Any renegotiation of Greece’s austerity programme should not include writing off debt owed to Malta and other eurozone countries, Finance Minister Edward Scicluna said today.
Giving his reaction to the outcome of the elections in Greece, Prof Scicluna said before a scheduled Eurogroup meeting of finance ministers that it was very unlikely that anyone would accept writing off debt owed by Greece.
Greece had already been given two major concessions, he added.
“We twice went to Parliament to seek approval over concessions, which included lower interest rates and a longer repayment period,” Prof. Scicluna said.
When these two concessions are factored in, Greece’s debt burden is not more than Portugal’s and Spain’s, he noted.
“I believe that far away from the political rhetoric of a political campaign, I am sure the demands of the new Greek government will be watered down. There will probably be concessions, not on the debt burden but the conditions for structural reforms imposed by the EU, ECB and IMF,” Prof. Scicluna said.
Malta’s exposure to Greece comes in two parts: a €50 million bilateral loan and €138 million as guarantees to the European Financial Stability Facility (EFSF) set up as a temporary rescue mechanism in 2010.
Greece was bailed out in 2010 by fellow eurozone countries as it crumbled under the weight of the financial crisis. It was propped up by billions of euros on condition that the country implemented austerity measures to trim access public spending.
However, austerity has hit hard and wide, leaving millions in poverty. With unemployment soaring at 25 per cent, Greeks flocked to Syriza, a far-left party, led by the charismatic Alexis Tsipras.
Mr Tsipras has vowed to end the pain of austerity and renegotiate the terms of the bailout programme in what is expected to create shockwaves across the EU.
EU OPEN TO LATER GREEK DEBT REPAYMENT, BOT NOT WRITE-OFF
Meanwhile, the Eurozone this morning showed a willingness to give Athens more time to pay its debts, but little sign that it would yield to a new Greek government's demands for debt forgiveness.
European Union leaders and policymakers warned that a debt reduction for Greece would be against euro zone rules and would send the wrong message to other members of the single currency.
Before any talks on more time for Greece to repay its debts can start, Athens must get an extension of its existing bailout to give itself time for negotiations on future economic policy and on longer loan maturity with international lenders.
"My forecast is that an extension of the (Greek bailout) programme will have to happen," Thomas Wieser, who heads the Euro Working Group that prepares decisions of euro zone finance ministers, told Austrian broadcaster ORF.
The euro fell to an 11-year low as Syriza's victory set Athens on collision course with international lenders and potentially threatened its place in the single currency.
Syriza officials have previously said their government's first priority would be to ask lenders for a few months of time so both sides can discuss their positions from scratch rather than picking up from where the previous government left off.
They resist the idea of extending a bailout programme that they are staunchly opposed to. Tsipras last week dismissed the Feb. 28 deadline when the bailout expires, saying he had until July to negotiate with lenders.
"We are asking for more time, not an extension of the existing programme," a senior party official told Reuters last week.
Even though Syriza won the elections on promises of ending fiscal austerity and demanding debt forgiveness, German Foreign Minister Frank-Walter Steinmeier said Berlin expected it to stick to agreements with its euro zone partners.
"We offer to work with the Greek government, but we expect them to stand by agreements," he said.
Finnish Prime Minister Alexander Stubb said his country was ready to discuss an extension if the new government can commit to agreed contracts and promised structural reforms.
"We will not forgive loans but we are ready to discuss extending the bailout programme or maturities ... But this will not change the fact that Greece must continue economic reforms," Stubb told reporters.
The chairman of the group of euro zone finance ministers, Jeroen Dijsselbloem, struck a similar note, saying there was very little support in Europe for writing off Greek debt.
European Central Bank board member Benoit Coeure said the ECB would not take part in any debt cut for Greece, but changes to the debt maturities were possible.