Facing a showdown with creditors, the recently-elected, left-wing leader of Greece's government says everything is going to work out just fine.
Alexis Tsipras’s country might be on the verge of running out of cash and defaulting on its debt to international creditors. But you would hardly have known that by looking at the Greek prime minister on Thursday, when he flew into Paris and briefed reporters. It seemed as though he had plenty of time to ruminate on the state of Greece’s economy.
His message: There’s no need to panic.
Tsipras’s said that his six-week-old, left-wing government has it all under control. “There is no reason for concern,” he told journalists at the Paris headquarters of the Organization of Economic Cooperation and Development, the data-collection and policy organization funded by 34 major countries, including Greece. When a Greek journalist asked him what would happen if creditors simply refuse to come to the country’s rescue again, Tsipras said, “Even if, over the next period, there won’t be a disbursement of an installment [of aid], Greece will certainly be able meet its obligations.”
That will not be easy. Greece’s bailout plan from the European Central Bank and the International Monetary Fund is a whopping €240 billion, by far the biggest rescue package of any EU country during years of economic crisis. The Greek national debt, about €445 billion (about $472 billion) as of late Thursday, is spiraling so fast that you can watch it tick up by tens of thousands of euros per minute on an online debt clock.
Tsipras, whose Syriza Party came to power last month on a wave of fury among Greeks over the EU and IMF’s cost-cutting demands, says Greece now needs a drastic debt restructuring—indeed, the prime minister is convinced that there is no alternative. “We can no longer pretend that the country’s public debt is viable and serviceable when it stands at 178% of GDP,” he told reporters. “After five years of economic decline and social hardship our country remains in a desperate economic state.”
But restructuring that debt is not in Tsipras’s control. This week, the EU and IMF officials are holed up in Athens, assessing whether Tsipras will bring in far-reaching enough changes to merit more aid, and to give his government breathing room to reform Greece.
That was one crucial reason why Tsipras and his top aides flew to Paris. The OECD, while not a lending institution, is packed with technocrats skilled in drafting economic policies for troubled countries, and in tackling deep structural problems like corruption and tax evasion, which many believe have hobbled Greece’s economy for decades.
What is more, Tsipras believes the OECD—in contrast to Greece’s creditors—will likely back its calls to end austerity. He told reporters he wanted the OECD to “cosign” his reform plan, as a way of bolstering tough negotiations with creditors. OECD chief Angel Gurria, a Mexican economist, seemed willing. “We will not tell the Greeks what to do with Greece,” he told reporters, bringing a smile to Tsipras. Gurria said the OECD would help Greece draft new laws and polices, based on their experiences in other countries of “what has worked, what has not worked.”
The list of needed changes is long, including teaching skills to unemployed Greeks (there is about a 50% unemployment rate among youth), streamlining the labyrinthine bureaucracy for businesses operating in Greece, and attempting to crack down on tax-dodging, which is endemic in the country. Speaking at the OECD to hundreds of diplomats and officials, Tsipras said also needed dramatically lower yields on 10-year government bonds, “making it possible once again to meet our financing needs in the capital markets.”
For all the optimistic talk of change, Tsipras made it clear that the new government’s relationship with IMF and EU officials was deeply strained, and that it fully intended to resist all the demands for more cost cutting. “What we saw from the troika on repeated occasions was something like blackmail,” he told reporters, and later told the diplomats and officials in his speech, “We have to replace political myopia with boldness.”
Until now, the doomsday scenario has been that Greece would ditch the euro, or be forced out of the Eurozone through defaulting—a so-called Grexit. The night his party, Syriza, won Greece’s elections, Tsipras’s blunt-talking, biker-jacketed finance minister Yanis Varoufakis said on CNN that he regarded the common currency “like the Eagles song ‘Hotel California’: You can check in but you can’t check out.”
But after years of suffocating cost-cutting programs, some economists now believe Greece might in fact benefit from checking out of the Eurozone, allowing Greek companies “to become more efficient and productive,” Loizos Heracleous, a professor of strategy and international business at Warwick Business School in Britain, wrote this week on Harvard Business Review‘s site. “Business thrives under conditions of certainty, which has been sorely lacking in Cyprus and Greece since the implementation of the austerity agenda. A managed exit could alter that.”
On the sidelines of the Paris meeting, Fortune asked Varoufakis on Thursday how dire the lack of money was for the new government. “You think too much about money,” he quipped, and then again lapsed into a pop-culture reference to elide the answer. “As the Beatles said, ‘money can’t buy you love.'”