The Greek crisis faded into the back burner but is certainly not forgotten and it is set to reach the agenda quite soon: Greece has to pay the ECB on August 20th, and it doesn’t have the money.
The big elephant in the room remains debt restructuring: after the IMF clearly supported it, more voices from the ECB are heard supporting this as well. Will Germany allow it already in the first agreement?
Greece has only a received a temporary bridge loan to cover its immediate needs, and the cash has run out. Negotiations for the 80-90 billion euros of a third bailout are making little progress.
The July 13th aGreekment talks about talking about restructuring only after the first review of the third bailout, and this means November. Greek PM Alexis Tsipras has promised his people debt relief in November.
But his country is not exactly in his hands. Here are where his creditors stand:
The troika
1) IMF
But this may come already earlier. While IMF MD Christine Lagarde has been quite careful, her staff certainly rejects any agreement that doesn’t address Greece’s unsustainable debt. They see it as ballooning to 200% and will not want to support a third deal.
2) The ECB
The European Central Bank holds the tools: it effectively shut down Greek banks and severely disrupted the Greek economy once Greece did not accept the terms laid down on it and later allowed them to reopen.
But this powerful organization has also made different tunes, supporting the Greek call for debt restructuring. Apart from Mario Draghi’s saying that “some form of debt relief is not controversial” in a side comment, we are hearing more and more voices supporting it:
- ECB member Ewald Nowotny said they could consider extending the maturity of Greek debt.
- ECB member Benoit Coeure said the question is how to restructure Greek debt rather than if to do it.
- ECB member Ignazio Visco said Greek debt “needs to be dealt with” and adding that that extending repayments will not be enough. We can see hear some kind of support for a clear haircut – more than just restructuring.
3) The Euro-Zone (Germany)
As we’ve already learned, the euro-zone is firmly in the hands of Germany. Germany opposed any concessions to the debt stricken country and German finance minister Wolfgang Schäuble actively pushed for a Greek exit of the euro-zone.
Perhaps he will get what he wished for: Germany wants the IMF and the ECB on board but does not want any debt restructuring now. These two desires may not be compatible. If Germany insists on both, we could see negotiations break down once again and a Grexit.
Former Greek finance minister Yanis Varoufakis said that Schäuble’s plan from the outset was to push Greece out in order to discipline others. Nobody denies this and becomes harder to do so as Varoufakis also mentioned that he recorded the Eurogroup meetings.
The Plan
All sides wish to reach a deal on August 18th, before the August 20th deadline, but in the weeks that passed since July 13th, it is hard to see signs of hope.
As with any set of negotiations, a deadline serves as an accelerator to the talks. The sparks might return to the limelight next week.
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