Germany: No Debt Restructuring for Struggling Greece
Greece, being the problem child that it is, is getting a check up from Dad this week to make sure things are going well enough for the country to get its allowance.
Dad in this case is European Central Bank Executive Board member Joerg Asmussen, who is just dropping by to ensure reforms are being made so the country can draw its next round of bailout funds, Reuters reports. The International Monetary Fund, European Union, and ECB are acting as the financiers of struggling Greece, providing funds so that the government there can stay operational and avoid defaulting on its debt.
However, the lenders have grown increasingly impatient with Greece, where a questionable political culture has slowed many attempts at reform.
The IMF has publicly willed Greece to move faster in reforming its overburdened public sector and increase privatization and cost-cutting efforts, according to the BBC. While protests and parliamentary feuds have made privatizing a difficult road to go down, the country has at least found itself with a recent primary budget surplus — though a surplus not factoring in payments on debt and other entitlements.
Still, the extra cash comes at a time when Greece’s economy isn’t really structurally changing at all: Tax collection continues to be punitive and weak, debt remains high, and unemployment remains an omnipresent disease crippling the country’s chances of moving forward.
This is the climate Asmussen is arriving in for his most recent checkup. In an emailed statement to Reuters on Tuesday, the ECB said of his visit, “In the run-up to the next troika review mission, ECB Executive Board member Joerg Asmussen will visit Athens for bilateral meetings with Greek policy makers and representatives of society and the business community to discuss the Greek adjustment program and wider euro area developments.”
Questions remain, though, about Greece’s ability to cope with its debt even as further funding arrives from lenders. Speculations that Greece would need some sort of writedown or renegotiation of its debt have since cropped up, and Germany has been none too pleased with this kind of talk. In an interview with Bloomberg, Volker Kauder, the parliamentary caucus leader of German Chancellor Angela Merkel’s Christian Democratic government, said the international community can forget about that notion.
“I don’t foresee a debt writedown for Greece whatsoever,” he told the publication. “Even a discussion about this paralyzes the reform efforts in these countries.”
With reforms coming at a slow pace and European lenders stepping up the pressure for more, Kauder’s hesitance toward this kind of talk makes sense, as the right incentive structure is likely to be beneficial in attempting to transform Greece from being a drag on euro zone growth into an asset.
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