SLIGHT progress has been made in talks to avert a Grexit from the eurozone, but for the majority of voters their modern-day Greek tragedy inexorably moves on.

Believing they have been betrayed by a left-wing government they elected to fight against the catastrophic austerity measures imposed by the European Union and the International Monetary Fund (IMF), they took to the streets last week in three days of violent protests.

With the country grinding to a halt because of what has been described as “Alice in Wonderland” economics, a possibility of a return to the drachma as the nation's currency looms. If this happens, it could trigger a Brexit, analysts believe, as left-wing voters in the UK – disgusted at the economic blackmail being imposed on Greece – could join those on the right in voting to leave the European Union.

It has become clear over the past few days that the situation in Greece is no better than it was last summer when it was on the verge of defaulting on its massive loans.

One year on and it is stalemate again, with Greece needing bail-outs to save the economy from total collapse and other eurozone countries insisting on more harsh austerity measures – even though all austerity has done so far is shrink the economy further, making debt repayment less likely. Even the IMF has now conceded that the demands on Greece are unrealistic but eurozone finance ministers, led by German hardliner Wolfgang Schauble, are unwilling to compromise for fear of angering their own voters.


IF it is agreed to grant Athens some debt relief, it is unlikely to help those who have been reduced to scrabbling for food in rubbish bins.

Unemployment stands at 24.4 per cent of the workforce and the Greek economy has contracted by a quarter in the last eight years. Around 230,000 businesses have closed since the beginning of the crisis, including 10,000 this year alone.

“My income tax has just gone up to 29 per cent, my social security payments have gone up 20 per cent, my pension has been cut by €50; they are taxing coffee, fuel, the internet, tavernas, ferries, everything they can, and then there’s Enfia [Greece’s hated property tax],” said 71-year-old Kostis Nakos, who owns a tiny shop in Athens. “Now that makes me mad. They said they would take that away.

“Everyone’s outraged, they’ve been swearing, insulting the government, calling [Prime Minister] Alexis Tsipras a liar,” he said. “And they’re right. Everything he said, everything he promised, was a fairy tale.”

Doctors claim the health service is on the verge of collapse, buses have stopped running and businesses close daily. On top of this, the government has been forced to agree to £4.3 billion in savings to unlock an €86bn bailout agreed last summer.

However, because the eurozone finance ministers doubt the left-wing Syriza government’s commitment to engineering the savings, they have demanded extra “contingency measures” from Tsipras.

These are worth €3.6bn and would be triggered if Greece fails to meet its targets.


ECONOMISTS argue that it is inevitable that Greece will fail to meet its targets. “The target is for Greece to run a primary budget surplus of 3.5 per cent of gross domestic product by 2018 and in every year thereafter,” point out Larry Elliott and Dan Atkinson, authors of Europe Isn’t Working. “This means that once Greece’s debt payments are excluded, tax receipts have to exceed public spending by 3.5 per cent of GDP.

"The exceptionally onerous terms are supposed to whittle away Greece’s debt mountain, currently just shy of 200 per cent of GDP.

“If this all sounds like the economics of Alice in Wonderland, then that’s because it is. Greece is being set budgetary targets that the IMF knows are unrealistic and is being set up to fail. It will then be punished further for being unable to do what it was impossible to do in the first place.”

Elliot and Atkinson say that while the Greek government has said the demands are unconstitutional and extreme, they can do little about them as they jettisoned their only bargaining tool last summer when they made clear they would keep the single currency at any price.


IMF chief Christine Lagarde has warned that if the eurozone finance ministers do not ease the pressure on Greece she will not risk any more IMF money.

She wants the primary budget surplus target to be reduced from 3.5 per cent to 1.5 per cent of GDP and for relief to be offered on the national debt which is now 180 per cent of GDP. She believes anything over 120 per cent is unsustainable. On Sunday, despite the protests, Athens agreed to overhaul the pension and tax system and will continue to negotiate to hammer out a deal.

That means the eurozone has to decide if it will honour the commitment it made last July to save Greece or push it into default – in effect creating a European failed state.

Most economists appear to agree that only debt restructuring will prevent a Grexit – which means that taxpayers in the more prosperous countries in Europe such as France, the Netherlands and Germany, will lose money. Greece has already been given more than €250bn euros in bailouts – the largest economic rescue in world history.

Germany’s Vice-Chancellor Sigmar Gabriel conceded the inevitability of debt relief at the weekend, saying: “Everyone knows that debt relief will have to come at some point. It makes no sense to shirk from that time and time again.”

If agreement is not reached, Greece will almost certainly default on payments due in July.

Greek voters are pessimistic. “Until we leave the euro, until we return to the drachma, until we have a currency that is not so strong, things will never be right,” said taxi driver Giorgos Balabanis. “Remember me because it’s going to happen. There will be an explosion and Grexit, and the drachma will come back.”