Déjà vu: Grexit is back on the table!

In Europe, Brexit has put Grexit in the shade. The British vote to leave the European Union has dominated the economic headlines since last summer’s referendum and overshadowed the fear that Greece — the EU’s most vulnerable and debt-laden country — would crash out of the Eurozone. But could Grexit be poised for a comeback?

We may get the answer on Monday. Euro finance ministers meet to consider whether the Greeks should get the next installment of their bailout money, money they must have before July if they are to avoid defaulting on some of their loans.

Most independent observers say that Greece has not complied sufficiently with the terms of its third bailout to qualify for the next chunk of cash. The left-wing government in Athens has in particular resisted passing two labor market reforms demanded by Greece’s creditors. The first would make it possible for business owners to carry out mass firings; the creditors believe that this would boost the privatization of state-owned companies by making it easier to slim down the bloated payrolls. Secondly, the creditors want to restrict further the right to strike. Greek blogger John Psaropoulos said the Syriza government finds these reforms “unthinkable.”

Complicating matters further, the creditors are divided over what to do about Greece. The International Monetary Fund believes that the country’s €330 billion debt pile cannot be repaid, and the Fund would like to see some form of debt forgiveness. But German leader Angela Merkel famously said the term debt forgiveness “doesn’t sound too good in German.” And it sounds even worse this year when Merkel is seeking re-election. Stephen Clapham of Fenician Capital said writing off Greek debt is also unthinkable.

“If you’re a German politician, you do not want to donate money to Greece. After all, German train drivers are not going to vote for you when Greek train drivers are retiring earlier on higher pay,” Clapham said.

Greece’s eurozone creditors are in a quandary. Three of them — including Germany — face general elections this year amid a rising tide of euroskeptic populism. They don’t want to be seen letting the Greeks off the hook, but they also don’t want to see Greece defaulting and causing euroturmoil.

“I think that there will be another can-kicking exercise precisely because of the elections,” predicted Joan Hoey of the Economist Intelligence Unit in London. “The Europeans are not going to allow this to blow up over the next few months and will find some way out as they usually do,” she said.

So, Grexit may once again be postponed. But in the longer term, Hoey believes, it is the likeliest outcome.

“Almost 50 percent of young Greeks are unemployed,” she said. “They can’t see any future in this currency union. I find it very hard to imagine that Greece will still be in the eurozone in four or five years from now.” she said.

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