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Greece's Economy Remains Embroiled In Turmoil


Finance ministers from around the world are arriving here in Washington, D.C. for their annual spring meetings. And two are getting particular attention, the finance ministers from Germany and Greece. Germany is Europe's strongest economic power. Greece's economy has been in shambles for years. It's received bailouts from the EU, agreeing to massive austerity cuts. Greeks elected a new leftist government in January, rejecting austerity, raising concerns about Greece's future in the eurozone. The Greek and German finance ministers were on stage separately at the Brookings Institution yesterday, with David Wessel, who's a senior fellow there. David's also a contributing correspondent to The Wall Street Journal and a frequent guest on this program. He joins us on the line. Good morning, David.


GREENE: So things in Greece have been bad for a long time. We've heard about it for a while. Is this an especially desperate moment?

WESSEL: It is. The Greek government is running out of cash again. It's unable to borrow on the global bond markets, dependent on loans from the rest of Europe from the International Monetary Fund. And they're saying, we're not going to let you any more money unless you make some firm commitments, this new Greek government, to make reforms that'll save the government money, make Greece more economically competitive over time. Now, the Greek finance minister, Yanis Varoufakis, says that the conditions to which the previous government agreed have produced an economic disaster, a Greek Great Depression, unemployment above 25 percent with few of those people collecting unemployment benefits. He says his government has a mandate from Greek voters to pursue a new deal. And here's how he put yesterday.


YANIS VAROUFAKIS: Greece went from a period, before 2008, of Ponzi growth, of growth fueled by unsustainable borrowing, to a period of Ponzi austerity, funded by unsustainable borrowing.

GREENE: So wait a minute, David. You're on stage here, the Greek finance minister and the German finance minister. And he's basically saying, I mean, Ponzi, as in the bailout was a Ponzi scheme? Is he basically accusing Germany and the rest of Europe of sort of having a flawed bailout for Greece?

WESSEL: Absolutely. He says the bailout was flawed in conception, flawed in execution both by the creditors and the Greek government. And he says they're just going to have to change it if they want Greece to stay inside the eurozone. Now, the German view is that countries make politically unpopular decisions that are painful in the short term but necessary for long-term prosperity only when they are forced to do so. So here is how Wolfgang Schauble, the veteran finance minister of Germany, described his position.


WOLFGANG SCHAUBLE: As long as you give them way out, you will never get hard decisions you have to take. You know, any democratic system tends to take the more comfortable decision if you have the alternative to do so.

WESSEL: Now, the Germans, the other European governments, the IMF, they all say the Greek government has yet to offer specific proposals sufficient to put Greece on a sustainable course. And so they're pushing hard to get some agreement while Greece is running out of money day by day.

GREENE: I mean, I'm wondering how uncomfortable it was on stage for you to be in between these two gentleman. I mean, it sounds like they're really far apart, and their governments are very far apart.

WESSEL: Well, I didn't have them at the same time. They were sequential.

GREENE: Oh, OK, safer that way probably, David.

WESSEL: Well, less fun though. Look; both sides say they're looking for common ground. But right now, it's hard to see what policies will fly politically in Greece and satisfy the conditions sent by the IMF in Europe. It's a game of chicken. Each one expects the other side to blink first. And Greece is taking a hard line, expecting the creditors will flinch first 'cause they're afraid that if there's an implosion in Greece, that'll produce a lot of problems in other vulnerable countries. Here was Varoufakis' bottom line.


VAROUFAKIS: We will compromise. We will compromise. And we will compromise. But we're not going to end up being compromised.

GREENE: OK, well, that sends a message. I mean, David Wessel, if Greece can't come to agreement, I mean, on its debts with these other eurozone countries, will it be able to stay in the currency union and continue to use the euro?

WESSEL: Perhaps not. Two years ago, everyone seemed to think if Greece left the euro or any country left the euro, that would be disaster for everybody. Today, they - markets and some in Europe - say that this might be just inevitable. Mr. Varoufakis isn't one of them. When I asked him about it yesterday, he said that anybody who claims that they know what the effect of a Greek exit from the eurozone is are deluded. So he's counting on them being too afraid to push Greece to that point.

GREENE: David Wessel is director of the Hutchins Center on Fiscal and Monetary Policy and a contributing correspondent to The Wall Street Journal. David, thanks as always.

WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.