Talk about “a rocky start”, says Economist.com. Last week Greece’s new government said it would reverse structural reforms, end privatisations and ignore calls for an extension to the economy’s bailout programme, which expires at the end of this month. Greek stocks slumped and bond yields jumped, as investors feared that a stand off would force Greece out of the euro.
In the past few days, however, the mood has improved. Syriza, the governing party, is reputedly proposing a deal that would exchange some bonds for new ones whose coupons would be linked to the performance of the economy. That would give Greece a break from servicing the debt until the economy is strong enough to cope with the interest payments, says Capital Economics.
If Greece’s creditors simply extend the maturities of the loans, it might not be enough: the economy could still be on its knees when the rescheduled repayment falls due.
This plan makes sense, adds the FT. “Greece’s debt burden is too high for normal repayment and can be worked off only if the country enjoys sustained growth.” Rejigging some of the debt in this way would give Athens “breathing space for reforms to take effect. But even if this is the way forward, it won’t be discussed in a hurry.
Germany reportedly plans to wait until the spring, when Greece is likely to be running out of cash, in order to strengthen its bargaining position, according to Bloomberg.com’s Arne Delfs. While politicians delay, Europe’s slow-motion crisis grinds on.