Monday, July 13, 2015

The Cost of Delay in Greece Agreement

The tentative agreement on Greece reached a few hours ago is not a substantial improvement over the one that the EU proposed three weeks ago only to withdraw two days later, nor is it a noticeable improvement over the plan Greece put forward four days ago. The cost of the three-week delay to EU governments is easily over €100 billion. The broader cost to the European economy is several times that. Even now, delays continue on important matters, with a decision on whether to reopen or liquidate banks in Greece not expected before Thursday.

The delay was unavoidable, it is said, because of the governance flaws of the eurozone. The cross-culture consensus-based approach makes it impossible for the EU to anticipate, avoid, or respond to a crisis in which different countries have differing perspectives. I guess we can add that to the list of structural flaws in the eurozone that will have to be addressed when conditions permit.