A look at what is at stake as Greece asked its European partners for a new three-year bailout.
Q. What does Greece want?
A. Greece wants debt relief from its European creditors, including Germany and France, the European Central Bank (ECB) and the International Monetary Fund (IMF).
Greece owes about 320 billion euros, or about $354 billion, and already missed a repayment last week of about 1.5 billion euros, or $1.7 billion, to the IMF. Greece must pay back 3.5 billion euros, or about $3.7 billion, to the ECB by July 20. That is highly unlikely.
Q. Why can’t Greece make these debt payments?
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A. Greece is about to run out of money, and Europe has said it will not lend money to the Greek government, or the country’s banks, until it changes its ways. When Greece runs out of money, and can’t borrow any more, it will not be able to honor its debts, pay pensions or finance services.
That’s the moment that Greece may be expelled or could quit from the group of countries that uses the euro. Its government would have to start printing paper money, possibly denominated in drachmas, Greece’s former currency, to keep some semblance of its economy going. There is no real precedent for this in Europe.
Q. What is Greece willing to do?
A. On Wednesday, the new Greek finance minister, Euclid Tsakalotos, sent a letter to the European Stability Mechanism, Europe’s bailout fund. The letter formally kicked off a process that Greece hopes will culminate in a bailout deal with its European partners by Sunday. Without at least a preliminary agreement by then, Greece’s banks are expected to run out of cash as early as Monday, and the country would almost surely be on the road to crashing out of the eurozone, the club of 19 nations that share the euro currency. The request did not specify how much Athens was hoping to receive in what would be its third international bailout in five years.
The letter’s central points:
• A request for a three-year loan program to meet debt obligations and ensure the stability of Greece’s financial system. Previously, Greece wanted two years and immediate debt relief.
• Greece is willing to postpone talk of debt relief until after a loan package is agreed to, a new concession.
• After three years, Greece wants “full and affordable market financing to meet its future funding requirements as well as sustainable economic and financial situation.”
• Greece will commit to “a comprehensive set of reforms and measures to be implemented in the areas of fiscal sustainability, financial stability, and long-term economic growth,” as early as next week.
• Tsakalotos’ letter said that measures would include changes to the tax code and pension payments, and modernization of the Greek economy.
The letter also repeated pledges by Greek officials, including Prime Minister Alexis Tsipras, to remain part of Europe’s common currency. But that might not be up to Greece.
Tsipras appeared before the European Parliament in Strasbourg, France, on Wednesday to defend his government’s handling of the crisis. He said the Greek economy, which has contracted by a staggering 25 percent since 2009, had essentially become a guinea pig for destructive austerity policies. He also insisted that the crisis was not Greece’s alone but one that confronted Europe as a whole.
Any loan package for Greece must be approved by the European Commission, the IMF and the ECB.
Q. What are the prospects that this offer will help?
A. The prospects are unclear. Greece won’t say how, exactly, it plans to accomplish any of this until Thursday, and specifics may never be made public. But Greece’s new willingness to postpone talk of debt relief until after a bailout deal is agreed might make a difference: France might be willing to consider this, but Chancellor Angela Merkel of Germany said Wednesday she was still not convinced.
Q. What is Europe offering?
A. Nothing. Or nothing new.
Before Greece missed its IMF payment and after Tsipras unexpectedly announced a national referendum on the deal proposed by creditors, the ECB cut Greece off. It said it would not increase emergency funding for Greek banks and would not release a 7.2 billion euro, or $7.97 billion, bailout payment.
Europe wants Greece to reduce its spending before it will be willing to renegotiate any debt or lend Greece any more euros.
European officials had indicated the possibility of a last-minute concession on demands for Greece to cut bonus payments for the poorest pensioners. Other specifics of the deal offered, and since rescinded, by Europe were never made public.
Greek officials characterized that offer as unpalatable before Sunday’s referendum. Voters seemed to overwhelmingly agree, even though they might not have known what, exactly, they were voting on when they rejected the offer.
Greece wants debt relief sooner rather than later, and enough money to keep operating for three years without cutting spending as much as Europe wants it to.
Europe, led by the austerity-minded Merkel, wants Greece to make deeper cuts than it is willing to make. Merkel has the support of a number of leaders of eurozone countries that have had to take similarly difficult belt-tightening measures in recent years, including Italy, Spain and East European members of the eurozone.