Thursday

2nd Apr 2020

Greece back from the brink after EU agrees debt deal

  • The Juncker-brokered debt deal is designed bring Greece back from the brink of bankruptcy (Photo: consilium.europa.eu)

Debt-laden Greece was brought back from the brink on Tuesday (27 November) after eurozone finance ministers agreed changes to the country's bailout deal.

After another marathon, 13-hour-long meeting which broke up in the small hours of the morning, ministers signed off on a deal that could cut the country's debt mountain to 124 percent of GDP by 2020 and around 110 percent by 2022.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or join as a group

Greece is on the verge of entering its sixth straight year of recession, with the country's economic output having contracted by a quarter since the start of the financial crisis in 2008.

Its debt burden, which stood at around 115 percent per cent in 2007 has since ballooned to around 190 percent - the highest in the EU by a large margin.

Under the new deal, which is estimated to be worth 20 percent of GDP, the maturity of bilateral loans from EU countries and the European Financial Stability Facility will be deferred for 15 years and interest payments by 10 years.

Greece will also get a 1 percent cut on the interest rate it is paying for loans from its first formal bailout package, while member states and the European Central Bank (ECB) will transfer the profits accrued from interest payments back to Greece.

The troika of lenders - which includes the European Commission, the ECB and the International Monetary Fund (IMF) - will also examine the viability of a debt buyback programme.

The main aim of the meeting had been to decide on the latest €34.4 billion tranche of bailout funding, with the Greek government warning that it would face a dire cash-flow crisis if it did not get the funds.

Two previous meetings had failed to reach a deal because of Germany's reluctance to consider a so-called official sector involvement - eurozone governments taking losses on their Greek loans. IMF chief Christine Lagarde had been pressing for OSI and refused to sign off on any deal that was not "credible". On Tuesday morning, a compromise was reached.

"When Greece has achieved, or is about to achieve, a primary surplus and fulfilled all of its conditions, we will, if need be, consider further measures for the reduction of the total debt," German finance minister Wolfgang Schaeuble said. Under the troika projection, this could happen in 2016, when the Greek budget is expected to reach a surplus.

But economists are sceptical how long these calculations will last before being changed again. "The Greek deal is like a car made from junk yard parts that can collapse at the first bump in the road. It is a very fragile contraption," Sony Kapoor from Re-Define think tank wrote on his Twitter page.

The new deal is expected to be formally adopted by the Eurogroup of 17 finance ministers on December 13, and will depend on national parliaments agreeing to the package.

Luxembourg Prime Minister Jean Claude Juncker, who chairs the group, told reporters that the "very difficult deal" had been reached after "very significant efforts by each and every stakeholder."

He added that the agreement signified "the promise of a better future for the Greek people and for the euro area as a whole, a break from the era of missed targets and loose implementation towards a new paradigm of steadfast reform momentum, declining debt rations and a return to growth."

For his part, French finance minister Pierre Moscovici agreed that the deal had required further concessions from Greece's EU creditor.

"Everyone has gone beyond their red lines," he said.

Meanwhile, Lagarde said she would be recommending the deal to the fund's executive board.

Praising the Greek government for "significant efforts" in forcing through a succession of structural reforms and budget cuts, she commented that the agreement would "help bring back Greece's debt ratio to a sustainable party and facilitate a gradual return to market financing."

Greece in limbo after bail-out talks fail

Eurozone finance ministers will reconvene next week after failing to reach a deal on whether to release the next tranche of Greece's multi-billion euro loan programme.

German opposition may delay vote on Greek aid

A vote in the Bundestag on the recently agreed Greece deal may be delayed or split as the German Social Democrats and Greens are asking for more time to study the implications of the package.

Merkel hints at future 'haircut' on Greek debt

German Chancellor Angela Merkel indicated Sunday that governments may have to take a loss on the Greek debt they own, breaking what was considered a taboo in German politics.

News in Brief

  1. Danish conservatives want Orban party kicked out of EPP
  2. Dutch finance minister repents on virus help
  3. France to house domestic violence victims in hotels
  4. Europe sends medical goods to Iran, despite US embargo
  5. Commission sets consultation on raising 2030 climate target
  6. 12-year old Belgian girl dies of coronavirus
  7. EU commission: no 'indefinite' emergency measures
  8. Denmark plans 'gradual' return to normal after Easter

Vietnam sent champagne to MEPs ahead of trade vote

A trade deal with Vietnam sailed through the European Parliament's international trade committee and after its embassy sent MEPs bottles of Moet & Chandon Imperial champagne over Christmas.

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. Without European patriotism, EU decline is inevitable
  2. EU cancels April Fool's 'fake news'
  3. A coronavirus 'Marshall Plan' alone won't be nearly enough
  4. Trying to think straight about coronavirus
  5. Berlin ready to airlift Greek island refugees
  6. Von der Leyen criticises Hungary, but fails to mention it
  7. Air pollution drops in Europe, but how long will it last?
  8. Human rights abusers don't stop for virus, MEPs tell EU

Join EUobserver

Support quality EU news

Join us