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Eurozone crisis

Opinion: Only a brief respite

Eurozone finance ministers held a marathon 12-hour session to hammer out a deal on Greek debt reduction. But the rabbits they pulled out of the proverbial hat won't last long, says DW's Bernd Riegert.

Eurozone finance ministers and the heads of the International Monetary Fund (IMF) and European Central Bank (ECB) appear to have found something peculiarly pleasing about masochistic late night do-or-die sessions. Why else would they assemble for a third sleepless night in Brussels in as many weeks? Was this yet another objective search for meaningful decisions? Hardly - because the facts have not really changed during the last three rounds.

The facts, in fact, are rather clear: Greece has a financing gap of around 30 billion euros ($38 billion) between now and 2016 due to a dramatic economic recession, excessive new debt and slow reforms. This is on top of the 230 billion euros already approved under the European rescue fund.

Someone will have to come up with the money to prevent Greece from going bankrupt. The various financial terms and instruments discussed and calculated over the last few weeks always arrive at the same result: The solvent states of the eurozone will be footing the bill and taking on ever greater risk.

Having creditor countries cancel a portion of Greek debt altogether is considered by many banking and finance experts to be the best way forward to get Athens back on track. But, taking a so-called haircut would not go down well politically in Germany or in a number of other eurozone countries.

That is why the plan now calls for Greece to buy back debt at reduced rates, or for creditors to extend the payback period, or reduce interest rates, or institute a voluntary reimbursement of central bank earnings. These complicated measures have the same effect as a haircut, but are disguised and are paid in installments. The costs, of course, are still shouldered by taxpayers in the eurozone countries, only that now it would be slower, not as obvious and not as rough as a haircut.

The euro rescuers in Brussels, however, should not be taking taxpayers for fools. Saving the bankrupt state of Greece will cost a lot of money. Finance ministers need to stop hiding this fact, even if they only barely managed to scrape together a compromise. It is absolutely illusory that Greece will ever be in a position to pay back even a portion of its debts on its own.

The timeline for rescuing Greece - or more precisely, the creditors who hold Greek debt - cannot be kept. The EU Commission, IMF and ECB did not do the math. With its slow reforms and procrastinating, Athens also did its part to muddy the waters.

The Greek economy has tanked by nearly 25 percent, leaving the country in a mess, but the debt burden continues to rise, despite all the billions in rescue funds over the last two-and-a-half years. Incidentally, the loans from Washington, Brussels and the various capitals of the eurozone have only benefited a small portion of the Greek population. The lion's share of the money has been spent to service the debt to creditors - whether private or central banks.

And there is no cost-effective, painless exit from this dilemma - not even for the creditors. A haircut will have to come and probably Greece will need a new currency to pull itself out of this morass. Continuing down the path that has been followed so far - the path that German Finance Minister Wolfgang Schäuble has bet on - is not working. As a result, the eurozone ministers, the IMF chief and the head of the ECB were not only sleepless in Brussels - they were also clueless.

During the summer, ECB President Draghi, German Chancellor Angela Merkel and other government leaders had promised they would keep Greece in the eurozone whatever the cost. Well, the bill has just arrived and the price is high.

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