Friday, 13 January 2017

Cyprus talks "coming very close" to settlement

UN Cyprus talks in Geneva on 12 January (UN)

The most promising United National efforts in 14 years to reunite the island of Cyprus were inaugurated on Thursday in Geneva. 

The UN's new Secretary-General, Antonio Guterrez, and European Commission President Jean-Claude Juncker, were on hand for the opening of direct talks between the President of the Republic of Cyprus Nikos Anastasiadis and president of the Turkish Cypriot community Mustafa Akinci. Also in attendance were the foreign ministers of Cyprus' so-called guarantor powers, Greece, Turkey and Britain. 


Remarks on all sides were broadly optimistic. "We are coming very close to what is the settlement, in relation to the creation of a bi-zonal, [bi-communal] federal institution in the Republic of Cyprus," said Antonio Guterrez. He warned journalists to be patient, however. "You cannot expect miracles or immediate solutions. We are not here for a quick fix," he said. 

Greek-Cypriots struck down a previous peace proposal in an April 2004 referendum. The key difference between that proposal, known as the Annan Plan, and this round of talks, is that the Annan Plan was handed down to the two sides by then UN Secretary-General Kofi Annan. This time, Greek and Turkish Cypriots have spent 20 months preparing proposals themselves. 

Anastasiadis and Akinci, who enjoy a rare rapport, have already discussed most aspects of the deal. The Geneva talks are expected to focus on the key aspect of security, which is likely to be the biggest hurdle to a final deal. Greece, Cyprus and Britain currently guarantee Cypriot security under the terms of the island's independence in 1960; but guarding the guardians has turned out to be the biggest problem with this arrangement. Greece attempted to install a puppet Cyprus government by coup in 1974. Turkey invaded the island in response and continues to occupy 37 percent of it by force. 

Greece and Cyprus, which is Greek Cypriot-dominated, now take the position that the Treaties of Guarantee are out of place in a sovereign EU member state, and need to be scrapped. Turkey disagrees, and according to some sources wants to establish a permanent military base on the island in return for giving up its status as guarantor power. Greece and Cyprus publicly denounce any such permanent military presence by Turkey. 

Greek Foreign Minister Nikos Kotzias stressed on Thursday that Turkish troops should depart immediately upon the adoption by referendum of a deal: "We want a constant flow - a large departure in the first week, if not the first day, and then a continuous departure." One of the main objections expressed by Greek-Cypriots to the 2004 proposal was that it scheduled the departure of Turkish troops over 19 years. 

Kotzias did publicly voice a compromise proposal: "We could agree to the creation... of an international team, which will observe and compose, under the auspices of the UN Security Council, reports on the implementation of decisions." 


"Our position, and the Turkish Cypriot side's position on this matter is the same," Turkish Foreign Minister Mevlut Cavusoglu told reporters after the day's talks, according to Reuters. "The guarantorship of Turkey and the existence of Turkish soldiers on the island will continue... This is an indispensable demand of the Turkish Cypriot people and the most sensitive issue for them."
The Greek and Turkish Cypriot negotiating teams are to continue talks on January 18. The UN Conference is to resume once they have submitted their reports. 

Monday, 19 December 2016

Greece reacts to Russian ambassador's assassination in Ankara

"We unequivocally condemn today's murderous terrorist attack against the Russian ambassador in Ankara, Andrey Karlov," says a statement released tonight by the Greek foreign ministry. 

The ministry called it a "barbaric act, which caused the tragic death of a diplomat, whose job by definition is to promote peace and dialogue" 

The conservative, opposition New Democracy released a statement calling the assassination "one more terrorist act in the neighbouring country, which deepens uncertainty and instability in the region." 

Friday, 16 December 2016

Greece's anti-austerity turn incurs creditors' wrath

This article was published by Al Jazeera International

ATHENS, Greece – Greece’s leftwing government has announced its first counter-austerity measures in over a year, only to incur the wrath of creditors and beneficiaries alike.

Prime Minister Alexis Tsipras was hard at work convincing his Eurozone partners at Wednesday’s European Union summit that his measures are affordable. They are now his biggest creditors, owning $220bn of Greek debt. They said on Tuesday that they were suspending debt relief worth $47bn, until Greece assures them it is toeing the line on agreed spending limits.

Meanwhile in Athens pensioners were furious that the government’s planned handout to them is paltry. Tsipras says he will spend $650mn on 1.6 million pensioners earning under $30 a day. Most of them earn less than the poverty level of $23 a day. Their pensions have been cut by between 20 and 50 percent since austerity began in 2010.

“I worked in construction for 42 years. I built Athens. It was a ruin, after the Germans and the Civil War,” says Thanos Tzobanos, who travelled from Karditsa in northern Greece to be at the rally. “We thought we were building a better world. Our reward is to go to hospital to die, instead of having the benefit of the sweat we put in for our children and grandchildren.”

With official unemployment still running at 22.6 percent, some studies find that about half of all households rely in whole or in part on income from pensions. Tzobanos’ pension was cut from 35 dollars a day to 20 - a living he shares with an unemployed son.

Despite the objections, parliament approved the handout by a two-thirds majority – far greater than the 153 seat government majority in the 300-seat chamber. The package also includes delaying a sales tax hike on eastern Aegean islands, which have born the brunt of the crisis.

The government says its handouts don’t cost more than 750 million dollars, and it can handily afford them because tax revenues this year are more than four billion dollars above target. That puts Greece in line to achieve a primary surplus of $7.8bn, far above the targeted $3.6bn. The government sees this handout, along with two and a half thousand new jobs in health and education on the islands, as a much-needed stimulus to the economy.

On December 5 the Eurozone lengthened Greece’s repayment on some of its debt and adjusted its interest. The measures fall far short of a 50 percent debt restructuring recommended by the International Monetary Fund, but they would achieve an estimated 20 percent reduction of Greece’s debt burden by 2060. All this has now been suspended pending a review of the latest measures.  

Wednesday, 14 December 2016

Greece’s Tsipras shifts back into anti-austerity rhetoric


This article was published by Al Jazeera International. 

After 16 months of implementing austerity measures he had once railed against, Greek Prime Minister Alexis Tsipras on Tuesday returned to his old, anti-austerity campaign rhetoric.

Speaking from the southeastern Aegean island of Nisyros, he called the technocrats overseeing Greece’s fiscal adjustment programme “silly” for failing to agree on the level of austerity Greece needs to implement.

“In theory we have technocrats to tell us the right numbers, but they can’t even get the numbers right,” Tsipras said. “They’ve often admitted that they’ve been wrong, but now they’re telling us again, ‘what’s wrong is right.’”

Tsipras is alluding to the International Monetary Fund’s attempts to distance itself from the latest Greek bailout, which has been financed solely by the European Stability Mechanism – the Eurozone’s sovereign distress fund.

In a blog post on Monday titled “The IMF is not asking Greece for more austerity’, Poul Thomsen, once the IMF’s iron-fisted overseer of the Greek programme, said that Greece needs to modernise its economy, not cut social spending further.

We think that these cuts have already gone too far, but the ESM program assumes even more of them,” Thomsen writes.  

Thomsen highlights the IMF’s chief disagreement with the ESM in calling for a major overhaul of Greek debt, something Eurozone hardliners led by Germany are adamantly opposed to. “Greece’s debt is highly unsustainable and no amount of structural reforms will make it sustainable again without significant debt relief,” Thomsen writes.

An ESM spokesman said he was surprised at the IMF's public statement, and Greek finance minister Euclid Tsakalotos struck back at the IMF's position in an interview on Tuesday

Taking advantage of this widening rift, Tsipras has now fired a broadside against the programme in its entirety. Last week he promised to spend an additional €617mn ($650mn) on poor pensioners, although he promises to keep spending within limits agreed with creditors.

On Nisyros, he promised to suspend a sales tax hike on Aegean islands, which creditors imposed on his government last year.  

“I’m talking about all the islands of the North Aegean and the Dodecanese,” Tsipras said, “which are bearing the burden of the receiving and hosting [refugees].”

Among those islands is Chios, which on November 30 held a one-day strike to protest against the increase of sales tax from 17 to 24 percent, in line with the rest of the country. Islands have traditionally enjoyed a few benefits because of the additional costs and hardships of island life. The hoteliers’ association of Lesvos called the hike “an unexpected gift to our competitors”.

Tsipras says he will hire more than 1,500 teachers and 1,000 medical personnel on the islands. He also promises infrastructure works worth $64mn until 2020.

“I’m waiting to see what, of all this, will actually get done, and whether it will be done in such a way as to be effective,” says Manolis Vournos, Chios’ mayor. “The prime minister made a mistake in tying these things to the refugee issue, whereas he should have tied them to island status. Greece is the only country in the European Union without a recognition of island status.”

Eastern Aegean islands have become increasingly restive over the presence of more than 16,000 migrants and refugees, who have been building up there since an EU-Turkey Statement in March. Under its terms, Turkey will take back those who do not qualify for international protection in Europe, but applicants may not leave the islands for the Greek mainland and continental Europe. This has turned places like Chios and Lesvos into a vast processing zone.

Last month, hoteliers on Lesvos refused a rent subsidy from the United Nations High Commission for refugees in return for putting up migrants, fearing that the refugee industry will replace the tourism industry. Chios’ municipal council went back on an agreement to allow the government to build a massive new refugee camp on the island, demanding the refugees’ removal instead.

The islands’ stance is changing national policy. In a letter to the European Commission, migration minister Yannis Mouzalas on Tuesday asked for permission for migrants from countries with low recognition rates to “be temporarily transferred to pre-removal centers in the mainland.”

Tuesday, 13 December 2016

Europe’s dilemma: Get closer or break up

This review was published by The Weekly Standard under the title "Unlearned lessons from the Greek financial crisis". 

“In Defence of Europe”, by Loukas Tsoukalis, Oxford University Press 2016, 238pp, ISBN 978-0-19-875531-9, £18.99

There is hardly a member of the European Union whose past is not more prosperous, secure, expansive and influential than its present. During every age of European civilisation someone has held the upper hand, and lost it. Perhaps thanks to the maturity that comes of rising and falling, this neighbourhood of high pedigrees and inflated egos managed, after its last great conflagration, to settle into the idea of sharing its croquet lawns. That idea is now in retreat. Was the European Union a passing whim?

In Defence of Europe is a work of controlled anger. Professor Loukas Tsoukalis, who chairs Greece’s pro-EU think-tank, ELIAMEP, argues that the Eurozone’s sovereign debt and refugee crises exposed potentially fatal design weaknesses and third-rate political responses, creating winners and losers. He writes from the Europe’s periphery, the ultimate loser, bringing forth incontrovertible economic data that back up a stinging accusation of the north, especially Germany. “Democracy is not a given, nor is peace,” he ominously warns three pages before the end.

Tsoukalis focuses on European Monetary Union as an inequality machine. Assumptions that EMU would encourage everyone to enjoy Germany’s high trade surpluses proved wrong, because when they adopted the euro member states had diverging levels of competitiveness. In the decade preceding the financial crisis of 2008, “unit labour costs in Ireland rose by 46 percent in relation to Germany. The corresponding figures were 33 percent for Greece and 24 percent for Portugal,” he says. Exchange rate fluctuations between EU members had made up for much of the competitiveness gap by lowering the cost of exports. By nailing everyone to a fixed currency, the euro amplified Germany’s essential competitiveness, but made it much more difficult for less competitive economies to export goods and services.

Nor is it only the periphery that suffers from currency overvaluation. In a recent interview, France’s far-right leader, Marine Le Pen, called the euro “a suit that fits only Germany.” She would ditch the common currency for the same reason that Greek leavers would: “The IMF has just said that the euro was overvalued by six percent in France and undervalued by 15 percent in Germany. That’s a gap of 21 percentage points with our main competitor in Europe,” she said. If she wins the presidential election next spring, an anti-establishment vote that seems all the more likely after Donald Trump’s success, Le Pen plans to recreate the “currency snake” of 1972 – a band of exchange rates 4.5 percentage points wide, within which EU members had some room for devaluation.

When financial markets collapsed in 2008, they started pricing risk into sovereign bond purchases and Greece, with its high deficits and debt, was soon unable to borrow. It asked its Eurozone partners to set up a distress fund. Greece got its sovereign loan on what Tsoukalis describes as “punitive and economically unrealistic terms”. As government cut costs it created a deepening recession. Greeks began to talk of a deliberate deconstruction of their economy as part of a northern European plot to reduce them to a cheap worker class and buy up their companies.

This dubious narrative had its northern counterpart. Germans talked of how the fiscal profligacy of the periphery threatened hard-won German budget surpluses should the EU allow the wealthy states to subsidise the less well off, as in the US economy. But with the exception of Greece, none of the sovereign debt crises that followed (Ireland, Portugal, Spain, Cyprus) were due to overspending, says Tsoukalis. They were caused by private debt bubbles leading to bank bailouts. The fiscal profligacy narrative, however, enabled German politicians to claim credit for German economic success as a product of political virtue, blame the periphery for its woes and justify the austerity wrought on it.

There was a more ominous financial reason for austerity, though. Northern European banks, grown fat on the savings of workers in strong economies, had financed a borrowed prosperity in the periphery, and were now in danger of going under should the periphery have trouble honouring its bonds. Tsoukalis puts a precise price tag on this. In the third quarter of 2009, “total claims of French and German banks on the countries of southern Europe plus Ireland had reached astronomical figures: $824bn for the French banks and $733bn for German banks.”

Europeans on the periphery have long held that Eurozone bailouts were entirely selfish: not to bridge the wealth gap, but to save northern banks and the euro. Tsoukalis tells it by the numbers: “Approximately 70 percent of the total financial assistance provided to Greece… has been spent on servicing, repaying and restructuring old debts, and another 20 percent has been spent on the recapitalisation of banks following sovereign debt restructuring… Politicians [in Germany] have never dared to tell their citizens the bitter truth, namely that the money they lent to other countries in the Eurozone was also money to save their own banks and some of it, at least, may never be paid back.”

Had even this been done in a burden-sharing fashion, with, say, part of the periphery’s debt being mutualised through a euro-bond, or by forcing creditors to accept at least some responsibility for their lending decisions, the political consequences of bailouts might have been less poisonous and European unity might have been preserved. But the Germans, Dutch, Finns, Danes and Belgians, with trade and budget surpluses, did it with an authoritarian, punitive and morally superior tone, partly as an example to others. Never before had European relationships been defined by the raw power of money.

In this process, financially strong countries destroyed the consensus politics traditional to the European Union, and took over control of what were purportedly councils of equals. On page 93, Tsoukalis momentarily drops his academic sangfroid to ask, “Is [austerity] a fiscal virtue in legal clothes or a kind of policy straitjacket in a European system that is turning into a madhouse?”

A weakened Union

It is a maxim that Europe has lurched forward during crises, but Tsoukalis believes the Eurozone crisis ultimately weakened European institutions because they came across as uncaring about people. “The losers turned to the nation state for protection, because they had nowhere else to turn. Europe did not offer any kind of protection.” Thus the EU came to be seen by many Europeans purely as the instrument of capital, and “an integral part of the globalization process in an era of neoliberalism.”  

European institutions were also weakened by legal sleight of hand, says Tsoukalis. Europe’s fiscal rules expressly forbid government bailouts, so the institutions created to offer them operate outside EU law.

Finally, bailouts came off as a German diktat to national parliaments, which are still the bedrock of European democracy. Austerity bills hundreds and in some cases thousands of pages long had to be considered in periods as short as 24 hours. Lawmakers were in each case told by German and EU officials that failure to pass a bill would result in emergency loans being stopped, and national bankruptcy. “How much economic sovereignty (or democracy) can you afford if you are bankrupt?” has become a key question in Europe.

Tsoukalis’ consternation by numbers supports the periphery’s view of European economic policy with data and argumentation. In effect, he tells the losers of Europe that they are right to be angry - and why. Despite its shortness, this is a dense work, but the student and observer of Europe will find it an invaluable resource.  

In retrospect, Germany’s comportment in Europe - forcing acquiescence upon others to divisive and often questionable policies – goes back to German reunification. At the European Summit of December 1991, Germany muscled through recognition of Croatia and Slovenia, which had declared their independence, ignoring warnings that this would prompt the breakup of Yugoslavia, which it did. After an eight-year civil war, which Europe did nothing to stop, Germany participated in the NATO-led bombardment of Serbia and Kosovo – its first military action abroad since the end of the Second World War. Germany’s Yugoslavia policy marked the first manifestation of her new persona – more assertive, prepared to take a leading role in Europe, but in the national rather than the collective European interest. Now Germany, along with other creditor countries in Europe, has hijacked European economic policy with purely national priorities.


It is tempting these days to think of the EU as divided along cultural lines. Germany can put herself at the heart of a resurgent Holy Roman Empire consisting of her supply chain countries and Teutonic affiliates. It is a Standard of Living Union, fundamentally different in outlook from countries like Italy, France, Greece, Cyprus, Spain, Portugal and Malta, which thanks to good climate and rich history can claim only a Quality of Life Union. If the EU is to have force on the world stage as a political entity, fiscal union, greater redistribution of wealth, a defence and foreign policy and a constitution must be on its agenda. In reality, both the self-proclaimed federalists and the new wave of populist separatists are pulling in the opposite direction.

Monday, 12 December 2016

A Greek election in 2017?

This article was published by Al Jazeera International.

The Eurozone’s biggest economies, France and Germany, hold elections next year. So may Italy, its third biggest, if a government formed out of the present parliament cannot hold. Greece, in recent years the Eurozone’s politically most unstable country, may now be vying for a place in the pack, adding to the shifting political parameters of 2017.

That, at least, is how some observers are interpreting Prime Minister Alexis Tsirpas’ decision to hand out €700mn in concessions for low-income pensioners on December 8. The announcement followed a Eurogroup meeting in which the ruling leftists failed to win more than short-term debt restructuring, leaving to 2018 the more substantial measures Greece needs to be viable.

The reasoning is that with the 2017 budget now safely passed in parliament last weekend (along party lines, with one defection) and Syriza fast running out of political capital following its failure either to restructure the debt or to enter Greece into the European Central Bank's quantitative easing programme, it is time to let the conservative New Democracy assume the mantle of austerity before Syriza loses any hope of re-election in future.

The ruling leftists are now trailing ND by more than ten points in every major recent poll:  

Public Issue, 1 Nov.: Syriza 18 percent, ND 42 percent
Univ. of Macedonia, 1 Dec.: Syriza 16 percent, ND 32 percent
Pro Rata, 5 Dec.: Syriza 18 percent, ND 29 percent
Pulse, 6 Dec.: Syriza 18.5 percent, ND 28 percent

Syriza, which was returned to power in September last year, theoretically has until 2019 to run. 

Former finance minister Alekos Papadopoulos gave To Vima a caustic interview on Sunday, in which he broadsided the political system for failing to undertake necessary reforms. “After seven years of crisis, the political system… deliberately hasn’t allowed people to understand the causes of this crisis,” Papadopoulos said. “Between 2001 and 2015, our people subsidised pension funds’ deficits to the tune of €220bn through taxes and borrowing. That is equivalent to two thirds of the debt.”

Papadopoulos acknowledged the “many tens of billions of euros” spent by European taxpayers to raise the Greek standard of living through European Union subsidies; but he blasted the European Union for postponing a resolution of the Greek crisis until after 2018, something he called “a grand deception on the part of the Europeans”.  

Friday, 9 December 2016

Analysis: The meaning of Greece’s partial debt restructuring

This month’s meeting of Eurozone finance ministers, or Eurogroup, approved debt relief measures for Greece that had been floated in May. At that time the proposals were contingent on Greece passing its first assessment under its third bailout loan, which it has now done.

The measures do not ultimately render the debt sustainable, but they represent the first important restructuring of Greek debt held by other European sovereigns. In that sense, the Eurogroup can be said to have passed a political milestone on a long maturing process that will hopefully see further measures. The ultimate goal of Greece’s bailout, after all, is to tide it over while it overhauls is uncompetitive economy, until it is able to borrow from the private sector again. Markets may be happy to lend to highly indebted economies with strong exports (Japan, US, Italy), but the Greek economy is not robust enough to warrant such treatment. 

What are the latest measures?

The December 5 Eurogroup approved three proposals by the European Stability Mechanism – the Eurozone’s distress fund for sovereigns - which currently holds €162bn of Greece’s €320bn debt, and will hold roughly €200bn of it in 2018. It is therefore the indispensable creditor:

1.     Steady rate of repayment: Greece still owes €131bn from its second bailout loan, which matures in 28 years. This will be extended to 32.5 years. The effect of this extension is that Greece will pay a bit more in interest, but it will face no “repayment humps” – years in which its annual premium is set to rise  sharply.
2.     Steady rate of interest: Greece’s first and second bailout loans carry a floating interest rate. That is fine in the current environment, where the European Central Bank’s base rate is zero. This has enabled Eurozone countries to lend to Greece at rates, which now average below two percent; but market conditions could change over the next 32.5 years, so the ESM will alleviate that risk by swapping Greece’s floating rate bonds for fixed rate bonds in order to lock Greece into current, low market rates (the precise rate is subject to a negotiation between Greece and the ESM). It will also offer any future loans to Greece on this fixed rate. In this way, the ESM acts as a shock absorber between Greece and the market.
3.     No stepped-up interest rate: Greece’s second bailout entailed an interest rate step-up of two percent for debt buy-back. This would start being charged in 2017, but is now being scrapped, at a cost of about €200mn to European taxpayers.

What these measures will ultimately do for Greece’s debt sustainability is not certain, but ESM chief Klaus Regling thinks they will lower Greece’s debt-to-GDP ratio by roughly 20 percent between now and 2060.

Is this enough?

No one is pretending that this is a breakthrough. Greek Finance minister Euclid Tsakalotos called the Eurogroup “intriguing and interesting” and its result “very promising”. Regling stressed that these are only short-term measures, and that anything more ambitious will have to wait until mid-2018, when Greece’s current bailout period ends. 

If anything, Greece has been reminded of an onerous undertaking in the Eurogroup statement, which recalls that, “the primary surplus target of 3.5 percent of GDP reached by 2018 should be maintained for the medium-term.” This means that Greece has committed to setting aside a sum equal to 3.5 percent of its economy with which to repay debt in 2018 (it is set at 1.7 percent for next year), and creditors expect it to continue to bleed its economy at that rate for several years thereafter. No one has said exactly how many years Greece will be asked to do this, but off-the-record estimates vary between three and ten.

This is a problematic premise. In its debt sustainability analysis last May, the International Monetary Fund said it didn’t think Greece could achieve the 3.5 percent level without politically impossible sacrifices. It confirmed that view on December 5.

Furthermore, the IMF said in May, “Even if Greece through a heroic effort could temporarily reach a surplus close to 3.5 percent of GDP, few countries have managed to reach and sustain such high levels of primary balances for a decade or more, and it is highly unlikely that Greece can do so considering its still weak policy making institutions and projections suggesting that unemployment will remain at double digits for several decades.” Instead, the IMF said, creditors should work on the assumption of a primary surplus of “no more than 1.5 percent of GDP”, this lying in the IMF’s view “within the realm of what is plausible”. 

This analysis is based on the fact that Greece’s political elite is now provably pitted against a fast pace of reform, and its banks so overburdened by non-performing loans that they won’t be able to finance much new business. Growth is therefore bound to be sluggish – as indeed it is in the Eurozone as a whole.

So what is the IMF’s proposed solution?

All of the measures the Eurogroup adopted this month are based on the IMF’s May proposals, but they are partial implementations. For instance, the IMF proposed that Greece’s first and third bailout also be included in the extension of the repayment period (another €113bn). Regling’s proposals extend only the second bailout (131bn). The IMF also proposed low, long-term, fixed interest “not exceeding 1.5 percent”. The goal, the IMF said, was to achieve a 50 percent fall in debt-to-GDP ratio by 2060 if Greek debt is to be considered sustainable, not the 20 percent fall Regling says will suffice for now.

Why has the ESM chosen to focus on the short-term relief instead?

Syriza did attempt to redefine Greece as insolvent, rather than just illiquid, in its first six months in office. In other words, Syriza said Greece needed an overhaul of its finances, including generous debt forgiveness, rather than constant cash injections that keep its economy alive but bedridden. This attempt famously failed, because under German leadership the Eurozone does not want to spend-and-stimulate its way out of members’ sovereign debt crises, but encourage them to save their way out, hence the policy of austerity.

Regling rejected the importance of the debt-to-GDP ratio in an interview with the Financial Times in October last year: “Mr. Regling’s argument is that Greece’s debt should be measured by what Athens currently has to pay on an annual basis rather than the overall stock of debt,” the FT wrote. “He insists [that] private investors – who must ultimately replace bailout lending – care more about such “debt flows” than the overall debt levels.”

This is the guiding principle of the ESM’s short-term measures - that Greece’s nominal debt ultimately doesn’t mater, only its ability to service its debt, and the ESM is prepared to lend Greece just enough to achieve the latter. But this logic goes against the founding principle of austerity, which is to bring Eurozone economies back in line with the terms of the Stability and Growth Pact. That allows a debt-to-GDP ratio of no more than 60 percent. 

Greece has had to accept that what Regling and Berlin say, with all their contradictions, is the reigning logic in Europe. During his annual keynote speech on the economy at the Thessaloniki International Fair last September, Prime Minister Alexis Tsipras didn’t even mention debt restructuring as a national priority. Instead, he talked of Greece’s one day being included in the European Central Bank’s quantitative easing programme. 

Under Regling’s proposals, Greece will try to lock the €131bn it owes under its second bailout into a low interest rate of, say, just over one percent. That will represent one of the lowest rates of interest it has ever paid. It's a start. It may be that this softer approach to a debt deal is producing better results than Syriza’s high-profile, head-on approach during its first six months in power. But unless Germany ultimately agrees to a fuller debt restructuring, these interim measures will be pointless and expensive to the Greek taxpayer. The IMF and the Eurogroup agree that at present, Greece's debt will be around 250 percent of GDP in 2060.