Ask and you shall receive. The Greek population decided it was time for a change in government and just last week, Greece elected and swore in its new prime minister, Alexis Tsipras. The prime minister represents a leftist party and reflects the desire of the Greek people for reform just years after a major bailout. Tsipras ran his campaign based on the issue of renegotiating the ensuing debt that citizens have blamed for large increases in unemployment and a recession.
Tsipras pledged to aggressively negotiate and demand write-downs of Greece’s 240 billion euro debt to its three creditors – the International Monetary Fund (IMF), the European Central Bank and the European Commission. The creditors are firm on their strict stance of Greece following the rules and paying back its debt. The two sides are essentially stuck in a gridlock. Greece still needs an installment of the bailout money to avoid default, yet it is still trying to aggressively reduce its debt. On the creditor side, the Eurozone, which is representing the European central bank, European commission, and the IMF, is stern on making Greece stick to its payment plan to fulfill its debt arrangements; but it is also conflicted due to the risk of Greece dropping from the Eurozone.
Still, Germany continues to call for a unified Eurozone, while the Tsipras government thinks the European Union will save Greece from any default. As a result, the new government of Greece has begun planning trips to major member nations, such as France and Italy, to leverage its demand for write downs of the 240 billion euro debt. However, they have been unsuccessful in gaining an audience with Germany mainly because of the pressure from German taxpayers who have grown tiresome of dealing with Greece. This is reflective of German Chancellor Angela Merkel’s stance on deferring negotiations with Tsipras.
Germany, the Greece bailout’s largest individual contributor, has a high stake in ensuring Greece does not plunge into default and that it does not leave the Eurozone. Since its inception, the Eurozone has boosted Germany’s economy by an average of 37 billion euros a year. If Greece left the Eurozone, the stability of the economic zone will face immense pressure and will risk breaking up.
Nevertheless, there needs to be compromise from both sides, and rather quickly, with debt payments to creditors due this summer. A continued gridlock with Greece eventually leaving the Eurozone will yield a lose-lose situation for both sides. Will Greece’s request for a reduction in its debt be answered? Feel free to leave a comment below!