Last week marked several important developments in the Greek bailout program story. The new Prime Minister of Greece, Alexis Tsipras, promised his voters to end the bailout program, reverse the reforms imposed by the hated Troika (EC, ECB, IMF) and to cut off a part of the enormous Greek debt. Even earlier, though, Mr Tsipras and his finance minister Janis Varufakis showed some willingness to compromise. They no longer speak of a debt cut-off. The debt itself is enormous, worth 175% of the Greek GDP. However, the majority is held either by the ECB, the IMF or the eurozone (EFSF – the eurozone bailout fund, or the individual eurozone governments). This large part of Greek debt´s conditions are very favorable for Greece and even though optically the debt seems impossibly high, interest payments for Greece are smaller compared to some countries with much smaller debts. Nevertheless, Mr Tsipras would like to deliver on his promises, while at the same time not alienating his EU partners. The compromise could be new bonds indexed to growth, or so-called eternal bonds, of which only the interests are paid, but without temporal limitation.
A more important issue, though, is the bailout program itself, associated with tough home reforms. Mr Tsipras says the reforms destroy Greece and their social effects are catastrophic. He promised to reverse all, or majority of them. Last week, though, he backed a little. Mr Varufakis told the media that some 70% of the reforms are actually acceptable to the Syriza-led government, but the remaining 30% are toxic and non-negotiable. The current program ends on 28 February. At its end, Greece should get the last tranche of its bailout, which the state desperately needs. But the assessment by the Troika will hardly be positive given the statements by Mr Tsipras. All parties therefore look for a way out. On Wednesday 11 February, the eurozone finance ministers met at a Eurogroup meeting to discuss things with Mr Varufakis. They want to push Greece to accept an extension of the program until things are sorted out. But this meeting was a complete failure. Greece did not even agree to sign a final statement of the meeting for the media and public. Subsequently, Mr Tsipras announced Troika and the bailout program dead. On Thursday 12 February, at the European Council, Mr Tsipras backed even further when he accepted expert talks with the representatives of the Troika institutions - EC, ECB and IMF. His efforts now aim at ensuring a temporary solution, which would keep Greek public finances alive, but without being officially named “a program” supervised by the Troika, until a final solution with the creditors is reached. Next round of talks will take place on Monday 16 February.
26th October 2020
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