Fri | Sep 21, 2018

Eurozone looks for dialogue after stunning Greece elections

Published:Tuesday | January 27, 2015 | 12:00 PM

The election in Greece of a radical party that wants to overhaul the country's bailout program raises new uncertainties for the eurozone. But several European creditor nations hinted they will seek a compromise deal to avoid disastrous scenarios, like Greece falling out of the euro.
Financial markets took in their stride on Monday the victory of the left-wing Syriza party after several leaders in the 19-country eurozone suggested they were open to discussing how to lighten Greece's debt burden.
The country has since 2010 needed euro240 billion (US$270 billion) in loans from fellow eurozone countries and the International Monetary Fund to avoid bankruptcy.
Syriza is calling on the eurozone to ease the spending cuts and tax increases required in Greece's bailout programme and a lightening of the country's rescue loans. The debt at over 170 per cent of GDP is at a level many economists think is unsustainable.
Syriza leader Alexis Tsipras joined with the small right-wing Independent Greeks party, united mostly in their opposition to the austerity measures imposed by the other eurozone nations in exchange for the loans. The tough spending cuts and tax hikes were meant to reduce debt but have also put the economy through a depression, causing unemployment and poverty to surge.
The two Greek parties now face the task of extracting concession from the rest of the eurozone.
Already on Monday, there was more than one hesitantly outstretched hand.
Jeroen Dijsselbloem, the Dutchman who chairs eurozone finance ministers' meetings, said that even though "there is very little support for debt write-offs," there is room to "come back to debt sustainability issues" in the future. He stressed "if necessary."
His views were echoed by the leader of Finland, a country that has long been among the most unmovable on austerity issues, offered help.
Finnish Prime Minister Alexander Stubb said that even if he opposes forgiving Greece's debts outright, he would be prepared to discuss extending loan repayments. Belgium's finance minister likewise said there was some room to discuss the "modalities" to ease the Greek debt program.
Germany was non-committal beyond stressing that commitments needed to be kept.
"Greece is still in the process of building a new government," said German Finance Minister Wolfgang Schaeuble.
Though Syriza has talked tough about renegotiating Greece's debt with the 19-country eurozone, financial markets were calm on Monday. The main stock market in Athens closed 3.2 per cent lower but that was a marked improvement on where it was at the open. European stock markets have also largely closed higher while the euro has clambered up from 11-year lows.
Yanis Varoufakis, a Syriza member who is tipped by some to become the next finance minister, said the government would seek to convince its euro partners that reducing Greece's debt burden by linking repayments to growth, say, would be positive for all parties.
Varoufakis has also dismissed suggestions that Syriza would threaten to pull Greece out of the euro – so-called Grexit.
"We, who happen to be in the eurozone, must be very careful not to toy with loose and fast talk about Grexit or fragmentation," he told BBC radio. "Grexit is not on the cards; we are not going to Brussels and to Frankfurt and to Berlin in confrontational style. There is plenty of room for mutual gains and benefits."