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

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
Interest-rate rises mean more pain for stocks
Stockmarkets

Interest-rate rises mean more pain for stocks

Interest rates are rising around the world as central banks try to get inflation under control. That’s hitting stockmarkets – and there is more pain t…
13 May 2022
Why Elon Musk's Twitter takeover could mark the end of the reign of the CEO
Stockmarkets

Why Elon Musk's Twitter takeover could mark the end of the reign of the CEO

The overlords of the corporate world have had their day, says Matthew Lynn. Long live the Technokings!
8 May 2022
Britain’s post-Brexit trade chaos
UK Economy

Britain’s post-Brexit trade chaos

The government has yet again postponed introducing post-Brexit checks on EU imports. Why has it done this, and does it matter?
7 May 2022

Most Popular

High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022
Cryptocurrencies are crashing – so how low will bitcoin go?
Bitcoin & crypto

Cryptocurrencies are crashing – so how low will bitcoin go?

The entire cryptocurrency sector is crashing, with bitcoin now well below $30,000. This is big, says Dominic Frisby. So just how low could bitcoin go?
12 May 2022
What the Ukraine crisis might mean for ESG investing
Advertisement Feature

What the Ukraine crisis might mean for ESG investing

The Ukraine crisis has brought many of the issues around ESG investing into sharper focus. Where does the sector go from here?
3 May 2022