11th Dec 2023

Greece needs 'new arrangement' on debt deal

Greece has indicated it will shortly ask for further assistance, in a sign the bailout extension agreed last week is just the beginning of a longer battle between Athens and its international creditors.

Finance minister Yanis Varoufakis told Handelsblatt newspaper that Greece will need a "new arrangement" in order to meet the country's repayment obligations of around €11.5 billion between June and August.

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  • The bailout extension was agreed but more disagreement is on the horizon (Photo: Constantine Gerontis)

He said he was not asking for some of the country's debt to be written off, saying that Athens has learned that "haircut is a dirty word. I've learned that".

"Just as we don't want to hear the word 'troika' anymore, so our creditors don't want to hear the word haircut. I can understand that," he said, with troika referring to the trio of lenders the European Commission, the European Central Bank and the International Monetary Fund, and synonymous for many Greeks with harsh austerity measures.

"We intend to begin the conversation with our partners and institutions regarding debt sustainability and debt rescheduling.”

Varoufakis, who has been giving a marathon round of interviews ever since taking the finance post at the end of January, said there were more "intelligent" options to a debt haircut that could be considered, such as linking credit to the Greece's economic growth.

He spoke of sovereign bonds whose returns were tied to Greece's GDP figures: "Then our creditors would also have an interest in Greece's economy starting to grow again."

Greece received a four-month extension to its bailout, which was due to run out on 28 February, last week, but only after much political bad blood had been spilt between Athens on one side and Germany, the main eurozone creditor, on the other.

Athens was riled by what it saw as German obstinacy and insistence on following the austerity path, Berlin by the Greek government's way of negotiating.

At times the exchanges between Varoufakis and Schaeuble on the Greek question have looked almost personal, with the German finance minister saying he was "stunned" by an interview his Greek counterpart gave to domestic radio last week about the country eventually getting debt relief.

The German parliament passed the bailout extension on Friday with an overwhelming majority (542 to 32), however, the 29 who voted against represented the biggest rebellion for chancellor Angela Merkel's CDU party yet over a bailout vote.

German media also suggested that many of those in the centre right who voted in favour of the extension had deep misgivings.

Spiegel Online notes that centre-right German politicians are giving the signal: "We don't want to and we can no longer hold Europe together. Not at any price".

Meanwhile, Varoufakis has already indicated where the battlelines will lie.

He said Athens will prioritise debt repayments to the International Monetary Fund (some are due in March), but that repayments to the European Central Bank are "in a different league".

"We shall have to determine this in association with our partners and the institutions."

“What we can do is package a deal that makes these repayments palatable and reasonably doable as part of our overall negotiation regarding the Greek debt,” Varoufakis told Associated Press.

Schaeuble, for his part, also took to the pages of Bild newspaper to urge that time be given to Athens' left-wing government.

"I am confident that it will put in place the necessary measures, set up a more efficient tax system and in the end honour its commitments. You have to give a little bit of time to a newly elected government," he told the paper on Sunday. "To govern is to face reality."

His more emollient tone came after Bild, the country's most widely read newspaper, ran an article last week suggesting readers take a selfie with the newspaper's front page which said "Nein" to further aid to Greece.

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