Can the German chancellor and International Monetary Fund chief find a Greece solution that pleases their own restless constituencies? Time is fast approaching for the latest installment of Europe’s long-running drama: The Greek Bailout. Christine Lagarde and Angela Merkel are expected to star in season three of this often suspenseful tale, with the main storyline centered around the continuing question of how to get Greece’s debt down in order to lift the country up.
The essential plot of season three: Can the managing director of the International Monetary Fund and the German chancellor find a way to agree on a deal while minding their respective, restless constituencies?
Lagarde’s institution is still feeling the scars of the 2010 and 2012 Greek bailouts. Merkel’s Germany is gripped by bailout fatigue as Germans feel they have been asked to pay the taxes Greeks refuse their own government. The IMF chief may look for reelection next year and must take into consideration her staff and her board’s reluctance to get involved in the Greek funk yet again. The chancellor has to deal with a Bundestag — parliament — reluctant to fuel “moral hazard” and with rising anti-euro sentiment in the electorate.
Both would rather agree, because a deepening of the Greek crisis would be bad for Europe’s and the world’s economy. But both may also feel less pressured to do so, because the EU economy is recovering slowly and a Greek meltdown isn’t seen as threatening the existence of the eurozone as it did five years ago.
In terms of their own relationship, the two women leaders see eye to eye on most European issues, and they have had a good personal chemistry ever since the four years Lagarde spent as finance minister of then-French president Nicolas Sarkozy, from 2007 to 2011. Last year, according to media reports, Merkel even approached France to put forward the IMF chief as European Commission president — not hiding her lack of enthusiasm at the time for Jean-Claude Juncker, who ultimately got the job.
The result of “extend and pretend,” noted Ashoka Mody, professor of international back almost €5 billion to the IMF, and €6 billion to the ECB by the end of the year. This is a country heading back towards recession after the first four months of the Syriza government, and struggling every month to pay some €1.7 billion in public sector salaries. If Tsipras finally decides to tackle the Greek economy’s structural flaws, he will have to trust Lagarde and Merkel to show him a way from under the country’s debt burden. That will not happen — and the situation will spiral downwards — if the two can’t agree. Germany, the IMF and Greece
