Protesters took to the streets in Athens on Wednesday, angry about the terms of a bailout the Greek parliament is voting on.
That agreement also faces a complicated path forward, thanks to the International Monetary Fund, which said Tuesday that it won’t be a part of a deal that doesn’t include debt relief for Greece.
Relief from Greece’s staggering debt could take different forms, including lowering interest rates, giving the country more time to make payments or simply wiping a portion of the debt away.
However, these paths are not created equal in the minds of many eurozone leaders.
“The line in the sand for some European states seems to be no principal reduction,” says Anna Gelpern, a law professor at Georgetown.
That hard line is all about politics and optics, she adds. “[They] don’t want to say we forgave Greek debt and lost money for the taxpayers.”
Debt forgiveness would also complicate Greece’s quest for additional bailout funds, says Mujtaba Rahman, with the Eurasia Group.
“It’s difficult to convince skeptical creditor parliaments to both lend money to Greece at the same time as assuming losses on loans already extended,” he says.
Eurozone leaders may also be worried about the precedent their treatment of Greece may set, says Steve Hanke, professor of applied economics at Johns Hopkins University.
He describes their thought process as, “If we allow people to continually break rules, pretty soon, it’s not just going to be Greece breaking the rules, but … some other country that’s in the eurozone.”
However, the IMF warned that Greece is facing an unsustainable level of debt. If forgiveness is off the table, it suggested there would have to be big concessions elsewhere, possibly pushing the timing of payments out by decades.
In other words, Greece and its creditors still have a long way to go.
“I think this is the very beginning of the story,” says Gelpern. “I don’t think we’re anywhere near the end.”