Tsipras plea gains some traction
by Andre Tartar Fergal O’Brien
originally published at Bloomberg August 17, 2015 — 1:46 AM PDT
Greek Prime Minister Alexis Tsipras has economists on his side when it comes to debt relief.
A whopping 92 percent of respondents said Greece should receive some form of easing of its debt burden, backing recent calls by IMF Managing Director Christine Lagarde to ease the country’s crippling debt load. German Chancellor Angela Merkel seemed to echo the sentiment in remarks this past weekend that “there is still leeway on the extension of maturities, on interest rates.” The Bloomberg survey of 42 European economists was conducted Aug. 7-14.
A similarly large share of respondents — 90 percent — simultaneously expect Greece to remain a euro member state through the end of 2016. That signals that the third bailout package, which includes an 86 billion-euro ($96 billion) loan program and was finally approved by the Greek Parliament and euro-area finance ministers last week, already has successfully defused the threat of a so-called Grexit, at least among economists. Greece needs funds from the new bailout by later this week to avoid defaulting on a payment to the European Central Bank.
Getting some leeway on Greece’s debt is one of Prime Minister Alexis Tsipras’s main goals as he looks for ways to help stabilize the nation’s public finances. At 177 percent of its gross domestic product in 2014, Greece’s public debt load is the heaviest of any European Union member, and by a hefty margin. Italy, the second-most indebted EU nation, had debt equal to 132 percent of its GDP.
Kristian Toedtmann, an economist at Dekabank in Frankfurt, said while the “political will” for Greece to remain in the euro zone suggests some debt relief will be forthcoming, there’s a lot of work needed on finding a deal.
It has to be “sufficient, so that the IMF can take part in the financial assistance,” he said. “It has to be politically feasible for the German and other national governments, which rules out a nominal haircut. And it has to be incentive-compatible in the sense that it doesn’t weaken reform efforts in Greece.”