As Greek Bailout Payment Stalls, Threat to Eurozone Grows

As Greek Bailout Payment Stalls, Threat to Eurozone Grows
Tourist walk among flowers and the ancient Temple of Zeus, Athens, Greece, March 31, 2015 (AP photo by Petros Giannakouris).

Despite marathon talks over the weekend, Greece and its creditors—the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission—failed to agree on a list of reforms that Athens must implement before the next $7.8 billion tranche of its bailout package is released. Greece could run out of money before next week if those bailout funds are not dispersed. The government must repay about $482 million to the IMF on April 9, but given the current situation, that seems unlikely.

Though it looks like there won’t be a deal before the end of the week, both sides have shown their commitment to finding a long-term solution. As Milton Ezrati wrote earlier this month, the fact that “the parties reached a temporary, four-month accommodation… provides a clear sign that both sides still want a durable agreement.” German Chancellor Angela Merkel yesterday said that she wants Greece to stay in the eurozone, but warned that Greece’s reforms must “add up” and satisfy its creditors.

But those creditors have concerns over Greece’s ability to actually implement necessary reforms. Greece’s ruling radical left Syriza party came to power on a staunch anti-austerity platform, saying they would not negotiate with Greece’s creditors. Obviously, Greece’s leaders have had to walk back that statement, along with other campaign promises, including about how they would deal with needed structural reforms. As I explained earlier this month, “The Greek government has already changed its language on how it will phase in a new minimum wage and shifted its policy on rehiring public sector workers.” Greece’s creditors have effectively forced Syriza to moderate, as “the debt talks so far have signaled that the IMF’s hard line on reform and monitoring will likely push Athens’ radical left government to the center in order to reach a comprehensive deal.”

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