Passport

Germany Won’t Cut Greece Any Slack On the $358 Billion It Owes But Can’t Repay

Greece is set to get cash from Europe, but not relief on debt it can't pay.

GettyImages-494198526

European finance ministers are poised to free up $12 billion in loans to Greece early Wednesday, meeting their self-imposed deadline to fill the coffers of a close-to-broke EU member. Deal or no deal, though, the grim reality remains the same: Athens owes a jaw-dropping $358 billion, and there’s no way it will ever be able to pay it all back.

The International Monetary Fund is well aware of Greece’s unrelenting economic nightmare — on Monday, the fund predicted double-digit unemployment in Greece until at least 2040, and the country’s economy has been battered by years of recession. IMF chief Christine Lagarde insists Europe forgive some of Greece’s debt if the fund is to participate in the bailout program.

Enter the Germans, who have steadfastly refused to even consider a Greek haircut until at least 2018, after Germany holds parliamentary elections in 2017. They also won’t continue to provide bailout funds unless the IMF puts up some money as well. Without Germany, both parts of the rescue package fall apart because Berlin is the biggest financial donor to Athens and holds more of its debt than any other EU member. Germany’s finance minister, Wolfgang Schäuble, once again made that clear Tuesday that a so-called haircut is far from imminent; he said debt relief is not a “pressing problem” in Berlin.

Top German officials worry that Athens won’t make the pension reforms, tax cuts, and spending decreases it has promised — Greek Prime Minister Alexis Tsipras has struggled to get individual bills through parliament — and lawmakers in Berlin are unconvinced Greece will live up to its end of the $96 billion bailout approved last summer.

Some German allies want Berlin to go a bit softer on Athens. French Finance Minister Michel Sapin said Tuesday, “Greece needs room to breathe, it needs certainty. It has made considerable efforts, which again we have seen this weekend in adopting a difficult package of measures.”

Little substantive process was made on the impasses that remain between the Eurogroup, or the 19 finance ministers who are meeting in Brussels Tuesday. As their meeting crept into the Belgian night, a grand solution appeared unlikely. Greece’s ANA news agency reported Tuesday that $12 billion would be given to Athens and that talks over outstanding issues — primarily debt relief — would continue. This loan would reportedly be split up into two separate tranches: one now, and one in the fall, conditioned on Greece making the reforms it’s promised.

As the meeting took place, in scenes reminiscent of violent protests in Athens, anti-austerity protesters took to the street of Brussels where they clashed with police. This shows little has changed since last summer, when both brutishness and disagreement defined the crisis.

Photo credit: JOHN THYS/Getty Images

David Francis was a senior reporter for Foreign Policy, where he covered international finance. @davidcfrancis

Trending Now Sponsored Links by Taboola

By Taboola

More from Foreign Policy

By Taboola