In 1986, then-Senator Bill Bradley called for third-world debt relief at a meeting in Zürich. That was highly controversial. But the debt conversion and reduction move led, a few years later, to the success of debt relief in the form of the Brady Plan. Issuing “Brady Bonds” helped former problem debtors in Latin America regain access to capital markets. Ever since Greece’s left-wing Syriza party under its radical leader, Alexis Tsipras, won a big election victory on January 25, 2015, and took extremist right-wing coalition partners, European leaders have been facing the eurozone’s first anti-austerity government and its calls for massive external debt relief.
The Greek economy is still in an alarming state. GDP has shrunk by 25 percent since the start of the crisis in the spring of 2010. The unemployment rate is 25 percent, and youth unemployment hovers around 50 percent. External debt at about 175 percent of gross national product is not sustainable. Rescue loans from the European Union, the European Central Bank, and the International Monetary Fund have reached about €240 billion.
When the new Greek government calls for debt relief, the battle lines are drawn. Speaking for the largest creditor country, German Chancellor Angela Merkel takes the position: “I do not envision fresh debt cancellation. There has already been voluntary debt forgiveness by private creditors; banks have already slashed billions from Greece’s debt.”
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