German Chancellor Angela Merkel has reportedly said that Greece’s major opposition Coalition of the Radical Left (SYRIZA) leader Alexis Tsipras would co-operate with Eurozone officials if elected and not renege on the country’s debt.
SYRIZA is on course to win the critical Jan. 25 elections and Tsipras said if he wins – and can form a coalition that would likely be needed – that he would renegotiate harsh terms that came with international loans or walk away from what the country owes, putting its Eurozone membership in jeopardy.
But Merkel said if he came to power he would quickly realize he can’t do that and would have to – as did current Prime Minister and New Democracy leader Antonis Samaras – abide by the terms of two bailouts of 240 billion euros ($306 billion) or see Greece left broke.
Tsipiras opposes the austerity measures that came with the loans but has already moderated his earlier vows to renege, easing some anxiety in the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) and investors.
Germany is the biggest contributor to the two rescue packages but Merkel demanded, and got, big pay cuts, tax hikes, slashed pensions and Greek worker firings in return to insure her banks would get repaid.
Greece is set to run out of money by mid-year if it can’t break the deadlock over its rescue program, according to two different officials from the international community with knowledge of the matter who spoke to the Bloomberg news agency.
That looming deadline will put the new government under immediate pressure to negotiate over an aid extension and how to trigger debt relief and two unnamed German officials told Bloomberg that she’s confident he would not risk a collision with her or the Troika.
Greece has enough money only until the end of February and political uncertainty and hopes of better terms have led many Greeks to stop paying taxes.
But in July and August, two bond repayments to the ECB totaling 6.7 billion euros ($7.7 billion), probably would overwhelm available buffers, they said, and one SYRIZA official has suggested the government just wouldn’t pay them.
“There is already a commitment of the euro area, dating from late 2012, to take a look at debt sustainability in Greece if the country implements all agreed reforms,” Klaus Regling, head of the European Stability Mechanism firewall fund, said in a Jan. 13 interview with Diario Economico. “This may happen.”
Merkel is sticking to her position that the next government is tied to the commitments its predecessors, Samaras and the PASOK Socialists made.
Greece’s aid program, set to expire at the end of last year, won an extension through February to allow time for talks with its international creditors.
SYRIZA – as does Samaras – favors new debt terms such as a longer time to repay and lower interest rates but concessions were already made that limits how much more could be made, EU officials said.
SYRIZA though also has suggested he wants to walk away from a big chunk of the debt. Its demand for a “significant haircut” on public debt is “reasonable and shared by many investors, analysts, academics and even European officials,” Panos Skourletis, the party’s spokesman, told Bloomberg.
We will put on the table the force of our arguments and the experience of the total failure of the conditions attached to the Greek bailout.”