Debt talks go down to the wire

The game of chicken between Greece and its creditors escalated this week. After talks broke down in acrimony last Monday, markets remained hopeful of an agreement by the end of February, when Greece’s bail-out programme expires. After that, Greece would be without an EU financial backstop for the first time since 2010. It is likely to run out of money a few weeks afterwards.

Any extension of its bail-out programme will require parliamentary approval in some states, which moves the deadline further forward if a new deal is to be reached by the end of the month.

On Wednesday, Greece revived a plan  to water down some reforms, a move that ran into German opposition.

What the commentators said

The two sides have been involved in “nomenclatural brouhaha” this week, said the FT. Greece says it wants a “bridge”: a deal that keeps it going beyond the end of February while a revised programme is hammered out.

The eurozone insists on sticking with the conditions that come with the current bail-out programme. But it has also signalled that it will consider revisiting the conditions. So the gap between the two sides “is more semantic than real”. Yet “a deeper lack of trust” has hindered progress.

Greece thinks agreeing to the current programme means it will never be changed; the eurozone reckons any transitional period will be a pretext for Greece to reverse reforms already implemented.

Even assuming the two sides can manage a short-term fudge, there doesn’t seem to be enough common ground to agree a long-term deal after that, said Simon Nixon in The Wall Street Journal.

Athens would have to pay an impossible 20% on three-year debt without European help. So it would need an extension of at least two years, during which it has to roll over €24bn of financing.

A new bail-out would inevitably come with conditions. Yet the new Greek government was elected on a pledge to end bail-outs and foreign oversight. European authorities and markets, who this week appeared sanguine about a potential Grexit, may sooner or later have their confidence put to the test.

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