European Union leaders and policymakers responded to Greek anti-bailout party Syriza’s election victory on Sunday with warnings that a debt restructuring for Greece would send the wrong message to other euro zone members.
Euro zone finance ministers gather in Brussels on Monday afternoon to consider how to deal with Greece after the change of government, especially given that the existing Greek bailout programme expires on February 28.
The euro fell to an 11-year low as Syriza’s victory set Athens on collision course with international lenders and potentially threatened its place in the single currency.
Without a bailout plan Athens will not be eligible for the European Central Bank’s plan of government bond purchases and will have problems financing itself on the market. If Greece refuses to service its debt owed to the euro zone, private investors are unlikely to lend to it either, officials said.
Euro zone finance ministers are likely to signal they could extend the current bailout for Athens to give the new government time to negotiate economic policy with international lenders and talk about more time to pay back what Greece owes them.
Finnish Prime Minister Alexander Stubb said his country was ready to discuss an extension if the new government can commit to agreed contracts and promised structural reforms.
“We will not forgive loans but we are ready to discuss extending the bailout programme or maturities … But this will not change the fact that Greece must continue economic reforms,” Stubb told reporters.
European Central Bank board member Benoit Coeure said that the ECB would not take part in any debt cut for Greece, but that changes to the debt maturities were possible.
“He (Syriza leader Alexis Tsipras) has to pay, those are the European rules of the game,” Coeure told Europe 1 radio. “There is no room for unilateral action in Europe, that doesn’t exclude a discussion, for example, on the rescheduling of this debt.”
It was a message echoed across much of Europe, particularly in Germany, whose chancellor has led calls for budgetary rigour.
Germany’s top-selling Bild newspapers led with “Greeks elect euro nightmare”, the next page showing Syriza leader Alexis Tsipras punching the air next to the headline “What is this victory punch going to cost us?”
It added that Germany had contributed 80 billion euros so far to the 240 billion euro Greek bailout package.
Germany’s EU Commissioner, Guenther Oettinger, said a debt restructuring for Greece would send the wrong message to other countries in the euro zone.
“If we cut debt (for Greece), that would give the wrong signal to Portugal or Ireland, Cyprus or Spain,” Oettinger told German radio Deutschlandfunk, adding that the new government in Athens had to stick to agreements with its euro zone partners.
(Additional reporting by Leigh Thomas in Paris, Stephen Brown in Berlin and Jussi Rosendahl in Helsinki; editing by Jan Strupczewski and Anna Willard)