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Resolving the Greek Debt Crisis — Crucial Next Steps Resolving the Greek Debt Crisis: Crucial Next Steps
(about 1 hour later)
What to Watch For WHAT TO WATCH FOR:
Greek Buy-in In Greece
One of the most important components of the deal agreed to by European leaders on Monday was the requirement that Greece move quickly to pass legislation enacting economic policy changes demanded by its creditors. By the end of Wednesday, Greece must pass a set of measures that would raise value-added taxes and cut pensions, among other changes. Another set of changes must be passed by the end of next Wednesday, July 22. The votes are intended, as much as anything, to show that the Greek government under Prime Minister Alexis Tsipras can hold together in the face of intense political pressure to deliver on the commitments in the bailout agreement. One of the most important components of the deal agreed to by European leaders on Monday was the requirement that Greece move quickly to pass legislation enacting economic policy changes demanded by its creditors. By the end of Wednesday, Greece must pass a set of measures that would raise value-added taxes and cut pensions, among other changes. Another set of changes must be passed by July 22. The votes are intended to show that the Greek government under Prime Minister Alexis Tsipras can hold together in the face of intense political pressure to deliver on the commitments in the bailout agreement.
German Buy-in In Germany
If the Greek Parliament does its part, it will set off another series of steps intended to lead to formal negotiations over the details of the bailout Greece needs to reopen its banks and meet looming debt payments. Among those steps is a vote by German legislators, tentatively scheduled for Friday, authorizing negotiations on a bailout. Although Chancellor Angela Merkel of Germany helped negotiate the bailout deal, her country and her party remain split over whether Europe might be better off ushering Greece out of the European common currency. Her hard-line finance minister, Wolfgang Schäuble, has suggested this week that some members of the government still favor Greece’s departure from the euro over a third bailout in five years. If the Greek Parliament approves the policy changes, it will be a major step toward new talks over details of the bailout that Greece needs to reopen its banks and meet its debt payments. Another step would be a vote by German legislators, tentatively scheduled for Friday, authorizing negotiations on a bailout. Although Chancellor Angela Merkel of Germany helped negotiate the bailout deal, her country and her party remain split over whether Europe might be better off ushering Greece out of the European common currency. Her hard-line finance minister, Wolfgang Schäuble, has suggested this week that some members of the government still favor Greece’s departure from the euro over a third bailout in five years.
I.M.F Buy-in At the I.M.F.
The International Monetary Fund was not a formal part of the bailout agreement reached early Monday between Greece and its European creditors. But it, too, has lent a lot of money to Athens — $23.6 billion as of the end of June – and Greece is in arrears, having missed a payment several weeks ago. The I.M.F has been advocating a bailout to address Greece’s huge debt burden, totaling more than 300 billion euros or more than $330 billion. But now the monetary fund is turning up the heat on that issue, suggesting that it might not be willing to lend Greece any more money if Germany and the other European lenders are not willing to forgive some of the Greek debt or at least find a way to stretch out the repayment schedule to make Greece’s annual interest bill less crippling. The monetary group’s stance is putting more pressure on Germany and others to soften their positions against debt relief — and providing some hope to Greeks that if they deliver on what is being asked of them, they will have an ally when it comes to seeking a break on their loan payments. The International Monetary Fund was not formally involved in the bailout agreement between Greece and its European creditors. But it, too, has lent a lot of money to Athens — $23.6 billion as of the end of June – and Greece missed a payment several weeks ago. The I.M.F. has been advocating a bailout to address Greece’s huge debt burden, but now it is suggesting that it might not be willing to lend Greece any more money if Germany and the other European lenders do not forgive some of the Greek debt or at least stretch out the repayments to make the annual interest bill less crippling. The I.M.F.’s stance is putting pressure on Germany and others to soften their positions against debt relief — and providing some hope to Greeks that they will have a new ally in debt talks.
Unlocking the Money At the Banks
The process of actually getting Greece the money it needs to stay afloat is likely to have several stages. The first deadline for action is coming up on Monday, when Greece needs €7 billion to meet debt payments and other obligations, a bit less than $7.7 billion. Its creditors are working on a bridge loan to provide that money. Greece would then need another €5 billion next month. And its banks need money in order to reopen, something that the government keeps promising will happen quickly but that might take some time. The process of actually getting Greece the money it needs to stay afloat is likely to have several stages. The first deadline for action is Monday, when Greece needs €7 billion, about $7.7 billion, to meet debt payments and other obligations. Its creditors are working on a bridge loan to provide that money. Greece would then need €5 billion more next month. And its banks need money to reopen, something that the government keeps promising will happen quickly but that might take some time.
The Final Package At the Negotiating Table
Assuming the Greek Parliament does its part — along with German and other national legislatures that need to approve a new round of bailout negotiations —-– Greece and its creditors will sit down to work out the details of proving Athens with as much as €86 billion in aid over three years. That is also the point at which the question of debt renegotiation will be on the table. While Germany and others have ruled out forgiving Greek debt, they have expressed a willingness to discuss extending the repayment schedule or reducing interest rates. With the I.M.F. now saying it might not be willing to lend any more money without substantial debt relief, that element of the negotiation could well be the next flash point in the crisis. Assuming that lawmakers in Greece, Germany and other nations give their approval, the Greeks and their creditors will sit down to work out the details of providing Athens with as much as €86 billion in aid over three years. The question of debt renegotiation will also be on the table. While Germany and others have ruled out forgiving Greece’s debt, they are willing to discuss extending the repayment schedule or reducing interest rates. With the I.M.F. now pushing for substantial debt relief, that issue could well be the next sticking point in the crisis.