0935 GMT March 31, 2020
Greece’s international creditors emerged from an 11-hour meeting in Brussels at on Wednesday having agreed on steps to ease the burden of Greece’s €321billion debt mountain, worth 180 percent of annual economic output, the Guardian wrote.
But the debt relief plan was a far cry from the ‘upfront’ and ‘unconditional’ debt relief the IMF had demanded on Monday, when it warned that Greece would face an ever-growing bill to service its loans. Poul Thomsen, director of the IMF’s European program, said the IMF had made ‘a major concession’. “We had argued that [debt relief measures] should be approved up front and [now] we have agreed that they should be made at the end of the program period.”
The fund had been locked in a stand-off with Germany, which was adamant that debt relief could not be considered before the end of Greece’s current €86 billion bailout program in mid-2018.
Germany’s reluctance to make concessions is also thought to stem from fear of antagonizing voters ahead of federal elections, due in October 2017 at the latest.
Negotiations ran more smoothly when eurozone ministers agreed to give Greece access to a €10.3 billion tranche of bailout funds, split into two payments: €7.5 billion in June and €2.8 billion in September.
Greece’s finance minister, Euclid Tsakalotos, said he saw ‘some ground for optimism’ for turning Greece’s vicious circle of recession-measures-recession into one where investors have a clear runway to invest.
Athens cleared the way for the latest installment earlier this month when it agreed on contingency measures — spending cuts and tax increases worth €3.6 billion that will come into force if it fails to meet its fiscal targets.
Several eurozone finance ministers said Greece had done enough to get the next bailout check hailing the latest austerity measures — an unpopular series of tax hikes pushed through by the Greek parliament on Sunday.
The Syriza-led government of Alexis Tsipras voted through €1.8 billion of revenue-raising measures, including tax increases on coffee, tobacco, Internet use and a higher VAT. These followed an unpopular pensions reform voted in by a narrow majority earlier this month. The government has also created a privatization fund to sell off state assets, in effect security for the loans.
French Finance Minister, Michel Sapin, said: “Greece needs room to breathe, it needs certainty. It has made considerable efforts, which again we have seen this weekend in adopting a difficult package of measures.” Even fiscal hawks, such as Slovakia’s Peter Kažimír, agreed it was important to agree the next bailout tranche ‘because we don’t need another liquidity crisis’, a reference to the dramatic events of last summer when Greece teetered on the brink of financial meltdown.
Alluding to the events of last summer, Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurozone, said the new agreement was ‘an important moment in the Greek program. We had a major crisis of confidence between us … and confidence has started to recover’.
Consensus on the bailout payment meant the most difficult task for the meeting was squaring the differences between Greece’s creditors.
In a hard-hitting assessment published on the eve of the meeting, the IMF said Greece had no chance of meeting the terms of its current bailout plan without debt relief. According to the IMF forecast, Greece will be burdened with debts worth 250 percent of GDP by 2050 without ‘a substantial reprofiling’ of the terms of loans.
‘Reprofiling’, by extending repayment terms and fixing interest rates at low levels, could reduce Greece’s debt burden to 100 percent of GDP by 2050, according to the IMF.
In the early hours of Wednesday morning, the IMF and the eurozone agreed on a series of short-term debt relief measures, such as locking in lower interest rates and smoothing out repayment schedules. Greece is also likely to get profits made by the European Central Bank from buying euro-bonds. The Greek government has been unable to collect profits from the SMP and ANFA bond arrangements since 2014, because of a dispute over its bailout, but these transfers are now likely to be restarted.
The debt-relief measures were described by the IMF’s Thomsen as part of ‘a universe of measures’ to make Greece’s debts more manageable. However he stressed that the IMF’s board still had to approve the plans, while IMF staff would have to carry out a new debt sustainability analysis.
Greece is expected to get the next €7.5 billion bailout payment in the second half of June, before its next debt repayment — €3.5 billion owed to the European Central Bank — falls due in July. But eurozone finance ministers had been anxious to wrap up an agreement on the funds, well before the UK referendum and Spanish elections in June.