ATHENS – No matter what international lenders say, Greece can’t recover without a big cut to the debt it owes, a Leftist politician in line to be the next Finance Minister if the major opposition Coalition of the Radical Left (SYRIZA) wins has said.
“To promote reforms one must settle the debt issue,” Yiannis Dragasakis, the senior economist at anti-austerity party SYRIZA who are favorites to win Sunday’s general election, told Agence France Presse in an interview.
“The possibility of recovery is limited” because Greece is laboring under a debt of nearly 320 billion euros ($371 billion), or 175 percent of national output, he said. His party’s stance has been roundly criticized by investors and bankers.
SYRIZA, which promised to renegotiate with the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) the harsh austerity terms that came with 240 billion euros ($306 billion) in two bailouts has rattled markets with talk it might also default on the debt otherwise.
IMF chief Christine Lagarde on Monday warned of “consequences” if European countries try to renegotiate their debts.
“Collective endeavors are welcome but at the same time a debt is a debt and it is a contract,” Lagarde told the Irish Times during a visit to Dublin.
“Defaulting, restructuring, changing the terms has consequences on the signature and the confidence in the signature,” she said.
The writedown in the value of the debt to private creditors plus the 240-billion-euro rescue package means that Greece is now mostly into debt to the IMF and its Eurozone partners, with the heaviest repayment period still some years off as the interest has been lowered already and the term extended.
Dragasakis said that, “Our proposal does not solely concern Greek debt, but the problem of excessive debt facing many European countries.”
He added: “It is necessary to adjust the debt because it is not currently sustainable. The Greek economy has suffered a disaster and its capabilities are currently limited.”
Dragasakis is the only one of SYRIZA’s leaders to have prior government experience, having briefly served as Deputy Finance Minister in a five-month unity government in 1990.
He said, however, that cutting the debt will mean little without reforms to combat endemic corruption in the Greek public sector and civil bureaucracy which no government has ever been able to do.
“Even if the debt were zero, we would have problems without the necessary reforms in the state and civil administration.”
SYRIZA wants to erase more than 50 percent of Greece’s debt, and divert funds that are currently being used to repay bonds to help the country’s economic recovery.
SYRIZA leader Alexis Tsipras said he believes the Troika will blink and relent to his demand if it fears that Greece will be forced out of the Eurozone and jeopardize the financial bloc otherwise.