After some more concentrated efforts, Greece and its creditors announced an agreement in principal, way ahead of the August 20th deadline. This sent the euro higher.
But while Greek PM Tsipras faces little opposition at home, Germany doesn’t seem keen to play along with basically all its European peers. Here are three worrying signs:
- Minor issues: Upon announcing the agreement, the sides said there are still some “minor issues” left. While both sides said these are not deal-breakers, minor issues could always become major. The mere existence of issues means a deal is not 100% done.
- Merkel skepticism: Despite the technical agreement, acknowledged also by the EU, Germany is still not to keen to sign off the deal. Merkel and Tsipras talked on the phone and Merkel expressed skepticism, repeating the stance of yet another bridge loan instead of a full bailout, in order to keep talks going on.
- Debt sustainability elephant: The topic of debt was always a big issue. Greece wants debt relief, the IMF repeated that Greece’s debt is not sustainable and also the ECB said that some form of debt restructuring is “not controversial”. The July 13th agreement talks about talking about debt after the first review – kicking the can down the road. However, deputy finance minister Jens Spahn said that it is “important from German point of view that the IMF agrees with the evaluation of the ECB and EU Commission on Greek debt sustainability and reforms”. We clearly know that the IMF disagrees with Germany on the sustainability of Greece’s debt. At the exact same time, Germany wants the IMF to remain on board.
All in all, it seems that German finance minister Wolfgang Schäuble is still frustrated he didn’t manage to kick Greece out of the euro-zone a month ago.
Germany is skeptical about a deal everybody else, including even Finland, is ready to sign off. Getting the IMF to agree on a position they clearly oppose and at the same time insist there is no deal without the Fund shows they want negotiations to fail.
What do you think?
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