Greece bailout: Why won't Athens accept a bailout extension and what does Syriza want instead?

Greece's debt is currently €322 billion

Greece's debt has amounted to €322 billion

Germany's finance minister Wolgang Schaeuble on Tuesday said that none of his colleagues understand what Greece wants, and that "whether Greece itself knows is not clear either".

He said that Greece must make a decision over whether it wants to extend the bailout programme, after Monday's talks collapsed.

But why won't Greece accept the bailout extension and what does Athens want instead?

Why won’t Greece just sign up for a bailout extension?

Because Greece’s Syriza Party fought a general election only last month on a firm promise to repudiate the terms of that bailout. And it won a clear victory. They claim that the bailout, agreed in 2010 with the European Union and the International Monetary Fund, has been an economic disaster for Greece, shrinking its GDP by a quarter and pushing unemployment above 25 per cent. That’s an economic performance as bad as America’s during the Great Depression of the 1930s.

How much does Greece owe?

€322bn. That’s equal to 174 per cent of the country’s annual GDP, up from 170 per cent in 2011. The shocking thing is that the nominal value of Greece’s national debt has come down from €368bn in that time, thanks to a 2012 debt write-off agreed by the country’s creditors. But the collapse of the Greek economy has meant that as a share of GDP the debt burden has actually increased. Athens points to that perverse effect as more evidence of the failure of the bailout.

So what does Athens want instead of a bailout extension?

A bridge loan from its creditors to tide them over until the Summer. Greece says it wants to use the grace period to renegotiate its support package entirely. They are demanding a reduction in the face value of the debt owed to other eurozone states and a large reduction in the budget surpluses that it is currently compelled to run indefinitely. Greece claims that without this overhaul the domestic economy will remain a basket case.

Greece's debt is currently at €322bn

Why are the creditors demanding an extension?

The rest of the eurozone feels they cannot allow Greece to repudiate the terms of its earlier bailout as this would set a disastrous precedent, encouraging other struggling eurozone members to seek debt forgiveness. They also want to keep the pressure on Athens to continue enacting painful and necessary structural economic reforms and fear that agreeing to renegotiate the financial terms of the bailout would enable Greece to renege on this aspect of the deal too.