Greek debt crisis: Old barriers not yet resolved, new deadlock has come

(Baonghean) - Protests against austerity policies have continued in the Greek capital Athens over the past few days as the Greek government considers accepting new reforms in exchange for an international bailout package. Nearly 10 years have passed, and Greece's path out of the crisis is still very precarious. For many reasons, international partners have no choice but to help the mythical country's economy avoid a collapse.

Forced situation

As scheduled, Greece and its international creditors, the Eurozone and the International Monetary Fund (IMF), are discussing the next steps as Athens faces a €7 billion debt payment due this summer.

The worst case scenario is that Greece will not be able to pay its debts if the creditors do not activate a new disbursement in the third bailout package worth 86 billion euros. Because of the deadline and the strict conditions set, the problem in the negotiation becomes difficult to solve and difficult to compromise. Despite everyone understanding that if Greece collapses, no one will benefit, and even the collapse of the Eurozone is inevitable.

German Chancellor Angela Merkel and IMF chief Christine Lagarde will be able to find a compromise on a solution for Greece. Photo: Guardian

The problem is that Greece's debts are all due. This means that without concessions from both debtors and creditors, it will be difficult to solve the difficult problem. The IMF - an important partner in the process of resolving Greece's debt - has not yet officially joined the third bailout package with the Eurozone because of some disagreements. The IMF has warned that it will stop participating in the bailout program for Greece because Athens' debt is too large. Meanwhile, the economic targets set by the Eurozone for Greece are unrealistic.

Therefore, the global financial institution believes that it can only continue to disburse loans if Eurozone countries commit to further debt relief for Greece before disbursing new bailout funds. According to the IMF, even if all the requested reforms are fully implemented, Greece still needs to significantly reduce its debt to achieve sustainable growth and budget targets. But this condition has met with strong opposition from Germany and many creditor countries in the Eurozone.

On the Greek side, Prime Minister Alexis Tsipras’s government has no way back either. The €7 billion obligation due in mid-July is too big a challenge if a compromise with its creditors cannot be found. Over the past two years, Greece has implemented reforms and budget commitments. However, the “gift” or new bailout will not be released until Greece passes the current review. If all of those conditions are met, Greece will have to rely on luck.

Germany and the Netherlands will only agree to continue if the IMF is fully involved. So the old hurdle is not cleared, a new deadlock has arisen. And this time, the IMF continues to demand more austerity from Greece, despite remaining skeptical of the budget targets set by the Europeans. This is no different than the government in Athens stirring up anti-austerity protests at home.

The bottom line with the EU

After the British vote to leave the EU last year, the EU is facing a new test. The result of this test is whether Greece will remain in the Eurozone or not. In the event that Greece goes bankrupt, or is no longer eligible to join the Eurozone, it will only be a matter of time before it leaves the EU like the UK (Brexit).

If no agreement is reached by July, Athens will inevitably default on its debt. So far, Greece has no other choice but to rely on the “lifebuoy” of the EU, the European Central Bank (ECB) and the IMF. But these three institutions seem to be too tired to keep up with developments in Greece’s debt profile.

Up to this point, they have spent 310 billion euros to help Athens escape. They are also forced into a "go-for-broke" situation because they cannot abandon Greece in dire straits. But if they help this time, it is not certain that they will not have to help again. With the conditions set by this trio of creditors, it can be seen that Greece has not seriously met. Simply because of the pressure of protests from the people in addition to political stability to change the economic and financial situation.

Greek farmers protest against new taxes during anti-austerity protests last week. Photo: New York Times

But the EU’s problems don’t end there. There are also differences within the bloc over how to deal with Greece’s debt, whether to ease its debt or to meet the demands of the IMF to join the EU and ECB. Germany, for example, has the strongest position in the Eurozone on a deep debt reduction for Greece as requested by the IMF.

Along with other countries such as the Netherlands, Berlin has made full IMF participation a condition of its participation in the Greek bailout. Germany fears that the EU alone will find it difficult to maintain pressure on Greece to implement reforms. If the IMF remains outside the Greek bailout program and only sets conditions, German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble will be in a difficult position just months before elections in September.

Talks on restructuring Greece’s debt are still ongoing. Now, all sides need to compromise and take more concrete action if they are to get rid of this debt that has been accumulating for too long. After all, no one wants the debt crisis in Athens to become the linchpin of the EU’s existence.

Thanh Son