Trump, Tsipras and Washington’s wordsmiths: What is a “responsible debt relief plan” for Greece?

Although much furor has arisen in Greece over the alleged high costs of the planned upgrade of part of the Greek F-16 fighter fleet ($1.1 billion) announced when Greek PM Tsipras met President Trump at the White House October 17th, much of this was offset by Trump’s brief but completely clear recognition of the need for some form of debt relief for Greece, currently hovering at close to $385 billion. These few words, albeit in a new formulation, became the prize PM Tsipras needed to justify everything he has done in terms of improving relations with the United States.
Enter the Washington wordsmiths. It might be helpful to review who has said whatever about Greek debt relief in recent years. The U.S. only formal involvement in the Greek bailout packages since 2010 has been via the IMF, and by all counts its role has been perceived as generally positive, as the largest “shareholder” in the IMF’s share-based voting system. Remember that the IMF, by design, resolutely declares any of its resources allocated to bailout programs are “senior” and thus cannot be subject to restructuring or see bailout repayments otherwise reduced if the borrowing country is to remain a member in good standing. Thus its advice to other creditors on debt rescheduling is taken by those creditors with a healthy dose of skepticism. It is also worth noting that Greece’s European creditors have repeatedly told U.S. Government representatives that “without any skin in the game,” it is very easy for Washington to tell others to consider writing down a country’s sovereign debt. And that is about as far as discussions have ever gone, as far as we know.
Obama-Lew formulation: The Obama Administration, relatively active in its last years on the Greek debt issue yet still largely ineffective, had preached the need for “meaningful debt relief.” Most recently President Obama said, just prior to his Athens visit in November 2016: “That is why I will continue to urge Greece’s creditors to take the steps needed to ensure the country is well placed to return to robust economic growth, including by providing meaningful debt relief.” It is up to the reader do determine if “meaningful debt relief” in any way translates into debt forgiveness, or is it perhaps just another way of saying that something tangible must be done by Greece’s creditors to keep debt repayment levels manageable.
Trump formulation, Rose Garden October 17th 2017: President Trump certainly raised eyebrows when he said: “I have encouraged the prime minister in his continued implementation of reform and reform programs and I have totally reaffirmed our support for a responsible debt-relief plan,” in his prepared marks to the press in the Rose Garden, with U.S. Treasury Secretary Mnuchin seated in the front row. We don’t know what this means in practice, as it was not discussed in the follow-up question and answer session. But the bottom line is that the U.S. will somehow remain engaged, at least at the IMF level, on the issue. The inferred reference from the word “responsible debt-relief plan” means that some other debt-relief proposals are in some way irresponsible or unrealistic. Trump also took care to refer to continued reform implementation before debt relief in his statement, maintaining the existing conditionality.
Vice President Pence’s office, after Tsipras meeting October 18th: Greek PM Tsipras and a few senior advisers met with Vice President Michael Pence on October 18th and yet another mention of Greek debt relief emerged in the post-meeting statement quickly issued by Pence’s office. “The Vice President congratulated Prime Minister Tsipras on Greece’s return to economic growth and financial markets, encouraged further reforms to spur investment, and reiterated U.S. support for credible debt relief.” So now we have pivoted to the term “credible debt relief” whatever that might mean. Did somebody somewhere complain about Trump’s Rose Garden formulation and ask for something softer from the White House? Time will tell.