Brussels will cooperate with a SYRIZA government – Only problem the debt ‘haircut’

Brussels will cooperate with a SYRIZA government – Only problem the debt ‘haircut’

Athens, January 23, 2015/ Independent Balkan News Agency

By Spiros Sideris

“Talks of a haircut sound cute.”

In the same wavelength were the statements of the Commissioner for Monetary EU Affairs Pierre Moskovisi, who made it clear that Greece’s accession to the euro is undisputed, as it was at the height of the crisis in 2011 and 2012. Moskovisi proposed to Greeks to continue on the same path of reforms, because it has brought the first positive results. “What we expect from the Greek government is in any case both achievable and possible”, he said.

Brussels would have no problem cooperating with a SYRIZA government. In some positions, such as staying in the euro, the positions of both sides coincide. What is puzzling is the party’s politicians’ request, like MEP Katrougalos for the partial deletion of the greek debt.

“A debt deletion sounds cute when you’re not a lender”, says Wolf Guntram of Brussels’ think tank «Bruegel». “Such a measure would favor Greece. But assuming that it is made unilaterally, then Greece would lose its access to markets with negative consequences for the country”.

Whatever the outcome of the elections in Greece, the EU wants the country to remain in the euro family. This position has been reiterated many times lately by senior officials in Brussels, for example, the EU Commission president, Jean-Claude Juncker. “There is no such issue”, he said. “Greece will not leave the eurozone and will not be advised to do so”.

Is the eurozone ready for a haircut?

Strongly opposed to the possibility of a “haircut” is the German Finance minister, Wolfgang Schaeuble, but also the Prime Minister of Finland Alexander Stubb. Speaking at Spiegel, Schaeuble warned Greek politicians to not promise before the election more than they can apply afterwards. The problem is that the greek debt is now in the hands of the member-states and any haircut would burden the European taxpayers.

“If Greece proceeded with debt deletion, it would mean that some of the claims that Germany, Italy or Spain have from Greece would be permanently deleted”, says economist Gkountram Wolf. Certainly SYRIZA wants negotiations on the debt, despite reminders, that each new government must respect the agreements made by the previous one.

However, there are slight differences in the views that have been expressed on the matter. French Finance Minister Michel Sapen argued for example, that the eurozone should be ready to talk after the election with the new government about a debt restructuring. His Irish counterpart implied the convergence of an international conference on debt, in which would be discussed the reduction of Ireland’s and Spain’s debt.

Gkountram Wolf cites a number of serious consequences in the event that Greece proceed unilaterally to stop serving its debt. In conclusion, the EU may be forced to reach a compromise with Athens in the form of relaxing the strict conditions and extending repayment of loans by 2050.

IMF: “The debt is debt”

Nobody has an interest in a Greek exit from the eurozone, because for creditor countries, just like the case of a haircut, it would mean a forced removal of their claims. The impact on the other 18 member-states of the eurozone of a scenario of Greece’s exit from the euro is difficult to determine, but pundits consider it would undermine the credibility of the common currency, and the credit reliability of Greece would suffer internationally. For the IMF, which has lent a lot of money to Greece and other countries in crisis there is no other way to pay back the loans. “Common thoughts are welcome, but eventually the debt is debt”, Christine Lagarde stated to the Irish Times.