"We cannot go back to the era of bailouts," said Prime Minister Alexis
Tsipras, as MPs debated and approved a government programme that sets this country
on a potential collision course with the rest of the eurozone. "That would mean the
end of popular sovereignty."
While everyone is closely watching the ongoing bailout debate, I suggest to have a look at what options there still are for Greece, which can still be accepted by the eurozone creditors.
1. Growth-linked bonds
After ECB stopped accepting Greek bonds as collateral, one of the main deals being proposed by finance minister Yanis Varoufakis is for a portion of Greece's current debt to be "swapped" with bonds linked to the future growth rate of the economy. Mr Varoufakis thinks Greece's debt burden could be eased if the emergency rescue loans from the IMF and other eurozone countries (not including the ECB), are switched with bonds which "we will start paying back in full when Greece posts solid growth."
The idea is similar to the "Bisque bonds" proposed by John Maynard Keynes for distressed debtors in the 1930s.
Greece has already issued nominal GDP-linked bonds under its private creditor restructuring in 2012, as Ambrose Evans-Pritchard noted. Argentina also issued growth-linked paper after it underwent a restructuring in 2005.
The attraction of this sort of debt instrument is that it would likely soften the austerity imposed on Greece, while encouraging the structural reforms so craved by the country's creditors.
At the same time, a debt swap would still force Greece's lenders to take substantial losses, according to Diego Iscaro at IHS Global.
"To have a significant impact on Greek debt levels, the deal would surely have to be structured in a way in which creditor countries suffer large losses, and this will be difficult to be accepted by most eurozone governments," said Mr Iscaro.
Another potential obstacle would be the quality of the growth statistics that bond payments would be indexed to.
"Creditor countries would also have to have full confidence in Greece’s statistical data if they accept to switch their loans. Given Greece’s history, this could also be challenging," adds Mr Iscaro.
2. Perpetual bonds
Another widely touted plan could see Greek debt owned by the ECB replaced with "perpetual bonds."
The precise nature of this swap is not yet clear, but it would likely entail issuing new debt with no fixed maturity date.
In the aftermath of the First World War, then chancellor Winston Churchill issued a form of perpetual bonds known as consols, which the government only decided to repay back in full last year.
Athens is currently due to pay €6.6bn of bonds held by the ECB in 2015. A debt replacement of this kind would help prolong the profile on its liabilities.
3. Room for budgetary breathing
Currently, Greece is required to run a primary budget surplus of 4.5pc in 2016 and 2017 under the eurozone's bailout rules.
Mr Varoufakis will be looking for some relaxation of this target. He has already promised to meet a surplus target of around 1.5pc of GDP, and vowed the government would "never" fall into a budget deficit.
Securing some leeway will be vital if his party is to carry out its promises to loosen the government's purse strings in hiring back many sacked public sector workers and raising the minimum wage.
