And last but not least, Greece could be running out of money soon, and the Troika, composed of the EU Commission, the ECB and the International Monetary Fund, will have to report on Athens’ progress and decide whether or not to award a new tranche of aid.
Against this backdrop, asking the question whether or not Angela Merkel is tempted to think the unthinkable is not so outlandish. However, as The Economist argues, Germany should think twice. The cost would be huge, both in financial and political terms. Allowing Greece to drift off to sea would likely cost the German taxpayer around 110 billion euros, and as much as 500 billion if it involved a larger breakup with countries such as Ireland and Spain. And all of this in an election year for Germany. The image of a principled yet pragmatic Chancellor could fall apart. For that reason even a so-called Grexit is not something that she is likely to accept. But kicking the can down the road until after the German election is over in late 2013 is not a realistic alternative either. Merkel is still in the driver’s seat and has the power to steer the course. But as things close in, time is ticking away. The more she waits, the more isolated she becomes in Europe and a rescue will only become much costlier.