Many of those who worry about our country’s future feel a great deal of apprehension over the coming autumn; and no, they don’t fear a possible political crisis or social upheaval. What concerns them is the battle that will be played out between Germany on the one side and the US and International Monetary Fund on the other. The IMF leadership has made it clear that it wants to cut a generous amount of official Greek debt and Christine Lagarde herself said she was committed to this promise. So wherein lies the danger?
The forgiveness of debt is anathema to Germany and the northern EU member states. A discussion on debt forgiveness will only revive all the cliches of the “bad southern countries who refuse to reform and make us pay to bail them out.”
The Greek government must weigh things very carefully before it decides whether and how to pursue the issue. Because if a resounding no is heard, grave consequences may follow. The political fallout abroad will be immense, the opposition will have a party and Greece will be left hanging in the balance because the US and IMF have neither the funds nor the will power to cover Greece’s financial needs if Germany refuses.
Moreover, Greece has not quite achieved the primary budget surplus that would theoretically allow it to blackmail its lenders with the threat of bankruptcy. The IMF’s debt is guaranteed and it can never be cut. If the negotiations for a European country’s debt forgiveness collapse, EU officials will simply say, “I told you so.”
What other path is there for the country? If Greek political leaders could agree on a minimum of reforms, they could together pursue a different deal that would ease the fiscal adjustment and combine the gradual lessening of debt with a specific set of goals. In this new agreement, it would not be necessary for the IMF to take part and it would be more to the liking of Brussels and Berlin. In effect, it would be an internal European agreement with clear terms and specific goals without the melodrama of constant troika visits.
Such a deal would have a significant chance of success if opposition leader Alexis Tsipras were to go along with it. I know that something like this would be almost inconceivable in Greece and that there is not a shred of trust between the country’s main political protagonists. But it would be worth a try.
It would be a mistake for Greece to be destroyed in a dispute intended to save it. That is why great skill and serious handling is needed for the country to succeed. We have clawed back a great deal of lost ground and European leaders will do whatever they can to keep Greece inside the eurozone. In this battle, it is important for us to convince those who are important, not just those who are playing nice. The tough negotiations expected this autumn between the EU and IMF will have direct repercussions on Greece’s fate. We must not forget this.