A compromise is needed in the talks between Greece and the rest of the EU, to give space for more detailed negotiations in the weeks ahead on Greece’s debt and its economic programme. As negotiations resume on Monday among eurogroup finance ministers, there is a lot at stake for Greece and Europe. It should be possible to find some middle ground which provides funding for Greece and its banks for the next few months, on a basis agreeable to both sides.
Above all, a deal should not fall apart on the basis of semantics. The new Greek government has upped the ante, saying that it will not deal with the “ troika” and does not want an extension of its current bail-out programme. The response it got – very clearly – at last Wednesday’s finance ministers’ meeting was that further funds would only be advanced in return for some commitments on policy and oversight. Over the weekend, officials were trying to reconcile the two positions.
On the face of it, the new Greek government does not appear to have garnered much support around the European table. While Germany is an important decision maker, there are also 18 other finance ministers, many also overseeing difficult economic positions. Greece’s initial demands for debt forgiveness and the end of the bail-out agreement and its plans to spend more state money thus met an initial and predictable rejection.
That said, there is a clear case for giving Greece leeway. There is no point pretending that its debt burden is manageable in the medium term. However, the new Greek government also needs to show it can deliver on reform and to realise that because most of its debt is owed to Europe, the issue of a write-down is intensely political.
The new Greek ministers argue that austerity has failed and that a deal for Greece can point the way to the future. They are correct that Europe’s policies have not given anything like enough emphasis to economic growth. However there also is a responsibility on states to correct their public finances, improve their economic structures and be accountable for what they are doing if they are in receipt of outside assistance.