Greece’s new prime minister Alexis Tsipras is finding out that his country’s massive debt won’t go away just because he wants it to. Maybe that’s why Germany has a strong economy and Greece doesn’t.
Jane Wharton of Express UK reported:
Merkel refuses to write off Greece’s debtIn her first interview since Syriza won the Greek election last weekend, Angela Merkel has made it clear the debt stands but she hopes they stay in the eurozone.The far-left party stormed to victory last weekend with 36 per cent of the vote, promising to ditch austerity and renegotiate the country’s £180billion bailout from the European Union, the European Central Bank and the International Monetary Fund – also known as the troika.Their finance minister Yanis Varoufakis has said this troika of global institutions is “rotten” and has refused to work with them to renegotiate bailout terms.Syriza is now beginning to roll back on the austerity measures imposed by the EU on the previous administration in exchange for the loans.However this morning the German Chancellor said that while Europe will continue to show solidarity with Greece and other nations hit by Europe’s debt crisis, the debts must be repaid in full.Speaking to Hamburger Abendblatt, she said: “I do not envisage fresh debt cancellation.”There has already been voluntary debt forgiveness by private creditors, banks have already slashed billions from Greece’s debt.”
It’s amazing what can happen when a politician is told he can’t spend money he doesn’t have.
The Tsipras administration, which knows it doesn’t have the negotiating power (or money) to defy reality has quickly adopted a new position.
Greece Changes Strategy: No Longer Demands Debt Write Off, Ask For Debt Exchange InsteadOver a week after the new Greek government came to power, it has presented its first actual proposal of how it hopes to negotiate with Europe that does not involve the infamous “debt write off”, which as both Germany and the ECB have made clear, is a non-starter as it impairs the ECB’s balance sheet and leads to a loss of “faith” in the money printer, the legacy monetary system and so on. So instead of yet another debt restructuring, the FT reports that Yanis Varoufakis “would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.” Actually he still does, only he is not calling it as such.The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed “perpetual bonds”, would replace European Central Bank-owned Greek bonds.
Greek voters put their faith in a charismatic politician who made big promises, but they’re going to learn a harsh lesson.
The deck chairs of the Titanic can only be rearranged so many times.
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