Europe News

Greece Must Renegotiate Bailout: Expert


Greece needs to see consensus among the various political factions and to renegotiate its bailout to return to markets and build a long-term program of economic growth, according to the President of the Athens Chamber of Commerce.

Greek Parliament
PNC | Brand X Pictures | Getty Images

“We need a government that is representative of at least 50 percent of the Greek electorate, even the smaller parties need consensus. We should renegotiate parts of the [bailout] package as we need to increase revenue and growth,” Costas Michalos, President of the Athens Chamber of Commerce told “Squawk Box Europe”.

The fragile country at the center of the euro zone debt crisis goes to the polls this Sunday with a record number of parties running. The country, which won its second bailout from international lenders earlier this year, has committed to a program of severe austerity, spending cuts and socio-economic reform in return for the money, to the chagrin of the electorate.

The socialist PASOK and the New Democracy parties have both supported the bailout deal and its stringent conditions. The smaller parties are hoping to ride on the back of a wave of discontent that has swept the country in recent months, with some asking for a renegotiation of the terms of the bailout and some even calling for an exit from the euro itself.

He added that despite committing to a number of structural reforms and an economic overhaul, little action has been seen on the ground. 

“We haven’t simplified the bureaucratic obstacles to business enterprise and we need reforms immediately. We need political authority and political will to gain the confidence of the international investor,” Michalos added.

With the political landscape in a number of European countries shifting markedly this year, Michalos was confident that the tide was turning for the hard-pressed periphery, as there was backlash against the austerity of the northern European model, which had failed to deliver on growth.

He said that the Southern European countries were likely to have a "very strong ally" in Francois Hollande and would be "strong and very confident" if Hollande wins Sunday's elections.

However, critics have long argued that despite two bailouts the Greek economic model itself is broken and requires a major overhaul if growth is ever to re-emerge.

Julian Knight, Head of European Rates Strategy at UBS, was doubtful that the Greeks had much leeway for negotiation.

“The elections are seen as causing further instability in a fragmented country. The other parties want to renegotiate the plan, or reject it completely and some want to leave the euro. In times of turmoil this always happens, the polemic rises,” Knight said.

He added that Greek governments of whatever make-up found it notoriously difficult to implement the cuts they had signed up for.

“The government finds it hard to pass austerity and it has been running behind and we can expect that to continue. We don’t see where they can make any more cuts from,” he said.