Greece’s economic weakness over the last decade and the valuable political capital that has been frittered away in dealings with its lenders have left the country vulnerable to even the slightest of shocks from developments outside of its borders.
This is one of the reasons Greeks will be closely following developments in Germany, where elections Sunday are expected to lead to Chancellor Angela Merkel being re-elected for her fourth term but with doubts about who she will govern with.
The euro crisis elevated Berlin into the decision maker as well as paymaster within the single currency area. Since 2010, Greek leaders have tried everything from cozying up to and lashing out at the formidable Merkel, but with little impact.
The conservative leader has never wavered from the path in terms of how to handle Greece. While Merkel may have lacked an overall vision of how to reshape the eurozone and learn from the lessons of the crisis, she was always very clear on what was needed to protect the single currency. This involved Greece going through a painful fiscal adjustment and lengthy reform process, whose targets would be agreed with the troika (now the institutions), while being ringfenced from the rest of the euro area.
Any attempt to deviate from this, for instance by trying to negotiate directly with her met with a polite but firm reminder that details had to be settled with the lenders’ representatives, the ones who had the technical expertise and on-the-ground knowledge to decide exactly what measures Athens needed to take.
However, while the bailouts have largely defined the relationship between Athens and Berlin over recent years, the prospect of Greece exiting its third program next year means this dynamic could change.
Before we reach this point, though, there is a tricky period ahead: One in which Athens will have to complete dozens of prior actions and meet this year’s fiscal targets before its lenders sit around the table again to discuss debt…