Greek Finance Minister Euclid Tsakalotos urged creditors to agree on debt easing measures before the end of the year in order for the country to come out of the seven-year economic slump.
Tsakalotos spoke to The Wall Street Journal, in the aftermath of Tuesday’s visit of U.S. President Barack Obama to Athens. During his stay, the U.S. President supported the need for Greek debt relief.
However, Wolfgang Schaeuble, Finance Minister of Germany, Greece’s biggest lender, remains adamant that long-term debt relief measure will be discussed after 2018, when the country’s third bailout program is completed. Tsakalotos argues that procrastination could undermine Greece’s hopes of recovery in 2017.
Debt sustainability would also facilitate Greece’s inclusion in the European Central Bank’s quantitative easing program by March 2017, another step towards economic recovery, Tsakalotos said. If there is no debt relief agreement by December or January, Greece will not be included in the bond-buying program.
Tsakalotos rejected the theory that Berlin is postponing the Greek debt issue for after the 2017 German elections. Debt relief wouldn’t translate into a noticeable cost for the average voter in Hamburg, Tsakalotos believes. He said that the issue is trust, as Germany displays a lack of trust in Greece’s willingness to continue with reforms after it gets debt relief. “At some stage in the relationship you have to trust the other person, because there are huge costs to lack to trust,” he told WSJ.
Tsakalotos spoke of a “virtuous circle” of debt relief, investor confidence, and ECB bond-buying. Failure to form that circle soon could jeopardize Greece’s ability to exit its bailout as planned, “to the disadvantage of both us and our creditors.”
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