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Publié le
Jeudi 22 Janvier 2015
The future of the euro area hangs in the balance before an election that may be won by a party willing to break ranks with the way European governments have acted
The Third Greek Test

Greece has twice provided the acid test for the rules of the game of the European monetary union. Once again it is likely to provide a critical testing ground, this time on the occasion of the general election on January 25.

The first test came in spring 2010, when the government in Athens lost market access and required assistance from the European Union and the International Monetary Fund. The question then was: Can official support be provided to a member of the monetary union, and if so, by whom? The EU treaty was remarkably ambiguous on the issue. Many read it as implying that there was no room for official European assistance because it would violate the so-called no bail-out clause. But in the end the heads of state and government decided to extend conditional loans to Athens alongside the IMF, giving birth to the now famous (or infamous) troika. The same template would apply later to Ireland, Portugal and Cyprus, without giving rise to legal challenges.

The second test came in 2011-2012, when it became evident that Greece's debt burden was too high and that some sort of relief from its private creditors was indispensable. Could a member of the monetary union renegotiate its debt while remaining in the euro? Here again, the treaty was remarkably silent and there was no procedure whatsoever for debt renegotiation. For months, a fierce battle went on in Europe. Most European officials claimed that a restructuring by a euro-area country was unthinkable, and that Greece had no choice but to repay or, for some, to leave the euro. But in the end – and actually at a late stage, after many private creditors had been repaid in full – European leaders decided that debt relief was acceptable. In February 202, Greece reached a debt reduction agreement with its private creditors.


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Jean Pisani-Ferry
Anciens auteurs de France Stratégie
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