Athens weighing its options
Gov’t torn between making concessions for a deal with creditors and letting talks drag, with risks that entails
As it has become clear that a deal with Greece’s international creditors still appears a bridge too far, the government is reportedly split between making the concessions required to reach an agreement soon and opting to live dangerously by waiting it out, with all the risks to the economy that entails, hoping for more favorable conditions.
Berlin, for its part, has signaled that a deal on the second review of the country’s third bailout must be concluded sooner rather than later.
German Vice Chancellor Sigmar Gabriel said as much during his visit last week to Athens, while Finance Minister Euclid Tsakalotos was recently told by the country’s lenders that he should not expect conditions to change favorably for Greece, and that if negotiations drag on until June the repercussions for the economy could be catastrophic. But given that the biggest and toughest obstacle to a deal is the highly unpopular and contentious demand for labor reform, some government members appear bent on Greece taking its chances by allowing the talks to drag on. The reasoning behind this line of thought is that by the end of April, and under US pressure, the International Monetary Fund may withdraw from the Greek bailout program.
Furthermore, US President Donald Trump’s choice for deputy undersecretary of the Treasury for international finance, Adam Lerrick, could, according to a recent story published in the New York Times, signal the decision by the US to change its stance to international organizations such as the IMF and World Bank. Lerrick, for his part, has been a fervent critic of both organizations, claiming they waste taxpayers’ money. Athens expects a clearer picture to emerge after the Spring Meetings of the IMF on April 20-23. According to sources, if the IMF does indeed decide to pull out of the program, the government believes it could clinch a deal with the country’s European partners that would still be hard to swallow, but palatable, nonetheless, to the SYRIZA party base. But it will be engaging in a high-stakes gamble – if opts to go down the path of waiting it out until the end of April – as the continued uncertainty would further damage the prospects of economic recovery. Secondly, if the IMF is out of the program, then there is a risk that European creditors would seek changes to the program which may not be to the government’s liking.