If Greece leaves the eurozone in the coming days, it will be the result of decisions made by German Chancellor Angela Merkel, more than any other institution or leader.
Although Greece has been negotiating with a so-called "troika" of institutional creditors -- the International Monetary Fund, the European Central Bank and the European Commission, which represents the eurozone nations -- Germany is widely believed to be the creditor whose views are most decisive. The country is the single largest creditor in the series of bailout payments that the troika has provided to Greece since 2010. As such, Germany under Merkel’s leadership has been the lead architect of the loans-for-austerity policy Europe has used to manage the Greek debt crisis.
Germany is also the euro monetary union’s largest economy and, arguably, its most powerful voice on the international stage.
It was no surprise, then, that all eyes have been on Merkel in recent days.
On Monday, Merkel signaled her greatest willingness thus far to accept a Grexit, or a Greek exit from the Eurozone, arguing that it was important to keep Greece in the monetary union, but not at the expense of eurozone standards of fiscal prudence.
"Perhaps we could give them up in the short term, maybe we could say 'let's just give in for once,'" she said, according to Agence France-Presse, referring to a proposed deal that would accommodate more of Greece's demands.
"But I say: in the medium and long term, this would damage us," Merkel continued. "It would damage us in that we (Europe) would cease to be relevant in the world, that our unity disappears."
“If Greece asks for further negotiations, we will not ignore this,” she added.
Greece faces a June 30 deadline for a 1.6 billion-euro debt repayment to the IMF that it needs bailout money to pay. The IMF has said that it will consider any late payment tantamount to default.
On Saturday, after negotiations between Greece and its creditors came to a standstill, Greek Prime Minister Alexis Tsipras announced that his government was calling for a July 5 referendum vote on the latest proposal by its creditors.
In response, the ECB halted its emergency lending to Greek banks, prompting the Greek government to limit bank withdrawals to prevent banks from running out of cash -- a procedure known as imposing “capital controls.”
If the ECB declines to restore its lending to Greek banks, Greece could be forced to leave the eurozone, an outcome known as a "Grexit."
By leaving the door open to further negotiations, Merkel on Monday exhibited her occasional role as the "good cop" in negotiations with Greece, compared with the harder line taken by many ministers in her government. Indeed, she must contend with the criticism of members of her grand-coalition government -- in both her own center-right Christian Democratic Union party and the center-left Social Democratic Party -- who believe Germany has already been too generous with Greece.
Yet as the long-serving and popular leader of Europe’s largest economy and Greece’s largest creditor, Merkel bears ultimate responsibility for the unyielding negotiating strategy that creditors have employed with Greece thus far, as well as for the austerity policies that led Greece to elect a left-populist government and to attempt to renegotiate the terms of its bailout this past January.
Under Germany’s leadership, the eurozone nations have insisted that Greece make rapid fiscal adjustments in order to pay off its mammoth debts in a timely fashion. Greece claims -- and many economists agree -- that it will never be able to repay the debt it currently owes the troika of creditors, and that continuing to try to do so is preventing the country from recovering economically. But leaders of the eurozone nations have argued that writing down the debt would mean treating Greece differently than other eurozone nations like Portugal and Ireland that paid off their debts after implementing similar austerity policies.
As such, analysts believe that if Greece leaves the eurozone, history will treat Merkel as the European leader who is most to blame.
Peter Doyle, an economist and former senior manager at the IMF, says that Merkel could have called for a eurozone-wide write-down of debt that would have circumvented the issue of differential treatment for Greece.
“I very much hope that in this whole thing, that Merkel will, for the sake of Europe and reason,” call for greater compromise with Greece, Doyle said in an interview earlier this month.
Other European leaders, including European Commission President Jean-Claude Juncker, indicated after the referendum was announced that the vote would be a decisive vote on Greece’s status in the eurozone.
The prospect of a Greek departure could have long-term implications for the future of the eurozone as a political entity, despite the fact that European leaders have taken steps in recent years to limit the financial fallout of a Grexit.