Greece: Europe Tries to Contain the Economic Crisis

Aysegül Er writes for EA:

As the shock of the ongoing financial crisis in Greece spreads through almost all of Europe, tensions are rising. On Friday, Greek Prime Minister George Papandreou criticized the European Union's response to his country's financial requirements as timid and too slow. Papandreou claimed that EU institutions, the European Commission, member states, and the European Central Bank have failed to coordinate over the crisis and have undermined Greece’s credibility.

EU leaders maintain that Greece must take further measures to overcome its huge debts and should cut its budget deficit, which at 12.7 percent is four times higher than the upper limit set in the Eurozone, by 4 percent this year.


Papandreou said after the Brussels summit that his country was ready to take the extra action needed to reduce its deficit. “I think that political will is very clear,” he asserted, “Let us allow for the instrumentation to be something as a theoretical discussion, because we hope we will not be there because we are ready to take all the measures as well as Europe in order to be credible and to have a credible exit out of this crisis.”

EU ministers subsequently considered exceptional steps and coordinated action, if needed, to safeguard financial stability in the Euro-area. The EU Commissioner for Economic and Monetary Affairs Olli Rehn said, "Our view is that risks are materializing, and therefore there is a clear case for additional measures.” The European Commission approved the Greek austerity plan and agreed to work with the European Central Bank to monitor Athens.

Greek Finance Minister George Papaconstantinou denied that his country needed to take further austerity measures to cut its debt. He said, “My guess is that what will stop markets attacking Greece at the moment is a further more explicit message that makes operational what has been decided at the European Council." He pondered, “If we announce today new measures, will that stop markets attacking Greece?” but he then assured, “If additional fiscal measures are needed, we will take them.”

Israel-Russia: Situation Now A-OK on Iran?

On Monday, Prime Minister Benjamin Netanyahu met with Russian President Dmitry Medvedev to discuss Hamas, the kidnapped Israeli soldier Gilad Shalit, sanctions on Iran, and Russian's pending delivery of  S-300 missiles to Tehran.

At the end of the day, both leaders got what they sought. Medvedev did not put himself under any commitment to punish Iran severely but maintained a "threatening" position vis-a-vis Tehran. He  told Netanyahu that Russia will hold off on  delivering the S-300s to Iran. A spokewoman added: "The position of Russia regarding sanctions remains unchanged. [But] if Iran remains uncooperative, no one can exclude the use of sanctions."

Netanyahu was satisfied to return home with the "success" of the deferred delivery of the S-300s, and he ticked another  box in his "efforts to exhaust every possible chance to achieve peace" before "the necessity of applying a pre-emptive strike" against Iran in the future.



Netanyahu also sent another message in Moscow at a dinner meeting with Greek counterpart George Papandreo : "Turkey will go nuclear if Iran becomes so". Netanyahu added he was concerned Egypt, Turkey and Saudi Arabia would soon begin their own attempts to develop a nuclear weapon.

On Hamas-Russia relations, Netanyahu implicitly asked Moscow to limit its relations with the Gazan organisation. A senior source in Netanyahu's entourage said the Israeli leader told  Medvedev, "We are not pleased with your relations with Hamas. But since they exist, we can relay messages on humanitarian issues. Tell Hamas they won't get a better offer from us on the deal [for Shalit, the Israeli soldier held by Hamas]."

So, after some fuss, nothing changed in the position vis-a-vis Tehran. Moscow might use the deferment of the sale of S-300 missiles to urge Netanyahu to stop plans by an Israeli firm to close a major arms deal with Georgia, a proposal leaked by Russian intelligence on Friday. In the long run, if not in the medium-term, Moscow can use its third party role, both with Hamas and with Tehran, to increase its credibility and bargaining power in the region. However, the question is how long can tension between the West and Tehran continue without a breaking point for Russia's search for a more cooperative Tehran?