Greece Looks to Avoid a Third Bailout

Would a third bailout or a debt relief help Greece better cope with the economic crisis?

Posted on 03/16/14
(Photo by SpirosK photography)
(Photo by SpirosK photography)

Greece is raising the prospect of debt relief with international lenders as Prime Minister Antonis Samaras announced a primary surplus of 1.5 billion euros as proof the country’s battered economy will begin to rebound this year.


Samaras said, however, he is keen to avoid a third bailout that may contain additional austerity measures, which he has repeatedly rejected, and particularly ahead of the critical May municipal and European Parliament elections.


Both Samaras and the opposition Coalition of the Radical Left (SYRIZA) agree that Greece cannot repay the 240 billion euros obtained from the EU-IMF-ECB troika. But the government and opposition differ about what to do next. The government is leaning toward asking the troika for lower interest rates and a longer repayment period of up to 50 years, while SYRIZA leader Alexis Tsipras supports seeking better terms or outright default.


The government cannot stand another bailout because of the new austerity terms, said Antonis Klapsis, head of research at the Konstantinos Karamanlis Institute for Democracy in Athens. “It cannot happen because it will be political suicide,” Klapsis told SETimes.


A decision on whether Greece obtains additional financial assistance or debt relief will not be made until after the summer, said Jeroen Dijsselbloem, president of the Eurogroup. “[The burden] has to be reduced; the question is who does it and how to do it,” Dijsselbloem said.


The dilemma comes amidst unresolved reforms and a 2.4 billion euro budget gap the troika has asked Athens to explain how it will solve. The lenders said Greece should meet the established fiscal targets before they release the last of the bailout funds this year or discuss another bailout or debt cut.


Moreover, German Chancellor Angela Merkel ruled out any debt cut in which Eurozone taxpayers will pick up the tab.


Analysts said potential court rulings that military and emergency services cuts totaling 500 million euros are unconstitutional may undercut the surplus and complicate the situation.


Everybody agrees the debt is not sustainable, even Germany, said Charalambos Tsardanidis, director at the Institute for International Economic Relations in Athens.


“The problem is by which means they will reconstruct the debt when they start negotiating,” Tsardanidis told SETimes.


Greece’s previous government hit private investors with losses up to 74 per cent in 2011, jeopardizing Greek banks, bringing those in Cyprus to the edge of ruin and nearly wiping out many bondholders, including in the diaspora.


“Greece does not need a third bailout, nor can it afford the negative impacts on everyday life of the majority,” Nikolaos Bouzas, an economist at the National Centre of Social Research in Athens, told SETimes.


Samaras said he hoped to find a solution before Greece’s EU presidency term expires on June 30th, or even reach a tentative agreement with the troika prior to the upcoming May elections when Greece must also make a 10 billion euro bond payment.


It is a tight rope act for Greece, said George Tzogopoulos, a research fellow at the Hellenic Foundation for European & Foreign Policy in Athens.


“The country is receiving loans even to pay its interest rates. Its negotiating position is not very strong and consensus is absent,” Tzogopoulos told SETimes.


This article was first published by Southeast European Times.


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