Our Opinion: 2017

Another Greece crisis looms…

Ever since the Greek crisis began seven years ago, Greece and its creditors have failed to conclude a single review of the country’s debt relief programmes on time. The latest delay risks rocking the Euro-zone.

So it’s no surprise that the current one, which is to decide whether Greece gets the next tranche of its third rescue package, is running late. The government had hoped to finish it by the end of last year, and start negotiations on debt relief to bring its public borrowing down to sustainable levels.

All sides appear to be unreasonable. Germany won’t move without the International Monetary Fund (IMF), which is insisting that the government make politically toxic pledges, to meet a tough fiscal surplus target of 3.5% of GDP. The left-wing populist Government, meanwhile, is refusing to cut generous pensions or lower the country’s tax thresholds. The ending is likely to be a government back down or a snap election. Prime Minister, Alexis Tsipras could call an election if he feels creditors are demanding too much. A vote is likely to see his administration replaced by a centre-right party.

The IMF wants Eurozone countries to offer debt relief to Greece, writing off some of their loans in a bid to stop its debts running out of control again. Bit other countries reject this idea, with Germany’s Finance Minister saying it breaks the terms of the Lisbon treaty.

Mr Tsipras would prefer to see debt relief than any extra austerity, telling other nations to “be more careful towards a country that has been pillaged and people who have made, and are contributing to make, so many sacrifices in the name of Europe.” He went on to say that new demands for Greece are “absurd, imaginary unreal, it doesn’t matter, as long as it made to look like Greece is to blame.”

There will, no doubt, be some sort of fudge. The crunch point will be July, when Greece must repay €6bn, and talks of ‘Grexit’ likely to resurface. Talks about debt relief are likely to get delayed and, without them, there is no prospect of the economy getting back on a sustainable long-term growth path. This long running problem is only ever managed – never resolved.

13th February 2017