The Greek tragedy enters its next act - act seven, to be precise. The seventh instalment of the first aid package for Greece has to be paid out around March 20. Greece faces making 15 billion euros ($19.78 billion) worth of debt repayments - or default.  Actually, sufficient funds are still left from the bailout set in May 2010 at 110 billion euros - of that batch, only 73 billion euros in loans was transferred to Greece by the EU and the International Monetary Fund (IMF). So financially, jumping the hurdle on March 20 shouldn't be a problem. 

The drama that is currently unfolding before the eyes of surprised Europeans is a political one. The finance ministers from the eurozone nations want to force Greece to stick to its commitments and tighten its belt even further.

Greek political leaders want to get their hands on the new loans to the best possible terms - they're already embroiled in campaigning to elect a new parliament in April. So far, however, none of the parties has come up with a clear idea of how to overcome the crisis. In the Greek drama's last act in November 2011, the EU, thoroughly fed up with Greek party politics, made sure the socialist prime minister was replaced by the independent former central bank chief. That hasn't had much of an effect domestically - it appears politicians in Athens still haven't grasped how serious the situation is.

Pressure and drama

Inspectors from the EU, IMF, and the European Central Bank have checked the books in Athens for the sixth time and again found a shrinking economy, a budget deficit that is too high, and a slow pace in implementing reforms. To get the Greek government and political parties moving, the EU has linked a decision on the second bailout package to payment for the funding gap on March 20. Of course, politicians in Athens know that the two are not really connected, as the funds from the first bailout haven't been used up. They can expect the EU to pay up rather than let Greece slide into default. No one can seriously predict the consequences of a Greek default for the other 16 euro zone states. For that reason, the insolvency Jean Claude Juncker, the frustrated head of the eurozone group, has been mentioning is not very credible. Greece and all its problems would still exist after an insolvency and as an EU member state, it would need help from Brussels or the IMF.

Threats by Prime Minister Lucas Papademos, who has pondered exiting the euro zone, are just as implausible. The consequences for Greece and Greek banks in particular would be catastrophic. So for one more week, Brussels and Athens will continue their game of poker until the finance ministers give the go-ahead for the next bailout package of 130 billion euros.

Moreover, private creditors are expected to cancel debts to the tune of 100 billion euros. However, it remains unclear whether this cut will actually work because nobody knows whether the large hedge funds betting on a Greek default will join in the effort.

To be continued

The next act will be played out in three months time. That's when the troika will issue its next report about Greece. When the catharsis, the purification of the soul that every tragedy should bring about, finally occurs, cannot be predicted. The current plans call for the play to continue until at least 2020, until Greece returns to the regular financial markets. Perhaps both sides will come to realize before then that neither the Greeks nor the helpful Europeans can be expected to endure this tragedy for so long.

The IMF representative in the troika in Athens has paved the way. Poul Thomsen said that Greece would be budgeted into oblivion if it is faced with unceasing demands for austerity. At some point, prolonging the tragedy will lead to social unrest. Instead, it is necesary to invest in building up the Greek economy and a working state administration. But no-one knows how the reconstruction of Greece can be organized under the country's present political elite. Not for the first time has the case of Greece led to widespread perplexity in the EU. So the sickness is prolonged and the costs pile up.

Author: Bernd Riegert / sb

Editor: Neil King