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24th Jan 2021

Greece's creditors confident despite election uncertainty

  • The latest opinion polls put the left-wing Syriza and the conservative New Democracy (ND) neck and neck. (Photo: Spyros Papaspyropoulos)

Ten days before the 20 September Greek election, it is difficult to foresee who will run the country, but Greece's partners and creditors want to be sure it will not weigh on the implementation of the bailout agreed in August.

"There is no need for plan B," an EU official said Wednesday (9 September). "Plan A is the only game in town. There is not the slightest indication that the upcoming Greek government will not honour the agreement".

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The latest opinion polls put the left-wing Syriza and the conservative New Democracy (ND) neck and neck, with 26-28 percent of voting intentions. And no party seems to be able to win a majority on its own.

While ND leader Evangelos Meimarakis said he would seek a large coalition to govern, Syriza leader Alexis Tsipras ruled out any alliance with ND. Centrist party To Potami, which is considered as a possible ally to both Syriza and ND, has not indicated its preference.

No discussion

In a televised debate with all party leaders, except Nikos Michaloliakos from the far-right Golden Dawn, Tsipras admitted on Wednesday evening that he "didn’t manage to implement part of [his] pledges" when he was prime minister from January to August.

"But the fight continues and we hope to succeed in the future,” he said.

Meimarakis, whose party was running Greece before Tsipras' victory, said he asked "for people’s vote to complete what we didn’t have time to complete in the previous term."

"In January, when we handed over the country, the economy was in a much better state than it is now," he said.

Due to the electoral uncertainty, "there can be no discussion on how implementation [of the bailout programme] is going on" when eurozone finance ministers meet in Luxembourg on Saturday (12 September) for an informal Eurogroup, the EU official said.

But he indicated that the first review of the programme should start in October, and he downplayed in advance any tension in future discussions.

"A review is a living thing, you adapt continuously," the official said, pointing to the fact that economic indicators often change between the elaboration of a program and the evaluation of the implementation.

Despite their differences, neither Tsipras nor Meimarakis questioned Greece's third bailout programme.

Debt

In an interview with Slovenia's Delo, the head of the European Stability Mechanism (ESM), the eurozone fund that provides the bulk of the bailout, said he was "happy to work together with any future government in Greece".

"What is important is to have a workable government as soon as possible," Klaus Regling said. "It is important that the reforms continue as quickly as possible after the elections."

One of the main issues of the first review, along with pension reforms and the situation of the Greek financial system, will be the issue of the Greek debt.

"If reforms are implemented as agreed and if there is a need for further debt relief – and that is not a haircut – the Eurogroup is prepared to talk about that," Regling said, while insisting "there will be no nominal haircuts".

The issue of the Greek sustainability has been a point of disagreement among Greece's creditors, the EU, the European Central Bank, the ESM and the International Monetary Fund (IMF).

The IMF did not participate in the first disbursement of the bailout in August, but now "every indication points to the IMF actually being on board in the context of the first review", the EU official said on Thursday, suggesting creditors will agree on how to evaluate the Greek debt.

While the IMF insisted the Greek debt was unsustainable because of a high ratio between debt and GDP, the ESM, which owns 40 percent of the Greek debt, says it is sustainable.

"The actual annual burden on the Greek budget and the Greek economy is relatively low," Regling told Delo.

"It is possible for Greece to service the high amount of debt with very low interest rates and very, very long maturities."

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