Why The European Finance Ministers Failed To Agree On A Greek Deal

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Photo: Wikimedia Commons

Last night, the Eurogroup — the collection of European finance ministers — failed to agree on an aid package for Greece.There’s no agreement about a new bailout, and there isn’t even a promise to disburse more cash to the country.

Der Spiegel has a good roundup of what happened, and it basically comes down to this:

The motive behind the finance ministers’ tactic is obvious: They want to keep up the pressure on the Greek government — not to mention the recalcitrant opposition. On Tuesday, Prime Minister George Papandreou will face a confidence vote in parliament, which will also vote on the austerity package next week. The euro-zone ministers explicitly appealed to all political parties in Athens to support the austerity measures. “Given the length, magnitude and nature of required reforms in Greece, national unity is a prerequisite for success,” the statement read.

Not surprisingly, German domestic politics are a huge issue here, especially if Merkel can’t find a way to get substantial private sector involvement in the bailout:

In this event, Merkel would find herself facing a huge problem. Voices in her coalition government of the conservatives and the business-friendly Free Democratic Party say that the private sector will have to be involved if the German parliament, the Bundestag, is to approve a second rescue package for Greece. Some members of the opposition centre-left Social Democrats are already speculating that the issue could lead to the downfall of Merkel’s government and early elections, should the chancellor fail to get a majority in parliament to back her plans.

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