Successive debt bombshells from Greece have so far failed to blow apart the political bonds that hold it in the euro zone, persuading growing numbers of economists to change their minds and conclude that the country’s fate lies inside the currency union rather than out.
Reuters polls over the last few months suggest Greece’s euro zone membership has become more secure, in spite of the daily torrent of dismal economic news from Athens, and perhaps even because of it.
The sheer magnitude of Greece’s slump has contributed to a growing sense that little remains, in economic terms, that would force lenders to cut off funding to Greece and boot it out the euro zone.
For economists, Greece’s future in the euro zone is no longer an economic question but one of political willpower, which remains firm in Athens and Brussels, in spite of opposition from politicians in Germany.
There is now a strong consensus that Greece will still be in the euro zone in 12 months, with 45 out of 64 economists polled last week in agreement. Even as recently as May, opinion was fairly divided.
“Given the extraordinary pressures on Greece’s credit within the euro zone, the power of the political factor should not be underestimated,» said Lena Komileva of independent research consultancy G+ Economics.
“Greece really ought not be a member of the euro zone at this point. The fact that it is one is down to political rather than economic factors.”
Last November, a Reuters poll of leading independent economists and former policymakers showed a firm majority — 14 out of 20 — reckoned the euro zone would not survive in its current form, with Greece by far the most likely candidate to leave.
Since then, even senior European politicians and policymakers have talked openly about Greece leaving the euro.
Eurogroup President Jean-Claude Juncker said on Tuesday a Greek exit would be manageable, but not desirable, while German Chancellor Angela Merkel has come under increasing pressure from her own coalition partners to force Greece out.
Sternest opposition to such talk has come from the European Central Bank, lead by its president Mario Draghi, who has repeatedly said the euro is «irreversible».
Greece is in its fifth consecutive year of economic recession, with nearly one in four citizens out of a job.
Its economy shrank 6.2 percent on an annual basis in the second quarter, a slump that is expected to persist deep into next year.
Despite the economic rot, the formation of a workable, pro-bailout government in Greece is a major reason why economists are now more inclined to believe it will stay in the currency club.
Greek Prime Minister Antonis Samaras will next week hold his first meetings with euro zone leaders since taking office.
Samaras will insist he can ram through an austerity package worth about 11.5 billion euros ($14.2 billion) — a key condition for more bailout funds under the supervision of a troika, comprising the European Union, International Monetary Fund and European Central Bank.
“The troika keep coming back to Athens, which suggests there is a broader political view that Greece’s insolvency should be managed within the euro zone rather than pushing Greece towards the exit,» said Komileva.
Much of the general public appears to still like the euro.
“Support for the euro is strongest in the Southern European economies,» said Martin McMahon, Europe economist at the Commonwealth Bank of Australia, citing opinion polls and the European Commission’s own surveys.
“It’ll take a fair bit of time for popular and political sentiment to shift before we actually see voluntary exit from the euro zone occurring.”
McMahon said it was hard to believe euro zone members, in the depths of a crisis, would forcibly remove another country. He doesn’t think that’s credible.
“It’s not just Germany and Austria saying ‘Well, we’ve had enough’ — you’d have to get the others to agree as well.”