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The endless Greek debt drama has finally hit the US

Nasos Koukakis, special to

Pope Francis is a hard act to follow, but for Greek Prime Minister Alexis Tsipras, who has been in New York since Sunday, getting European "rock star" treament isn't the goal. Tsipras is in New York seeking more generous friends than he has found in the euro zone to help relieve Greece's massive debt burden.

Hat in hand and hitting the United Nations and Clinton Global Initiative, the Greek prime minister is hoping to form intergovernmental alliances that favor a "market friendly" restructuring of Greek debt held by the members of the euro zone, including the European austerity "hard line" members led by Germany.

Alexis Tsipras speaking at the Clinton Global Initiative, September 28, 2015.
Adam Jeffery | CNBC

In his speech at the UN Summit on Sunday, Tsipras said, "We can not speak effectively for aid to developing countries, or loans in developed countries, unless we address the debt issue as an international challenge at the heart of our global financial system. In all forums, including this one here, we should talk about how the restructuring or reconfiguration of the debt can be associated with the development."

Notably, Tsipras cited the 1953 deal for Germany's external debt as an example.

At the Clinton Global Initiative annual meeting in New York, Tsipras called upon the world community and Greek Americans to support the reconstruction efforts in Greece. "We will fulfill our promises, but it is also important for the other side to fulfill its promises to ease the public debt," he said, adding that solving the debt crisis is a prerequisite for attracting investors in Greece. Answering questions posed by President Bill Clinton, Tsipras said growth with social cohesion and tackling the high unemployment rate are the only ways for Greece to overcome its financial crisis.

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Greece aims to initiate debt-relief negotiations before Christmas, but the power dynamic in the euro zone won't allow Tsipras to get the best deal he can to relieve the country's debt. The International Monetary Fund, while calling for Greek debt relief, does not want to clash with Europe on how debt restructuring is implemented. As such, Greece is looking to the U.S. for the greatest possible support on debt restructuring.

Greek diplomatic documents published in the Greek newspaper Kathimerini reveal how Tsipras has received valuable support from the Obama administration in recent months. The documents also show how Washington advised the previous Greek government against butting heads with Germany and to instead show a willingness for reform in the time leading up to the July 13 agreement for the third Greek bailout.

A secret telegram sent to the Greek government on July 16 by Greece's ambassador to the U.S., Christos Panagopoulos, reveals how Washington advised Athens to avoid verbal attacks against Berlin and to try to create a broad alliance with countries such as the U.K., France, Italy and Austria.

The U.S. government made it clear that the Tsipras administration would have to convince these countries that it was serious about implementing reforms if they, in turn, were to offer their support. Panagopoulos also explained that Washington's strategy was to stress the geopolitical importance of keeping Greece in the single currency.

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Panagopoulos also noted that there was frequent and extensive contact between Athens and Washington, including officials from the Treasury and the State Department. The senior diplomat wrote that U.S. authorities underlined the need for the euro zone to accept further reduction of Greek debt, while the U.S. government also encouraged the IMF to be vocal about debt relief.

Tsipras was among the participants in Monday's UN General Assembly, and on Monday evening he will attend a reception for the heads of the delegations, hosted by President Obama and First Lady Michelle Obama.

Driblets of debt relief cannot be merely a prize for more counterproductive austerity.
Ashoka Mody
visiting professor of international economic policy at Princeton University's Woodrow Wilson School

The way in which the euro zone carried out the Greek debt restructuring is essential for the country's broader effort to get its fiscal house in order. It is also essential for investors, who require fiscal stabilization and debt sustainability, to invest in Greek bonds. Debt relief has special political importance for Tsipras, who must implement tough fiscal measures and structural reforms and use the debt settlement as a "sweetener" to settle internal political and social reactions caused by the austerity battle with EU partner nations.

Euro zone officials have reportedly offered Greece a 30-year grace period and a lengthened loan maturity period so that annual debt servicing does not exceed 15 percent of the country's GDP. Some analysts argue that such a settlement would keep Greece dependent on the "moods" of its creditors for years, perhaps decades. In such a case, Europe is likely to pin the restructuring of Greece's debt to a series of milestones and new terms and conditions.

"Driblets of debt relief cannot be merely a prize for more counterproductive austerity," said Ashoka Mody, visiting professor of international economic policy at Princeton University's Woodrow Wilson School.

The Greek aspirations for debt include extending the euro zone loans' maturities and an interest-rate swap so that the floating-rate loans become fixed. However, if such a swap is conducted at market rates, it will not reduce the net present value of the debt without the euro zone debt holders assuming losses—one of the main reasons Tsipras is seeking international community support.

By Nasos Koukakis, special to