Rhetoric remains elevated in the Greek crisis ahead of yet another Eurogroup meeting tomorrow. However, a proposal to cut military spending could be the key: this would satisfy the EU’s demands for a higher primary surplus while leaving the spending on pensions untouched, thus not crossing Greece’s red lines. Greece is ranked 9th in the Global Militarization Index so there certainly is fat too cut off over there.
However, two players in this crisis could raise objections.
Military spending
This topic seemed to be off the table, but it is worth examining. Greece spends much more on defense in comparison to its EU peers. This means buying arms from abroad, including German and French firms.
In fact, Greece is in the global top 10 in military spending to GDP. Greece maintained its position at No. 9 throughout the crisis. The country is close to rival Turkey and to Russia, and not too far from the Middle East. But is this justified?
Now, according to some reports, the EU has actually already suggested cuts to the military, but the IMF vetoed it. Why? What are their interests. So, if Juncker and other European officials push through with these suggestions, the organization led by Christine Lagarde is one hurdle.
The second hurdle could come from Greece. While the government is dominated by the left wing SYRIZA party, it still needs its junior coalition partner, Independent Greeks. Both parties agree on stopping austerity but do not agree on other topics.
The junior party could oppose any cuts to the military.
However, cutting military spending abroad and keeping pensions makes much more senses: pensioners spend their money in the economy while the military spends some of the money abroad and the multiplier effect of internal military spending is much smaller than with money spent by pensioners.
Will this proposal prevail?
Growing tensions
Greek Prime Minister Alexis Tsipras has upped the ante by calling the IMF “criminals†and saying that the offers made by the EU are “asphyxiating†Greece.
On the other side, Juncker has blamed Tsipras for “not telling the whole truth†on the EU’s offers. Dijseelbloem said that leaving the euro-zone doesn’t mean leaving the debt behind.
Soothing words have been heard from heard from Angela Merkel: she said everybody is working on a solution.
How will this end?
