A compromise solution between the eurozone and the Greek government over its bailout programme remains the most widely expected scenario, Malta’s Finance Minister believes, even as talks between the two sides collapsed on Monday.
Eurozone finance ministers and the Greek government failed to strike a deal on restructuring the country’s debt, heightening concern that Greece could be moving closer towards exiting the single currency.
However, eurozone ministers, including Malta’s Edward Scicluna, are still optimistic a solution will be found soon.
“We are still far away but it’s a question of time,” Prof. Scicluna said after emerging from the meeting in Brussels.
“The two sides [the eurozone and Greece] have to adjust but a compromise solution is still possible.”
Flexibility seems to be the main bone of contention. Greece wants to scrap the current bailout deal because of the very painful programme of spending cuts and other austerity measures that come with it. Instead, it wants a bridging loan to help it meet its short-term needs while a new deal is hammered out. Having been elected on a platform of anti-austerity measures, the Greek government cannot back down and it does not want to betray Greek voters.
The most important thing is that a long-term solution is sought. We can’t keep patching up every now and then
On the other hand, the eurozone – with Germany particularly intransigent – has a different agenda. It maintains that while it can be flexible and an extension is possible, Greece must still honour its commitments. It does not want to write off any debts and wants Athens to stick to its reform programme.
“It will be a difficult deal but I believe a compromise is possible,” analyst John Cassar White told Times of Malta yesterday. “The most important thing is that a long-term solution is sought. We can’t keep patching up every now and then.”
Asked whether he felt Greece had an alternative, Mr Cassar White said the only one was to exit the eurozone.
“However, I don’t think this is a real solution even though technically it can be done. What we really need is a strong commitment for reform from Greece and more flexibility from the eurozone.”
Economist Lawrence Zammit is also optimistic that a compromise deal is in the offing, despite the doom and gloom in Brussels. “A compromise is possible so long as Greece commits itself to continued reforms and an understanding that European taxpayers will not pay for their debts,” he said.
Mr Zammit said although the eurozone could be flexible on the terms of debt repayment and the pace of reforms, there could be no compromise on Greece’s original commitments.
Greece’s current bailout expires at the end of this month and any new agreement reached with the eurozone will need to be approved by national governments.
Without this deal, Greece will soon run out of money and would not be in a position to repay its loans.
Malta has an outstanding loan of some €200 million with Greece as part of the bailout. Prof. Scicluna has already made it clear the island is against any sort of agreement to wipe out Greece’s outstanding debts.
Although no new date has been set yet for another eurozone ministerial meeting, it is possible the finance ministers will be recalled to Brussels by the end of the week.