Econ­o­mist cover by Jon Berke­ley.

Is your fig­ure less than Greek?
Is your mouth a lit­tle weak?
When you open it to speak
Are you smart?

— “My Funny Valen­tine”, Rodgers & Hart

A con­flu­ence of events last week may rep­re­sent a turn­ing point in the con­tin­u­ing cri­sis over the Euro Zone, and par­tic­u­larly what to do about the spe­cific prob­lem of Greece.

As Michael has pointed out ear­lier, there has been a con­flict between economies strongly advo­cat­ing aus­ter­ity (in the Euro Zone, pri­mar­ily Ger­many), and those advo­cat­ing stim­u­lus (pri­mar­ily the Greeks and other debtor nations, such as Spain, Italy and Ireland).

Ger­man Chan­cel­lor Angela Merkel has taken a hard line, mostly in keep­ing with the sen­ti­ments of the Ger­man peo­ple, that the Greeks need to get off their lazy κώλοι and get to work. This means severe aus­ter­ity mea­sures, and the Ger­mans (at least pub­licly) have taken a hard line on this issue.

From the Greek side, a May elec­tion which gave a second-​​place fin­ish to the left-​​wing Syriza party (Coali­tion of the Rad­i­cal Left, ΣΥΡΙΖΑ) only hard­ened posi­tions. Syriza’s leader, Alexis Tsipras, swore quite pub­licly that he would not accept German-​​backed aus­ter­ity mea­sures. There are 300 seats in the Greek Par­lia­ment. In the May 8 elec­tion, New Democracy’s leader Anto­nis Sama­ras (with 108 seats) failed to make a proper coali­tion in the three-​​day win­dow given by the Con­sti­tu­tion, so Syriza (with 52 seats) took a crack at build­ing one. Syriza also failed. That left mar­kets in a tur­moil and the Greeks fac­ing the very real prospect of a dis­or­derly exit from the Euro Zone. (more…)