Will the Eurozone come to a final deal with Greece over the latter’s debt?


“In a couple of weeks’ time, a group of international debt inspectors will land in Athens, where they will gain access to the Greek government’s accounts and pore over its policy proposals for what may be the final time. If this team of forensic economists comes away satisfied with the local authorities’ reform efforts, as well as their finances, it should, in theory, mean that European leaders will be able to settle on a long-term plan for the struggling country’s hundreds of billions of euros in outstanding debts by the end of June.” 
This is what CNBC’s Willem Marx notes in his article in the City AM website on 1 May, in which he highlights a number of tensions between international law, domestic laws in sovereign nations, and the generally understood principles of contract law.

Of these, contract law and international law are based on agreements between the parties to a contract, or nations through international instruments or treaties.
Greece is a sovereign nation in its own right with all the rights and responsibilities under its international law obligations, as reflected in assent to those international agreements that suit her best interests as a nation.
Greece also has treaty obligations in relation to her membership of the European Union; the conditions being clearly set out in the various instrument of union, which itself is an agreement between the member states of the Union.
In her dealings with other EU member states, Greece has contracted to a level of debt aggregate of the debt taken on by private and public debtors, and reflected by the net cash position of the instrumentalities managing the transactions, namely the banking system and relevant Greek fiscal authorities.

Tension has arisen from the conflict between international law, the conditions surrounding Greece’s membership of the EU and the terms and conditions surrounding the aggregate of contracts entered into by players in the Greek economy.
Added to that is the presence of ‘forensic economists’ who are empowered under the EU agreements to undertake investigation of matters that are normally internal to, and sacrosanct of, sovereign nations.
One part of the argument would be that the inspectors are executing their duties in line with the agreements that have been arguably voluntarily entered into by Greece (the so-called bail-out package).
Another part of the argument is that Greece is a sovereign nation and the inspectors have little or no right to interfere in her internal matters.
Yet another part of the argument is the perception that the larger and wealthier states are somehow taking advantage of the economic situation faced by Greece.
It is perhaps best to consider the tensions in the light of the Greek economic position in the wider context of the entire EU.

Accepting Mr Marx’ assertion that debt in Greece is running at 180 per cent of GDP, it is instantly recognisable that this is simply not sustainable – putting aside the obvious evidence of the economic privations suffered by the Greek population.
In Mr Marx’ words, “reducing, delaying or otherwise recalculating is not a solution, it is at best a sleight of hand.” In order for Greece to relieve her situation, she must find ways of generating higher GDP in order to fund debt repayment, not simply take on more debt to repay what is already in existence.
That means in some way increasing output of goods and services, or developing new goods and services that can be sold outside Greece to generate new revenue streams. The real kicker in this is how to achieve such an outcome.
Whilst the inspectors are doing their level best to ensure and measure that Greece is effectively actively trading herself out of debt, the Greek government and the Greek population need to take local action whilst thinking globally – at least to the extent of the EU.

“The unravelling then repackaging of Greece’s national debts has proved a long and tortuous journey for all involved, with eight years of tight supervision by a handful of foreign governments and funds, over the course of three separate bailouts. But unless a major roadblock appears between now and then, 20 August will mark the first day in almost a decade that Greece’s leaders would regain full control over their own spending. The alternative – a continuation of foreign supervision of government accounting that exists today – would be far from politically palatable for Prime Minister Alexis Tsipras as he prepares for national elections next year,” stresses Mr Max.

While Prime Minister Tsipras is facing a “politically unpalatable” possibility of continuing foreign economic supervision, he also faces the equally unpalatable task of demonstrating leadership by pressing forward with deep economic reform, something akin to heresy to socialist ideology, especially in the face of necessary cuts in state programs and social welfare.
Venezuela is already demonstrating the effects of the planets aligning in similar fashion.
Greece and her prime minister are facing a four-card trick – international, EU, commercial, and political obligations.
They need all the strength they can find, not to mention the irony of the author’s surname!

Tony Anamourlis BA LLB LLM MTax GradDipLegPrac LLM, is a Tax lawyer at La Trobe University.