Don’t waste the crisis

15 Jul 2015 By Hugo Dixon

Now that Alexis Tsipras’ Syriza party is splitting, he can form a credible and stable new government. That could put relations with Greece’s creditors onto a constructive footing and turn the economy around. If Tsipras squanders the chance, the country will be doomed to failure.

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An International Monetary Fund study published on July 14 showed that Greece needs far more debt relief than European governments have been willing to contemplate so far, as fractious parties in Athens prepared to vote on a sweeping austerity package demanded by their lenders.

The IMF’s stark warning on Greece’s debt came as Prime Minister Alexis Tsipras struggled to persuade deeply unhappy leftist lawmakers to vote for a package of austerity measures and liberal economic reforms to secure a new bailout.

The IMF study, first reported by Reuters, said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. Or else they must make annual transfers to the Greek budget or accept “deep upfront haircuts” on existing loans.

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