In Greece’s Talks with the EU, the Real Issue Is the Debt

While the media are filled with stories about how negotiations between Greece and its creditors remain at an impasse over so-called reforms, the real issue is not just the brutal austerity but the unpayable bailout debt. The Greek cabinet met Wednesday night to discuss the negotiations with Greece’s creditors.

According to the media reports, the negotiations at the technical level cannot go any further since the “institutions” continue to make unacceptable demands, including cuts in pensions and labor rights, and layoffs of government workers, which the government considers “recessionary.” It is also reported that the institutions are demanding that another EU3 billion be cut from the budget. The talks have to be moved up to the “political level” with the heads of government, as far as the Greek government is concerned.

Regarding the more important issue, the unpayable bailout debt has to be written off in the same manner as the German postwar foreign debt was cut by the 1953 London Debt Agreement. Speaking today at a conference sponsored by The Economist in Athens, Greek Finance Minister Yanis Varoufakis said that while the government is seeking to forge an agreement with its EU creditors, the next tranche is not Greece’s priority in the wake of five years of austerity that have failed to solve anything.

“Nobody would wish for lower supplementary pensions and higher VAT rates, just to get the EU7.5 billion installment and a return to the previous situation,” he argued, adding that the negotiations’ taking so long is not due to disagreements on a number of issues, but on the government’s interest in breaking free from the austerity trap.

He also said the EU27 billion worth of Greek bonds bought by the European Central Bank (ECB) under the Securities Market Program in 2010-2011, come up for repayment beginning in July-August with a payment of more than EU6 billion. But, he added, that as far as Greece is concerned, “These bonds should be pushed back to the distant future. This is clear.”

In this regard, Greek Prime Minister Alexis Tsipras will meet with European leaders in Riga, on the sidelines of the European Council Eastern Partnership Summit, May 21-22.

Meanwhile, it is reported that an emergency meeting of the International Monetary Fund’s Executive Board will take place May 15 to consider the latest developments in the negotiations with Greece, and on the same day ECB President Mario Draghi will meet IMF Managing Director Christine Lagarde.