Sunday

27th May 2018

Opinion

Europe ready to tackle Greek debt relief

  • Public debt is a major European problem, not solely a Greek one (Photo: Eric Maurice)

During the second congress of the Syriza party last week, Greek prime minister Alexis Tsipras set debt relief issue as the top priority for the government, seeking to reach a compromise with creditors by the end of the year.

The decision to address Greece’s unsustainable debt was taken during last May’s Eurogroup, with the European Stability Mechanism elaborating short-term and mid-term measures that could be submitted in December’s Eurogroup.

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The European Commission, through president Jean-Claude Juncker and commissioner Pierre Moscovici, has sent a clear message to all involved parties, stressing their commitment for successful conclusion of debt talks by the end of 2016.

The Progressive Caucus - the group of MEPs from the Left, the Socialists and the Greens - has also been intensifying pressure towards Greece's creditors. They recently signed an open letter, addressed to Moscovici, asking for the conclusion of Greece’s second bailout review and debt regulation by the end the year.

Public debt is a major European problem, not solely a Greek one.

Some of the biggest economies of the eurozone – like Italy, France and Spain – have a hard time paying their debts, missing targets on sustainable growth rates within the restrictive framework of austerity.

Nonetheless, the Italian government, pressed by an unstable banking system and the tough financial policy encouraged by the Stability and Growth Pact, endeavours to soften macroeconomic goals and endorse the growing concerns of the social and professional groups that have been direly hit by austerity.

The same goes for France, with the far-right xenophobic Front National capitalising on social grievances against Hollande’s conservative policies like deregulation of the labour market.

In Italy and France, populist movements aim at playing an important role in the coming elections, capitalising on society's growing disenchantment with the political establishment.

Meanwhile, Germany’s finance minister Wolfgang Schaeuble is trying to take advantage of a leadership gap that has been created inside the CDU as chancellor Angela Merkel tries to maintain the support of coalition partner CSU and fight the growing popularity of the AfD.

Schaeuble's irrational stance

Schaeuble wants to downgrade the importance of addressing Greek debt, ignoring the binding agreement of May’s Eurogroup, but also the fact that creditors already agreed to deal with this issue in July 2015.

It is deeply disappointing to witness a single finance minister trying to block positive developments in another member state.

Schaeuble’s irrational and short-sighed approach is destructive for European cohesion because it has been adopted by far-right and populist parties that work for the dissolution of the European Union and the creation of chaotic social and financial conditions.

In addition, Schaeuble’s stance goes against some of the fundamental values of the European Union, such as solidarity and collective decision-making.

The European Central Bank (ECB) works as a consultative body in Greece’s debt negotiations, having assumed an active role in bringing together EU institutions with the International Monetary Fund (IMF).

At the same time, the ECB is preparing the necessary steps so that Greece can be part of the quantitative easing programme after the second review of the bailout.

Such a development would be positive for the domestic economy, as it would enhance liquidity and trigger financial transactions.

A broad alliance

In the broader context, the ECB has been called to deal with the eurozone’s catastrophic austerity politics that have almost frozen growth rates below 2 percent since 2010, weakened macroeconomic indicators, and created a suffocating, unfriendly environment for investments, especially in the European South.

Quantitative easing, which boosts eurozone’s economies with €80 billion every month, is still absolutely necessary in the absence of signs of a steady recovery.

All these facts lead us to three major conclusions.

The first is that we have reached a point where even strong supporters of austerity seem incapable of convincing the public with their arguments.

The second is that the Greek government has built and broadened alliances within European institutions and member states that acknowledge not only the need to restructure Greece’s debt, but also to deliver another economic model for the eurozone that will be beneficial for all member-states rather than a small group.

The third and last point is that both the European institutions and the United States are moving in the same direction with regards to the Greek bailout programme – towards debt relief and, more broadly, the quest for building on a new growth model for Europe.

Dimitrios Papadimoulis is vice president of the European Parliament, head of the Syriza party delegation

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