Despite their bailout extension deal with European lenders; the new Greek government is supposed to draft up economic reforms that would enable it to get on the road to better fiscal health. I’m saying you shouldn’t hold your breath. The possibility of Greek exit from the European Monetary Union is a matter of when not if. Greece is too fundamentally fiscally unstable to stay in the European Union. Even if it was able to get its act together at the last minute, I’m not sure if it’s a good idea to let it remain in the European Monetary Union.
The reason for this is it sets a bad example. You can’t let a sovereign political entity maintain a huge voice in its fiscal policy and expect other member nations to simply accept the status quo. The central problem the powers behind European Monetary Union have to realize is that monetary union is impossible without a political union. Of course, the idea of a political union in Europe and elsewhere is simply a nonstarter. It’s dead in the water. Instead, they would like to have their cake and eat it too. They would like to gain the advantage of a monetary union without a total political union. It’s not going to happen. The power to set fiscal policy flows from political sovereignty. You can’t have one without the other.
Whatever reforms the new far-left Greek government can come up with is sure to disappoint because it was elected to buck austerity measures. Do you see the problem here? It’s like sending the fox to guard the hen house or asking the fox to come up with hen house security policies. It’s not just going to happen, and it doesn’t make any sense. I’m afraid to say that the Greek reform process is simply an empty charade. Barring a military coup in Greece, I don’t really see Greece turning around anytime soon.