Tuesday

10th Dec 2019

Greece's creditors set out debt relief roadmap

  • Greek finance minister Tsakalotos (l) and Eurgroup president Dijsselbloem (r) expect a deal to unblock €5bn in aid on 24 May. (Photo: Council of the EU)

As expected, eurozone finance ministers did not reach agreement during their meeting on Monday (9 May) on the Greek bailout programme to unblock a new tranche of aid.

But they came out of a Eurogroup meeting with an unexpected roadmap to combine the implementation of the programme, guarantees that Greek finances will improve, and the prospect of measures to ease the burden of the Greek debt.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

This was the first time ministers and Greece's creditors - the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund (IMF) - openly talked about debt relief.

The proposal put on the table by Eurogroup president Jeroen Dijsselbloem was endorsed by all ministers including Germany's Wolfgang Schaeuble, who had been opposed to offering relief before Greece completes the bailout programme agreed last year.

The Eurogroup, Greece and its creditors now hope to clinch a deal at the next planned meeting on 24 May.

"The discussion was positive and constructive. We made very important progress," EU finance commissioner Pierre Moscovici said at a press conference.

Greek finance minister Euclid Tsakalotos told journalists it was a “very good Eurogroup for Greece, and I think a very good Eurogroup for Europe”.

While not a definitive breakthrough, the roadmap could give a boost to technical talks that were dragging on.

The main proposal is a three-stage process to help Greece manage its debt in the short, medium and long term.

Measures such as longer grace and payment periods or capping interest rates and annual payments could be taken to reduce the cost for Greece of repaying its debt.

But Greece will have to implement the reforms required in the three-year bailout programme.

Debt relief is a Greek demand but also an IMF requirement to stay in the bailout, because it believes that without relief the Greek debt would not be sustainable and the bailout would be useless.

'Great relief'

According to an assessment presented to ministers by the ESM, the eurozone's emergency fund, Greek debt could fall to 62.8 percent of GDP by 2060 under an optimistic scenario, but it could also go up to 258.3 percent of GDP under a pessimistic scenario.

The latest figures by the European Commission suggest Greek debt is standing at 182.8 percent in 2016. The average debt in the eurozone is expected to be 92.2 percent this year.

EU, Greek and IMF experts were tasked by the ministers to come up with concrete proposal before the 24 May Eurogroup

"It is a great relief," Tsakalotos said, adding that Greek consumers and investors needed a long term clarity to "start making decisions on the long term".

The two other parts of the deal ministers hope to reach on 24 May concern Greek reforms.

The first part consists of measures required by Greece's creditors to conclude the first review of the bailout programme.

A day after the Greek parliament adopted two bills to reform pensions and the income tax system, the Eurogroup said the move "paves the way" to the conclusion of the review.

An agreement on the review will trigger the disbursement of €5 billion or more.

The Greek government still has to take measures on public sector wages, implement a strategy agreed last year to help Greek banks recover loans that have not been repaid and establish a privatisation fund.

Jigsaw

The second part is the adoption of so-called contingency measures, a package Greece would have to implement if its finances went off track between now and 2018.

The finance ministers agreed that rather than adopting specific measures now, the Greek government would establish a mechanism to trigger emergency spending cuts followed by structural reforms.

In practice, if Eurostat figures suggested Greece was not doing well enough, the Greek president would issue a decree to decide "across-the-board cuts excluding very sensitive items such as defence or unemployment benefits", Tsakalotos explained.

Then more measures would be included in the regular annual budget proposal.

"The mechanism fulfils the criteria: it is objective, legislated up-front, credible and automatic," Moscovici said.

Tsakalotos said he hoped the "three pieces of the jigsaw" would come together on 24 May to allow the disbursement of a new tranche of aid.

But much discussion will be needed in the coming two weeks, especially to work out a debt relief roadmap that satisfies both the IMF and sceptical countries like Germany.

Lenders press Greece to adopt conditional laws

New talks will take place on measures to be triggered if Greek finances are not good enough, in parallel with discussions on a review of Greek reforms and, for the first time, debt relief.

Greece and EU make progress on bailout deal

Athens and EU institutions agreed on an economy package to unblock aid that could go beyond €10 billion. Agreement on future contingency measures and IMF support still lacking.

EU and IMF agree debt relief for Greece

Greece's creditors will take measures to reduce the cost of debt repayment and for the first time say debt could be reduced in the future. They also decided a €10-billion new loan.

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.

News in Brief

  1. MEPs: Finnish budget proposal 'impossible to implement'
  2. EP committee supports 'Future of EU Conference'
  3. EU survey: climate change must be parliament's priority
  4. Zahradil resigns as rapporteur on EU-Vietnam trade deal
  5. Russia plans 'Arctic Air Defence" with S-400 missiles
  6. Belgium: King does another round of consultations
  7. Thousands protest Orban's theatre clampdown
  8. Russia and Ukraine agree ceasefire by new year

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.

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Stakeholders' Highlights

  1. UNESDAUNESDA appoints Nicholas Hodac as Director General
  2. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  3. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  4. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  5. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  6. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues

Join EUobserver

Support quality EU news

Join us