Debt talks go down to the wire

The game of chicken between Greece and its creditors has continued to escalate.

The game of chicken between Greece and its creditors escalated this week. After talks broke down in acrimony last Monday, markets remained hopeful of an agreement by the end of February, when Greece's bail-out programme expires. After that, Greece would be without an EU financial backstop for the first time since 2010. It is likely to run out of money a few weeks afterwards.

Any extension of its bail-out programme will require parliamentary approval in some states, which moves the deadline further forward if a new deal is to be reached by the end of the month.

On Wednesday, Greece revived a plan to water down some reforms, a move that ran into German opposition.

What the commentators said

The eurozone insists on sticking with the conditions that come with the current bail-out programme. But it has also signalled that it will consider revisiting the conditions. So the gap between the two sides "is more semantic than real". Yet "a deeper lack of trust" has hindered progress.

Greece thinks agreeing to the current programme means it will never be changed; the eurozone reckons any transitional period will be a pretext for Greece to reverse reforms already implemented.

Even assuming the two sides can manage a short-term fudge, there doesn't seem to be enough common ground to agree a long-term deal after that, said Simon Nixon in The Wall Street Journal.

Athens would have to pay an impossible 20% on three-year debt without European help. So it would need an extension of at least two years, during which it has to roll over €24bn of financing.

A new bail-out would inevitably come with conditions. Yet the new Greek government was elected on a pledge to end bail-outs and foreign oversight. European authorities and markets, who this week appeared sanguine about a potential Grexit, may sooner or later have their confidence put to the test.

Recommended

Plenty more Brexit arguments to be settled yet
Brexit

Plenty more Brexit arguments to be settled yet

Many important negotiations remain to be sealed in our deal with the EU. “No deal is better than a bad deal” is the way to play it, says Matthew Lynn
10 Jan 2021
Will 2021 hold one last deflation scare?
Global Economy

Will 2021 hold one last deflation scare?

With many looking ahead to a world of high inflation, John Stepek looks at a couple of potential scenarios that could give the world one last deflatio…
28 Dec 2020
Will a stronger euro ruin Europe's rally?
European stockmarkets

Will a stronger euro ruin Europe's rally?

International investors have been buying into European stocks, driving the euro higher. But that surge now risks dampening the recovery that started i…
21 Sep 2020
No deal is the best deal for Britain – and the EU too
Brexit

No deal is the best deal for Britain – and the EU too

Europe has a lot to gain from a thriving, independent Britain, says Matthew Lynn.
6 Sep 2020

Most Popular

Bitcoin: fool’s gold or the new gold?
Bitcoin

Bitcoin: fool’s gold or the new gold?

With bitcoin hitting new highs last week, and close to becoming a mainstream investment, is it really gold for the 21st century?
15 Jan 2021
Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021
The MoneyWeek Podcast: bitcoin special
Bitcoin

The MoneyWeek Podcast: bitcoin special

Merryn talks to bitcoin experts Dominic Frisby and Charlie Morris to get the lowdown on the cryptocurrency to find out why it's such a huge global phe…
15 Jan 2021
Free 6 issue trial then continue to