Brussels, 31/08/2015 (Agence Europe) - On Monday 31 August, the European Commission reiterated the importance of fully supporting the Greek economic adjustment programme.
Following the setting in place of an interim government to lead Greece into the early elections of 20 September, the Commission states that it is “happy to see continuity in key portfolios”, particularly that of the finance minister, said the spokesperson to the Commission, Margaritis Schinas. “Broad support and timely delivery of the reforms of the programme will be necessary for its success”, he added. On his Twitter feed, the Commissioner for Economic and Financial Affairs, Pierre Moscovici, said on Friday that he was “looking forward to working with the interim government to maintain reform drive”.
The Syriza party of the outgoing Greek Prime Minister, Alexis Tsipras, announced on Monday that it would implement the commitments taken under the third economic assistance plan, but that it was determined to seek measures to minimise the negative impact and that it would take a tough line in negotiations with Athens' creditors on the parts of the agreement which remain open, according to the party's plans. Tsipras said in an interview with Realnews that he was seeking a strong mandate, “an absolute majority for the Syriza government”. Last week, and despite Syriza dropping in support compared to the country's second party, New Democracy, Tsipras ruled out a coalition government with the traditional parties.
The latest opinion poll of 30 August put Syriza at 24.5% and New Democracy at 22.5%, with undecided respondents representing nearly 15% of the voters. According to this opinion poll, Syriza's current coalition partner, the Independent Greeks, would fall short of the 3% required to take up their seats in the national parliament. The leader of New Democracy, Evangelos Meimarakis, on the campaign trail to the region of Aitolokarnania, western Greece, is quoted by Kathimerini as saying that the protest vote was not a solution. “Many voted for Syriza thinking that they would thus punish New Democracy and they ended up paying an extra 90 billion euros”, he explained, in reference to the third bailout plan signed off by the Syriza government in August.
For his part, Tsipras insists that he fought to remain faithful to the mandate given to him by the Greek people, who wanted to stay in the eurozone.
Angela Merkel: extending loan maturities. Speaking from Berlin, the German Chancellor Angela Merkel reiterated that it would be possible to extend the maturities of the loans granted to Greece, but not to reduce the interest rates. In view of the peculiarities of the relationship between the Greek state and the Eurozone bailout fund, “it is rightful that we don't ask about the debt to GDP ratio, but ask what is the actual burden on Greece from its debt service? The 15% could be a metric”. According to the IMF, indeed, a country's gross financing needs must remain below 15% of GDP in order for public debt to remain viable (see EUROPE 11338 and 11357). Dr Merkel said that she expected Greece's debt servicing burden to remain significantly below 15% until 2022 or 2023, referring to the Commission's analysis of the debt trajectory (see EUROPE 11375). “When the repayments begin, one has to make sure that the burden will stay below the 15% threshold”, she explained. According to the Commission's analysis, over the period 2020-2030, the gross financing needs will remain around 12% on average, but will exceed the 15% threshold in the following decades.
This idea of looking at debt servicing rather than the debt/GDP ratio is not a new one, and even though the director general of the ESM, Klaus Regling, has gradually brought it to the table, it originates from the management agency for the Greek debt (see EUROPE 11064). More recently, a Syriza government figure told EUROPE that it was on debt servicing that action needed to be taken. (Élodie Lamer)