Tusk joins call for Greek debt relief

The European Council president gives a boost to Prime Minister Alexis Tsipras.

In a break with some of Greece’s creditors, European Council President Donald Tusk endorsed providing debt relief for Athens if it steps forward with a realistic economic reform proposal.

Eurozone leaders gave Athens a final ultimatum this week: present a credible package by midnight Thursday, then talks can begin on a third bailout program. If not, Greece will face ejection from the eurozone at an emergency summit of all European Union leaders Sunday.

Greek Prime Minister Alexis Tsipras has demanded that a debt deal be part of an agreement with creditors. They, in turn, have long held the position that commitment to reform should come first.

But Greece’s pleas for debt relief is gathering more support. In addition to Tusk, U.S. Treasury Secretary Jack Lew explicitly recommended it this week and the International Monetary Fund once again pointed out the unsustainability of Greece’s debt load in a speech Wednesday. The burden is equivalent to 180 percent of its total economic output.

Speaking in Luxembourg at a press conference with Luxembourg’s prime minister Xavier Bettel, Tusk said he spoke Thursday with Tsipras, and that he hoped to receive “concrete and realistic” reform proposals today. He tweeted the same thing.

He then added that “realistic proposal from Athens needs to be matched by realistic proposal from creditors on debt sustainability to create win-win situation.”

IMF chief Christine Lagarde reiterated her institute’s support for debt restructuring in a speech in Washington, saying this had to be an element of the solution to an “acute crisis, which needs to be addressed seriously and promptly.”

Many of Greece’s European creditors — including the region’s largest economy, Germany — have made clear their objection to any debt relief for Greece in the short term and European Commission President Jean-Claude Juncker said at Tuesday’s emergency summit that the issue could not be discussed for at least three months.

However,  it appears likely that if Greece meets its midnight deadline to provide credible reform proposals, there will be now have to be some discussion of how to make its debt levels more sustainable at Sunday’s summit.

The prospect of debt relief would also make it much easier in domestic political terms for Tsipras to bow to creditors’ demands for deep spending cuts and savings in sensitive areas such as pensions and taxes.

Tsipras told the German conservative MEP Manfred Weber (EPP) Wednesday, when the Greek prime minister joined a debate in the European Parliament, that “the strongest moment of European solidarity” was when European countries relieved Germany of its debt in 1953.

Vince Chadwick contributed to this article.

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