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The Cable

The Cable goes inside the foreign policy machine, from Foggy Bottom to Turtle Bay, the White House to Embassy Row.

Europe, Once Again, Kicks a Long-Term Solution to Greek Debt Down the Road

Everyone says Athens needs debt relief. But Germany won’t give it.

By David Francis

June 15, 2017, 2:20 PM

Greek Prime Minister Alexis Tsipras got the cash he needs to meet some urgent payments next month to his creditors. But Athen’s financial crisis will live to see another day.

European finance ministers met in Luxembourg Thursday, where they approved a $9.5 billion injection of cash that will allow Athens to keep up to date on its bond payments; Greece owes European creditors $7.8 billion early in July. In addition, the ministers agreed that some debt repayments could be delayed by 15 years. But the issue of some form of longer-term debt relief still hangs over the talks, now in their seventh year.

IMF chief Christine Lagarde is in Luxembourg as well. To appease Germany, which said it could not continue to bailout Greece without IMF participation, Lagarde recently agreed to support the bailout — though without contributing any money to it.

She insists that without debt relief for Athens, continuing with bailouts will only repeat the past cycles, which saw Greece run up $355 billion in debt. Since 2010, Greece has received three bailouts from Europe in exchange for pension reforms and tax and spending cuts implemented over the years.

France and Italy also have urged some debt forgiveness; Greece has gotten to a point where it has little prospect of ever paying back what it owes, which essentially shuts it out from capital markets. wants to forgive some of what Athens owes.

And the Greeks, who earned their prior bailouts by promising to cut budgets, trim government payrolls, and make painful economic reforms, are now insisting that they should be rewarded.

“Greece has fulfilled its commitments and adopted the required reforms. Now it is time for the Europeans to comply with their commitments on debt relief,” Greek President Prokopis Pavlopoulos said in an interview with German daily Handelsblatt.

The Greek people are once again growing impatient with spending cuts. On Thursday, some 1,500 pensioners protested in Athens against more than a dozen rounds of pension cuts since austerity was enforced seven years ago.

But Greece’s plight doesn’t concern Europe quite as much it did just a few years ago. European divisions are rife and the European Union itself is under fire. And with President Donald Trump espousing an ‘America First’ foreign policy, Europe has plenty of major challenges to deal with.

“European leaders now have bigger fish to fry, with Trump and Brexit,” said Mujtaba Rahman, head of the European practice at the Eurasia Group. He said the best Greece could hope for is some sort of limited debt relief deal in 2018, which will likely be agonizing to extract from Europe but still won’t solve Athens’ woes. European leaders, Rahman said, “want to spend their limited political capital addressing these challenges and the future of the EU, not yesterday’s problems, which is how they see Greece.”

Photo credit: LOUISA GOULIAMAKI/Getty Images