Greece’s creditors say they are inching nearer to an agreement over the next batch of reforms the cash-strapped country has to make to unlock further bailout funds and trigger debt-relief discussions.
Following weeks of criticism and delay, Jeroen Dijsselbloem, the top official of the grouping of the 19 euro countries, said Friday that both sides “are close to an agreement on number of key areas, such as the pension reform, the income tax reform” and a privatization fund.
All those reforms were part of last summer’s bailout with the left-led Greek government. Greece narrowly avoided leaving the eurozone by committing to further austerity measures in return for its third bailout that was potentially worth 86 billion euros ($97 billion).
International lenders asked Greece on Friday to prepare a package of additional savings measures which would be passed into law now but implemented only if needed, to make sure the country reaches agreed fiscal targets. Once agreed, the set of contingent reforms, together with measures already under negotiation, would enable the disbursement of new loans to Athens and pave the way for debt relief.
Contingency package
The idea of a contingency package appears to end a long dispute between the euro zone and the International Monetary Fund over whether Greece’s current reforms are enough.
“We came to the conclusion that the policy package should include a contingent package of additional measures that would be implemented only if necessary to reach the primary surplus target for 2018,” the chairman of euro zone finance ministers Jeroen Dijsselbloem told a news conference in Amsterdam after the ministers met.
The contingency measures needed to be “credible, legislated up-front, automatic and based on objective factors.”
Greek Finance Minister Euclid Tsakalotos said Athens could not legislate “contingent measures” as Greek law did not allow it.
But Dijsselbloem said a way would be found.
News conference
“We need to work on how that mechanism is going to look like. Of course if there are legal constraints we can’t and won’t break legal constraints. We will design it in a way that delivers credibility …and (is) legally possible,” Dijsselbloem told a news conference.
The contingency package is to produce savings of 2 percent of GDP, on top of savings of 3 percent that are to come from reforms under negotiation now, Dijsselbloem said.
He said Eurogroup ministers would likely have a special meeting Thursday
Agreement on both reform packages — the regular and the contingent one — would mean euro zone ministers would meet again on Thursday to approve the deal and have a “serious discussion” on debt relief for Greece.
The prospect of debt talks may encourage Athens to back the new package, and lenders reminded their Greek counterparts that there are time constraints.
“The liquidity situation is becoming tight, there are debt service payments … there is a risk that the government may have to accumulate domestic arrears again,” the head of the euro zone bailout fund Klaus Regling said.
Schaeuble: Debt Sustainable
German Finance Minister Wolfgang Schaeuble said Greece doesn’t need debt relief now and won’t require an easing of its debt burden as long as the troika of creditors determines that debt sustainability is ensured.
The European Stability Mechanism, the euro region’s financial backstop, will seek to lock in the favorable refinancing costs it’s passing on to Greece for an extended period of time, Schaeuble said in Amsterdam. While not part of the Greek program, these operations — if in place — would help ease pressure on Greece, he said.
“The debt sustainability analysis determines whether measures are needed” to help the cash-strapped country, Schaeuble told reporters after a two-day meeting of European Union finance ministers. “It is my conviction that this is not necessary for the coming years.”
Greece’s government bonds rose for a third day on Friday after euro-area finance ministers and the International Monetary Fund signaled that a deal on the nation’s next bailout installment is in sight. Schaeuble said “we have no desire” to repeat the confrontation between Greece and its creditors from last summer.
An agreement on the bailout package and the target for Greece to reach a primary surplus of 3.5 percent of GDP by 2018 “appear possible,” Schaeuble said.
Sources: AP, Reuters, Bloomberg,greeknewsonline.com
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