Time is running out for finding a solution to the Greek imbroglio. Otherwise, Ms Merkel would face severe criticism over Europe’s failure in preventing a problem with the potential to provoke significant disturbance in the common currency zone. The US has already voiced its concern at what they view as a source of financial instability across the world. They are also worried about the impact of a plunge in the euro on their own currency.
Last week, when Ms Merkel stepped in and summoned the institutional creditors to impose final conditions on the Greek government, observers bet her bold move would pay off. Yet Athens is dragging its feet and rejects endorsing any painful reform likely to fuel fierce resistance back home. This is particularly the case amongst the ranks of those supporting the current government. It will remain entrenched in successive refusals until it reaches the kind of compromise it could sell domestically without excessively damaging its political standing.
Even Ms Merkel seems powerless to convince Tsipras to agree on a compromise. She made a wrong move when monopolising the discussions with his Greek counterpart. Unless she makes bigger concessions than expected, she will face the unpalatable position of being held responsible for the ensuing failure. By offering such an advantage to a cornered Tsipras, Ms Merkel is bound to broker a deal Athens could never have dreamed of just a few days ago. By making clear that reaching an agreement is a must for Germany, she will have to pay a price for it.
According to unofficial sources an understanding has already been reached on pensions and deficit targets. Don’t expect any further substantive concessions from the Greek side.