With a Greek sovereign default looming early July, when Athens has to repay some €7.3 billion, or $8.2 billion, in maturing loans, the European Union’s powerful commissioner for economic and financial affairs has called on the euro zone finally to agree a way to reduce Greece’s debt burden when finance ministers meet on June 15.
“We must find a solution at the next meeting,” Pierre Moscovici told Handelsblatt’s sister publication WirtschaftsWoche in an interview published on Friday. “No one would understand if we were to create a new crisis out of nowhere,” he said, adding the finance ministers from the 19 euro-zone countries had “a duty to find a compromise.”
“We’re telling them: Do or die. That just doesn’t work.”
Athens faces insolvency in July if it does not receive the next tranche from the current 86 billion-euro bailout program in time. The euro-zone’s bail-out fund, the European Stability Mechanism, has plenty of fire power to avoid this. But whether finance ministers will order it to transfer funds to Greece remains uncertain.
Greece’s sovereign creditors disagree about conditions for the next loan. The International Monetary Fund (IMF) said it could continue co-financing financial assistance only if euro-zone nations reduce Greece’s debt burden. But German finance minister Wolfgang Schäuble opposes such a move, and insists that the IMF keep lending.
In a long search for a compromise, the IMF last month said it would be willing to participate in a new loans for Greece. But the Washington lender suggested it would only pay the Greek government if Athens could prove its debt to be sustainable. Greece quickly rejected the proposal – and no new attempt to end the stand-off has been made.
Mr. Moscovici voiced support for Greece. The country had already shown “a lot of effort” to fix its ballooning debt by passing many reforms under the supervision of Brussels and the IMF. He stressed that he did not view last month’s proposal as a sufficient basis for discussion. “We’re telling them: Do or die. That just doesn’t work.”
Indeed, there does appear be movement. IMF head Christine Lagarde last week told Handelsblatt that she would consider giving euro-zone countries “a bit more time” to find a common stance. On Thursday, IMF spokesman Gerry Rice told Reuters talks with European creditors were “making progress” and there was now hope an agreement.
Mr. Moscovici, French finance minister until he switched to Brussels in 2014, also told WirtschaftsWoche he was confident France would also adopt more economic reforms – as the German government hopes it will. “There is awareness among the French that changes are necessary to make the economy more competitive,” he said.
Germany’s main political partner will elect a new parliament in June, a month after installing centrist Emmanuel Macron as new president. Berlin and Brussels hope he will boost the French economy and the EU. Mr. Moscovici signaled his confidence: “In France, people have always gathered behind the President in difficult times.”
This article was originally published in WirtschaftsWoche, a sister publication of Handelsblatt. Jean-Michel Hauteville, an editor with Handelsblatt Global in Berlin, also contributed to this report. To reach the author: firstname.lastname@example.org.