by
Wolfgang Tucek*
The spectre of Grexit (Greece’s withdrawal from the eurozone) has reemerged. Among others, potential next US ambassador to the EU Ted Malloch has predicted it. Is it really a risk?
I would pay little attention to the statements issued by the United States’ possible new ambassador. The fact is, the so-called second review (of the bailout programme) has been going on for a while. And the fact is that the International Monetary Fund (IMF) has come out with a negative appraisal of Greece’s debt sustainability. There are different opinions: the Anglo-Saxon world tends to agree with the IMF, but the rest of Europe sees it very differently, as Greek growth has clearly been positive.
Tax revenue has increased so much that a primary surplus of between 2 and 3% is on the cards, while over 3% is predicted for 2018. Even though these are preliminary figures, such a negative review of its debt development is just following old trends.
It hasn’t been enough to convince the IMF and bring them onboard the current bailout programme, though. From a German point of view at least, the fate of the programme relies on it…
It is essential for many countries that the IMF has its own dedicated programme for Greece. The outlooks of the four involved institutions, the European Commission, the European Central Bank, the European Stability Mechanism and the IMF, have to be largely congruent.
But the fact remains that the IMF wants more debt relief for Greece and that the eurozone is unwilling to comply.
No. There was an agreement in May 2016 that set out what debt relief would be made in the short-, medium- and long-term. We have already implemented the short-term measures via a reduction of long-term Greek debt by 20% of GDP. At the end of the programme, in 2018, if necessary, other measures will follow…
So there won’t be any further discussion about more debt relief or haircuts in one way or another?
No, it will be more a case of discussing the details and arrangements of what has already been agreed. The major difference between the European institutions and the IMF is in their assessments of the medium-term fiscal packages.
Is Grexit not an option?
In our circles, no one thinks that would solve anything. No one wants it and it’s not feasible or advisable. It’s a non-issue.
Does the agreement with the IMF have to be finalised before the next meeting of the EU’s finance ministers next week?
Next week might come too soon for every ‘i’ to be dotted and every ’t’ to be crossed. I would be very happy if significant progress with the Greek government is made by that point. It might be the case that the agreement is ready by the meeting after, in March.
Are things going to be even more difficult because of the Dutch elections on 15 March?
The debate is difficult in any case. But the Dutch Constitution says that there will be no problems even after the elections if the Greek programme sticks to the parameters that have already been agreed.
When does the deadline for an agreement run out? Before France’s elections in April or after the summer, when the next scheduled repayment is due?
The real time pressure is dictated by what damage further delay will do to the Greek economy. Growth, private investment in companies and private consumption are all at stake.
But if the IMF doesn’t come on board then the bailout programme is scuppered and a new one will have to be set up. That would be a long process, no?
There are plenty of indications from IMF chief Christine Lagarde that they are still determined to participate in the Greek programme. There’s no reason to doubt it now.
*First published in www.euractiv.com
By: N. Peter Kramer
