Merkel sees Greece’s Tsipras making deals as cash crunch looms
January 17 2015 11:38 PM

Alexis Tsipras, Greek opposition leader, talks to reporters outside the parliament building after the last round of a presidential vote in Athens on December 29, 2014. Chancellor Angela Merkel is confident that, once in power, Tsipras would scale back demands that put him on a collision course with creditors, German government officials said.


Chancellor Angela Merkel is convinced that Greek opposition leader Alexis Tsipras will do business with other euro-region governments if he wins next week’s election, German officials said, as a cash crunch looms for his country.
Greece is set to run out of money by mid-year if it can’t break the deadlock over its rescue program, according to two different officials from the international community with knowledge of the matter.
That looming deadline will put the new government under immediate pressure to negotiate over an aid extension and how to trigger debt relief. With polls showing Tsipras’s Syriza alliance holding its lead, Merkel is confident that, once in power, he would scale back demands that put him on a collision course with creditors, two German government officials said.
The nation could probably stretch past the end of February — the limit Prime Minister Antonis Samaras has hinted at during campaigning — so long as tax flows continue and there’s no disruption to emergency liquidity support for Greek lenders, said the international officials, who spoke on condition of anonymity because the analysis is private. But in July and August, two bond repayments to the European Central Bank totaling €6.7bn ($7.7bn), probably would overwhelm available buffers, they said.
Greece’s Finance Ministry, the European Commission in Brussels and the International Monetary Fund declined to comment.
“There is already a commitment of the euro area, dating from late 2012, to take a look at debt sustainability in Greece if the country implements all agreed reforms,” Klaus Regling, head of the European Stability Mechanism firewall fund, said in a January 13 interview with Diario EconomiCo “This may happen.”
While Tsipras has called for a debt cut and an easing of austerity conditions, he has retreated from some of the positions that unnerved investors after Samaras called early elections in December. At the same time, Merkel is sticking to her position that the next government is tied to the commitments its predecessors made to the rest of the euro region, whoever wins the election.
Greece’s aid program, set to expire at the end of last year, won an extension through February to allow time for talks with its international creditors.
One of the German officials said Greece already enjoys a favorable debt structure, with 30-year repayment periods on loans from European governments and a multiyear waiver on interest payments, leaving little space for further relief on interest or maturities. Merkel’s spokesman, Steffen Seibert, declined to comment on possible Greek election outcomes.
After years of austerity for Greeks, Syriza has promised voters it will seek to reduce the state’s debt burden and do more to combat economic weakness. The party reached out to investors by pledging to avoid unilateral decisions on obligations to creditors.
From Germany to Brussels, officials are signaling that while Greece’s official creditors won’t write down outstanding debts, easing the terms of aid loans are a possibility. As leader of the biggest country contributor to euro-area bailouts, Merkel’s blessing is required for any changes.
“There’s no reason to discuss a debt cut right now,” Bartholomaeus Kalb, a lawmaker in her governing Christian Democratic bloc, said this week.
Offering concessions to a Tsipras government that creditors withheld from Samaras, a Merkel ally, would suggest that countries can get special treatment and risk encouraging anti-austerity campaigners in other euro countries, according to the German officials.
Syriza’s demand for a “significant haircut” on public debt is “reasonable and shared by many investors, analysts, academics and even European officials,” Panos Skourletis, the party’s spokesman, said by phone. “We will put on the table the force of our arguments and the experience of the total failure of the conditions attached to the Greek bailout.”
Greece’s government could get through to June by beefing up regular revenue with treasury-bill auctions, drawing on deposits from social security funds and other state entities, and increasing the stock of overdue tax rebates and arrears to its suppliers, according to one official directly involved in monitoring Greece’s financing.
That person’s estimate is based on the assumption that cash flow from taxes and other revenue will not be disrupted by political uncertainty, and that the elections won’t spark a massive outflow of deposits and capital from the country.
Following the biggest debt restructuring in history, most of Greece’s debt is now held by the European Union, the European Central Bank and the IMF. Only a fourth of the €322bn of Greek public debt outstanding at end-September was tradable, according to the Finance Ministry’s website.

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