Here’s a safe prediction for 2017: the Greek debt crisis will turn ugly again. In fact, the next chapter has already begun. On Wednesday, eurozone finance ministers put their plan for short-term debt relief on hold because Athens handed a relatively small sum of money to pensioners at Christmas and said it would pay for school meals for 30,000 children in impoverished areas.
In the view of Alexis Tsipras, Greek prime minister, the country has earned the right to make small acts of generosity, like €617m (£518m) for pensioners. Greece didn’t just meet its target to run a budget surplus of 1.5% last year, it exceeded it. That achievement was secured after seven years of austerity, a period in which Greece also found itself at the front end of Europe’s migration crisis.
In the eyes of the eurozone ministers, however, rules are rules. Tsipras’s measures “appear not to be in line with our agreements” and thus debt relief will be suspended. The message to Tsipras was plain: perform a U-turn, however politically embarrassing.
It is possible that the immediate tension could be defused, but it is hard to be optimistic about next year. The demands on the budget get stiffer from here – a surplus of 3.5%, rather than 1.5%, is required by 2018. The International Monetary Fund regards that target as too stiff, but its argument for greater leniency comes with strings attached. It wants Greece to make sweeping structural reforms to its economy and labour laws to promote growth. But how, politically, is that supposed to happen in the face of the current high rates of unemployment and without an adequate system of welfare support?
The position is a mess. Greece is at loggerheads with eurozone ministers, and the eurozone and the IMF are struggling to maintain a united front. Optimists might argue that bigger disagreements have been overcome in the past. The difference this time, however, is that the demand for a 3.5% budget surplus looks unachievable, which is the IMF’s point. The body is right, but the eurozone’s position is only hardening.