Wednesday

19th Sep 2018

No debt relief or bailout money yet for Greece

  • "It should not be beyond the wit of man to find that compromise within three weeks," said Greece's minister Euclid Tsakalotos (c). (Photo: Council of the EU)

Greece and its creditors have postponed an agreement to unblock a new disbursement from the Greek bailout and on debt relief measures.

The deal will now be re-examined in mid-June, Eurogroup president Jeroen Dijsselbloem said after a late-night meeting in Brussels on Monday (22 May).

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"We have not reached an overall agreement," he said.

"We were unable to close the gap between what could be done and what some of us expected could be done."

The agreement stumbled on how to ease the Greek debt burden, in discussions that pitted the EU, especially Germany, against the International Monetary Fund (IMF).

The IMF is one of the four creditor institutions – together with the European Commission, the European Central Bank and the European Stability Mechanism (ESM).

The IMF insisted on measures that would reduce the cost of debt repayments for Greece in the medium and long-term if it was to take part in the €85-billion bailout programme signed in 2015.

The Washington-based fund, which took part in the two previous Greek bailouts in 2010 and 2012, is prevented by its own rules from helping a country whose debt is deemed to be sustainable.

Several eurozone countries, mainly Germany, have said that the IMF's participation was needed in order to make the third bailout viable.

A year ago, the EU and the IMF agreed, in principle, on a set of debt relief measures that were to be fleshed out later down the line.

Germany's finance minister, Wolfgang Schaeuble, said that these measures can be detailed only at the end of the bailout programme in 2018, when Greece has implemented the cuts and other reforms required by its lenders.

"This afternoon and this evening we had a first in-depth discussion on the topic of debt sustainability, looking very carefully at needs, options, constraints," Dijsselbloem said.

He said that the IMF and the EU would continue to talk in order to reach an agreement at the next Eurogroup on 15 June.

He added that he expected the next disbursement of bailout money to Greece to take place "before the summer", when Athens has to repay some €7 billion of its sovereign debt.

"There is some time left to work on this but not very much," Klaus Regling, the ESM chief, said on Monday.

Dijsselbloem said that the Eurogroup's "intention is to bring the IMF on board", with a programme "involving money" from the fund.

The deadlock on the debt issue prevented an agreement on the so-called second review of the bailout programme, despite Greece having met the creditors' requirements.

"We are very positive on the work done in Greece by the Greek government," said Dijsselbloem, referring to a bill passed last week to cut pensions and raise taxes in order to save around €4 billion until 2020.

Killing time

The discussions in Brussels lasted for some seven hours.

Dijsselbloem spent most of the time holding short group meetings with the IMF representative Poul Thomsen, Germany’s Schaeuble or the new French finance minister, Bruno Le Maire.

Thomsen also spent time on the phone with IMF colleagues back in Washington.

The other participants in the meeting were left waiting in the room to hear if any progress had been made.

"We are patiently waiting," a Greek contact told EUobserver about the side talks in which the Greek minister was not involved.

"Even in my darkest dreams I had not imagined that," another EU source said, referring to their disbelief at having so little to do during the side talks.

The source said most of the eurozone ministers and officials spent Monday night making small-talk or resting to kill time.

After several hours, a proposal was put forward that would have seen a green light for the loan disbursement, with the IMF agreeing in principle to participate in the programme, but without committing to an amount of money or even to a date for when it would come on-board.

The solution would have allowed the IMF official to ask the fund's board, which represents its member states, for approval.

But, according to several sources, the deal was vetoed by Greece, which did not want the debt discussion to be separated from the disbursement decision.

For the left-wing Greek government, which recently faced several days of strikes and demonstrations, an agreement on debt relief would be a political counterweight to the austerity measures taken since 2015.

Last week, as the Greek parliament passed the bill, prime minister Alexis Tsipras said that "debt relief [would] correspond to the sacrifices of the Greek people".

"It was a difficult discussion," Greece's finance minister, Euclid Tsakalotos, said after Monday's meeting.

He added that after the new set of austerity measures adopted last week, "it was the duty of the IMF and the European member states to reach a compromise" on Greek debt.

He regretted that the creditors had failed to give "clarity to the Greek economy and the financial markets".

Eurozone and IMF leaders are now expected to hold talks at the highest level in order to find an agreement before the 15 June meeting.

The G7 summit in Sicily on Friday and Saturday (26-27 May) will be an opportunity for German chancellor Angela Merkel, the new French president Emmanuel Macron and IMF director Christine Lagarde to discuss the issue.

US president Donald Trump, whose country is the IMF's main shareholder, could also weigh in.

Wit of man

"Things are happening between Paris and Berlin," an EU official said on Monday, adding that Merkel and Macron were working on a solution.

For his part, Macron told Tsipras on Monday that he would seek a deal on debt relief.

After the Eurogroup meeting, French finance minister Le Maire said that Germany's role had been "constructive" but that he "would be lying if [he] said that France and Germany have no difference over the sustainability of Greek debt".

After months of deadlocks and delays, all participants wanted to believe that the next meeting would be successful.

"It should not be beyond the wit of man to find that compromise within three weeks," the Greek finance chief, Tsakalotos, said.

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