The question on everyone’s mind at the moment is-Will Greece ever reform? The economists have highlighted the fact that it‘s difficult to get the Greek economy functioning, because of the following reasons:

• The emphasis has been too much on the austerity measures and too little on structural reforms, without any offset in monetary ease and devaluation
• Structural reforms are very difficult to implement because of the very poor character of the Greek public administration
• The low quality of public administration and the judiciary system make fraud much easier than it should be
• There are waves of dependency between politics and professions and unions to keep the status quo and there is a tendency to shift the cost onto others

It is indeed difficult to break this cycle, so it was understandable for the Germans to ask for more EU powers on the ground in Greece, simply because reforms don’t seem to get any real grip on the ground, even if they’re written in law. If the Germans lose faith in the Greek ability of addressing the problems then the Euro zone are nearing a monumental decision. Greece would give enormous leverage over the rest of the Eurozone and its international debtors, and so it’s not a surprise to see EU Commissioner Kroes argue that if Greece would leave the euro, this would be manageable.

Yesterday, the Greek politicians struck a deal amongst themselves with regards to austerity and the structural reforms. We have yet to see whether this is acceptable for the troika i.e. IMF, ECB and EU. If it is, a restructuring of private debt, perhaps even with the ECB weighing in, it is likely to be on.

All this could very well be rather irrelevant. In April, Greece will go the polls and elect a new parliament. It looks likely that could bring quite a change. Here is a terrifying scenario: troika approves the Greek reforms, private debt is restructured, everybody is happy for a couple of months as disaster seems averted, and then the Greek elections bring most of the reform efforts to a standstill. But as the days are added after the elections, the question of the reform may yet again be on everyone’s minds.

Have a great weekend everyone!