Greece's approval of a scheduled 750 million euros ($836 million) debt payment to the International Monetary Fund this week. The decision was made as euro group finance ministers expressed some satisfaction at the greater seriousness shown by the Greek government and urged it to do more, and quickly.

This interpretation is strictly correct; it is also potentially misleading.

The deal does buy time for Greece and Europe. But it doesn’t get either side much closer to resolving a crisis that is causing considerable human tragedy in Greece and eroding the credibility of European institutions. At best, it is another attempt to prolong the muddling through, despite the escalating costs and steadily diminishing effectiveness. As a result, conditions on the ground continue to slowly slip out of the control of Greek and European policy makers.


No comments: