Quid pro quo deal for Greece?
German lawmaker, ECB official suggest EU would offer better repayment terms for more reforms
Europe is calling for more reforms and a greater fiscal adjustment in order to offer Greece better conditions for the repayment of its 110-billion-euro bailout loan. At the same time, Finance Minister Giorgos Papaconstantinou said a haircut would constitute a huge mistake.
Papaconstantinou had expressed hope on Monday that Greece would secure more favorable terms to pay back its loan, and yesterday Michael Meister, the alternate head of the parliamentary party of Germany’s governing Christian Democratic Union, said this discussion “is heading in the right direction.”
However, speaking to Reuters, the German lawmaker added that “in order to expect additional help, Greece will have to show additional reforms.” The reason Meister is asking for extra work from Athens is to limit the risk of a default, suggesting that only then could the discussion on reducing the interest rates for the 110-billion-euro loan continue.
Similarly, the vice chairman of the European Central Bank, Vitor Constancio, stated that for rumors about the restructuring of the Greek debt to stop, Greece will need to strengthen its fiscal streamlining program. He added that “there are many people and bodies which take an interest in maintaining those rumors. Some of them wish to profit, should there be a restructuring in the eurozone.”
Speaking to state TV channel NET, Papaconstantinou emphasized that “a restructuring, haircuts on debt, would constitute a huge mistake for the country.”
The Greek minister added, “It would come at a very great cost and we would not benefit; we would stay out of markets for 10-15 years; the wealth of Greek pension funds would suffer write-downs; we would have problems in the system and therefore in the real economy.”
He went on to suggest that growth means that Greek economy will regain people’s trust and that does not come via a magic button. Returning to the markets remains Greece’s objective.
It now appears that the first bond issue will take place in June, but will likely concern diaspora Greeks, probably in the United States.