ATHENS – Uncertainty remains over whether Greece – as Prime Minister Antonis Samaras’ claims – will begin to recover this year or will need a third bailout and has been fueled anew by estimates from an influential European Union think tank that the country’s $430 billion debt is unsustainable.
The Brussels-based Bruegel institute said in a study that Greece will need a third package of international bailout loans worth 40 billion euros ($55 billion) to reduce its debt burden to a manageable level, and that even then it would take until 2030 to reach that plateau, wiping out hopes for the current generation of the country’s young suffering 60 percent unemployment.
Bruegel’s report said that currently discussed plans to only extend the maturity and lower the interest rates on Greece’s outstanding debt won’t be sufficient. Greece has been surviving since 2010 on two bailouts of 240 billion euros ($325 billion) from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB).
But those monies run out this year and Greece could find it difficult to return to the markets if its debt is still considered runaway and because a previous government in 2011 stiffed private investors and Diaspora bondholders as well as banks with 74 percent losses in a failed bid to reduce what it owes.
Samaras’ administration, led by his New Democracy Conservatives with the fading PASOK Socialists as partners, said that achieving a current account surplus and primary surplus this year is enough to trigger debt relief from the Troika.
That would mean that taxpayers in the other 17 Eurozone countries would have to pay the bill for generations of wild overspending by Greek governments and has already been rejected by Germany, the biggest contributor to the bailouts and which has insisted on the accompanying harsh austerity measures that created a record jobless rate and deep poverty.
IMF Managing Director Christine Lagarde earlier said the EU and ECB should take losses but that her agency wouldn’t, but has reportedly been leaning toward changing her mind amid speculation she wants to become the European Commission President and needs to curry favor with EU leaders who appoint the position.
Bruegel says a new loan package would allow the country to gradually reduce its debt level, provided it balances its budget by 2018 and continues to record primary budget surpluses, that is, before counting interest payments, the cost of local and state enterprises, social security and some military expenditures. Greece’s debt level currently stands at about 175 percent of GDP.
With municipal and European Parliament elections looming in May – and as Greece holds the symbolic EU Presidency until June 30 – EU leaders have been seen as keen to hold down political and social unrest that could benefit the anti-bailout major opposition Coalition of the Radical Left (SYRIZA) from coming to power and reneging on the deals.
That led Eurozone chief Jeroen Dijsselbloem to jump in and say that the third bailout talk is premature, backing Samaras and his minsters, even though that was cautioned by talk that it might be needed yet.
Speaking to the European Parliament’s Economic Affairs Committee, the Dutch finance minister said he hoped the optimists would prevail and that skeptical analysts who believe Greece can’t pay back its loans would be proved wrong, but he was cautious in how he phrased it.
“We will evaluate this in the second half of the year,” said Dijsselbloem. “That is when we will decide if a new program is needed and what form it might take.”
German Finance Minister Wolfgang Schaeuble, a hardliner on demanding pay cuts, tax hikes and slashed pensions, has already reportedly said that he believes Greece will need more aid but Samaras has been downplaying negative reports as SYRIZA begins to pull away in surveys and open its lead over New Democracy. PASOK is already essentially irrelevant.
Dijsselbloem’s comment came ahead of the resumption of negotiations with the Troika on Feb. 24 with the lenders envoys set to talk about unresolved reforms and a hole in the 2014 budget of as much as 2.4 billion euros ($3.28 billion) that needs to be closed.
Samaras has rejected further austerity as one method and told ministers to give him progress reports to present to the Troika officials. He wants negotiations done before an April 1 Eurozone meeting in Athens, pushing that deadline back from a March 10 meeting of the finance chiefs in Brussels.
(Material from the Associated Press was used in this report)