EU open to later debt repayment, not forgiveness

Europe showed a willingness on Monday to give Athens more time to pay its debts, but little sign that it would yield to a new Greek government’s demands for debt forgiveness.

European Union leaders and policymakers responded to Greek anti-bailout party Syriza’s election victory on Sunday with warnings that a debt reduction for Greece would be against eurozone rules and would send the wrong message to other bailed-out members of the single currency, including Cyprus.

Before any talks on more time for Greece to repay its debts can start, Athens must get an extension of its existing bailout to give itself time for negotiations on future economic policy and on longer loan maturity with international lenders.

“My forecast is that an extension of the (Greek bailout) programme will have to happen,” Thomas Wieser, who heads the Euro Working Group that prepares decisions of eurozone finance ministers, told Austrian broadcaster ORF.

Syriza officials have previously said their government’s first priority would be to ask lenders for a few months of time so both sides can discuss their positions from scratch rather than picking up from where the previous government left off.

They resist the idea of extending a bailout programme that they are staunchly opposed to. Tsipras last week dismissed the February 28 deadline when the bailout expires, saying he had until July to negotiate with lenders.

The extension of the bailout is needed because without it Athens will not be eligible for the European Central Bank’s plan of government bond purchases and private investors would not lend to it either.

The chairman of the group of eurozone finance ministers, Jeroen Dijsselbloem, said there was very little support in Europe for writing off Greek debt.

Arriving for the eurogroup meeting on Monday, Dijsselbloem congratulated the winning party, saying: “We stand ready to work with them as we have always worked with previous Greek governments.” He said that extension of the period for repayment of Greece’s debt would be the first thing under discussion between the eurogroup finance ministers and Greece, but added that a formal request for extension must come from Athens before it could be agreed.

Dijsselbloem said that discussion would also centre on the ‘sustainability ‘ of Greece’s debt, though he declined to go into more detail on what that may mean.

European Central Bank board member Benoit Coeure said the ECB would not take part in any debt cut for Greece, but changes to the debt maturities were possible.

Germany’s EU Commissioner, Guenther Oettinger, said a debt restructuring for Greece would send the wrong message to other countries in the eurozone.

“If we cut debt (for Greece), that would give the wrong signal to Portugal or Ireland, Cyprus or Spain,” he told German radio Deutschlandfunk.

The IMF also said Greece treatment for its debt.

“There are internal eurozone rules to be respected,” IMF chief Christine Lagarde told Le Monde daily. “We cannot make special categories for such or such country.”

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