Migrant Crisis Alters E.U. Calculations for Greece as Its Debt Struggle Continues

5 March 2016
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When Greece’s debt crisis threatened to sink the European Union’s single currency last summer, the rest of Europe, led by Chancellor Angela Merkel of Germany, ganged up to deliver the Greek government a stern message: Overcome your domestic political problems and do what is necessary to hold the Continent together.

Eight months after Greece agreed to do its part, it is the rest of Europe that is failing to muster the will to address a threat to the bloc’s unity, this time the continued influx of migrants from the Middle East and beyond. And Greece, the main entry route for asylum seekers, has been largely left to fend for itself.

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“We are now in the situation where Greece is essentially becoming a holding pen for refugees and is being asked to solve a problem created by other countries,” said Jens Bastian, an economics consultant based in Athens and a former member of the European Commission’s task force on Greece. “You are basically putting the management of Europe’s migrant crisis at the doorstep of Greece.”
The chaos has saddled Prime Minister Alexis Tsipras with the challenge of simultaneously handling growing numbers of migrants, while carrying out austerity measures and structural reforms required under the financial bailout Athens received last year to avoid exiting the euro — just as Greece has fallen into yet another recession.

But if the situation is generating more despair in an already battered nation, it also holds the potential for Mr. Tsipras to exert new leverage over the rest of Europe — with a possible ally in Ms. Merkel, long seen in Greece as a usurper of Greek sovereignty and a dispenser of economic punishment.

Perhaps more than any other European leader, Ms. Merkel, who continues to welcome refugees from Syria and Iraq to Germany despite intense opposition at home and among other governments, needs a deal to defuse the migrant problem. She would find her job that much tougher if Greece deteriorates further into humanitarian and political crisis.

With Mrs. Merkel angered by decisions in Austria and nine other countries to tighten their borders, trapping tens of thousands of migrants in Greece, “this creates an opportunity for a closer alliance between Athens and Berlin,” said Mujtaba Rahman, the head of European analysis at the Eurasia Group in London. The refugee crisis “could win Greece some bailout flexibility,” he said.

Some members of Mr. Tsipras’s fragile coalition government have also hinted they would like creditors to reduce some of Greece’s debt in exchange for Greece bearing the burden of warehousing the migrants Europe will not allow in.

There is little outward sign that European leaders are willing to link the two issues and let up on requirements in last summer’s bailout plan for deep budget cuts and painful overhauls of many elements of the economy. Wolfgang Schäuble, the German finance minister, warned on Thursday in a speech at the London School of Economics that the refugee crisis did not mean Greece could relax its fiscal efforts.

 

“Of course, there is a new situation, the refugee crisis, and therefore Greece needs beyond all discussion additional solidarity,” he said. “This does not mean that Greece should not continue to work to regain competitiveness.”

Yet, with dramatic scenes of thousands of migrants piled up at Greece’s northern border, enduring tear gas and increasingly unsanitary conditions, European officials moved with unusual speed this week to promise 700 million euros, about $770 million, in humanitarian assistance over the next three years, most of it for Greece. And they are intensifying their efforts to bottle up more of the migrants in Turkey, before they can reach Greece, with hopes of relocating those who qualify for asylum directly to the heart of Europe.

But Mr. Tsipras’s challenge remains substantial, with political opponents coming at him from the far left and right.

The economy has continued to weaken since last summer, when Greece imposed capital controls during turbulent negotiations with its European Union creditors for a new bailout in exchange for accepting harsh austerity terms.

Despite tentative signs that the worst was over, the economy has continued to contract after Mr. Tsipras imposed new taxes and began cutting pensions further to comply with the terms of the bailout. Greece’s overall unemployment rate has been stuck above 25 percent for more than two years, while the number of young people without jobs remains near 50 percent.

Mr. Tsipras’s biggest immediate challenge is to complete an overhaul of the near-bankrupt pension system, without which Greece cannot move forward in talks with creditors on sorely needed debt relief. The pressure from creditors has sparked raucous street protests in recent weeks. The creditors have also delayed disbursing billions of euros in new bailout funds, citing slow progress by Mr. Tsipras’s government in implementing the austerity measures.

Throughout last year, the government had effectively waved through migrants — almost none of whom wanted to stay in the economically moribund country — to Germany and other prosperous nations where they wanted asylum. But when the nations along the migrant trail decided to constrain the flow of people, the rest of Europe warned Greece that it could be kicked out of the Schengen system of passport-free travel if it did not exercise control over its borders.

Faced with an ultimatum, Mr. Tsipras has moved to get new migrant registration centers operating on the islands and ordered the construction of refugee camps around Athens and elsewhere.

At the same time, he has hardened his position with Europe, demanding this week that the European Union “explicitly recognize that Greece cannot assume all the responsibility by itself,” and demanding sanctions for countries that do not take their share of refugees under a Europe-wide relocation plan that has so far been a flop.

“It’s a huge challenge for Tsipras because the nature of the crisis is changing, and rather than seeing refugees and migrants simply pass through, we’re now talking about having to find places to house them,” said Nick Malkoutzis, the editor of MacroPolis, a political analysis website.

“The one thing he can’t let happen is for migrants and refugees to be left out in the open, where they become not only vulnerable to extremists, but turn into a focal point for the far right to try and rally support,” he said.

In a peculiar reversal, analysts say, Mr. Tsipras’s greatest hope may lie with Mrs. Merkel, who has steadfastly admonished other countries not to let Greece “plunge into chaos,” and rebuked Austria and the nine Balkan states that shut their borders.

“Do you seriously believe that all the euro states that last year fought all the way to keep Greece in the eurozone — and we were the strictest — can one year later allow Greece to, in a way, plunge into chaos?” she said in a weekend interview with the public broadcaster ARD.

Yet on the streets of Athens, few are buying talk of European solidarity.

“This just shows you how not-united Europe is,” said Jackie Rogers, a Briton who has lived in Greece for nearly 40 years, sweeping her eyes over migrants scrambling for donated food, water and clothing at Victoria Square in central Athens.

“I think it suits northern European nations who don’t want the problem in their backyard to use Greece as a dumping ground.”

New York Times

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