Greece looks for debt help after backing further cuts
BRUSSELS – Greece is seeking Monday to persuade its creditors in Europe that it has done enough to get another chunk of bailout loans and a firm commitment on alleviating Athens’ hefty debt burden.
Greek Finance Minister Euclid Tsakalotos is meeting his counterparts from the 19-country eurozone at a meeting in Brussels, where Greece will once again be top of the agenda.
The country is in the middle of its third international bailout, but its progress has been slow in light of various disagreements related to the reforms the Greek government has to impose in return for the rescue money. Disagreements between Greece’s creditors – the eurozone and the International Monetary Fund – on what is required, particularly on debt relief, have also stalled the negotiations.
The left-led Greek government of Prime Minister Alexis Tsipras hopes that a package of measures, including further spending cuts and economic reforms, passed by lawmakers last week, will be enough to break the logjam and allow the so-called eurogroup to release a new bailout installment, without which the country would struggle to meet its debt servicing obligations in July. Agreement will also accelerate negotiations on easing Greece’s debt repayment terms.
Jeroen Dijsselbloem, the eurozone’s top official, says a decision on the disbursement of Greece’s next batch of bailout cash – around 7 billion euros ($7.7 billion) – could be secured at the meeting, while downplaying expectations that a debt relief package is imminent.
Speaking ahead of the meeting, Dijsselbloem said if “all goes well,” then a deal can be reached that will allow the money to be disbursed “well in time” of a summer debt repayment hump for Greece. Without the money, Greece would struggle to meet its obligations and would again face another brush with bankruptcy, as it has done on various occasions over the past seven years, most recently in the summer of 2015.
Under the terms of the current Greek bailout program, the country has to enact a series of economic reforms in order to get the cash. Its creditors in the eurozone have also promised they would offer the prospect of debt relief if the country meets its side of the bargain.
“I expect, and (am) working on a deal today but it won’t be the end deal,” Dijsselbloem said. “We’ve always said the final concrete decision on extra debt relief measures will come at the end of the program. which will be next year.”
Greece is currently in the midst of its third bailout program – the current three-year program expires in the summer of 2018 and could be worth up to 86 billion euros ($95 billion) in total. In return for the money, the government promised to enact a series of austerity measures as well as economic reforms – its progress is continually monitored by institutions from the European Union and the International Monetary Fund.
Dijsselbloem said he hoped further progress could be made at Monday’s meeting to get the IMF on board on the third bailout. As well as disagreeing on the scale of debt relief Greece requires, the IMF and the eurozone have diverged on their growth projections for Greece.
One potential ally for Greece is Emmanuel Macron, France’s new president. On Monday, Macron spoke to Tsipras and according to his office stressed “his determination to find an accord soon to lighten the burden of Greek debt over the long term.”
French Finance Minister Bruno Le Maire, named last week, is joining his peers for the talks, and traveled to the Belgian capital with Wolfgang Schaeuble, his counterpart in Berlin who has been a vocal critic of Greece over the seven years of its bailout era.
While Le Maire said it’s “important there be a solution that reassures the Greek people and of course reassures Greece’s creditors,” Schaeuble insisted that “structural reforms are the decisive thing” to improve Greek growth. He, like Dijsselbloem, said that “extra measures if required” would come after the bailout program expires next year.
The Greek government is hoping to secure a deal as soon as possible so it can lift the uncertainty that’s been hanging around the Greek economy over recent months.
Though Greece emerged from its economic depression in 2014 and its annual budget position has improved dramatically, the economy is back in recession, having shrunk for two straight quarters. Analysts say the main reason why Greece has taken a step back is its stalled bailout negotiations.
While the austerity measures have seen Greece’s public finances improve, the draconian spending cuts have seen poverty rates surge to more than 35 percent. And the country’s debt burden stands at around 175 percent, a level that the Greek government thinks is unsustainable in the long-term – hence its insistence on some debt relief, at least in the form of lower interest payments and longer repayment terms.