Monday

28th May 2018

EU agrees on debt measures for Greece

  • Agreed debt measures "will improve Greek debt sustainability,"said the head of the eurozone emergency fund Klaus Regling (r), with Eurogroup president Jeroen Dijsselbloem (l) (Photo: Council of the EU)

Eurozone finance ministers agreed on Monday (5 December) on a set of measures to reduce the cost of Greek debt, but postponed a discussion on the future of the bailout programme.

At a Eurogroup meeting in Brussels they endorsed a plan of short-term measures presented by the European Stability Mechanism (ESM), the eurozone emergency fund.


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The measures, which can be implemented now, include allowing Greece more time to repay existing ESM loans - from 28 to 32.5 years - and limiting the variation in interest rates on these loans.

ESM chief Klaus Regling said at a press conference that although Greece would initially have to pay higher interest rates, "these measures will improve Greek debt sustainability".

He said that by 2060, the package would bring a 20 percent reduction of debt compared to GDP and a 5 percent decrease of so-called cross-financing needs, such as repayments and interest rates payments.

Greek sources told the ANA-MPA agency that the package would lower the debt by €45 billion.

"The benefits are clear and the costs are limited," Regling noted.

"This is very good and will start helping the Greek economy immediately," Greek minister Euclid Tsakalotos said after the meeting, insisting that "Greece is returning to growth".

More work needed

The measures agreed on Monday are part of an agreement in principle reached in May between Greece's EU creditor institutions - the European Commission, the European Central Bank and the ESM - and the International Monetary Fund (IMF).

The IMF insists on relief measures to make the Greek debt sustainable, because its rules say it cannot participate in a bailout programme if a country's debt is not sustainable.

The IMF and the EU had planned to discuss on Monday whether the Washington-based fund will stay on board of the Greek programme after the end of the year.

But the discussion was postponed until an agreement is found between Greece and EU experts on the second review of the current programme.

"More work has to be done," Eurogroup president Jeroen Dijsselbloem said at the press conference, adding that "the institutions are prepared and stand ready to return to Athens to work on it".

EU finance commissioner Pierre Moscovici said that he hoped a staff level agreement would be reached before the end of the year. A eurozone source said that in this case, a Eurogroup could be convened to approve it early January.

Talks are stumbling mainly on labour market reform, but Dijsselbloem said that it was not a topic for ministers to discuss.

'Every step a struggle'

Another difficulty in the second review talks is the so-called fiscal trajectory. Greece, the eurozone and the IMF have different views on how long Greece will have to reach a primary budget surplus of 3.5 percent of GDP after 2018.

"We all agree that serious measures will have to be put in place for a 3.5 percent primary surplus to be met and sustained at least for some years," Dijsselbloem said.

But as long as the target and the measures to reach it are not set, thus giving a clearer view on the future of the debt situation, the IMF will not decide whether to stay in the programme.


The short term measures agreed on Monday are a first step for Greece but the EU-IMF still lies ahead.

"Every step is a struggle," French minister Michel Sapin observed.

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