“Why Is the Eurozone Back in Crisis Over Greece?” Jim Brunsden, Financial Times, 8 February 2017

“Athens faces another big debt payment and eurozone politics makes relief impossible”

Greece’s international creditors --Eurozone governments and the IMF-- disagree about the country’s situation and how to make its debt manageable. The IMF argues the austerity in Greece’s third €86bn bailout needs to be eased, by lowering budget surplus targets and granting Athens debt relief. But a German-led group of fiscal hawks refuses to let off. Only the European Stability Mechanism, the eurozone’s €500bn bailout fund, has been lending to Greece. The IMF has said it will not join the third programme without big changes. Berlin has never really trusted EU authorities (the European Commission), to monitor Greece’s bailout. That demand has gradually become a political red line in Germany. Should the impasse continue, it could be impossible to secure parliamentary approvals for releasing future tranches of bailout aid, throwing the whole programme into jeopardy. With elections imminent in Germany and the Netherlands, bailout politics in Berlin and The Hague are becoming even more fraught.  Greece has enough cash to make it to July. But political reality is different: EU officials fear a scenario where prolonged uncertainty hits investor confidence in Greece, turning the IMF’s predictions into a self-fulfilling prophecy. The Dutch general election — the first of a series of crunch votes in Europe this year-- comes in March. Among policymakers, there is a shared sense of the need for a breakthrough. Behind the scenes, there are intense discussions to find a solution. As one EU official puts it: “February is not formally, but [is] realistically, the time when one needs to reach political agreement.”

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“Why Is the Eurozone Back in Crisis Over Greece?” Jim Brunsden, Financial Times, 8 February 2017


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